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August 1, 2006
U.S. government controls the supply of physicians by how much federal funding it provides for the residency training. Hospitals are reimbursed for the cost of training medical residents through the federal Medicare program, which is the major financier of graduate medical education. In
1996, Congress passed the Balance Budget Act, establishing caps on the number of physicians in training (residents) that can be paid for by Medicare. These caps seriously discourage teaching hospitals from increasing the number of resident physicians being trained. No new residency programs are being created, and some programs are being closed because Medicare does not pay enough to cover residents and faculty salaries, benefits, and overhead expenses related to training programs.