AARP Public Policy Institute INSIGHT on the Issues Graduate Medical Education and Medicare: Understanding the Issues The Medicare program spent about $9 billion on graduate medical education (GME) in 2008. There are important questions about whether the Medicare program, beneficiaries, and taxpayers are getting good value for this investment. How many residents should Medicare fund? To what extent should Medicare GME funding be used to advance workforce policy? For what kinds of training should Medicare pay? This Insight on the Issues examines the adequate supply of providers and role of Medicare in financing residency ensuring a workforce capable of training for physicians-in-training at delivering high-quality care. Without teaching hospitals. It presents enough physicians, nurses, and other information on funding, residency health care providers, Americans lose population, and teaching hospital access to care, both preventive and numbers. It also discusses issues facing lifesaving. Absent rigorous standards of policymakers concerned about the training, health care quality for all relationship between Medicare and the patients is threatened. Residency training physician workforce, including the role should ensure that our nation has a that Medicare should play in training sufficient supply of the kinds of residents, the extent to which Medicare providers needed to treat patients, and funding should be used as a tool to shape that these providers enter the workforce the physician workforce, and what kinds with the knowledge and skills required of training Medicare should support. to provide high-quality care. Graduate medical education (GME) is the Responsibility for implementing these system of hospital-based training required goals falls to those who oversee the of all physicians licensed to practice structure and content of residency training medicine in the United States. After programs and those who fund them. The spending four years in medical school (the main body charged with overseeing the “undergraduate” portion of medical content of GME programs is the education), physicians-in-training spend Accreditation Council for Graduate from one to seven years as residents Medical Education (ACGME), a private, training in hospital-based programs. This nonprofit body that accredits all residency residency training is referred to as training programs in the United States. graduate medical education, and the Funding for GME programs comes from a hospitals that operate residency training number of different sources, but the programs are known as teaching hospitals. dominant funder is the Medicare program. This Insight on the Issues focuses on The GME system, a key component of Medicare’s role in funding and shaping the country’s health care infrastructure, GME. has two main goals: ensuring an Graduate Medical Education and Medicare: Understanding the Issues Medicare’s Role in GME 0B payments, the number of residents a hospital may count for purposes of Medicare is the main funding source for Medicare payment is capped. GME in the United States. 1 Medicare D D pays teaching hospitals to train residents in order to ensure that the country has an GME by the Numbers adequate supply of doctors and that Medicare patients have access to the In 2008, Medicare paid teaching hospitals treatments and technologies available in about $9 billion in GME funds, or about teaching hospitals. $100,000 for each of the roughly 90,000 residents supported by the Medicare Medicare funding for GME comes in program.4 About two-thirds of the money D D two forms: direct and indirect GME. went toward IME payments and one-third Direct GME pays for the direct costs of for direct GME payments. operating a residency training program, including salaries for teaching faculty While the Medicare program supported and residents, administrative costs, and training for about 90,000 residents in rent and overhead costs for rooms used 2008, the total number receiving training for teaching. Payments are based on the at accredited programs in U.S. hospitals number of residents; every hospital has was 109,482, according to ACGME. its own per-resident amount based on Seventy-two percent were graduates of historical GME costs. Per-resident U.S. medical schools, while the amounts are about 6 percent higher for remainder were graduates of primary care (family practice, general international medical schools. About internal medicine, general pediatrics, one-fourth of residents were in the first obstetrics and gynecology), geriatrics, year of training, while 2 percent were in and public health programs than for training year five or beyond. A little other training programs. 2 While teaching more than one-third of residents were training in primary care specialties. 5 D D hospitals are free to train as many D D residents as they like (or as many as In 2006, 3,824 hospitals admitted ACGME approves), the number of Medicare patients, and 1,095 (just under residents Medicare will support is 30 percent) were teaching hospitals. capped. 3 These caps were put in place in D D Among teaching hospitals, 243 were 1997 in response to two concerns: “major” teaching hospitals, which means (1) that hospitals had a strong incentive the hospital had at least one resident for to add residents to get more money, and every four beds, and 853 were “minor” (2) that the country would soon have an teaching hospitals, with fewer residents oversupply of physicians. per bed. 6 D D Indirect GME payments (IME) reimburse Teaching hospitals and residents are hospitals for the additional costs of caring unevenly distributed. While a handful of for patients while simultaneously training states have more than 50 medical residents residents. Teaching hospitals receive an for every 100,000 people, most states have extra payment for each Medicare patient fewer than 30, and four states have 10 or they admit; the amount of extra payment fewer medical residents for every 100,000 depends on the number of residents the people.7 The geographic distribution of D D hospital trains and the size of the hospital. residents is important because research Hospitals that have more residents shows that residents are more likely to relative to the number of beds receive remain and establish practice in the state in higher IME payments than hospitals that which they complete their residency, train fewer residents. As with direct GME 2 Graduate Medical Education and Medicare: Understanding the Issues was clear: teaching hospitals had a strong because it helps highlight the areas that are incentive to keep adding residents in order relatively underserved by physicians, and to attract more Medicare dollars, at the because it shows where Medicare GME same time that analysts foresaw an funding goes. oversupply of physicians in the decades ahead. Today, the concern is not an Medical schools awarded 16,468 MD oversupply of physicians, but a potential degrees in 2009. That number is growing shortage of physicians in the future. in response to calls by the Association of Already, some states need more primary American Medical Colleges (AAMC) care physicians. and the Council on Graduate Medical Education (COGME) for a significant In response to these concerns, medical increase in enrollment by 2020 to schools are increasing their enrollments. In address concerns about physician 2009, 18,390 students matriculated at U.S. shortages. 8 A total of 18,390 students D D medical schools, more than a 10 percent entered medical school in 2009, increase over five years.12 In 2006, the D D suggesting more graduates in the future. 9 D D AAMC called for increasing enrollment by 30 percent. In 2005, COGME recommended that the number of residents who enter Issues Facing Graduate Medical 1B training each year increase from about Education 24,000 in 2002 to 27,000 in 2015. In 2007, COGME called on Medicare to increase Supporters and critics have raised a GME funding by at least 15 percent to number of issues and concerns about the accommodate more residents.13 way Medicare funds GME. 10 These D D D D issues come down to three fundamental Not everyone agrees that the nation needs questions facing policymakers: more physicians. Some argue that if we could reform the delivery system to reduce How many residents should unnecessary care, we would have enough Medicare fund? physicians to provide needed care.14 D D To what extent should Medicare Others believe that primary care can be GME funding be used to advance provided not only by physicians but also workforce policy? by physician assistants (PAs) and nurse practitioners (NPs), both of whom are less For what kind of training should costly to educate. Medicare pay? PAs practice medicine under the The underlying theme of each question supervision of physicians following two is whether the Medicare program, the years of full-time study. 15 NPs are D D beneficiaries who contribute directly to registered professional nurses trained in GME funding through premiums and providing primary care through at least cost sharing, and taxpayers are getting two additional years of full-time value from their investment in GME. graduate education. In most states, NPs practice without physician supervision. How Many Residents Should Medicare 3B Numerous studies have demonstrated Fund? that NPs provide primary care that is As mentioned earlier, the number of comparable in quality to that of MDs. 16 D D residents Medicare funds at a given teaching hospital is capped at the number The strongest argument against more in training at the hospital in 1996.11 At the D D residents is money. Even now, it is not time they were instituted, the need for caps clear just what Medicare gets for the 3 Graduate Medical Education and Medicare: Understanding the Issues $9 billion it spends on GME each year. to the growth of entitlement programs, The Medicare Payment Advisory including Medicare, may make Commission (MedPAC), the independent fundamental changes to the funding commission tasked with advising mechanism more likely. Congress on Medicare payment policies, has consistently found that the additional To What Extent Should Medicare GME 4B IME payments teaching hospitals receive Funding Be Used to Advance Workforce for each Medicare patient treated are far Policy? higher than the actual cost of treating these Beyond questions of how many physicians patients. In its most recent analysis, the population needs, there are questions MedPAC showed that Medicare inpatient about what kinds of physicians are most costs per case increased about 2.2 percent needed, and how physicians are for every 10 percent increase in the ratio distributed geographically. Most analysts of residents to hospital beds, less than half agree that the need for primary care the current IME adjustment of physicians is greater than the need for 5.5 percent. 17 D D specialists, but existing payment policies favor specialists. In a 2009 letter to Medicare could potentially have a larger Department of Health and Human impact on the primary care workforce at Services Secretary Sebelius, COGME much lower cost by investing in graduate noted that primary care physicians make nursing education. A recent cost up 35 percent of all practicing physicians, analysis 18 projected that a $1 billion D D but fewer than 20 percent of graduating investment could add 19,000 more medical students choose primary care. advanced practice nurses to the workforce over the next 10 years. 19 D D Current Medicare GME funding policies favor primary care residency positions Perhaps the more fundamental question with slightly higher per-resident amounts is why Medicare carries so much of the for primary care. The differential dates burden of funding GME. While other to the mid-1990s, when for two years payers, both public and private, do primary care per-resident amounts were provide funding, Medicare is the largest updated for inflation while other per- source. Medicare funding for GME is resident amounts were not. The about three times that of Medicaid, the differential is less a policy than a next largest explicit funding source. 20 D D historical artifact, and it has little effect The extent to which private payers fund on residency training. The higher GME is debatable because their support payments have not led to more primary tends to be implicit in the prices they care residents or physicians. negotiate with teaching hospitals relative to prices at nonteaching hospitals. Some Another area of workforce policy in estimates put it close to Medicare need of attention is the supply of funding; others suggest it is far less. 21 D D geriatricians available to treat Medicare beneficiaries. Various entities have Past efforts to expand participation in identified the need for more GME funding have failed. However, geriatricians. 23 , 24 , 25 Despite the fact that D D D D D D ongoing discussions by MedPAC suggest Medicare is the dominant funding source a new effort at expansion. At its March for residency training, fewer than one- 2010 meeting, MedPAC laid out a set of half of 1 percent of all residents are principles for restructuring GME funding training as geriatricians. In 2009, that include transitioning funding from ACGME reported 410 residents training Medicare to general revenues.22 The new D D in geriatrics. 26 While the number of D D principles, along with increased attention older Americans is growing rapidly, the 4 Graduate Medical Education and Medicare: Understanding the Issues number of residents training in geriatrics accommodate new funding streams? has declined over the last 10 years. 27 D These are the types of questions that need answers in order to adapt A third area that GME funding policy Medicare’s GME funding to new could influence is the geographic residency training models. distribution of residents and physicians. Medicare funds programs today based In addition to the question of training on how it funded them almost 20 years settings, there is the question of ago, with the geographic distribution of curriculum content. As noted earlier, we teaching programs reflecting that of the face a large shortage of geriatricians to physician workforce generally. Research treat the rapidly expanding Medicare has shown that residents are most likely population. One way to deal with this to practice close to where they train, and shortage is to train all physicians in also that students from rural areas are specialties that treat large numbers of more likely to practice in rural areas than older patients in geriatrics. their urban counterparts. Envisioning the Future: Changes 2B For What Kind of Training Should 5B to GME on the Horizon Medicare Pay? An ongoing concern for GME is the Recent GME-related activities suggest requirement from the Centers for that policymakers recognize the need to Medicare & Medicaid Services that address these issues. The health care resident training be hospital based in reform law enacted in early 2010 order to be eligible for GME funding. provides grants to support the Changes in health care delivery, along development of teaching health centers with changes in population health, make providing primary care residency hospital-based training less relevant training. The institutions eligible to today than it was decades ago. receive grant funds must be “community-based ambulatory patient COGME has called for Medicare to care centers.” 28 These teaching health D D broaden the definition of training sites centers will be eligible to receive funds beyond traditional hospital settings and for both the direct and indirect costs of to remove regulatory barriers limiting medical education, based on existing flexible GME training programs and per-resident funding amounts. These settings. Teaching hospitals have long grants are an important step in shifting advocated for regulatory changes that away from the hospital-centered would make it easier for residents to residency training that currently spend more time in nonhospital settings. dominates under the Medicare GME funding system. The new law also The need for residents to train in the creates a graduate nurse education settings in which they are most likely to demonstration in which Medicare will practice, and to treat the types of patients support clinical training for advanced and illnesses they will treat during their practice registered nurses. careers, is clear. The challenge is how Medicare (and other payers) should More sweeping policy changes may distribute funds outside of the hospital result from MedPAC’s recent setting. Should Medicare make recommendations. In March 2010, payments to nonhospital-based residency MedPAC introduced a set of policy programs? If so, how should those principles that would fundamentally payments be structured? How should restructure GME financing. The existing GME funding be changed to principles included transitioning GME to 5 Graduate Medical Education and Medicare: Understanding the Issues general revenue financing, enhancing workforce analysis and evaluation, and 1 increasing accountability for high Other programs that support GME include Medicaid, the Department of Veterans Affairs, the education standards. Health Resources and Services Administration, and private payers. While precise estimates are In April 2010, MedPAC approved a set difficult to obtain, Medicare funding is about three of recommendations for GME that times that of Medicaid. Estimates of private would retain Medicare as the dominant funding are especially imprecise. See Barbara source of financing, but would tie Wynn, Cassandra Guarino, Linsey Morse, and funding to “support the workforce skills Michelle Cho, Alternative Ways of Financing Graduate Medical Education (Arlington, VA: needed in a delivery system that reduces RAND, 2006). cost growth while maintaining or 2 improving quality.” 29 The D D Medicare Payment Advisory Commission (MedPAC), “Medical Education in the United recommendations identify these skills as States: Supporting long-term delivery system practice-based learning and reforms,” in Report to the Congress: Improving improvement, interpersonal and Incentives in the Medicare Program communication skills, professionalism, (Washington, DC: MedPAC, 2009). and systems-based practice, including 3 There are some limited exceptions intended to integration of community-based care encourage residency training in rural areas. with hospital care. The 4 MedPAC, “Medical Education in the United recommendations also call for States.” “workforce analysis to determine the 5 Primary care specialties include family number of residency positions needed in medicine, internal medicine, geriatrics, and the U.S. in total and by specialty…along pediatrics. See Accreditation Council for with the optimal level and mix of other Graduate Medical Education (ACGME), Data health professionals.” Resource Book: Academic Year 2008–2009 (Chicago: ACGME, 2009). The demonstrations in health reform and 6 The number of residents in training relative to policy recommendations from MedPAC the number of hospital beds is known as the are small steps. Both efforts recognize resident-to-bed ratio. that the value of GME funding—to the 7 The states with more than 50 medical residents Medicare program and the public in per 100,000 population are Connecticut, general—could be enhanced and set a Massachusetts, New York, Pennsylvania, and foundation for enhancing it over time. Rhode Island. The states with 10 or fewer medical residents per 100,000 population are Still, policymakers could go further. It is Alaska, Idaho, Montana, and Wyoming. easy to envision GME funds being used 8 Association of American Medical Colleges to affect policy goals more directly—for (AAMC), AAMC Statement on the Physician example, raising limits on the number of Workforce (Washington, DC: AAMC, 2006); residents in training for primary care Council on Graduate Medical Education (COGME), Sixteenth Report: Physician Workforce programs only, removing caps for Policy Guidelines for the United States, 2000–2020 geriatrics programs entirely, or shifting (Washington, DC: COGME, 2005). funds to programs in or near underserved 9 On average, 96 percent of matriculating areas. More dramatic steps include medical students eventually graduate with an limiting funding to specialties identified MD degree. See AAMC, Analysis in Brief: as having a shortage, or requiring that Medical School Graduate and Attrition Rates hospitals include geriatric training for all (Washington, DC: AAMC, April 2007). residents. Changes such as these would 10 Wynn and others, Alternative Ways of enhance both the value of our GME Financing Graduate Medical Education; investment and the quality of health care MedPAC, “Medical Education in the United all patients receive. 6 Graduate Medical Education and Medicare: Understanding the Issues States”; COGME, Nineteenth Report: Enhancing provide anesthesia services; and certified nurse Flexibility in Graduate Medical Education midwives who provide gynecological care to (Washington, DC: COGME, 2007). women of all ages, as well as obstetric care. 11 20 Congress has allowed adjustments to the caps Wynn and others, Alternative Ways of several times since 1997. Most recently, the Financing Graduate Medical Education. Medicare Prescription Drug Improvement and 21 INSIGHT on the Issues A. Dobson, J. DaVanzo, and N. Sen, “The Modernization Act of 2003 allowed for unused residency slots to be redistributed to hospitals that Cost-Shift Payment ‘Hydraulic’: Foundation, could demonstrate capacity to train more residents. History, And Implications,” Health Affairs (1): 22–33. 12 AAMC Applicant and Matriculant data, 22 http://www.aamc.org/data/facts/applicantmatricu C. Boccuti and C. Lisk, “Restructuring medical education financing: Principles and H lant/table4-fact2009slrmat-web.pdf (accessed priorities,” http://www.medpac.gov/transcripts/ H January 27, 2010). H public%20med%20ed%20march%202010%20v 13 COGME, Sixteenth Report: Physician 2.pdf (accessed April 1, 2010). H Workforce Policy Guidelines for the United 23 MedPAC, Report to the Congress: Impact of States, 2000–2020 (Washington, DC: COGME, 2005); COGME, Eighteenth Report: New the Resident Caps on the Supply of Geriatricians Paradigms for Physician Training for Improving (Washington, DC: MedPAC, 2003). 24 Access to Health Care (Washington, DC: American Geriatrics Society and the Association COGME, 2007). of Directors of Geriatric Academic Programs, 14 David C. Goodman and Elliott S. Fisher, Geriatric Medicine: A Clinical Imperative for an Aging Population (New York: American Geriatrics “Physician Workforce Crisis? Wrong Diagnosis, Wrong Prescription,” New England Journal of Society and the Association of Directors of Medicine 358, no. 16 (2008): 1658–61. Geriatric Academic Programs, 2004). 25 15 Institute of Medicine, Retooling for an Aging Accreditation Review Commission on Education for the Physician Assistant, America: Building the Healthcare Workforce Frequently Asked Questions, http://www.arc- H (Washington, DC: Institute of Medicine, 2008). 26 pa.org/faq (accessed April 8, 2010). H ACGME, ACGME Data Resource Book: 16 M. O. Mundinger and others, “Primary Care Academic Year 2008–2009 (Chicago: ACGME, Outcomes in Patients Treated by Nurse 2009). 27 Practitioners or Physicians: A Randomized MedPAC, Report to the Congress. Trial,” JAMA, 283, no. 1:59–68; B. J. Kirkwood, 28 D. J. Coster, and R. W. Essex, “Ophthalmic Patient Protection and Affordable Care Act, Nurse Practitioner Led Diabetic Retinopathy Pub. L. no. 111-148. Screening. Results of a 3-Month Trial,” 29 MedPAC, Transcript of Public Meeting, http://www.ncbi.nlm.nih.gov/pubmed/ H Thursday, April 1, 2010, http://www.medpac.gov/ H 16254596?dopt=Citation (accessed April 1, H transcripts/0401-0402MedPAC.final.pdf. H 2010); U.S. Congress, Office of Technology Assessment, “Nurse Practitioners, Physician Assistants, and Certified Nurse Midwives: A Policy Analysis,” http://www.princeton.edu/ Insight on the Issues I42, April, 2010 ~ota/disk/1986/8615/8615.pdf (accessed April 1, 2010). Written by Lynn Nonnemaker, Ph.D. 17 MedPAC, “Medical Education in the United AARP Public Policy Institute, States.” 601 E Street, NW, Washington, DC 20049 18 The Lewin Group, Medicare Graduate Nurse www.aarp.org/ppi H H Education New Proposal: Estimates of New 202-434-3899, ppi@aarp.org Proposal Costs and Benefits (Falls Church, VA: © 2010, AARP. The Lewin Group, Inc., 2009). Reprinting with permission only. 19 Advanced practice nurses include nurse practitioners who provide primary care; clinical nurse specialists who provide advanced nursing care in specialty areas; nurse anesthetists who 7