direct outlays for physician services constitute only 20 percent of health care expenditures, some experts have estimated that decisions made by physicians are directly or indirectly responsible for 70 to 90 percent of all health care expenditures (Feil et al., 1993; Mullan et al., 1995). An inadequate physician supply or a maldistribution of physicians geographically or by specialty (or both) is widely believed to impair access to health care. With respect to quality of care, a physician shortage might make medical care unavailable, but a physician surplus might produce underemployed practitioners with poor technical skills or create incentives to recommend unnecessary diagnostic and therapeutic procedures.

Pre-1980s Era

Concerns about a physician shortage dominated national physician workforce policy during the 1950s, 1960s, and early 1970s. As given in government statistics of the time, the number of active nonfederal M.D. physicians per 100,000 population in 1950, for example, was 126.6; the figure rose to 127.4 in 1960 and 137.4 in 1970 (DHHS, 1993). At those levels, the consensus was that the United States needed more physicians to provide medical care to a growing population, to expand access to care in rural and inner-city areas, and to meet the increased demand for care that would result from the passage of Medicare and Medicaid legislation.

The response to these perceived needs was complex. Federal and state governments took steps to increase the domestic production of physicians and to enable more graduates of foreign medical schools—that is, international medical graduates, or IMGs—to train and practice in the United States. Federal initiatives included capitation and construction grants to medical schools; direct support for education and training in family medicine, general internal medicine, and pediatrics; and payments to hospitals through Medicare and some state Medicaid programs for the costs associated with residency training programs. Federal funding was also made available to support the education and training of nurse practitioners and physician assistants. Several service-linked programs were developed, including the National Health Service Corps and financial support for community health centers and area health education centers (Kindig et al., 1993; Schroeder, 1994a; Desmarais, 1995; Mullan, 1995). A variety of state initiatives—such as the opening of new medical schools, increases in medical school class size, and the development of loan and scholarship programs for medical students—supplemented the federal effort.

These efforts to increase the U.S. physician supply were spectacularly successful (Figure 2-1). Between 1970-1971 and 1991-1992 the annual number of graduates from allopathic medical schools (M.D.s) in this country increased from approximately 9,000 to more than 15,000;2 the analogous rise for graduates

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