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AAMC Talking Points on Medicare Continuing to Finance GME
Issue
Some policy makers have proposed removing the current special payments
for physician training and care for the poor from the Medicare program to
enhance the solvency of the Hospital Insurance (Part A) Trust Fund. They
also contend that financing these activities through Medicare Part A,
which is funded by a payroll tax, places an undue burden on workers,
particularly on low-wage earners, because they do not benefit directly
from Medicare's support of physician and health professions training. In
addition, some say that the Hospital Part A Trust Fund is an inappropriate
financing source as medical care and clinical education move increasingly
to non-hospital settings. Critics assert that support for these education
and service activities should be financed from general revenues and
subjected to the federal appropriations process so that additional
oversight can be applied to them.
AAMC Position
The AAMC strongly opposes any changes in Medicare's current structure
for financing graduate medical education (GME) and care for the poor. The
Medicare program must maintain its current commitment to high quality
health care by retaining its obligation to direct graduate medical
education (DGME), indirect medical education (IME), and disproportionate
share (DSH) financing because:
- The patient care and services that teaching hospitals provide, such
as offering highly specialized, sophisticated patient care to the most
severely ill, training health professionals, and providing an
environment in which research can flourish, are the cornerstones of our
health care system. These patient services are indispensable components
of what the Medicare Part A Trust Fund seeks to accomplish through the
funds designated for DGME, IME, and DSH: access to high quality care for
the elderly and the disabled.
- The Medicare program's contributions for support of GME and DSH are
not grant programs as some critics seem to argue. They are payments for
the "cost of doing business" as a health care insurer, and compensate
hospitals for the real, added costs they incur in providing
sophisticated specialty services, care for the uninsured, training for
future health professionals and an appropriate setting for research.
- Seniors, taxpayers, and all society benefit from a strong health
system infrastructure and the availability of high quality health
services. Taxpayers contribute to the Part A Trust Fund throughout their
working lives to support the hospital care and other services that
today's senior citizens receive and to ensure that they and their
spouses will have health insurance and access to a high quality health
care system when they retire. While the Part A Trust Fund is financed on
a pay-as-you-go basis, the public maintains its investment and trust so
that Medicare and quality health care will be available when they need
them.
- The Earned Income Tax Credit, which has been expanded dramatically
in recent years, is available to low-income workers to offset their tax
burden so that financing the Medicare program, and therefore GME and
DSH, through a payroll tax is not unfair to low-income wage earners.
Additionally, unlike the Social Security tax with a current limit of
$68,400 subject to the maximum 6.2 percent Social Security tax, there is
no limit on the maximum wage amount for Medicare tax purposes. All
taxable wages are subject to the 1.45 percent Medicare tax, requiring
high earners to pay more into the Medicare Part A Trust Fund than
low-wage workers.
- The best way to assure a high quality health care system is to
require all payers of services to invest in training and related
activities. The burden of financing GME and care for the poor should be
borne equitably by the Medicare program and all other payers of health
care services. All payers of health care services should make these
contributions and these funds should be secure and protected. Medicare's
structured, "entitlement" approach is the correct model for an
"all-payer" mechanism; an annual appropriation and/or grant process is
not.
- As the only national insurer that provides explicit payments for GME
and related activities, Medicare sets the standard, or social benchmark,
for every insurer. Medicare has supported the costs related to physician
and health professions training through a dependable mechanism in the
Part A Trust Fund for over thirty years. Eliminating Medicare's
entitlement commitment to fund these activities through payments tied to
health services provided to both Medicare managed care and
fee-for-service enrollees will embolden all private and public insurers
to abandon their stake in helping to finance a well-trained health
professions work force, continued scientific and medical advancement,
and provision of care to the poor.
- Subjecting GME to an annual appropriations process would introduce
inordinate uncertainty into an activity that demands careful planning.
While the National Institutes of Health (NIH) and several other programs
are generally well-supported in the annual appropriations process, they
compete for funding with many worthy causes and are inevitably
vulnerable to the changing interests of Congress. The AAMC's polling and
public opinion research clearly demonstrates that physician education
does not enjoy the same level of public support that biomedical research
does.
- Long-term, dependable GME financing, such as Medicare's current
entitlement system provides, is necessary to ensure that teaching
institutions have the ability to adapt to changing market conditions.
Residency training takes at least three and as many as seven-to-ten
years depending on the specialty. Accredited, high quality training
programs may take several years to establish. Moving residency training
increasingly from hospital to non-hospital settings takes time. Sponsors
of GME training can adjust the specialty mix and size of their programs
over time, but need stable funding to plan and fulfill the ethical and
moral obligations they have made to physicians currently-in-training.
- In addition to hospital inpatient care, the Part A Trust Fund
finances some skilled nursing facility care and home health services and
hospice care--settings where physicians and health care professionals
are being trained to provide the excellent and appropriate care that
society needs and expects. The Balanced Budget Act (BBA) of 1997 made
several changes in Medicare Part A GME payments to complement the shift
in training from hospital to non-hospital settings that is already
taking place.
- Teaching hospitals are still adjusting to significant, complex
financial and structural changes in Medicare's GME financing mandated by
the Balanced Budget Act (BBA) of 1997. Among the changes are an overall
29 percent reduction in IME payments over four years, the termination of
Medicare's "open-ended" support by placing a cap on the number of
residents hospitals may count for DGME and IME payments, and provisions
to stimulate training in non-hospital settings. Implementation of these
sweeping changes has been more complicated than anticipated. Many
teaching hospitals are taking a fresh look at the number of residents
they can support and their ability to place residents in non-hospital
educational settings.
- Even before the 1998 payment reductions mandated by the BBA, the
Medicare program just barely covered the cost of treating Medicare
patients at many teaching hospitals.
- According to the Medicare Payment Advisory Commission (MedPAC), in
1996, Medicare paid on average about 4 percent above the costs of
Medicare patients, or about a 3.7 percent margin, at 110
privately-owned major teaching hospitals. This margin includes DGME,
IME and DSH payments at higher levels than they are today. The margin
from caring for Medicare patients was slightly below the 4.0 percent
total margin for major teaching hospitals in 1995.
- For 467 "other" teaching hospitals that provided data, MedPAC
calculated that Medicare payments were not in excess of costs, but at
"break even" levels.
If the Medicare program had paid teaching hospitals at levels similar
to private payers, the program would have had to pay teaching hospitals
more than it paid them in 1996. The gap between Medicare and private
payers may be even greater when the BBA-mandated Medicare payment
reductions are taken into account.
- With all the changes mandated by the BBA and by the evolving
competitive health care system, this is a particularly bad time to
propose removing GME and DSH payments from the Medicare program and
making them subject to the appropriations process. Teaching institutions
depend on Medicare as the bulwark of GME and DSH financing. Policy
makers should remember the important precedent established and
maintained by the Medicare program when setting a course for the future
of GME and DSH financing in a competitive health care system.
Contacts
For more information contact Lynne
Davis, AAMC Office of Governmental Relations,
202-828-0526. |
