If you’ve ever faced long waits for a doctor’s appointment, or traveled hours for care, it might surprise you that as recently as the turn of the century, policymakers sounded the alarm regarding a glut of U.S. physicians. In 1980, the Department of Health, Education, and Welfare (now the Department of Health and Human Services) issued a pivotal report, “Graduate Medical Education National Advisory Committee Report,” that documented the surplus concerns that persisted for about 20 years.
Today, to the contrary, the U.S. faces a dramatic physician shortage. Across the country, 76 million people live in primary care deserts, most frequently in rural areas. The supply of health care workers is lagging woefully behind the demand, in part caused by pressing health care needs of the aging U.S. population. By 2037, the estimated physician deficit is expected to reach 187,000 doctors, including a shortfall of 87,000 primary care providers. Rural areas are projected to face a 56% shortage compared with 6% in urban areas, exacerbating ongoing geographic and demographic health disparities, such as higher rates of stroke and lower life expectancy in low-income, rural areas.
Addressing this physician shortage will require a multi-pronged approach, including increasing the number of medical students, incentivizing geographic and specialty diversity, and adjusting physician compensation. However, for such strategies to be successful, one key bottleneck must be addressed: limited physician training opportunities, especially in high-need specialities and settings.
After graduating medical (or osteopathic) school, physicians complete residencies in graduate medical education (GME) that last between three (e.g., internist) and seven (e.g., surgeon) years. The role of a resident is unique, bridging the gap between student and independent physician. In this apprentice-like phase, residents transition from paying for education to earning a modest salary, a fraction of what attending physicians receive. To secure a residency, final-year medical students are competitively paired with training programs through a national “matching” algorithm based on their mutual preferences and rankings. GME residency slots within each training program are largely funded through Medicare with some additional support from other federal and state governmental agencies.
In 1997, as “Medicare’s open-ended subsidies” were seen as a major culprit of the physician surplus, the Balanced Budget Act capped the number of residents GME programs could train. Despite a profoundly different outlook on physician supply today, GME structures have largely remained unchanged, leaving the U.S. ill-equipped to build a robust physician workforce. Each year, thousands of medical school graduates don’t match to residency, with lower match rates in rural settings and in financially less-lucrative specialties such as family medicine and primary care. The need for more primary care doctors in underserved rural regions is widely recognized, and physicians often practice where they train. Even so, of the $16.2 billion Medicare budget for GME in 2020, only 2% of Medicare-funded resident training slots were located in rural areas — areas where 18% of the U.S. population resides.
Academic Medical Centers (AMCs) receive Medicare training funding through direct and indirect payments. Direct payments, totaling $4.5 billion in 2020, help cover residency program costs based on hospital costs from 1984 (adjusted for inflation), the number of residents from 1996 (which informed the 1997 caps), and the hospital’s Medicare patient volume. GME indirect payments, amounting to $11.7 billion in 2020, are meant to offset additional costs of training residents — such as increased diagnostic testing — and are tied to the ratio of residents (subject to the 1997 caps) relative to hospital beds. The outdated GME funding formulas poorly reflect current population health trends and advancements in medical practices, and also reward hospitals based on care volume, rather than care quality. As a result of these GME funding structures, medical residencies and GME slots are condensed in the Northeast where hospitals boast sub-specialty and super-specialty programs, disadvantaging both rural and primary care programs.
Conventional wisdom holds that residents are a financial burden on hospitals, thus requiring Medicare reimbursement to offset resident training-related costs. However, this theory lacks economic evidence. Despite flat GME funding and the 1997 federal residency caps, hospitals themselves have financed 15,000 new slots over 20 years. In academic medical centers with already well-established training programs and infrastructure across numerous sub-specialties, residents, in fact, help offset training costs with below-market salaries and modest bargaining power.
Efforts to modernize GME include the Consolidated Appropriations Act of 2021, which added 1,000 new Medicare-funded GME slots in priority areas. While these slots were appropriately dedicated to primary care specialties in high-need areas, one study found that most were allocated to urban regions. Another proposed bill aims to add 2,000 GME positions annually to settings including rural shortage areas and historically Black colleges and universities; it has been stalled in the House of Representatives since early 2023.
Swift and substantial GME reform is urgently needed. In 2014 — now over a decade ago — an Institute of Medicine (IOM, now the National Academy of Medicine) report titled “Graduate Medical Education That Meets the Nation’s Health Needs” called for phasing out of current GME fee-for-service payment structures in favor of value-based payment; building a strategic plan to work towards geographic and specialty-aligned goals; and transforming GME funding toward positions in priority areas. Importantly, the IOM report also proposed a new transformational fund to support pilot studies on innovative policies to improve GME structure.
But progress toward the IOM report recommendations has been thwarted, in part by interest group politics and subsets of physicians or hospital systems who disproportionately benefit from the current or alternative approaches. Societies like the American Hospital Association and the Council of Teaching Hospitals have lobbied Congress to continue using the outdated GME structure to fund their member teaching hospitals. The Alliance for Academic Internal Medicine and the American College of Physicians published a joint paper opposing the IOM recommendations and instead recommended modest changes, like lifting of GME caps, spreading the cost of GME across all payers (e.g., private insurance), combining direct and indirect payments, and increasing GME funding transparency. Ultimately, GME reform must be transformative, seting aside special interest priorities and serving the greater good of the entire system.
Reforming GME is necessary but insufficient to address the physician shortage. In our recent review in the New England Journal of Medicine, we discuss the need for change at all steps of the complex physician production process: medical school entry and costs, training, compensation, and retention. In that review, we highlight an “evidence emergency”: There is little consensus on the most efficient way to address the physician shortage as a step on the pathway to improved U.S. health care outcomes. We call for investment in the independent evaluation of initiatives to strengthen the physician workforce, including strategies for GME reform.
In the 2024 Commonwealth Fund report “Mirror Mirror 2024”, the U.S. ranked 10th (among 10 similar high-income countries) on health systems performance, 10th on access to care, and 10th on health outcomes. While recent federal action on drug pricing has worked to address some access issues, there is pressing, essential work ahead to tackle the escalating physician shortage. Small, incremental improvements in the number of rural and primary care GME slots will not keep up with the intensifying shortage in the least healthy areas of the country. The large-scale critical changes needed — such as GME reform — demand urgent congressional action. The current neglect is leading to dire consequences: The health of our nation is deteriorating, and without bold action, we will continue to grow sicker.
Nicole C. McCann is a Ph.D. candidate in health services and policy research at Boston University School of Public Health. Rochelle Walensky, M.D., M.P.H., is an executive fellow at the Harvard Kennedy School of Government and at the Harvard Business School, and the former director of the Centers for Disease Control and Prevention.