Medical students confront a residency black hole by Elizabeth G. Olson @FortuneMagazine April 1, 2013, 5:10 PM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons FORTUNE – On a single day every March, tens of thousands of medical students learn how their medical career will begin. They call it Match Day. Budding doctors are given residency training slots that will set the course of their professional lives. But this year’s Match Day left hundreds of applicants without an immediate professional berth. The news drew alarm from physicians’ organizations and federal lawmakers who argue that more needs to be done to thwart the looming nationwide shortage of doctors. “We are troubled by reports about significant numbers of highly qualified U.S. medical school graduates who do not match to residency training positions,” says Darrell G. Kirch, CEO of the Association of American Medical Colleges, which represents 141 accredited U.S. medical schools. MORE: Tim Cook issues an apology to Apple’s Chinese customers Medical schools are graduating more doctors, but the flow of medical school graduates has not been aligned to available training slots. The gap has left hundreds of fourth-year medical students without the training spots they need to become full-fledged practitioners. Two weeks ago, several federal lawmakers reintroduced legislation to add between 3,000 and 4,000 federally funded residency positions over a five-year period. Medical groups have argued that such a measure could help fill a projected shortfall of 130,000 physicians by 2025, as more Americans sign up for Medicare and become eligible for medical care under newly mandated health insurance coverage. New medical schools = more doctors-in-training Four new medical schools recently graduated their first classes, adding nearly 1,000 students to this year’s residency matching pool. And medical schools are on track to increase enrollment by 30%, according to AAMC figures. But closing the doctor deficit takes time because students must spend between three and seven years training in a medical specialty, which can range from primary care to surgery. Med school graduates who fail to find a match end up in a kind of professional no man’s land. They can apply for one of the approximately 1,000 positions that are not filled in the official matching process, apply for a research grant or — in the worst case — abandon plans to become a doctor. This year, nearly 17,500 graduates of U.S.-based medical schools applied to the National Resident Matching Program, which uses an algorithm that pairs student and hospital preferences with available openings at teaching hospitals around the country. Some 1,100 U.S. graduates did not find a match this year — and about half of those didn’t land a spot in the informal period afterward. Medical groups say the disparity between students and slots will only grow in coming years and are urging Congress to make changes to assure that all applicants find training. MORE: A new tool to stop cybercrime The American Medical Association has launched a campaign called “Save GME,” for graduate medical education, to eliminate what it calls a bottleneck for graduates seeking residency slots and reverse the constraints on federal funding imposed more than a decade ago. About one-fourth of residencies are currently funded by Medicare, the federal health program for people over the age of 65, but that is a historically low proportion. Congress limited such financing in a 1997 budget-cutting measure. Congress recently reintroduced bills that would add 15,000 Medicare-financed residency positions over five years, emphasize training in community or outpatient settings, and set aside new training spots for specialties where there are identified shortages, such as primary and geriatric care. The AAMC also supports the bill. “Right now, there are about 26,000 people [medical school graduates] and a similar number of residency slots,” says Atul Grover, the organization’s chief public policy officer. “But starting in 2016, that will begin to change, with more medical school graduates, and without a corresponding growth in residencies, there will be a wider gap.” The AAMC estimates that it will cost about $9 billion to close this gap. Wanted: More family doctors The system will also need to address a drop in the number of available residencies in family medicine. As doctors flocked to high-paying specialties like dermatology and orthopedic surgery, training hospitals eliminated some 390 family medicine residencies in recent years, a decline that the American Academy of Family Physicians and other groups have tried to address. This year, 1,374 students chose primary care as a residency specialty, says Mona M. Signer, the residency match program’s executive director. That’s an increase of 39 students from the previous year. Primary care includes internal medicine, family medicine, and pediatrics. But the AAFP says that the percentage of those choosing family medicine has slowed. A decade ago, 10.5% of medical students chose family medicine in the residency match, compared with 8.5% this year. Adding family medicine residencies would encourage graduates to choose that specialty, says Jeffrey Cain, the AAFP’s president. Family medicine fell out of favor because students have wanted less encumbered lifestyles, and the job offers salaries that are about half of what specialists earn. MORE: ‘Game of Thrones': A biz leader’s guide But, Cain says, “More medical schools are making students aware of the importance of family medicine, and insurance reimbursement and changes in practices are also helping.” About 60% of family medicine doctors are employed by large group practices and 40% in single-person practices. It had been the reverse just a decade ago, but many doctors have sold or closed their individual practices since then. Cain says that med students abandon their aspirations to practice family medicine in droves between the time they enter and graduate from med school. And family medicine physicians now account for only 32% of the total pool of working doctors. “We need to bring those numbers up to 40% so we can rebalance the health care system,” he says, “so those who need care are getting it.” Editor’s note: A previous version of this story incorrectly referred to the Association of American Medical Colleges as the American Association of Medical Colleges.