The number of practicing physicians per person in the United States is lower than in just about any other developed country. Yet from 1980 to the early 2000s, the prevailing wisdom was that the number of physicians within the United States ought to be reduced. During this period, a series of ill-judged reports by the federal government warned of an impending physician surplus. These reports ushered in a period in which both private and public actors took actions to constrain the supply of U.S. physicians, the most significant of which was the medical school moratorium. The resulting dearth of physicians had the effect of making U.S. health care more intensive and less accessible than it otherwise would have been.

The “physician surplus” narrative

In 1976, the secretary of the Department of Health, Education, and Welfare (now the Department of Health and Human Services) commissioned the Graduate Medical Education National Advisory Committee (GMENAC) to intensively study the U.S. physician workforce and provide policy recommendations. The committee’s mandate was to answer the question whether a rapid increase in the number of U.S. physicians that had occurred over the previous decade was cause for concern. Released in 1981, the GMENAC report concluded that the United States was on the verge of a massive physician surplus, recommending immediate action to curtail both the domestic training of physicians as well as the admittance of those trained outside of the country. 

It’s difficult to overstate the influence of the GMENAC report in cementing the narrative of physician surplus during the 1980s and 90s. The report is pervasively referenced in medical and policy journals during this period. In subsequent years, the “surplus” narrative would be routinely endorsed by governmental bodies. The congressionally-authorized Council on Graduate Medical Education repeatedly endorsed the need to constrain physician numbers in order to avoid a “surplus” in its annual reports between 1988 and 2000. Workforce modeling by the federal Bureau of Health Professions endorsed the same conclusion. And in 1997, a consensus statement by the American Medical Association, the Association of American Medical Colleges, and other prominent medical associations declared the same. 

In years following the GMENAC report, the surplus narrative would motivate efforts by both governmental and associational actors to restrict the U.S. physician supply. Just a few of the various actions taken included:

But perhaps the most long-lasting and damaging impact of the surplus narrative was the medical school moratorium from 1980 to 2005.

The medical school moratorium

The GMENAC’s first set of recommendations concerned the introduction of limitations on the output of U.S. medical schools. The specific supportive recommendations included: 1) a moratorium on the establishment of new medical schools; 2) a reduction in medical school enrollment and freeze on future class-size expansions. The report’s recommendations here, for the most part, became reality.

In response to the report, medical schools established a voluntary moratorium on new schools, during which a total of three new M.D.-granting medical schools were established in the United States. Similarly, in line with the GMENAC’s recommendations, medical schools either froze or cut student enrollment. Four years after the moratorium commenced, the number of medical graduates peaked and then began to decline modestly. The number of M.D. annual entrants fell in absolute terms from 16,600 in 1981 to a low of 15,800 in 1989. M.D. enrollment would not match its previous high until the moratorium ended in 2005.

One side effect of the medical school moratorium was the mainstreaming of D.O.-granting osteopathic medical schools, which opted not to participate in the moratorium. Initially formed as a heterodox school of medicine emphasizing bone and joint manipulation, the number of D.O.-holding osteopathic physicians increased substantially as a share of the physician graduates.  As such, D.O. degrees became increasingly accepted as a substitute for M.D. degrees. Yet because the number of D.O. enrollees started from a much smaller base, however, the net effect on the overall physician workforce was mostly to offset absolute declines. 

Another way to look at the GMENAC’s impact is in terms of the near-freeze on new medical schools between 1980 and 2005. Just a handful of new medical schools were established in this 25 year period, the bulk of which were D.O.-granting osteopathic schools. While federal support for medical education in the form of grants and scholarships was reduced or frozen during the 1980s, the widespread narrative of an imminent physician surplus promulgated in government documents likely did more to limit the U.S. physician supply than government policy itself. The zeitgeist within the industry during the period was one of skepticism and discouragement toward any action that would meaningfully expand the nation’s physician-training capacity. 

One impact of the medical school moratorium was an increasing U.S. reliance on physicians educated abroad. Between 1980 and 2000, the number of residency positions filled by international medical school graduates (IMGs) more than doubled. This increase was driven not only by immigrant physicians and participants in J-1 visa residency-exchange programs but also by an increasing number of U.S. citizens educated internationally. U.S. applicants rejected by domestic programs increasingly traveled abroad to receive their medical education, particularly to Mexico and the Caribbean. 

By the early 2000s, awareness began to grow that prior projections of physician surpluses were inaccurate. In 2005, the Association of American Medical Colleges switched its tune from “surplus” to “shortage”, calling for a substantial expansion in medical school enrollment by 10 percent, and raising the recommendation to 30 percent the next year. More recently, the Association of American Medical Colleges forecast a shortfall of somewhere between 43,000 and 121,000 physicians by 2030. Though the “physician surplus” narrative is mostly discredited today, the U.S. is still wrestling with damage in terms of reduced medical school capacity.

Physician supply is mostly about what kind of health system we want 

The “physician surplus” was a fake issue. A surplus of physicians will exist when prospective medical students forgo the profession in favor of more attractive opportunities. Any other definition is either confused or dishonest. 

The fundamental flaw of GMENAC and related physician workforce forecasts during the 1980s and 1990s was failing to account for the manner in which demand for health care rises in accordance with disposable income. People demand more health care as they get richer, a relationship that is remarkably consistent across countries. Contrary to popular belief, supply-side factors (such as physician density) largely influence the form that health care spending takes, rather than influencing the total amount spent. Only direct restraints on health care’s demand-side, like the short-lived ”managed care revolution” of the 1990s, appear to substantially reduce health spending at the level of national aggregates. Given the resources, health care providers’ capacity to increase the intensity of services appears boundless. 

Observing the relationship between physicians entering the profession and health care consumption helps to illustrate this point. In 1985, the number of physicians entering residency programs peaked along with medical graduate class-sizes, yet health care consumption grew unabated. Health care spending grew more disconnected from providers as a result.

Put another way, the number of physicians in the U.S. is largely a question about the sort of health care system that we want to have. Fewer physicians per person means that health care services are scarcer. Rather than ensure patients can easily access providers, the U.S. instead systematically directs health resources to high-intensity, often wasteful, treatments. In fact, an analysis conducted by the National Academy of Science’s Institute of Medicine found that unnecessary care was the largest contributor to waste in the U.S. health care system. 

Looking at other countries should have been a signal that our “physician surplus” worries were misguided. In 1960, the United States actually led the developed world in terms of physicians per person. By the 1980s, however, the U.S. had already fallen behind the majority of its peer countries in terms of doctors per person. Rather than being cause for alarm, the substantial run-up in medical school enrollment during the 1960s and 1970s was, in fact, merely a reflection of growing health care demand. In hindsight, judging by the even larger run-ups in medical school enrollment in Europe, we likely should have tried to expand the supply of physicians in the U.S. instead.

Today, the United States ranks last on “access to health care” among the 12 rich countries evaluated by the Commonwealth Fund, just barely behind Canada. Like the U.S., Canada enacted similar physician-reduction policies during the 1980s and 1990s, demonstrating that free health care doesn’t equal accessible health care without the workforce to deliver it.

And though medical school output is once again expanding, the U.S. still has a long way to go until it catches up with its international peers. Had the United States continued expanding medical school enrollment at the rates it experienced during the 1960s and 1970s, annual graduating class sizes today would be similar to those of countries where physicians are plentiful, such as Austria or Belgium. There are ultimately two ways to get physicians: train them domestically or import them from abroad. Relative to other rich countries, the United States does less of both.

Conclusion

Misguided fears of an impending physician surplus motivated policies that resulted in the United States falling substantially behind its international peers in terms of physicians per capita. The episode illustrates the power of narratives to not only influence public policy but private actors as well.  Robert Graham, the acting administrator of the Health Resources and Services Administration, concisely summed up the attitudes of the era towards physician supply when he stated in 1981:

I believe that the Administration’s position can be interpreted as follows: (1) The general supply of health professionals is adequate or the capacity of the U.S. health professionals schools to produce the needed supply is perceived to be adequate, (2) there will be a minimum federal role for investment in terms of health professions education whether we are talking about direct project grants, institutional assistance, student aid or other support, and (3) competition will sort out the major issues of distribution, specialty choice, and workforce mix.

While far from the only legacy of the “physician surplus” scare, the medical school moratorium of 1980 to 2005 was likely the most damaging. Even today, with medical school enrollment continuing to expand annually, we are still making up lost ground. Undoing this self-inflicted damage by expanding physician supply is essential if the United States is to achieve a top-tier health care system. 

Robert Orr is a poverty and welfare policy associate at the Niskanen Center.

This piece is part of our Captured Economy of Cost Disease series exploring the role of regressive regulation in driving up the costs of core goods like health care, education, and housing. It is made possible thanks to the generous support of the Peter G. Peterson Foundation

Photo Credit: Pixabay.