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Medicare Payment Advisory Commission

MedPAC's June Report to the Congress: In its report released June 15, the Medicare Payment Advisory Commission (MedPAC) recommends that Congress authorize the Secretary of Health and Human Services (HHS) to establish a performance-based incentive program for Medicare graduate medical education (GME) payments. This recommendation, along with four others, is included in a chapter titled: Graduate medical education financing: Focusing on educational priorities. Three of the recommendations are for studies aimed at examining specific aspects of health workforce training. The June Report chapter concludes the commission's nearly two-year-long examination of ways to improve GME through Medicare's teaching payments.

The chapter emphasizes the commission's primary goal in undertaking this project: to create a payment system that fosters greater accountability for Medicare's GME dollars and rewards education and training that will improve the health care delivery system. MedPAC acknowledges that the U.S. system of GME is, in some respects, the best in the world. However, the commission believes that more can be done to improve certain education and training skills, such as evidence-based medicine, team-based care, care coordination, and shared decision making.

To achieve a "performance-based" GME program, the commission recommends that Congress authorize the Secretary of HHS to distribute approximately $3.5 billion in indirect medical education (IME) payments above the so-called "empirical level" that MedPAC estimates to be around 2.2 percent; the IME adjustment is currently set at 5.5 percent. The distribution of IME funds above the empirical level would be contingent on institutions meeting desired educational outcomes and standards.

Recognizing that Medicare should not prescribe GME curricula, the recommendation states that the Secretary of HHS should establish standards for distributing these funds after consultation with various groups, including accrediting organizations, training programs and health care organizations, as well as patients and purchasers.

The other recommendations would have the Secretary of HHS:

  • Annually publish a publicly accessible report that shows the direct GME and IME payments received by each hospital, the number of residents trained and Medicare's share of the associated costs incurred by the hospital;
  • Conduct workforce analyses to determine the number of residency positions needed in the U.S. by total and by specialty;
  • Report to the Congress on how residency programs affect the financial performance of sponsoring institutions and whether all residency programs should be supported equally by the Medicare program; and
  • Study strategies for increasing the diversity of the health professional workforce (e.g., increasing the shares of underrepresented rural, lower income and minority communities) and report on which strategies are most effective.

In a July 7 letter to MedPAC Chair Glenn Hackbarth, the AAMC responded to the recommendations that the commission made in its June 2010 Report to the Congress.  The letter expresses disappointment that the commission chose to ignore the need for additional Medicare resident cap slots, instead recommending only that the Secretary of HHS conduct a workforce study. The AAMC also states it opposes the commission's recommendation to reduce Medicare indirect medical education (IME) payments by more than 50 percent (about $3.5 billion) and put them "at risk" in a performance-based incentive program. Such a program is unnecessary given the accreditation requirements of the Accreditation Council of Graduate Medical Education (ACGME) and because it would significantly destabilize the academic medical community. The AAMC strongly supports the commission's recommendation that the secretary study strategies to improve the diversity of the health professional workforce.

Data Book: In June, MedPAC released its 2010 Data Book, which contains tables and figures accompanied by brief discussions on a broad range of Medicare topics.  The Data Book includes financial margin information for hospitals, including teaching hospitals.  MedPAC’s analyses of Medicare data show that, between 2007 and 2008 total margins have declined for all hospitals regardless of teaching status.  However, the aggregate margin for major teaching hospitals declined more sharply, becoming negative for the first time in more than a decade.  Specifically, major teaching hospitals saw a 5.9 percentage points decrease in the aggregate total margin, from 5.4 percent to -0.5 percent, compared to a 4.2 percentage points decrease for other teaching and a 2.8 percentage points decrease for nonteaching hospitals.

In 2008, Medicare inpatient margins were 5.3 percent for major teaching hospitals, -5.8 percent for other teaching hospitals and -9.4 percent for nonteaching hospitals.  Medicare overall margins in 2008 were -1.5 percent for major teaching hospitals, -7.4 percent for other teaching hospitals and -10.0 percent for nonteaching hospitals.  This year’s data book does not include historic Medicare inpatient or overall margin data by teaching status. 

Read the MedPAC Report PDF External Link

The AAMC’s letter to MedPAC on the DGME and IME policies is available at:



On Government Affairs

Testimony and Correspondence

External Resources