March 26, 1999
Cardin Introduces All Payer GME Legislation
Rep. Ben Cardin (D-Md.), along with 5 original cosponsors, introduced the "All Payer Graduate Medical Education (GME) Act," HR 1224, on March 23. The bill establishes a trust fund to finance private payers' contributions to GME while continuing Medicare, Medicaid and veterans' health care programs' commitments to physician training through their current GME financing mechanisms. Overall, the bill would increase net hospital revenue by $4.1 billion. Reps. Pete Stark (D-Calif.), Jerry Kleczka (D-Wis.), John Lewis (D-Ga.), Sander Levin (D-Mich.), and Ken Bentsen (D-Texas) cosponsored H.R. 1224.
Specifically, the bill creates an all payer fund by assessing private health plans a 1 percent premium tax. The income from the premium tax, estimated to be $3.2 billion, would be used to provide direct graduate medical education (DGME) and indirect medical education (IME) payments. The bill creates a new formula for DGME payments, using the total number of residents, a new per resident formula, and the private payers' share of GME costs. The new per resident formula would use the national average of resident salaries and fringe benefits, adjusting for inflation and wage indicies. The private payers' share of GME costs would be based on the ratio of a hospital's private payer revenues to total revenues. Once the DGME payments are determined, the remainder of the total trust fund's monies would be distributed as IME payments based on Medicare's IME formula.
The bill continues Medicare's contribution to GME, but makes changes to the DGME formula and reduces Medicare IME payments. Like the trust fund's DGME formula, Medicare's DGME payment also would be based on a national average per resident amount. Faculty supervision costs would no longer be allowable costs to include in calculations for either Medicare or the trust fund's per resident amount. However, 20 percent of the newly calculated DGME money from both Medicare and the trust fund would be required to compensate physicians for teaching. Medicare's contributing share to DGME costs would be based on a hospital's ratio of Medicare revenues to total revenues instead of Medicare inpatient days to total hospital days. The bill also would reduce Medicare's IME formula from 5.5 percent to 4.8 percent starting in FY 2001.
The bill's changes to the Medicare DGME and IME payments would save Medicare an estimated $1.4 billion. However, $300 million of the $1.4 billion in Medicare savings would be used to reimburse payments for graduate education for non-physician health professionals.
The bill also reforms disproportionate share hospital (DSH) payments by including the cost of uncompensated care. DSH payments would be redistributed accordingly. Moreover, the bill carves out DSH monies from Medicare Plus Choice plan payments.
The bill directs the Secretary of Health and Human Services, in concert with the AAMC and other affected community representatives, to develop and implement a plan to reduce the number of residency training positions to 110 percent of American medical schools graduates by 2005. In addition, the bill directs the secretary to consider the financial impacts of residency reductions to hospitals and allow a portion of the money saved by the residency reductions to be used to support affected hospitals.
AAMC President Jordan Cohen, M.D., hailed Rep. Cardin for his leadership on GME and pledged to work with Cardin to pass all-payer legislation. Dr. Cohen said, "the AAMC is pleased to endorse the concepts embodied in the [legislation.] The framework of this bill is correct; it maintains Medicare's historic commitment to the support of GME and recognizes the analogous obligation of all payers of health care services." While the AAMC supports many of the provisions in the legislation, the Association is concerned that the actual costs of GME currently exceed the funds provided in the legislation.
Information: Richard Knapp, 202-828-0410 or Lynne L. Davis, 202-828-0526, AAMC Office of Governmental Relations.
