States increased in nominal terms from $60,400 in 1977 to $182,400 in 1994. In nominal terms, average physician income increased 202 percent over the 17-year period. Adjusting for inflation [1994 = 100], average physician net income after expenses but before federal income taxes in the United States increased in real terms from $147,700 in 1977 to $182,400 in 1994. Thus, in real terms average physician income increased 23.5 percent over the 17-year period (Physician Payment Review Commission, 1996). For purposes of this analysis of the relationship between physician income and physician supply, the measure change in physician income that will yield the greatest validity in the analysis of the relationship between the two variables is the real increase in physician income over the 17-year period.
Over the same period, the total supply of physicians in the United States increased from 428,300 in 1977 to 684,400 in 1994, an increase in physician supply 59.8 percent over the 17-year period. By another measurement of physician supply, the number of physicians in the United States increased from 190 physicians per 100,000 population in 1977 to 263 physicians per 100,000 population in 1994, an increase in the physician supply of 38.4 percent over the 17-year period (American Medical Association, 1996). For purposes of this analysis of the relationship between physician income and physician supply, the measure of physician supply that will yield the greatest validity in the analysis of the relationship between the two variables is the increase in physician supply within the context of the number of physicians per 100,000 population over the 17-year period.
Therefore, average physician income in real terms increased 23.5 percent over the 17-year period, while physician supply as measured by the number of physicians per 100,000 population increased by 30.4 percent over the 17-year period. At a basic level of analysis, increasing dema...