Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
May 12, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 1719 words
HEADLINE:
TESTIMONY May 12, 1999 DAVID BLUMENTHAL SENATE FINANCE CHANGES
TO THE MEDICARE SYSTEM
BODY:
STATEMENT OF DAVID
BLUMENTHAL, MD, MPP CONCERNING GRADUATE MEDICAL EDUCATION AND
DISPROPORTIONATE SHARE FUNDING UNDER THE MEDICARE PROGRAM BEFORE THE SENATE
FINANCE COMMITTEE MAY 12, 1999 Mr. Chairman, members of the Senate Finance
Committee, my name is David Blumenthal. I am executive director of the
Commonwealth Fund Task Force on Academic Health Centers, and director of the
Institute for Health Policy at Massachusetts General Hospital and Partners
HealthCare System in Boston, Ma. As a primary care internist and a member of the
faculty at Harvard Medical School, I am also actively engaged in caring for
Medicare beneficiaries as well as teaching medical students and residents. I
greatly appreciate the opportunity to appear before you today to discuss the
future of the graduate medical education and disproportionate
share provisions of the Medicare program. The views I will express reflect for
the most part the conclusions of the Commonwealth Task Force, which is supported
by the Commonwealth Fund of New York City to study and make recommendations
concerning the preservation of the social missions of academic health centers.
Academic health centers consist of medical schools and their closely affiliated
clinical entities, including teaching hospitals. Their social missions include
teaching, research, the provision of rare and specialized services, innovation
in patient care, and the care of vulnerable populations, including the indigent.
In the brief moments allotted me this morning, I would like to address a few
basic issues. The first point concerns the purpose of the graduate
medical education provisions of the Medicare program. One of the most
confusing things in the discussion of these provisions is the use of the term
"Graduate Medical Education" or "GME" itself. The fact is that
these provisions do not support and were never intended to support only or even
primarily the education of physicians and other health professionals. Rather,
the extra payments received by academic health centers and other teaching
hospitals under Medicare were intended to pay the extra costs of caring for
Medicare patients in those institutions. Therefore, the debate about the future
of the GME provisions is really a debate about whether and how the Medicare
program - and/or the federal government generally -- should continue to pay for
the greater expenses incurred when Medicare beneficiaries receive their care in
academic health centers and other teaching hospitals. The next issue I would
like to address concerns this question of whether Medicare should continue to
pay the extra costs of academic health centers and other teaching hospitals. The
answer depends of course on what the source of those costs are and whether they
are legitimate expenses for the Medicare program. There are at least two basic
contributors to the additional costs of academic health centers and other
teaching hospitals. The first contributor is directly related to the nature and
value of the services that Medicare beneficiaries receive when they are cared
for in academic health centers. There is good evidence that the Medicare
patients treated in academic health centers are sicker and thus more expensive
than those treated in other hospitals. Furthermore, these expenses are not fully
captured by DRG payments. There is also good evidence that the quality of care
provided in teaching hospitals and academic health centers is superior to that
available in other institutions, and that this improved quality is associated
with increased costs. To the extent that the extra expenses of teaching
hospitals and academic health centers reflect the burden of illness they
confront, and the quality of care they provide, those expenses are arguably
legitimate and essential expenses for the Medicare program to pay. There is also
a second contributor to the extra costs of teaching hospitals and academic
health centers. This is the involvement of these institutions in the production
of what economists might call "public goods." Public goods are things that have
intrinsic value but are unlikely to be adequately supported in private markets,
and thus deserve public financing. In the case of teaching hospitals and
academic health centers, these public goods include teaching, biomedical
research, continuing innovation in patient care, the provision of rare and
highly specialized services that have very limited markets (such as
transplantation, complex burn and trauma care), and care of the indigent. The
problem with these types of services is that everyone benefits from having them
available, but most of us don t benefit directly or immediately enough to pay
their full value. Thus they tend to be under-supplied in private markets. In
this country, we have chosen to pay a significant portion of the costs of
producing these public goods by letting teaching hospitals and academic health
centers charge higher prices and use the proceeds to cross-subsidize these
activities. To the extent that the extra expenses of teaching hospitals and
academic health centers result from the involvement of these institutions in the
production of public goods, the Task Force believes that these expenses are
legitimate and deserve support from the federal government. Whether they deserve
support from the Medicare program itself is a more complex question. The
Commonwealth Task Force believes that everyone who benefits from the public
goods produced by academic health centers and teaching hospitals should
contribute fairly and equitably to their costs. Medicare beneficiaries are
clearly among those who benefit. Indeed, given their higher burden of illness
and disproportionate use of resources, they arguably benefit more than many
other groups. Thus, contributing to those costs is a legitimate expenditure for
the Medicare program if our country continues to support these public goods in
the way we traditionally have - by leaving it to academic health centers to
cross-subsidize them from patient care expenses. Here we get to the third issue
I would like to address: the question of how the Medicare program - and
implicitly, the federal government as a whole -- should contribute to the
justifiable extra costs of teaching hospitals and academic health centers. The
Commonwealth Task Force recommended the creation of an Academic Health Services
Trust Fund as one approach to this task. This recommendation was based to some
degree on provisions of the Balanced Budget Act of 1995, which included a
proposed Graduate Medical Education and Teaching Hospital Trust
Fund. Such a trust fund could be financed in a number of ways, but it should
have a secure and stable source of funding that is based on contributions from
all who benefit from the goods and services it supports. One way to finance it
would be to require all third party payers to make a modest payment to the trust
fund. Under such circumstances, Medicare should contribute its fair share.
Another way would be to pay all or part of the expenses from general revenues.
The creation of a trust fund -- equitably, securely and fairly financed -- is in
many ways an ideal long-term solution to the problem of paying the extra costs
of teaching hospitals. However, the Congress faces the short-term question of
what to do with the graduate medical education and
disproportionate share payments under the Medicare program. The Task Force has
taken the position that, whatever policies the Congress pursues, it should
assure that Medicare patients who need the extra services provided by teaching
hospitals and academic health centers continue to receive those services, and
that the nation s ability to produce needed public goods be protected. Decisions
about whether to move some of the expenses of the GME and disproportionate share
provisions under Medicare into the regular appropriations process should be
judged by this standard. Before concluding, I would like to make a few
additional points. First, the Task Force strongly believes that academic health
centers and other teaching hospitals should be held more accountable in the
future for the extra costs that they incur in serving legitimate public
purposes. The Task Force is working on methods to assure such accountability. It
believes that academic health centers could be more efficient in provision of
routine patient services and in the production of public goods. Better measures
of the quality and cost of these activities are needed in the future to help
achieve these efficiencies. Second, though the Task Force never explicitly
considered the implications of a premium support approach to purchasing Medicare
services, I would like to reflect on the consequences of this potential policy
direction for the goods and services now partially funded by the
graduate medical education and disproportionate share
provisions of Medicare. It is not at all clear how premiums would cover the
legitimate extra expenses of teaching hospitals and academic health centers. To
simplify this matter, the Congress might decide that Medicare should pay only
patient care costs, and that the expenses associated with public goods provided
by academic health centers - teaching, research, indigent care -- should be paid
for some other way, perhaps by direct appropriation. From a technical
standpoint, it is extremely difficult, if not impossible, to separate the costs
associated with the public goods produced by these institutions from the patient
care costs associated with the sicker patients they treat and the higher quality
of care they provide. Even if this separation were possible, however, the
premium support model must confront the challenge of paying teaching hospitals
and academic health centers for the legitimate extra patient care costs they
incur in treating Medicare beneficiaries: the case mix and quality related
expenditures. Without better measures of quality of care and better case mix
adjusters, the premium support model carries the risk that Medicare patients
will not have appropriate access to teaching hospitals and academic health
centers in the future. Mr. Chairman, members of the Committee, thank you for the
opportunity to share these views with you today. I would be pleased to answer
any questions you may have.
LOAD-DATE: May 13, 1999
