Imagine a world where thousands of talented medical graduates are left without a place to call their own, a place to hone their skills and serve patients. This is the reality we face today, and it's a tragic waste of potential.
More than 9,000 medical school graduates this spring were unable to secure residency placements, a record-breaking number that exposes a critical flaw in how Washington handles physician training funding.
These aspiring doctors now face a difficult choice: wait a year and try again, take up non-clinical roles, or leave the medical field altogether. Meanwhile, the U.S. healthcare system is grappling with a growing physician shortage.
But here's where it gets controversial: federal law still restricts the number of doctors who can enter residency training each year. This regulation, a relic of the past, is limiting the supply of doctors at a time when the demand for healthcare services is at an all-time high due to the retirement of the baby boomer generation.
The government's own Health Services and Resources Administration predicts a physician shortage of 187,000 by 2037. To address this crisis, we must return the physician training process to the forces of supply and demand.
After medical school, graduates must complete a residency, a crucial period of hands-on training under supervision, which is a prerequisite for licensure.
So, who funds these resident physicians? Surprisingly, it's largely the American public, not through hospital bills as one might expect, but through federal Medicare taxes. These taxes subsidize graduate medical education in teaching hospitals.
The Balanced Budget Act of 1997 imposed a cap on the number of residency positions that Medicare would fund at each teaching hospital, freezing the number at 1996 levels. The intention was to control Medicare spending, but it has had unintended consequences.
At the time, policymakers believed there might be a surplus of doctors, and organizations like the American Medical Association supported limiting the pipeline. However, as we now know, this has contributed to a physician shortage.
Medicare, through the Social Security Amendments of 1965, explicitly provided funding for teaching hospitals to train physicians, recognizing the societal benefits of supporting these institutions.
This arrangement, however, has created a bottleneck, subject to the influence of powerful medical lobbies like the AMA, which have historically advocated for caps on residency spots. This has kept the supply of practicing doctors low and their wages high.
Even prestigious hospitals, which can be selective in their resident choices, benefit from the current system. Federal funding subsidizes resident salaries, keeps labor costs low, and ensures a steady supply of skilled yet inexpensive medical labor. Expanding residency slots could threaten their prestige and increase competition, potentially driving wages up.
Another issue is accreditation. The Centers for Medicare and Medicaid Services only subsidize accredited residency programs, which are largely limited to large hospital networks. This excludes or underutilizes numerous medical institutions that could effectively train physicians, such as outpatient clinics and rural health centers.
Who suffers from this arrangement? Patients. The ongoing physician shortage, a result of supply and price caps on training, makes it harder for patients to access convenient and affordable medical care, especially in rural areas where health outcomes and life expectancy are already lower due to a lack of primary care physicians.
The solution is clear: end Washington's monopoly on residency funding. Hospitals, states, charitable networks, and private donors should be empowered to step in and fund additional residency positions. Accreditation should be open to competing institutions that meet transparent quality standards, allowing clinics, rural hospitals, and private practices to train more doctors and address shortages.
Texas offers a glimpse of success through a decentralized approach. By combining legislative action, state funding, and medical school collaboration, Texas has expanded residency opportunities and kept more physicians practicing in-state.
Congress should follow suit and phase out the Medicare residency cap imposed by the Balanced Budget Act of 1997. Hospitals, states, and private institutions should be allowed to directly fund more positions.
The doctor shortage is not a mystery; it's a direct result of outdated funding methods and restrictive regulations on residency options. Lawmakers must remove these barriers and ensure the next generation of physicians can train where they are needed most.
