Implications of an expanding supply of physicians: evidence from a cross-sectional analysis

In the fall of 1980 the Graduate Medical Education National Advisory Committee (GMENAC) issued a report estimating that the supply of physicians will increase by 43% from 1978 to 1990, compared with an increase of 11% in the United States population. GMENAC estimated that this will lead to a surplus of 70,000 physicians by 1990, increasing to 145,000 by the turn of the century. Particularly marked surpluses are estimated to occur for nearly all surgical specialties, as well as most medical subspecialties. This paper attempts to estimate the impact of this increase in the supply of physicians on health care utilization and spending for health care services. Using cross-sectional data for 1978 this study estimates that an increased supply of physicians increases hospital admissions, lengths of hospital stays, costs per hospital day, physician fees for specialty services, and physician expenditures per capita. However, physician incomes appear to be lower in areas with more physicians. Projections to 1990 indicate that total health expenditures may be $50 billion higher as a result of the increase in physician supply. Real incomes of physicians, however, may be no greater than in 1978.