IM is still extremely competitive, especially at top-tier programs. It probably has the widest distribution of competitiveness--e.g. FM and Psych are categorically uncompetitive, Derm and Oto are categorically competitive, and IM covers both ends of the spectrum. In these top programs as many as 80% of residents end up specializing.
In terms of reimbursement, basic economics simply will never allow primary care to be reimbursed at a "reasonable" rate.
1) On the supply side of things, I think a competent physician makes a real difference in the 5% of the sickest patients, where someone really needs to get a handle on all the person's medications and different recommendations from different specialists. But in 95% of patients, telling them that they're now 50 and in need of a colonoscopy, or that their A1C is high enough to start metformin, just does not require very much skill and could be done by a PA, RN, NP, or frankly a relatively simple computer program. And these 95% of patients are going to drive reimbursement rates. If you compare this to a neurosurgical procedure, well, 100% of their time (instead of 5%) is spent doing something that requires a ton of training.