The initiatives in 'Canada's Economic Action Plan' always sound great – but are they meaningful? Earlier this month, the federal government announced that all family physicians (including residents) and nurses who decide to work in rural communities after April, 2012, will be eligible for partial Canada Student Loan forgiveness – up to $40,000 over five years for doctors. Ottawa expects this initiative to expand access to health services in rural and remote communities. Should Canada's small towns prepare for a flood of doctors heading their way?

Consider first the number of physicians that are potentially influenced by this initiative. From the 2007 National Graduates Survey, 41 per cent of the 2005 graduates that could be representative of new doctors (graduated from a health-related program, with a university degree above a bachelor's degree, and working in a health occupation and industry) had borrowed from Canada Student Loans.

Of those who borrowed, 31 per cent owed $35,000 or more in (federal and provincial) government student loans at the time of graduation in 2005. In 2007, 20 per cent of the borrowers owed $35,000 or more. These statistics are based on some small samples, but would roughly suggest that 8-13 per cent of new doctors could be influenced by this initiative.

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According to CIHI, Canadian faculties of medicine awarded 2,344 medical degrees in 2009. So we can imagine just over 200 new doctors per year potentially influenced by a Canada Student Loans forgiveness programs.

Is $8,000 a year enough to convince the average family physician and their family to take up practice in a rural community? Most would agree that $8,000 a year doesn't seem like much to a person earning a six-figure salary. If married, doctors are likely to have a spouse with similar earnings potential. The job opportunities for a spouse may be equally important in the doctor's location decision.

Research (by Bolduc, Fortin and Fournier in 1996) has shown that incentive programs for new doctors can have a significant effect on location decisions. Quebec's Differential Remuneration Program paid substantially higher fees to rural doctors in the 1980s and was predicted to increase the number of new general practitioners in remote and isolated regions by 14 per cent. Quebec's bursary programs tied to rural service ($10,000 per year in 1982 to medical students), settlement grants ($5,000-$10,000 nontaxable), refresher training programs, and additional grants to doctors in the most isolated regions increased supply by 34 per cent.

Unfortunately, the $8,000 a year offered under the new Canada Student Loans program pales in comparison to the set of Quebec programs examined. Given the empirical evidence available, to suggest that up to 20 new doctors per year (10 per cent of the 200 potentially influenced) is probably a very generous and optimistic estimate. Only a handful of those will settle down in the rural communities in the long-run.

How many rural communities in Canada are struggling to get family physicians? A lot more than 20.

The Government of Canada expects this program to cost $9-million a year.

Tammy Schirle is an Associate Professors of Economics at Wilfrid Laurier University