Market Failure: Why Medicare Pays To Train New Doctors

This Thursday, March 18, is "Match Day."

You won't find it noted on most calendars. But for about 30,000 recent medical school graduates, it is the day when career hopes are confirmed — or dashed.

Those 30,000 are competing for about 22,500 slots in residency training programs at teaching hospitals around the country. The selections, known as "matches," will be announced this week.

Those who earn a residency will start treating patients this summer under the supervision of experienced doctors. Those who don't will start wondering if they've just wasted four years and a few hundred thousand dollars in tuition and fees.

It takes more than just four years of medical school to become a practicing physician; more, even, than successful completion of a residency and fellowship.

It takes Medicare — your tax dollars.

That's something to think about the next time you hear someone complain that health care reform is a "government takeover" of health care.

Private insurance companies play an important and necessary role in American health care. But they don't pay to train medical residents.

The lion's share of those costs comes from the federal government, most through the Medicare program.

Technically, Medicare is a health insurance program for elderly people and disabled people. But since it was created in 1965, it also has been the prime funding source for training young doctors.

As recently as 15 years ago, there was an oversupply of physicians. Most medical advocacy groups predict a serious shortage in the near future.

The American Association of Medical Colleges says we'll need at least 125,000 more doctors by 2025; other estimates are even higher.

That's because many practicing doctors are baby boomers, who are reaching retirement age.

And an aging population will strain the medical system.

If health care reform reduces the number of uninsured people, it will increase those strains even more.

Training new doctors is expensive, usually more than $150,000 per year for each resident. Medical residents deliver most care in teaching hospitals under the supervision of, although not always in the presence of, more experienced physicians.

But hospitals can't charge for residents' services. That's where Medicare comes in. Last year, Medicare's direct and indirect payments for medical education were about $9 billion.

In 1997, as part of a deal to balance the federal budget, Congress capped the number of residency positions it would underwrite.

That freeze remains in place, even though at least two dozen new U.S. medical schools have opened since then or have announced plans to do so.

Some people have suggested requiring private health insurance companies to start making payments for medical education.

After all, they depend on an adequate supply of doctors as much as the rest of us. Not surprisingly, the insurance industry doesn't like that idea.

Congress is under pressure to increase the number of medical residents. More important than the total number is the composition — how many go for primary-care doctors and how many for medical specialties.

But even with increased attention, not all the available residency positions in primary-care training programs are filled. Of 825 internal medicine and family medicine programs, 113 weren't filled on Match Day last year.

For thousands of recent medical school graduates, those larger social issues will be overshadowed by more personal concerns on Thursday. Where they match and what they learn will have an enormous impact on their future.

And on ours.

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