How Medicare Contributes to the Physician Shortage

Funding for Graduate Medical Education

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The number of people on Medicare is expected to grow by 10,000 people per day through 2030. With a projected physician shortage, what can Medicare do to assure there will be enough doctors to care for them?

This article will explore physician shortages, causes, funding, and how Medicare can address the problem.

The Physician Shortage

The Association of American Medical Colleges (AAMC) has warned of physician shortages for years. Their sixth annual report, published in June 2020, estimated that the United States would be short between 54,100 and 139,000 physicians by 2033.

Looking closer, primary care physicians would account for 21,400 to 55,200, specialists 17,100 to 28,700, and medical specialists 9,300 to 17,800. These estimates are based on the growing population size, the number of current physicians approaching retirement, and the number of available training positions for new physicians.

Retiring Physicians

The AAMC’s 2020 Physician Specialty Report identified 938,980 total active physicians. When you consider that 45% of physicians were 55 or older, approximately 423,000 physicians will approach retirement age within the next decade.

The problem is, a physician shortage is not only in the future—we are living with one now. Depending on where you live in the United States, certain areas are federally designated as health professional shortage areas (HPSAs).

As of August 2021, nearly 7,300 of those areas lacked primary care services. More specifically, there was a need for more than 15,000 providers to adequately cover the 83 million people living in those HPSAs.

There was also a need for increased mental health care across 5,812 HPSAs covering 124 million people. More than 6,400 providers would be needed to close that gap. Again, rural areas tend to have more deficiencies than urban areas.

While the Medicare Payment Advisory Commission reports that most Medicare beneficiaries are currently able to access care, there are some deficiencies. According to a 2020 survey, 38% of Medicare beneficiaries looking for a new primary care physician had difficulty finding one in the past 12 months. Another 20% struggled to find a specialist.

Graduate Medical Education and Physician Training

After completing undergraduate education, a potential physician will go to medical school or osteopathic school. Once they graduate, they are technically a physician with an MD or DO degree, but they cannot yet legally practice medicine. They must first complete graduate medical education for primary care or the specialty of their choice.

Graduate Medical Education

Graduate medical education (GME) refers to residency and fellowship programs. Many states allow physicians to get a medical license if they have only completed one year of residency.

Residency is the bottleneck in the path to becoming a practicing physician. No matter how many students graduate from medical school, the number of residency positions determines the number of physicians entering the workforce in any given year.

According to the National Resident Matching Program, there were 38,106 open positions across all specialties in 2021, with 48,700 applicants competing for those spots.

Residencies last anywhere from three to seven years, depending on the specialty. Completion of a residency program is required for board certification. However, not completing a residency program could make it harder to get affordable malpractice coverage and limit employment options at established institutions.

At current match rates, around 38,000 residents enter residency programs each year. In the best-case scenario, there could be 380,000 physicians entering the workforce in the next decade. This number will vary based on the number of years of training required for a given residency program and the number of physicians who complete their training.

Funding for Graduate Medical Education

Unlike medical school, where students pay to go to school, each residency slot is a paid position. However, it is important to understand that GME funding goes beyond paying a stipend to the resident or fellow.

There are two parts to GME funding: direct GME (DGME) and indirect medical education (IME). The former pays resident salaries, faculty supervision, accreditation fees, administrative costs, and institutional overhead. The latter addresses the added costs that come with running a teaching hospital.

While hospitals and training institutions also contribute to these costs, graduate medical education receives the bulk of its funding from the federal government, including:

  • Centers for Medicare & Medicaid Services
  • Department of Defense
  • Department of Veterans Affairs
  • Health Resources and Services Administration (including the Children’s Hospital GME Payment Program and the Teaching Health Centers GME Payment Program)

Of these sources, Medicare contributes approximately 85% of the overall federal funding.

Medicare and the Physician Shortage

While Medicare has contributed more funding than any other source, many have criticized the program for not doing enough.

In 1997, the Balanced Budget Act put a cap on the number of residents that Medicare would support, approximately 90,000 each year. As a result, no existing residency program could add more residency slots in their hospitals beyond those available in 1996.

This cap would curb Medicare spending but would hinder residency programs from adapting to future physician shortages. This does not mean that there have been no new residency slots since 1996. Existing programs can add positions through other funding sources, i.e., state, private, or otherwise.

New Medicare-funded GME positions could also be added to hospitals that did not have preexisting residency programs or to newly constructed hospitals. Since the Balanced Budget Act of 1997, the total number of residency positions has grown by 27%.

Multiple laws have been proposed over the years to increase the number of capped Medicare positions. Unfortunately, it took almost 25 years before one succeeded.

The Consolidated Appropriations Act of 2021 (H.R. 133) added 1,000 new Medicare-funded GME positions at both rural and urban teaching hospitals. Still, this will not be enough to offset current and projected physician shortages.

Ways to Curb the Physician Shortage

The physician shortage is not going to go away anytime soon, not when it takes years of training. Increasing rates of physician burnout, as high as 44%, also threaten how long doctors stay in clinical practice.

There are no easy solutions. Medicare could expand its cap on residency coverage or remove it altogether to generate more GME opportunities. Ultimately, patients would benefit by having access to more physicians, but this could decrease the number of dollars in the Medicare Trust Fund used for direct patient care, i.e., your Part A benefits.

Other federal and state agencies could contribute a higher percentage of funds, but this could potentially redirect funding from other needed areas. Alternatively, professional medical organizations could donate to residency programs.

Allowing private entities to fund residency programs is also possible, though care would need to be taken to avoid potential conflicts of interest.

Making the U.S. healthcare system more efficient and finding ways to decrease provider burnout could keep doctors working longer. Not only would this decrease the number of physicians leaving clinical medicine each year, but it could also slow the projected physician shortage.

Summary

Medicare is the primary source for resident funding in the United States and currently limits the number of residents it covers. If Medicare does not take action, there could be a shortage of physicians when an aging population needs them most.

A Word From Verywell

Until you need a physician and can’t find one, how the medical education system works may not feel relevant to your daily life. To advocate for health care for yourself and your loved ones, learn more about these issues and get involved in supporting solutions.

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10 Sources
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Medicare Payment Advisory Commission. June 2015 report to the Congress: Medicare and the health care delivery system.

  2. Association of American Medical Colleges. The complexities of physician supply and demand: projections from 2018 to 2033.

  3. Association of American Medical Colleges. Active physicians in the largest specialties, 2019.

  4. Association of American Medical Colleges. Active physicians by age and specialty 2019.

  5. Medicare Payment Advisory Commission. Report to the Congress: Medicare payment policy. Chapter 4: physician and other health professional services.

  6. Federation of State Medical Boards. State specific requirements for initial medical licensure.

  7. National Residency Matching Program. Results and data: 2021 main residency match.

  8. Congressional Research Service. Federal support for graduate medical education: an overview. Updated December 27, 2018.

  9. American Medical Association. 2020 Compendium of graduate medical education initiatives report.

  10. Yates SW. Physician stress and burnoutAm J Med. 2020;133(2):160-164. doi:10.1016/j.amjmed.2019.08.034