AAMC Reporter: July 2009

Overview: Graduate Medical Education and Health Care Reform

How is resident education funded?

Since its creation in 1965, the Medicare program has helped cover a portion of the costs associated with graduate medical education (GME) and the patient care missions of teaching hospitals. It does so through two discrete payments: direct graduate medical education (DGME) and indirect medical education (IME). DGME payments help fund resident stipends and benefits, as well as other costs directly related to residency training. IME payments help cover the higher patient care costs incurred by teaching hospitals. In fiscal year 2008, Medicare DGME payments totaled an estimated $2.7 billion, while IME payments were estimated at $5.7 billion.

Medicare pays its share of direct GME costs based on each hospital's ratio of Medicare inpatient days to total days. The remaining costs of training and other missions are largely borne by teaching hospitals themselves. In 47 states and the District of Columbia, the Medicaid program also provides some support for GME.

Why is there a cap on residency positions?

In an effort to control federal spending, Congress passed the Balanced Budget Act in 1997, which capped the number of residency slots supported by Medicare at the then-current level.

The cap is hospital-specific, meaning Medicare contributes to a certain number of residency slots. Hospitals may choose to create more slots-and they have-but Medicare will not help fund them. The Balanced Budget Act also capped the number of residents used in the IME payment formula.

The cap has been in place for more than 10 years. In the mid-2000s the AAMC, as well as several medical student and physician organizations, began warning of an imminent physician shortage and called for efforts to increase the nation's supply of doctors. Medical school enrollment increased, but the resident cap, which many saw as an impediment to educating more physicians, remained intact. The cap may now be poised for a change due in part to health care reform. Health care reform proposals, including different ways of providing health coverage to more Americans, are gaining serious momentum in Washington and throughout the country. Because increasing health care coverage would likely increase the demand for physician services, there is renewed discussion over the need for raising the cap.

How is Congress reacting?

Several lawmakers also see an opportunity. Led by Senators Charles Schumer (D-N.Y.), Senate Majority Leader Harry Reid (D-Nev.), and Bill Nelson (D-Fla.), and Reps. Joseph Crowley (D-N.Y.), Kendrick Meek (DFla.), and Kathy Castor (D-Fla.), the House and Senate introduced in May the Resident Physician Shortage Reduction Act of 2009. The bill would increase the number of residency training slots by 15 percent (or approximately 15,000 slots).

Lawmakers also see the increase as a means not only of increasing training slots, but also as a potential tool for improving health care access. Castor has said "we need more medical residents in community health centers, hospitals, emergency rooms, and clinics so that families can receive quality, affordable medical care."

The bill would distribute the new slots in a way that gives preference to teaching hospitals that commit to expanding or creating more primary care and general surgery residencies, emphasize community-based training, or are in areas with rapidly growing populations. The legislation would also redistribute the residency slots currently lost when the hospital that supports them closes, and it would remove barriers to resident training in non-hospital settings.

What are the prospects for this bill?

If passed, when could we see tangible results? The legislation is still in its very early stages. The next step is for proponents of the bill to secure substantial bipartisan support. Without that support, the bill will have a difficult time moving forward in what is already a packed legislative session.

If the bill passes, are GME worries over?

They are never over. Several issues remain on the table that could significantly affect funding for GME. For one, the Medicare Payment Advisory Committee (MedPAC), the influential body that advises Congress on Medicare issues, has recommended a decrease in GME spending. On Jan. 6, during a MedPAC meeting to discuss Medicare payment updates, the commission voted to recommend reducing the indirect medical education (IME) payments by 18 percent.

MedPAC sees it as a way to reduce Medicare spending; teaching hospitals say it could significantly affect their ability to balance patient care with educating doctors. According to AAMC estimates, an 18 percent cut would mean $1.1 billion less in IME payments for teaching hospitals, and $214 million less for teaching hospitals in the state of New York alone.

Given that the current administration is looking to overhaul the nation's health care system, there is little doubt that GME itself may also become the subject of intense discussions.

—By Scott Harris