January 8, 1999
Medicare Commission Moves Toward Agreement on GME Proposal
Commissioners charged with making recommendations to Congress on the long-term financial solvency of Medicare, including the program's graduate medical education (GME) payments, appeared to come closer to agreement on a GME proposal Jan. 5-6.
Emphasizing that "nothing is final," Sen. Bill Frist (R-Tenn.), chair of the GME working group, presented a proposal that "combines several of the best features" of a white paper developed in December by commission staff. It would remove direct graduate medical education (DGME) and disproportionate share (DSH) payments (about $7 billion combined) from the Medicare Part A Trust Fund to a discretionary funding source. The indirect medical education (IME) payment (about $4 billion) would remain in Medicare's prospective payment system, but government analysts would be directed to re-examine the formula because "data indicate that the IME adjustment is not based on the true cost of indirect medical education." The commission did not vote on the proposal, which would require approval by 11 of the 17 members, but there is clearly significant support for the idea.
AAMC President Jordan Cohen, M.D., urged all AAMC members to contact commissioners immediately to voice their opposition to the proposal.
Sen. Frist updated the full commission on the working group's progress in finalizing a GME financing proposal. He noted that moving DGME funding to the discretionary process would align payments for physician training more appropriately with other federal payments for education and training activities. Sen. Frist called DSH payments "flat-out subsidies" to hospitals. He noted that the proposal did not recommend reducing DSH funding, but that the budget caps would have to be raised to account for the movement of DGME and DSH to the discretionary part of the federal budget. Finally, Sen. Frist explained that these payments were "only tangentially related to patient care."
The proposal would retain the IME adjustment in the Medicare program, because it is directly related to patient care. However, Sen. Frist said the formula for calculating the payment would be examined so that it would be "more accurate." Administrative Chair Bill Thomas (R-Calif.) congratulated Sen. Frist on the proposal, adding that the idea of taking fundamentally educational costs out of the Medicare program is good. Rep. Thomas urged a re-examination of both the IME and the DSH formulas, noting that while the Balanced Budget Act lowered IME to 5.5 percent, a smaller number might be appropriate and that DSH payments need to be re-targeted. Senator Phil Gramm (R-Texas) called the proposal "too modest" as it did not move IME payments to discretionary funding, but was generally supportive.
Commissioners Bruce Vladeck, Ph.D. and Stuart H. Altman, Ph.D. focused their remarks on DSH payments. Dr. Vladeck said that removing DSH from Medicare would put some hospitals out of business, and called the attack on DSH a politically focused threat to hospitals in minority districts that care for people of color. Dr. Altman indicated that while he was in sympathy with all three proposals, DSH payments are not the only subsidies in the Medicare program for certain classes of hospitals. Dr. Altman said Medicare policies provide subsidies to rural hospitals, and that to be fair, the commission should remove all subsidies from the program and review their purpose.
The commission will meet again at the end of January.
Information: Linda Fishman or Lynne Davis, AAMC Office of Governmental Relations, 202-828-0526.
