Most Surprising Thing I’ve Learned this Year (so far)

by Don Boudreaux on January 1, 2012

in Health, Regulation

Reading Linda Lesky’s paper “Physician Migration to the United States and Canada: Criteria for Admission” (which is chapter 5 of High-Skilled Immigration in a Global Labor Market, Barry R. Chiswick, ed. (2011)), I learn on page 156 that

hospitals determine the specialty composition of their residency positions, but the total number of positions has been capped at 1998 levels since enactment of the 1997 Balanced Budget Amendment [sic; the correct name of this legislation, enacted in August 1997, is the "Balanced Budget Act"].

Who knew?

Question: why does a government ostensibly committed to increasing the supply of high-quality medical care cap the total number of residency positions available at hospitals in the United States?

Explanations based on economic ignorance to rational political myopia to raw public-choice forces suggest themselves.

UPDATE: Loyal Cafe patron Kevin Kennedy sent the following note to me by e-mail (pasted below with his kind permission):

They don’t actually cap the number of residents, they cap the number they are willing to pay for.  Hospitals can add as many residents as they wish but above the cap they will not receive additional reimbursement.  This is spelled out in immensely complicated medicare regulations defining funding for graduate medical education.  We can applaud the cost-cutting impulse but of course the mechanism for getting there makes no sense and fails to reward innovation of any kind.

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