Debt deadbeats risk losing medical licenses

A growing number of state medical boards are leveraging licensure against student loan repayment.

By Jay Greene, amednews staff. Aug. 13, 2001.

Physicians in their first years of practice face a myriad of money matters as they juggle the desire for middle-class trappings of success with the obligation to pay back student loans, now averaging about $93,000.

If they don't juggle wisely, they risk losing their license or facing other disciplinary actions in a small -- but growing -- number of states that are stepping up their efforts to collect delinquent state and federal loans.

Debt-ridden

"The last five years the number of states that discipline physicians for failing to pay student loans has been increasing," said Dale Austin, interim chief executive officer of the Federation of State Medical Boards. "In some cases the loan amounts are so huge that authorities look for some effort to pay. We have to figure out some way to help these folks pay their loans, not just punish them."

This year, legislators in Texas and Georgia passed laws, joining Minnesota, Washington, Virginia and California, to discipline physicians for failure to pay federal student loans or fulfill such service obligations as practicing in underserved areas in exchange for loan forgiveness. The type of discipline can range from fines in California to license revocation in Minnesota. Florida and Alabama also tie discipline to state loan defaults; Maryland disciplines doctors for failing to complete service obligations. Of the 94 doctors disciplined for these issues by medical boards in 2000, most worked out payment schedules to avoid losing their licenses, FSMB said.

Real culprit: rising education costs

Todd Coulter, MD, chair of the AMA Young Physicians Section, and David Buck, chair of the AMA Medical Student Section, are concerned that ever-rising student debt might lead even more physicians to default. They also think there is a more insidious result of burgeoning student debt: Students turning to the specialties that pay the most or away from medicine altogether.

"We need to address the root of the problem, which is rising debt and costs of education," said Buck, a fourth-year student at the University of Washington School of Medicine, Seattle.

On graduation, medical students can owe an average of $93,000 in loans.

Some doctors pay $1,000 a month in student loans, said Dr. Coulter, an internist in Ocean Springs, Miss.

"Young physicians are beginning to understand the realities of student debt," Dr. Coulter said. "They are delaying getting married and having kids. They buy a less expensive house. You aren't going to make $150,000 guaranteed each year."

In 1995, Dr. Coulter agreed to practice in Mississippi for four years in exchange for the state paying off his $87,000 in student loans. But he is concerned that rising debt will cause some doctors to shun practicing in poorer areas.

"Doctors say, if I cannot put food on my table for my family, I cannot afford to be charitable," Dr. Coulter said. But for himself, he added: "Moving to Mississippi was the best decision I ever made. I am debt free and my family loves it here."

Still, in a survey taken last year by the Assn. of American Medical Colleges, 29% of graduating medical students said their debt influenced their specialty choice. "States that take away licenses will only push students more into specialties," Buck said.

Instead of punitive measures, government should address the high cost of medical education, Dr. Coulter said. In 2001, a bill was approved in Congress to deduct interest from student loans for those taxpayers who earn less than $65,000 or $130,000 for joint filers, Buck said. "Our goal is to restore tax law to pre-1986 status, where all interest paid on an educational debt is tax deductible."

To date, 1,700 doctors -- more than half of whom are chiropractors and more than 300 of whom are dentists -- have defaulted on $166 million in federal loans in the Health Education Assurance Loans program. Of those doctors, 192 are allopathic physicians with $20.5 million in defaulted loans and 39 are osteopathic physicians with $5 million.

"Ninety-five percent of borrowers have paid back the loans or are in process of paying them back," said Kay Garvey, a spokeswoman with the Health Resources and Services Administration, which administered the HEAL program until 1999 when it was phased out. "We prefer to get them in a settlement agreement to pay back the loans."

In addition to potential license revocation, HEAL defaulters also face prosecution by the U.S. Justice Dept. and exclusion from the Medicare and Medicaid programs.

The Dept. of Education also administers various federally insured loan programs; however, it does not track physician default data. While medical student debt has doubled the past 10 years to an average $93,000, Garvey said HRSA didn't think the number of defaulting doctors had increased as a result. But since 1998, 300 new health professionals have fallen into default.

State discipline

In Texas, more than 100 physicians each year default on their state loans through the Texas Guaranteed Student Loan Corp. But only about three physicians each year are disciplined by the state board for defaulting. New legislation will require the medical board to go after the licenses of the 21 physicians, owing $1.7 million, on the HEAL default list.

In Maryland, the Board of Physician Quality Assurance has taken action against two physicians for failing to meet service obligations, said Barbara Vona, chief of the board's compliance division. One lost his license and the other is on probation.

"When we review license applications we look to see if they are in default on a student loan or child support payments," Vona said. The Washington Medical Quality Assurance Commission suspended the license of a surgeon last year for failing to pay a student loan. The physician has since been reinstated, said Pam Mena, a board spokeswoman. Two other physicians are listed on the HRSA site in default of $450,000 in HEAL program loans.

In Virginia, six physicians have been reviewed since 1999 for nonpayment of student loans. Two physicians were reprimanded; two cases were closed and two are pending, said William Harp, MD, the board's executive director.

"The number of doctors in default is very low," Dr. Coulter said. "There are many more doctors who are struggling to pay their loans in the face of high government regulation and declining reimbursement. We need to help those doctors."