May 28, 1999

GME Financing Discussed in Senate Finance Committee Hearing on Premium Support

The May 26 Senate Finance Committee hearing on Medicare reform (see above) included a brief discussion on how graduate medical education (GME) would be financed if Medicare were to be modeled after the Federal Employees Benefits Health Program (FEHBP), also known as premium support. Sen. John Breaux (D-La.) and Rep. Bill Thomas (R-Calif.), who co-chaired the Bipartisan Commission on the Future of Medicare, testified on their comprehensive Medicare reform proposal. The Breaux-Thomas proposal, which would base Medicare on a premium support model, contains reforms to Medicare's GME financing.

When Sen. Daniel Patrick Moynihan (D-N.Y.) questioned Sen. Breaux and Rep. Thomas on how their proposal would fund GME, they acknowledged the importance of GME as a "public good" and the need for its continued funding. While Sen. Breaux indicated his willingness to work with the committee and Sen. Moynihan on the Breaux/Thomas GME proposal, Rep. Thomas stressed GME's current financing mechanism (through Medicare's Part A trust fund) is unsustainable and the need to change GME financing to a broad-based revenue stream.

Sen. Jim Jeffords (R-Vt.) followed up by asking how GME's financing should be broadened. Sen. Breaux used the example that GME could be made an entitlement and funded through the appropriations process, therefore financing GME out of the "larger pot" of general revenues, not Medicare.

Rep. Thomas quoted from the Breaux/Thomas GME proposal, "Payments for direct [graduate] medical education (D[G]ME) would be financed and distributed independent of a Medicare premium support system. Since the Part A and Part B trust funds would be combined and the traditionally separate funding sources of payroll taxes and general revenues would be blurred, Congress should provide a separate mechanism for continued funding through either a mandatory entitlement or multi-year discretionary appropriation program. On the other hand, Indirect Medical Education (IME) presents a unique problem since it is difficult to identify the actual statistical difference in costs between teaching and non-teaching hospitals. Therefore, for now Congress should continue to fund IME from the Trust Fund as an adjustment to hospital payments premium-based comprehensive reform proposal includes important changes to the financing of GME."

Rep. Thomas also indicated his belief that GME would continue to enjoy much political support from Members of Congress and suggested that medical schools and teaching hospitals "could get more" funding through the appropriations process than currently in Medicare.

Information: Lynne L. Davis, AAMC Office of Governmental Relations, 202-828-0526.