Medical Schools are free to expand but they have to spend a ton of money (more than you pay in Tuition, believe it or not) to train medical students. The same goes for residents. The hard cap on residency slots isn't really a deal with the devil. It is very expensive to train residents. If we want more doctors we need an expansion of residency slots and this would be very expensive. As it stands, the American people do not feel compelled to further fund medical education (or education in general, but the evidence I'm referring to is burgeoning medical school debt). If such an incentive from the government did not exist then hospitals would most likely charge tuition for residency as the hospital's incentive would be to try to equalize on their very expensive money pits (medical residents).
Once upon a time residents were paid close to nothing (even relative to the general population) and lived at the hospital, their living expenses covered by the hospital of course. Residency hour restrictions did not exist at the time. "No one complained about money as there was no time to spend it in. It was hard times but it was the best of times" writes one physician of this period, a long time ago. If we were to increase residency slots without an increase in funding for medical education (I.e Medicare reimbursements to pay for residents) then there would have to be a subsequent cut to residency pay, an increase to residency length, and a shortening of the resident work week.
Cut in pay is obvious, you mentioned it already.
Why do I say an increase in length and shortening of the resident work week? Well think about having more residents. It is one thing to say that new hospitals open residencies all over the country but the realistic scenario is that existing teaching hospitals also increase their slots. Residents need a lot of exposure to medicine in order to reach attending-level expertise. If you have more residents in your program and they all need to work but you only have a finite amount of work time (learning time) in the week then you every resident works less hours but the overall training length is increased. That, or a number of beds is added to the hospital which will accommodate for more working bodies on the floor. I doubt every teaching hospital could afford such an arrangement so I imagine most would take the former route.
What I'm saying is not far fetched, I am describing something akin to the NHS training path way in the UK. "Residency" is much longer in the Uk because work hours are much shorter for every "resident" (junior doctor over there).
Thus if you have a finite amount of work to be done, no reimbursement from the government to increase residency slots, and you increase medical school seats:
- Residencies need to start charging tuition or cut resident pay (or both) to offset training costs.
- Medical Schools need to increase tuition to afford having more seats since no reimbursement is coming from the Fed for increased training.
- Residency work week shortens, training pathways lengthen.
There would also be another interesting consequence. With the supply of physicians on the rise, salaries would drop for those who are salaried. Current attendings would probably work more hours, depending on the cut in pay, to maintain their current lifestyle. Especially younger attendings with a lot of medical school debt. Taking on a bigger workload to maintain their pay reduces the need for more bodies to be hired, which is a bigger expense, and you have residents graduating without a job. Given that there is a maldistribution of physicians - and not a shortage - highly desirable work areas would become more competitive than they already are young, indebted attendings would most likely be forced to the boonies. Overall, bad things for those already out of the training pathway.
Tl;dr: If the American people don't want to pay for it then it sure as hell isn't happening (barring "it" is not funding for the military).
Someone please fact check me I wrote this very quickly on my phone but I think it's sound.