Geographic Inequities Focus of Research Calling for Changes in GME Funding

AAFP Calls for Restructuring System to Meet Public Needs

November 27, 2013 03:12 pm Jennifer Lubell

The AAFP has long pointed out(4 page PDF) that there are geographic problems with funding for graduate medical education (GME), and now an article in the November Health Affairs( underscores the geographic imbalances in Medicare's GME system and makes a number of recommendations to revise the formula.

[Map of US, Alaska and Hawaii sectioned by color]

According to the article's authors, a state-by-state analysis of Medicare cost reports from teaching hospitals found significant differences in Medicare GME payments, as well as in the average payments per person and payments per medical resident. The imbalance seems to tilt in favor of Northeastern states with established GME programs. "States such as New York, Massachusetts, and Pennsylvania have long-standing medical education programs and substantial training capacity," said the article. "These realities have provided them with comparative advantages in terms of the Medicare GME payments received overall and per person, and the number of Medicare-sponsored residents per 100,000 population."

For example, according to the article, compared with New York, where total GME payments amounted to $2 billion, payments totaled just $1.64 million in Wyoming. In Connecticut, GME payment per medical resident is $155,135 on average per year, which is more than twice the GME payment per medical resident in Louisiana ($63,811). Significant state-level variations also were reported in the resident caps per 100,000 population, ranging from 202.87 residents in the District of Columbia to 1.63 residents in Montana.

Story Highlights
  • A new study in the November Health Affairs points out the geographic variability that often leads to significant differences in graduate medical education (GME) funding.
  • For example, the GME payment per medical resident in Connecticut is $155,135, but the per-resident payment is only $63,811 in Louisiana.
  • Authors of the article call for standardizing per-resident payments in all hospitals across all states to revise GME funding formulas, but the AAFP believes CMS must go even further.

The findings of the study "make it quite apparent who is benefiting financially the most from the present imbalance in the GME funding system, and it also highlights the magnitude of inequity in the system," said Perry Pugno, M.D., M.P.H., AAFP vice president for education.

Medicare GME payments "represent the largest single public investment in health workforce development," said the article. Teaching hospitals receive funds from the Medicare GME program to support residency and fellowship training for physicians. In 2010, about 1,200 hospitals received more than $10 billion from Medicare to help train 89,000 residents and fellows, according to figures from CMS.

However, the GME system has undergone many changes since its inception, including a cap on residency positions that was set by the Balanced Budget Act of 1997 on the premise that an oversupply of doctors existed in the United States.

According to the article's authors, "formula-driven GME and the blunt instrument reforms that capped individual hospitals at their 1997 training levels have frozen in place a very irregular geography and, effectively, robbed current policymakers of the ability to make strategic judgments about the $10 billion provided annually to teaching hospitals in the name of graduate medical education."

Granted, the federal government has since made minor adjustments to level out inequities in the system by setting a floor and a cap on GME payments, "but the fact is the states where the training takes place are obviously going to get the money because the money is designed to support the training. That's the reality of it," said Pugno.

The article's authors suggest that variation in overall GME payments exists largely because of Medicare's indirect GME payment formula, which compensates hospitals on the assumption that their expenses run higher than those of nonteaching hospitals. "Each hospital's ratio of interns and residents to beds significantly affects its indirect payment," said the authors. "Hospitals with higher resident caps, set at the level of training in 1997, can achieve higher ratios that result in higher indirect payments, compared to hospitals with lower resident caps."

The Medicare Payment Advisory Commission (MedPAC) determined that "the indirect payment rate is nearly two times higher than can be empirically justified," according to the article.

In a 2010 report to Congress(, MedPAC suggested reducing indirect payments based on the lack of evidence of their necessity, said Fitzhugh Mullan, M.D., Murdock Head Professor of Medicine and Health Policy at George Washington University and lead author of the Health Affairs article. Such an approach "provides a budget-neutral way of generating funds to support new cap positions," Mullan said.

Standardizing per-resident payments in all hospitals across all states would be another way to revise the GME funding formulas, according to Mullan. States receiving less GME support should receive some protection in the event funding reductions take place, and in turn, be given higher priority if funding increases, the article said.

"GME's dependence on federal support raises legitimate concerns about distributional fairness in this form of public funding," the authors noted, suggesting that the system would benefit from a coordinating body that would make policy recommendations on public investments in GME.

Some AAFP experts thought the proposals in the Health Affairs article didn't go far enough. "What we have now is a system in which there is misalignment of the workforce production with the needs of the country," said Stan Kozakowski, M.D., director of the AAFP Division of Medical Education. "It is an artifact that seems to be set in stone as a result of the setting of the cap in 1997.

"If we continue to try to make minor modifications in the GME payment system, what we continue to have is more of the same mismatch. If we (the nation) had the political will to address this, then we'd be able to restructure the GME system to meet the needs of the American population."

A report issued earlier in the fall by the Council on Graduate Medical Education (COGME) offers a more comprehensive approach to revamping the system, said Pugno. Among other things, the COGME report recommended that Congress increase funding for additional GME positions and direct increases to high-priority specialties, including family medicine, general internal medicine and general surgery, as well as to some subspecialties. The report also recommended looking at sources other than Medicare to fund GME.

Medicare shouldn't be the only entity supporting GME when many other entities are consumers of the GME system, Pugno said. "What we need is a more socially accountable GME funding system that will generate the kinds of physicians that the nation needs to meet the health care needs of the population. These are the types of major changes that need to take place."