Medical residency subsidies and physician shortages

We quantify the impact of federal subsidies for graduate medical education on primary care physician (PCP) supply by examining the impact of Section 5503 of the Affordable Care Act, which increased the number of residents that teaching hospitals in rural and high-need areas could receive subsidies for training. Instrumenting for selection into the program using its eligibility criteria, we find that the provision increased both recruitment of residents into primary care and time spent at teaching hospitals in high-need areas, resulting in a 4.1 % increase in PCP supply. • Section 5503 of the ACA reallocated residency subsidies to high-need areas. • We address hospitals’ selection into Section 5503 using instrumental variables. • Resident recruitment into primary care programs increased in high-need areas. • Primary care physician supply increased by 4 % in high-need areas.