Nonphysician Clinicians Physician Compensation Public Policy

Funding Physician Medical Education

Each year, more than $15 billion of taxpayers’ money is spent to support physicians in residency training. About one-third of this amount comes from Medicaid, the Department of Veterans Affairs, and the Health Resources and Services Administration. The remaining nearly $10 billion flows through the Medicare program, primarily to academic medical centers via a complex system of direct graduate medical education (DGME) payments for residents in approved training positions and indirect medical education (IME) payments intended to compensate teaching hospitals for the added costs of caring for Medicare beneficiaries in a training environment.


How is this money being spent? Is it being spent wisely? The Medicare Payment Advisory Commission (MedPAC) recommended cutting IME payments by more than 50% (about $3.5 billion) and using these funds to create performance-based incentive programs. An Institute of Medicine (IOM) committee also considered these questions as well. What did they conclude?


According to an essay by Gail Willensky, the IOM committee made a number of recommendations. One of them was to gradually eliminate the DGME and IME programs and instead transform them into (1) an Operational Fund that continues to support existing and future Medicare funded training positions and (2) a Transformation Fund to support innovations in how GME funding is used. The IOM committee also recommended a “single national, geographically adjusted payment per resident. These payments would be made directly to GME sponsoring organizations and, over time, would move to a performance-based system informed by the Transformation Fund pilots.”


Representatives from the American Association of Medical Colleges, American Hospital Association, and American Medical Association generally did not approve of this plan. They cite a pending physician shortage of nearly 100,000. The IOM committee, however, assumed that forecasting physician supply is difficult and assumed that a pending shortage is not imminent.


In a typical market, increased demand would increase worker interest in becoming a physician. However, this market is constrained because slots at medical schools are limited. Physicians from abroad could practice in the US, but it is unclear whether this could fill a void if there was a large shortage. Additionally, the trend towards increased use of physician extenders such as nurse practitioners and physician assistants could increase the productivity of physicians and decrease the need for physicians. Despite this uncertainty, one thing that is certain is that the fight over funding the education of the nation’s physicians is likely to continue.

Leave a Reply

Your email address will not be published. Required fields are marked *