Does 'Regulatory Capture' by the AMA Explain the US Doctor Shortage?

The popular narrative surrounding the US doctor shortage usually falls into one of two traps: either the American Medical Association is a ruthless cartel intentionally strangling the supply of doctors to inflate salaries, or a stingy 1997 Congress broke the pipeline by capping Medicare residency funding. Both explanations are mathematically incomplete. The evidence shows that the United States does not merely have a raw shortage of medical graduates; it has a highly engineered maldistribution problem. The true bottleneck is a hybrid of regulatory capture that controls how doctors are trained, and market incentives that dictate where they practice. To understand why it takes months to see a primary care doctor, we have to look past the raw number of medical school graduates and examine the financial architecture of the residency system.

The raw numbers paint a stark and concerning picture of medical scarcity across the country. The Association of American Medical Colleges projects a national shortage of up to 86,000 physicians by 2036, with primary care and rural medicine facing the steepest and most immediate deficits. The United States currently fields just 2.7 practicing physicians per 1,000 residents, significantly lagging behind the OECD average of 3.8. This gap is widening precisely as the American population ages; the US population over the age of 64 has grown by 140% since 1980, drastically increasing the per-capita demand for complex, ongoing medical care.[2][3]

For critics of the medical establishment, this scarcity looks like classic regulatory capture. Economists note that the physician profession historically exhibited all the traits favorable for capture: a large occupation with high income absent licensing, stable membership, and fragmented consumers. The Accreditation Council for Graduate Medical Education (ACGME)—the body that dictates residency requirements—is governed by incumbent organizations including the American Medical Association and the American Hospital Association. Because state licensing laws effectively mandate ACGME-accredited residencies for medical practice, this coalition holds a functional monopoly over the physician pipeline.[3]

Critics argue that these incumbent groups benefit directly from this scarcity through reduced competition and higher compensation, incentivizing them to maintain stringent, expensive accreditation standards that block innovative or accelerated training models. By controlling the accreditation bottleneck, the establishment ensures that the supply of new doctors remains tightly constrained, which in turn preserves the high baseline salaries of US physicians. This guild protectionism, critics argue, is the primary structural reason why the United States produces fewer doctors per capita than almost any other wealthy nation, despite having the highest healthcare spending in the world.[3]

However, the medical establishment points the finger squarely at the federal government. In 1997, the Balanced Budget Act capped the number of Medicare-funded residency positions in an attempt to curb federal healthcare costs. Medicare remains the largest single funder of graduate medical education, providing roughly $15 billion annually to teaching hospitals. The AAMC and hospital associations argue that this 1997 freeze stymied growth just as the US population began to rapidly expand and age, artificially choking the pipeline through congressional inaction.[1][2]

Medical schools have largely done their part to address the shortage on the front end, increasing enrollment by nearly 40% since 2002 and opening over 30 new MD-granting institutions across the country. Yet, every single medical school graduate must complete a residency program to practice medicine independently. If the federal government refuses to fund new residency slots, the establishment argues, the bottleneck is purely a matter of federal funding, not guild protectionism. The argument is straightforward and financially grounded: hospitals simply cannot afford to train new doctors if Medicare does not foot the bill.[2]

But the data contradicts the idea of a hard federal ceiling that completely prevents the creation of new residency positions. Despite the 1997 Medicare cap, the total number of residents in training has surged by 70%, growing from roughly 98,000 in 1997 to over 167,000 in the 2024–2025 academic year. Hospitals can and do fund residency slots above their Medicare-reimbursed limits using private financing and internal hospital revenues. In fact, a Government Accountability Office report found that 70% of teaching hospitals currently train more residents than Medicare actually funds, proving that growth is possible without federal subsidies.[1]

If hospitals are successfully bypassing the federal cap, why does the shortage persist? The answer lies in the economic incentives of self-funded residencies. When a hospital pays for a resident out of its own pocket, it must generate a return on that investment. This heavily skews the creation of new slots toward highly lucrative specialties—like orthopedics, dermatology, or cardiology—rather than the primary care and rural medicine positions the country desperately needs. The market optimizes for hospital revenue, not public health.[4]

This dynamic perfectly explains the severe geographic and specialty maldistribution that plagues the American healthcare system. Of the projected 86,000 physician shortfall, 48,000 are expected to be primary care physicians. Rural areas, which have older populations and higher rates of Medicare and Medicaid patients, compensate hospitals at significantly lower rates than privately insured urban centers. Consequently, rural hospitals lack the capital to self-fund residency slots, creating a geographic vacuum that looks like a raw shortage but is actually a misallocation of resources driven by the financial realities of modern healthcare.[4]

The debate over the US physician shortage ultimately forces a choice between competing diagnoses of a deeply flawed system. Is the system broken because a guild restricts entry, because the government refuses to pay for training, or because the free market optimizes for profit over public health? The reality is a complex synthesis of all three factors: regulatory capture sets the rigid rules of entry, federal caps limit the baseline subsidy for unprofitable care, and market incentives warp the remaining growth toward the highest bidder, leaving everyday patients to bear the cost of the resulting scarcity.