I was in an online forum discussion recently and a newly licensed practitioner was aghast at the “travesty” of behavioral health salaries at the masters level. She compared professions such as Speech Language Pathologists, Occupational Therapists, Genetic Counselors and Licensed Professional Counselors and was “flabbergasted” that the LCP salary she posted was around $45,000 per year while Genetic Counselors make $78,000.

While mental health practitioners, especially those not in private practice, do seem to be paid a low rate compared to professions with similar education requirements, comparing pay across fields using a masters degree as a proxy for value is a mistake. The real reason counselors get paid what they do is quite simply, economics.

One reason for the apparently low salaries is that practitioners accept those salaries. This will be controversial but “what they are worth” isn’t determined by what we think they are worth — it’s determined by what the market is willing to pay. When LPCs are accepting $45k, that’s the problem. However, if they don’t, then someone else will.

Electricians have a median salary around $50k and it takes 5-6 years to become a journeyman electrician — that includes 4-5 years working as an apprentice. That’s roughly 7000 hours of apprenticeship. However in many regions, there’s a big shortage of electricians and the pay is rising considerably.

In Houston, where Harvey-related construction is backlogged, electricians have more work than they can possibly do and thus electrical contractors are paying much higher wages.While a masters degree is held in more esteem (especially by those that have them,) than the education and experience required to be an electrician, the electrical field is just as tough to get into from an experience, process, training perspective. And the work itself if exhausting — at least as exhausting as doing a 10 session day at a public agency — and a bit more dangerous.

What happens is people have been told their whole life by well-meaning parents to “Get a degree” or “go to graduate school,” but then they’re shocked when their entitlement doesn’t match the reality of the marketplace. They’re outraged when they accept student loans the size of small mortgages and discover that their compensation isn’t proportional to their debt. There are plenty of Ph.Ds in a variety of fields barely getting by because the market doesn’t value a Ph.D in humanities as much as the enthusiastic, but naïve student thought it would.

But, a Ph.D in Computer Science with an emphasis on Machine Learning — you can earn salaries exceeding $350k. Why? Is that unfair? Of course not. Machine Learning is a relatively rare skill and an expert in that field is going to generate their company many millions of revenue, so a $350k salary is a bargain.

The economics of a behavioral health clinic

Let’s say a mental health clinic gets reimbursed $75 for an hour session. That means that the therapist delivering that care facilitated $75 in revenue. With 30 sessions per week, 48 weeks per year, that’s $108,000 per year in revenue brought in to the clinic.

The fully loaded cost of an employee is typically 1.5-2 times their cash compensation. That is the cost for benefits, payroll taxes, office space, etc. If we take the $108,000 in revenue, then divide that by 2, that would leave a theoretical maximum salary of $54,000, assuming a zero profit for the clinic as well as a 100% full case load 48 weeks of the year.

Suggesting a therapist at that level should be paid more than $54,000 doesn’t match reality. In fact, a $45,000 salary is what works, given the unit economics I’ve described. There is always the comparison to a psychiatrist and how it’s unfair that they’re paid more, however, if a psychiatrist is doing a 99213 procedure (15m med management) reimbursing at $50 and the masters counselor is doing a 90834 (60 min crisis psychotherapy) that reimburses at $75, the psychiatrist is able to theoretically see 4 patients per hour (resulting in $200 in revenue) while the counselor can only see 1 patient, resulting in $75 per hour.

Unless clinics can start charging significantly more (and get it reimbursed by payers,) the salary of a therapist working at that clinic is impossible to raise. If you’re selling cookies and an employee sells $50 in cookies, it’s impossible to pay that employee $51. The math doesn’t work.

Like teaching, therapists are subject to supply and demand. There are a lot of people willing to be teachers and LPCs, no offense, are a dime a dozen. In Louisiana, where there is a shortage, LPC salaries average $62k per year, with the range being 31k-120k. And that’s in Louisiana where the cost of living is really low. An EAP Counselor or Genetics Counselor in San Francisco can get around $90k — which, compared to Louisiana, seems like more money, but with cost of living, it’s actually a terrible salary compared to Louisiana. The reason? There are a heck of a lot more LPCs willing to work in San Francisco than Opelousas, Louisiana.

In all locales, working for a public agency is always going to result in being “underpaid.” Many practitioners consider agency work like a residency: simply the price of admission to eventually gain enough experience to go into private practice. Private Practice Clinical Therapists average around $150k.The “problem” isn’t that therapy is underpaid, but that it’s oversupplied. As long as LPCs are willing to take a job for $40k, that’s what the salary is going to be.

The perception of value of talk therapy providers

Alternatively, the problem could be seen as patients don’t want to pay enough and perhaps they don’t want to pay “enough” because they don’t see a therapist being worth $150 per hour in most cases. Considering the reproducibility crisis in psychology (and social science) research, the public doesn’t necessarily have a lot of trust that talk therapy is valuable enough to justify paying high enough prices to result in higher salaries — meaning the value of the profession is directly related to the value the public actually perceives the profession is providing.

Of course, there are plenty of clinicians that can command far beyond $150 per hour — those clinicians are typically either in very high cost areas (like Palo Alto, CA) or they are in high demand and under supplied specialties like Comprehensive Behavioral Intervention for Tics (CBIT.) Your typical masters-level generalist at a clinic won’t be able to demand $150 and insurance definitely isn’t going to reimburse a masters-generalist at $150.

This isn’t about us believing in the efficacy of the profession or not — this is about how the public views the efficacy. Considering the high profile fraud cases in psychological research, it’s no surprise that the public is skeptical — and certainly unwilling to pay doctor-style salaries to LPCs. You can’t pay an LPC $60k when that LPC is generating only $110k in revenue.

Why a raising the pay of counseling professionals is difficult

Unless “raising prices for services” is an option on the table, pay rates are going to stay roughly where they are for that level of practitioner. An alternative idea is that the insurance companies should pay more or the government should pay more — but then that also has unintended consequences: if insurance companies have to pay more, that either means that raises the cost of insurance or it lowers the duration of treatment.

If the cost of insurance goes up, that necessarily means, fewer people will have insurance, thus lower client demand and as a result, lower prices, since supply and demand is what drives everything. If the government made up the shortfall, then that’s money that isn’t available for other programs that might be equally important. The pool of available money from taxes is finite. If we were to raise taxes for example, by 20%, that means that practitioners themselves are going to have to pay higher taxes as well.

There’s also the issue of allocative inefficiency that results when the economic equilibrium for a service is not achieved. Allocative inefficiency is important, especially in health care. Payers wish to see their financial contributions used to maximize health gain. Under these circumstances, a provider would not be allocatively efficient if it produces treatments with low levels of cost–effectiveness, because the inputs used could be better deployed producing outputs with higher potential health gain. See the article Health system efficiency: How to make measurement matter for policy and management for more on this.

Is everyone underpaid?

We could make the argument that mental health professionals are underpaid, but then we could make the argument that soldiers are underpaid, teachers are underpaid, probation officers are underpaid — it would soon descend into absurdity because everyone is underpaid compared to what they feel they are worth, but they are paid exactly what the market will support. For example, when there is a teacher shortage, pay rises in understaffed districts. Incentives are offered to entice teachers into understaffed districts. Where there are nurse shortages, pay rises, often dramatically. The point is that the market adapts to supply and demand.

If a mental health agency has a budget of $1 million and they double the pay for their practitioners, that means they have 50% as many practitioners. That means that the agency can serve fewer people or double the caseload. Maybe that’s ok; but considering how overworked practitioners are at agencies already, that doesn’t seem viable.

If the pay is too low, either find another job, upgrade your qualifications, change professions, specialize in a rarer niche, or start a private practice. That might seem harsh, but a practitioner seeking to enter the field should be aware that no matter how good the intent, how important the service, economics is a cruel and unflinching mistress.

The behavioral health business is very tough and I have great respect for those choose to help others despite the renumeration being less that they deserve. Thanks for the hard work!

Do you have any thoughts or experience to share about counseling salaries? Continue the discussion in the comments below!

Published by Brian Dear

Brian is the cofounder and CEO of iCouch, Inc. He has an extensive background in software engineering, inbound marketing and mental health practice management.

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