How Medicare Feeds The Physician Shortage

One of the big issues feeding medical cost growth is the current physician shortage, exacerbated by increasing numbers of retirees (and their attendant needs to see physicians), and a too-small pipeline of new physicians. I knew that the AMA had a great deal to say about that (and Federal funding as well), but I did not know the specifics until this great post at the Mercatus Center laid it all out:

Adding to the problem, and yet less noticed, is how the financing of graduate medical education is restricting the supply of doctors. This will be a surprise to many readers — Medicare funds GME [Graduate Medical Education] and residency programs. To be a licensed physician, a person must attend medical school and then pass board certification (both at great expense). What a lot of people outside the field of medicine don't realize is that to be a licensed physician, a doctor must also complete additional graduate medical education in a residency program. Finding a proper "match" for a residency relies in part on an algorithm that appears more complicated than astrophysics.

A Wall Street Journal article addressed the problem of a residency program shortage back in 2013, but the financing problem has only increased since. According to the Institute of Medicine, taxpayers provide $15 billion in GME support; Medicare provides $9.7 billion, Medicaid $3.9 billion, and the Veterans Health Administration an additional $1.4 billion. These funding levels have essentially been capped since 1997.

From a public policy perspective, it is questionable whether the federal government should finance GME, or whether hospitals that benefit from the cheap labor of residents should be picking up the cost of training doctors. Either way, without additional resources to fund residency programs, the nation may end up with a shortage of physicians and limit the availability of retirees to see and choose a doctor.

The state breaking the link between supply and demand, while putting in competitive moats for a politically powerful lobby? Say it ain't so...