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Medicare Resident Limits ("Caps")


Medicare provides an important source of funding that helps offset some of the costs associated with educating residents, caring for patients who require more intense and complex care, and the other special missions of teaching hospitals.

The Balanced Budget Act of 1997 (BBA) limited the number of allopathic and osteopathic medical residents that would be counted for purposes of calculating Medicare indirect medical education (IME) and direct graduate medical education (DGME) reimbursement to the unweighted number on each hospital's most recent cost report as of December 31, 1996 (BBA Section 4621). Effective October 1, 1997, to the extent the number of allopathic or osteopathic residents being trained at a teaching hospital exceeds the 1996 limit, teaching hospitals receive no additional IME or DGME payments; podiatry and dental residents are excluded from the resident limits.

The Balanced Budget Refinement Act of 1999 (BBRA) increased the limit for rural teaching hospitals to equal 130% of each rural teaching hospital's 1996 resident count (BBRA Section 407).

Resident Limits Are Impeding Teaching Hospitals' Educational Mission

The BBA resident limits have imposed significant limitations on the ability of teaching hospitals and medical schools that sponsor and conduct graduate medical education programs to respond to the needs of the communities they serve. Over time, the current policy is beginning to impede the continued development of the educational mission at many teaching institutions.

Medicare reimbursement for additional residents and/or new residency programs at teaching hospitals are needed for a variety of reasons, including:

  • Rapid population growth in some areas of the United States. The current limits constrain the ability of hospitals and medical schools that sponsor graduate medical education programs to increase the magnitude of residency training activity to help assure adequate and appropriate numbers of physicians within that geographic area.
  • Shortages in certain medical specialties. It is not uncommon for shortages to arise in certain specialty areas of medicine due to changes in medicine, technology and practice. In these instances, some areas of the country may have a shortage of training positions for these specialties due to the dynamics of the medical marketplace and the longitudinal development of teaching programs.
  • Development of new specialties. Medicine is evolving at a very rapid pace. Driven in large part by the rapid increases in new knowledge arising from research and other activity at medical schools, pharmaceutical firms, technology firms, and research institutes, there is a need to continually consider the development of new specialties. These new specialties provide the leadership to assure that these new capabilities are available to the public. Staff of the Accreditation Council for Graduate Medical Education (ACGME) have noted that the current resident limits are impeding even preliminary discussions about the establishment of new residency programs.

There are other problems associated with the resident limits, including the fact that the BBA provision is based on a snapshot of activity, essentially "freezing" the status of residency education at a random point in time-1996. A number of institutions were undergoing transitions during that time such that 1996 was an anomaly in terms of residency counts. For these institutions, the resident limits can have profound effects on their educational missions.

The resident limits have now been in place for over four years. In other areas, decisions to impose a "freeze" are temporary in nature. In health care, and in Medicare in particular, the AAMC is unaware of policies that have not factored in the need for modifications after a certain period of time. In fact, the BBRA increased the resident limit for rural teaching hospitals to 130 percent of their 1996 resident counts.

It is essential that additional flexibility, in terms of residents trained, be provided to teaching hospitals and medical schools so that they can respond to the dynamics inherent in a changing population and in medicine.

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