The long-standing federal cap on Medicare-supported residency slots coupled with ongoing economic challenges faced by hospitals could spell trouble for the nation's physician shortage.
Most large academic medical centers train residents well beyond the number of positions for which they receive support from Medicare, meaning they cover the full cost of training for any additional residents. Across the country, teaching hospitals fully cover training costs for roughly 25,000 residents — averaging around $184,000 per resident annually in 2021 — without any federal reimbursement. They do so because a core part of their mission as teaching hospitals and academic medical centers is to develop the future physician workforce.
But amid ongoing financial pressures facing the industry, including high labor and supply costs, healthcare groups have warned that self-funded resident positions are not sustainable long-term.
"It is extremely expensive," said Leonard Marquez, senior director of government relations at the Association of American Medical Colleges. "Those over-the-cap positions are the types of things I think are at risk [of being cut amid escalating costs.]"
"That's one of the things that certainly worries me about how we're ultimately going to be able to address the physician shortage."
The American Hospital Association shares the concern.
"While some hospitals are filling in gaps by self-funding a portion of their own, this model is not sustainable over the long haul, as evidenced by the -17.3% Medicare margins (without COVID-19 relief funds) for teaching-only hospitals in 2020," the group wrote in a June 2023 fact sheet on graduate medical education funding.
Even with Medicare funding, hosting residency programs is a significant expense. In 2021, teaching hospitals spent $23.1 billion to run residency training programs, AAMC data shows. Of that, Medicare covered just over $5 billion, or 22%.
The path forward
Despite growing enrollment in U.S. medical schools, the number of Medicare-supported residency slots has essentially remained frozen at 1996 levels. In 1997, Congress established caps on the number of Medicare-supported positions, which were based on the number of residents teaching hospitals were training at the end of 1996.
Hospitals, medical schools and physicians say the cap is a major contributor to the nation's growing physician shortage and are urging federal lawmakers to pass bipartisan legislation — the Resident Physician Shortage Reduction Act — that would add 14,000 Medicare-supported residency positions over seven years, with one-third of the slots reserved for hospitals already training above the cap.
"Lifting the cap on Medicare-funded residency positions would enhance access to care and help America's hospitals better meet the needs of the communities they serve," the AHA said.
Should such an expansion come to fruition, the nation could limit the shortage of physicians to 86,000 by 2033. Without major federal investments in graduate medical education, the U.S. will likely end up with a much larger shortfall of up to 124,000 physicians, according to AAMC projections.
Since 2021, Congress has authorized funding for 1,200 new Medicare-supported positions under two laws, marking the first increases since the cap was established 27 years ago. The new positions will gradually phase in over the next several years. To date, CMS has awarded half of the 1,200 positions to teaching hospitals.
The physician shortage is complex and driven by a range of factors. But many healthcare stakeholders largely agree on one thing: The nation will not make meaningful progress in addressing the shortage until there are significant expansions to residency programs.