November 2018


If it’s free, what’s it worth?

by J.C. Noreika, MD, MBA

J.C. Noreika, MD, MBA

A gift of $100 million helps guarantee free medical school tuition for all
enrollees at NYU. Does this change anything?

In a Philadelphia coffee shop, I was once gifted a day-old donut. I joked that it was the tastiest donut I ever had. The barista countered that “free” is the best part of any recipe.
Ken Langone grew up on Long Island. His father was a plumber; his mother worked in a cafeteria. Like many of his generation, he pursued the American dream working menial jobs before graduating from Bucknell University in 1957. Tuition in the 1950s at a private college like Bucknell was around $600 per year, an additional $600 for room and board. At the cumulative rate of inflation, Langone paid $11,260 per year in today’s dollars. He hasn’t forgotten.
Returning to New York, he attended night school at New York University’s Stern School of Business. His story arc to billionaire philanthropist includes Ross Perot, the IPO of the latter’s Electronic Data Systems, founding a venture capital firm, investing in a builder’s supply business, and eventually creating Home Depot. In 2017, HBO took the facts of Langone’s encounters with Bernie Madoff and televised the legend.
In 2008, the Langones made an unrestricted gift of $200 million to the NYU medical center now bearing their names. In 2018, they pledged $100 million to help fund a program to make the then $55,000 medical school tuition free to all students. In a CNBC interview, Langone explained that by providing free tuition, “We think we’re giving them a good start in life to leave here debt free. And we think it’s the right thing to do.” He hoped other schools would follow their example.
According to The Wall Street Journal, the average cumulative debt of medical students in 2016 was $242,000. In 2000, it was less than $100,000. The September 26, 2018 AMA Wire stated that 80% of medical residents carry at least $100,000 of student loan debt. It proposed five tactics to manage this liability: refinancing, forbearance, consolidation and standard repayment, income-driven repayment, and loan forgiveness for public service. No option is ideal and Congress may eliminate the last-mentioned program.
Only mortgages exceed the $1.5 trillion student loan indebtedness in the United States. The government underwrites most of it. By 2018, 4.7 million borrowers had defaulted to the tune of $88.4 billion. Taxpayers pick up the tab. The Department of Education tracks defaulted loans; the number of medical doctors who evade repayment is low. But educational debt is often cited when physicians declare bankruptcy.
When choosing the rigors of a medical education on economic grounds, opportunity costs are an important if neglected topic. According to LendEDU’s website, the true cost of med school, including lost opportunity, is around $800,000. Physicians in their early 30s find themselves about $500,000 behind their bachelor degree counterparts, significantly more if the latter write software.
The Langones’ philanthropy raises interesting questions.
Will free tuition lead to more medical students choosing less remunerative specialties such as primary care, pediatrics, and public health? The Langones hope so but did not stipulate that free tuition dictate specialty choice. In The New York Times, Elisabeth Rosenthal wrote that “medical school should be free but not for everyone.”1 Using NYU School of Law as an example, she advocates that only those students who commit to work where there is need should have tuition waived. A comment to the article argued that although free tuition might help at the margin, income disparity between specialties remains the delimiting problem.
Will free tuition lead to more minorities choosing medicine? In a 2005 article in Health Affairs, qualified students who didn’t apply to medical school cited cost, time it takes to become a doctor, and demands of the lifestyle. Cost was the number one deterrent for African-American, Hispanic, and Native American students.2 Current data suggests little has changed. A diverse student body is the goal of most academic institutions. Legal challenges to admission practices of elite colleges such as Harvard’s alleged penalization of Asian-American applicants complicates how one ethnic group might gain favor over another without an ensuing morass of litigation. The Langone’s largesse does not address how and where lines are drawn.
Finally, why is medical school so expensive in the first place? Critics answer that education need not look further than the nation’s health insurance programs. The utilization of healthcare resources exploded when true costs are concealed from patients. Since government guarantees tuition payments through very low interest loans with generous terms, academic institutions can compete by investing in lavish and sometimes frivolous assets. Others reference Adam Smith’s economics as medical schools price their product in response to demand far outstripping supply. Another cadre of economists point out that medical school tuition subsidizes faculty and research otherwise unfundable. Cynics crack that schools “pick a number,” price having nothing to do with cost.3
Medicine is attractive: flexibility regarding how and where one practices, near-guaranteed employment, generally pleasant working conditions, intellectual challenge, respect, and the potential for making a difference. The late Uwe Reinhardt observed it is in society’s best interest to ensure its doctors are well compensated.
Are the early financial sacrifices worth it? In a 2010 study, Nobelists Daniel Kahneman and Angus Deaton found that above a threshold of $75,000, a person’s day-to-day emotional well-being, aka happiness, did not increase.4 What is the tuition cost/value proposition of medical school? Econometric models estimate the net present value of medical education considerably exceeds $1 million. You decide.


1. Rosenthal E. Medical School Should Be Free, but Not for Everyone. The New York Times. August 21, 2018.
2. Jolly P. Medical school tuition and young physicians’ indebtedness. Health Aff (Millwood). 2005;24:527–35.
3. Walsh K. Why is medical education so expensive? J Biomed Res. 2014;28:326–7.
4. Kahneman D, Deaton A. High income improves evaluation of life but not emotional well-being. PNAS. 2010;107:16489–16493.

Editors’ note: Dr. Noreika has practiced ophthalmology since 1981. He has been a member of ASCRS for more than 35 years.

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If it’s free, what’s it worth? If it’s free, what’s it worth?
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