Can anyone tell me exactly what an "unrestricted" medical license is. Do we start our PGY-1 year with Restricted licenses (can only practice in the residency program), and then we advance to unrestricted after we finish PGY-1 year, pass Step 3, and apply for the unrestricted license??
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Yes.
A full and unrestricted medical license requires passing Step 3 but you do not "advance" to the license unless you apply for it (many residents do not because they don't want to pay for one). Many states require you to have a training license in addition regardless of whether you have a full and unrestricted license. Rules will vary according to the state and program as to what you are required to have.