Graduate Medical Education Funding

Originally posted on March 4, 2013

Exploring new questions and ideas today will help reinvent the proposals of the past and ensure stability for the future

By David Reid, MSII
Kansas City University of Medicine and Biosciences

In 1965, Congress recognized the necessary public good that physician training provided by funding graduate medical education (GME) through the newly enacted Medicare program. This new program – created to help finance medical care for the elderly – was only to function as a support system for GME until society was able to “bear such education costs in some other way.”1 To this day, however, Medicare remains the primary source of funding for GME by a large margin, and through this avenue the federal government pays out nearly $10 billion to teaching hospitals every year to train new physicians.

Over the years, persistent legislative efforts to reduce GME funding through Medicare have been largely unsuccessful, but mounting pressures to reduce an astronomical federal deficit are starting to build and GME is consistently being considered as an opportunity for savings. At the same time, however, the US is seemingly on the verge of having to deal with a dramatically insufficient physician workforce. Some organizations estimate that the US will face a shortage of 90,000 physicians by 2020, and 130,000 by 2025 – over 50,000 of which will be primary care physicians.2

This need is being cultivated by a number of factors. The population is not only constantly growing, but aging as well. The Affordable Care Act (ACA) is also set to make health insurance newly available to millions of people through expansions in Medicaid eligibility and other provisions. With more people having access to coverage, more access to care will be critical. The demand is especially high for primary care physicians (PCPs), but this comes at a time when the number of medical students choosing to become PCPs is declining. The decreasing supply has been linked to factors such as increasing student debt loads, decreasing compensation, and increasing workload requirements.3

In a partial response to the impending shortage, plans to open 18 new medical schools (both osteopathic and allopathic) are in place, and the class sizes of existing schools have been steadily increasing.4 Unfortunately, the Balanced Budget Act of 1997 (BBA) made changes to GME that are starting to cause problems today. The law was enacted during a period of economic prosperity with a surplus of physicians, and it implemented a bullish cap on the number of residency spots Medicare was allowed to fund. The BBA also included significant liberal tax increases and conservative spending cuts that disproportionally affected Medicare.5 More than fifteen years later, the federal government continues its internal battle for similar revenue regulations, only in a less bearable climate. If no adjustments are made, the day may soon come when qualified graduate physicians will outnumber the availabilities for residency training – especially when considering the 7,000 international medical school graduates (IMGs) that enter into US residency programs annually.6

A review of the efforts to reform GME funding also reveals a similar trend of repetition. In a 1985 essay published in Health Affairs, Indiana senator and future Vice President, Dan Quayle, proposed reforming GME by calling on continued support from “third party payers,” and voicing his opinion that “a larger percentage of graduates…should enter primary care specialties.” Mr. Quayle also criticized the current system by claiming that “open-ended” funding was to blame for a lack of accountability in many teaching hospital programs’ decisions regarding GME. Mr. Quayle’s statements were made amid “projections [of] a substantial excess of physicians.” This makes it particularly interesting to note that in the current era of a physician shortage, studies published in recent months have strongly advocated for a multi-payer system of funding, incentives for primary care, and for greater accountability and transparency in GME spending.7

These ideas all have their merits, and among them viable solutions to these crises probably exist. To better identify those solutions, however, changes in perspective must be considered, and as the healthcare climate evolves, so must the efforts for reform. In order to meet this country’s growing medical needs, a combination of new and traditional ideas must be adopted to preserve current GME funding and to identify new streams of support that will ensure the continued availability of residency training opportunities for graduates of US medical schools.

There is no question that the legitimacy of GME funding is being called into question because of the ambiguity in how Medicare’s GME dollars are spent. This has raised suspicion in Washington and is leading towards reform that will eventually call for devastating reductions. Continued efforts must be successful in increasing the transparency of GME spending, even though this may cause discomfort to some of those who make teaching hospital financial decisions. Having clear evidence of the consequences of those reductions may create a moment of pause in the minds of slash and dash reformers, especially when dollar amounts are attached to job titles and patient benefits that can be connected to quality care outcomes.

Certainly the third party private payer options should continue to be investigated, but the question of how exactly that involvement will benefit those private payers needs to be more diligently explored. In order for private sector funding to be a viable and consistent option, more concrete incentives need to be identified and made clear to current and potential payers. Some questions that need to be more clearly answered are: How does a contribution to GME benefit a private payer in the short and long term? The MLR/Premium Rebate requirement in the ACA provides individuals with only very modest reimbursements, so could the policy be adjusted and utilized to provide an insurance company the incentive to fund GME with excess premium dollars in some fashion?

Work must also be done to better analyze the recent decline in state funding of GME through Medicaid programs. In 2005, 47 states contributed $3.78B to support GME, but in 2009 those numbers had dropped to 41 states and $3.18B.8 The questions that need to be investigated here are: where is this money going, and why has the value of supporting GME started to diminish? How can this be reversed? Can the federal government incentivize state funding for GME?

We will find greater success if we can identify ways to tie revenue streams from invested parties more directly to GME funding. Another idea that should be investigated is how the government might be able to use student loan repayments to aid in the solution of this problem. National student loan debt is at nearly $1 trillion dollars, and it may be very beneficial to take advantage of this issue. Research should be done on making student loan repayment possible with pre-tax dollars for borrowers who commit to repay at certain levels above the minimum required monthly payments. A “sliding scale” component could be tied to a person’s income and debt load to create individualized repayment goals. A balance could be found so that any funds lost in taxes would be made up for by increased student loan debt revenue, which would go directly to supplementing GME funding.

It is clear that the current policy of funding physician training programs needs to change and will do so as reform efforts continue. In order to ensure that the right reforms are adopted, the leaders of the medical education community must continue to act as leaders in researching new ideas. The final solution to finding a stable and adequate future for the funding of GME may not have been proposed above, but these questions and ideas deserve some consideration. It is often through tangential thought and exploration that both clarity and simplicity can be found in both new and old lines of thought. Although they may be difficult to recognize at first, new opportunities will be revealed as healthcare policy and practice evolve and improve.

1 Iglehart, John K. Financing Graduate Medical Education – Mounting Pressure for Reform. NEJM366;17. 2012
2 Seaman, Andrew M. us will need 52,000 more family docs by 2025: study. 11/16/2012
3 American Medical Association.
4 “Health Policy Brief: Graduate Medical Education,” Health Affairs, 8/16/2012

5 Metzler, Ian et al. The critical state of graduate medical education. The Bulletin. American College of Surgeons. 11/8/2012 6 Krupa, Carolyne. GME funding showdown looms in Washington. 8/27/2012

7 D Quayle, Graduate medical education: a proposal for reform, Health Affairs, 4, no.1, 1985:89-95
8 Iglehart, John K. The Uncertain Future of Medicare and Graduate Medical Education. NEJM365;14. 2011