Uwe Reinhardt is a very thoughtful and well-informed guy, but his post on debating doctors' compensation strikes me as almost too thoughtful and well-informed. Amidst many hundreds of words of discussion of the subject he totally buries the lede:
Standard economic theory suggests that over all, American doctors are overpaid, although perhaps not the primary-care specialties. This position leans on the fact that at existing incomes there is still considerable excess demand for places in medical schools among bright American youngsters – not to mention a huge pool of highly qualified foreign applicants. This suggests that the lamented doctor shortage in the United States is the result of an artificially constrained supply of medical school places and residency slots, which serves to inflate physician incomes above what they would be in a better functioning market without supply constraints.
That's really what you need to know about the subject. At current wages, the supply of qualified doctors could easily be increased. Alternatively, if doctors' wages were reduced there would be no decline in the supply of qualified doctors. That's because the supply of qualified doctors is being doubly restricted, first by regulations that make it exceedingly difficult to import qualified doctors from abroad and second by cartelization that prevents medical schools from training more doctors.
One really good piece of evidence on this that Bryan Caplan has highlighted is the mysterious vanishing male doctor:
It used to be that almost no women were trained as medical doctors. Then society changed for the better and massive barriers to women entering the medical profession were lowered. But rather than leading to an increase in the total supply of doctors, the entry of women into medicine has crowded out male doctors because we "forgot" to increase the number of slots in medical schools. Yet even as we produce fewer doctors than the market would support, many states insist on protecting doctors from competition from qualified nurse practitioners. If we changed scope of practice rules, liberalized immigration rules, and increased the number of medical school spots, we could easily have more medical personnel per capita and lower unit costs.
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