In the United States, the government deliberately creates a shortage of medical residencies through a longstanding cap on federal funding for graduate medical education, primarily administered via Medicare. Residencies represent the essential postgraduate training phase that new medical school graduates must complete to become licensed physicians, yet the vast majority of these positions are financed by Medicare payments to teaching hospitals. This funding mechanism traces back to the Balanced Budget Act of 1997, which Congress passed amid concerns over a perceived surplus of physicians at the time. The act froze the number of Medicare-supported residency slots at their 1996 levels, effectively limiting hospitals to reimbursements for a fixed quota of resident positions without adjustments for population growth or expanded medical school enrollment. As a result, while the number of U.S. medical school graduates has surged by over 30% since the late 1990s to meet rising healthcare demands, the pool of federally funded residency spots has remained largely stagnant, creating a persistent bottleneck that prevents thousands of qualified applicants from advancing into practice each year.
This cap not only constrains overall physician supply but exacerbates shortages in critical areas like primary care and rural medicine, as hospitals hesitate to expand programs without guaranteed reimbursement. Recent legislative efforts, such as the bipartisan Resident Physician Shortage Reduction Act, seek to add thousands of new slots over several years, but until such reforms pass, the 1997 policy continues to throttle the pipeline of trained doctors, leaving patients with longer waits and uneven access to care.