Medicare financing of graduate medical education

The past decade has seen ongoing debate regarding federal support of graduate medical education, with numerous proposals for reform. Several critical problems with the current mechanism are evident on reviewing graduate medical education (GME) funding issues from the perspectives of key stakeholders. These problems include the following: substantial interinstitutional and interspecialty variations in per-resident payment amounts; teaching costs that have not been recalibrated since 1983; no consistent control by physician educators over direct medical education (DME) funds; and institutional DME payments unrelated to actual expenditures for resident education or to program outcomes. None of the current GME reform proposals adequately address all of these issues. Accordingly, we recommend several fundamental changes in Medicare GME support. We propose a re-analysis of the true direct costs of resident training (with appropriate adjustment for local market factors) to rectify the myriad problems with per-resident payments. We propose that Medicare DME funds go to the physician organization providing resident instruction, keeping DME payments separate from the operating revenues of teaching hospitals. To ensure financial accountability, we propose that institutions must maintain budgets and report expenditures for each GME program. To establish educational accountability, Residency Review Committees should establish objective, annually measurable standards for GME program performance; programs that consistently fail to meet these minimum standards should lose discretion over GME funds. These reforms will solve several long-standing, vexing problems in Medicare GME funding, but will also uncover the extent of undersupport of GME by most other health care payers. Ultimately, successful reform of GME financing will require "all-payer" support.