DOCUMENT RESUME

ED 412 881 HE 030 673

TITLE COGME 1995 Physician Workforce Funding Recommendations forDepartment of Health and Human Services' Programs. Councilon Graduate Medical Education, 7th Report.

INSTITUTION Council on Graduate Medical Education.SPONS AGENCY Health Resources and Services Administration (DHHS/PHS),

Rockville, MD.PUB DATE 1995-06-00NOTE 26p.; For related documents, see HE 030 674-675.PUB TYPE Legal/Legislative/Regulatory Materials (090) -- Reports -

Evaluative (142)EDRS PRICE MF01/PCO2 Plus Postage.DESCRIPTORS Educational Change; Educational Finance; Educational

Objectives; Educational Policy; *Federal Aid; FederalPrograms; Federal Regulation; *Foreign Medical Graduates;Government School Relationship; Graduate Medical Education;Health Services; Higher Education; Labor Force Development;*Medical Education; Medical Schools; Medical Services; NeedsAssessment; *Politics of Education; Professional Education;*Public Policy; Teaching Hospitals

IDENTIFIERS Health Professions Educational Assistance Act; *Medicare;National Health Service Corps; Public Health Service

ABSTRACTThis report presents specific recommendations to the

Department of Health and Human Services and Congress from the Council onGraduate Medical Education that address Medicare's direct and indirectgraduate medical education (GME) payments and the monies allocated by thePublic Health Service that is targeted toward physician education and primarycare research. These include: continued funding of Medicare GME for U.S.medical school graduates, but reduced payments for international medicalresidents; targeted incentives for generalist physician training; transitionprograms to assist international medical graduate-dependent institutions;specifying Medicare capitation rates specifically for GME; demonstrationprojects to foster consortia to manage education policy and financing;reauthorization of the National Health Service Corps, Title VII, and primarycare research at 1995 appropriation levels; consolidating Title VII programs;funding Title VII educational programs that have demonstrated theireffectiveness; and reauthorizing the Council on Graduate Medical Education.The report text is supported by several figures and data tables. (Contains 25footnotes.) (CH)

********************************************************************************* Reproductions supplied by EDRS are the best that can be made *

* from the original document. *

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COUNCIL ON

GRADUATE MEDICAL EDUCATION

REPORT

JUNE 1995

COGME 1995 PHYSICIAN WORKFORCE FUNDING

AND

FOR DEPARTMENT OF HEALTH

AND HUMAN SERVICES' PROGRAMS

HEALTH CARE FINANCING ADMINISTRATION - MEDICARE

PUBLIC HEALTH SERVICE - PHYSICIAN EDUCATION

- PRIMARY CARE RESEARCH

iS. DEPARTMENT OF EDUCATIONOf ce of Educational Research and Improvement

E CATIONAL RESOURCES INFORMATIONCENTER (ERIC)

This document has been reproduced asreceived from the person or organizationoriginating it.

0 Minor changes have been made toimprove reproduction quality.

Points of view or opinions stated in thisdocument do not necessarily representofficial OERI position or policy.

2

BEST COPY AVAILABLE

COGMECouncil on Graduate Medical Education

David A. Kindig. M.D., Ph.D.Chairperson

Stuart J. MarylanderVice Chairperson

Marc L. Rivo. M.D.. M.P.H.Executive Secretary

AUG 2 5 1995

Dear Colleague:

We are pleased to transmit to you the Seventh Report of the Council on Graduate MedicalEducation. This report contains specific recommendations to the Department of Health andHuman Services (DHHS) and Congress for the prudent investment of public funds to bettermatch the physician workforce with its health care needs. The proposals specifically addressMedicare's direct and indirect graduate medical education (GME) payments (currently$6 billion annually) and the $500 million allocated through the Public Health Service (PHS)towards targeted physician education and primary care research goals.

COGME considers the analyses and recommendations in this report to be extremely topicaland timely, given that Congress is currently considering significant reductions in MedicareGME payments and in key PHS workforce programs. The Council has therefore authorizedthe dissemination of the Seventh Report prior to the release of its Fifth Report, coveringwomen and medicine, and its Sixth Report, covering managed health care issues.

In targeting federal funding for medical education, COGME suggests that the nation shouldattain the following goals:

1. Decrease the number of specialists trained.2. Modestly increase the number of generalist physicians trained and improve the

quality of primary care teaching.3. Increase minority representation in medicine.4. Improve physician geographic distribution.5. Train more physicians in ambulatory and managed care settings.

Moreover, in making its recommendations to Congress and the DHHS Secretary, COGMEidentified the following principles:

1. Target medical education funding to physician workforce needs.2. Provide options for budgetary savings that promote physician workforce goals.3. Simplify and consolidate DHHS medical education financing and minimize

regulation and micromanagement.4. Provide incentives to expand education in primary care, ambulatory, and managed

care settings.5. Assist academic medical centers and teaching hospitals during the difficult

transition.

Telephone: 301/443-6190 Parklawn Building, Room 9A-21. 5600 Fishers Lane, Rockville. MD 20857 Fax: 301/443-8890

Page 2 - Dear Colleague

Based upon these goals and principles, the Seventh Report summarizes the relevant DHHSauthorities within the Health Care Financing Administration (HCFA) and PHS and contains aconsolidated, coordinated, and targeted set of legislative recommendations. They include:

o Continued payments of Medicare GME funding of U.S. medical school graduates atcurrent funding but reduced payments for international medical graduate residents.

o Targeted incentives for generalist physician training and increased teaching in non-hospital settings.

o Transition programs to assist IMG resident-dependent institutions.

o Utilizing the DME and IME components of the Average Adjusted Per Capita Cost(AAPCC) from Medicare capitation rates specifically for GME.

o Demonstration projects to foster the growth of consortia to manage medical educationpolicy and financing.

o Reauthorizing the National Health Service Corps, Title VII (Health ProfessionsEducation), and primary care research, all at 1995 pre-recision appropriated levels.

o Consolidating Title VII programs and including the National Health Service Corps inthe consolidation.

o Funding Title VII educational programs that have demonstrated effectiveness or thehigh likelihood of achieving specified outcomes.

o Reauthorizing the Council on Graduate Medical Education.

COGME believes that the set of recommendations contained in the Seventh Report, ifimplemented, will provide for the prudent investment of public funds for training physiciansin the right settings, specialties, and skills needed to meet the health needs of Medicarebeneficiaries and the general public. Help will also be provided to academic medical centersand their teaching hospitals in restructuring.

If you have any questions or comments, please contact either me or F. LawrenceClare, M.D., M.P.H., COGME Acting Executive Secretary, at Room 9A-21, 5600 FishersLane, Rockville, Maryland 20857. Thank you for your interest.

Sincerely,

J . C.:14David A. Kindig, M.D., Ph.D.

THE COUNCIL ON(COGME)COGME was authorized by Congress in 1986

to provide an ongoing assessment of

physician workforce trends and to

recommend appropriate Federal and privatesector efforts to address identified needs. The

legislation calls for COGME to serve in anadvisory capacity to the Secretary of theDepartment of Health and Human Services(DHHS), the Senate Committee on Labor and

Human Resources, and the House ofRepresentatives Committee on Commerce. By

statute, the Council terminates on September

30, 1995.

GRADUATE MEDICAL EDUCATION

The legislation specifies that the Council is to

comprise 17 members. Appointed individuals

are to include representatives of practicingprimary care physicians, national and

specialty physician organizations, interna-tional medical graduates, medical studentand house staff associations, schools ofmedicine and osteopathy, public and privateteaching hospitals, health insurers, business,

and labor. Federal representation includesthe Assistant Secretary for Health, DHHS:the Administrator of the Health Care

Financing Administration, DHHS; and theChief Medical Director of the VeteransAdministration. COGME is staffed by theHealth Resources and Services

Administration in the Department of Healthand Human Services.

CHARGE TO THE COUNCILAlthough called the Council on GraduateMedical Education, the charge to COGME is

much broader. Title VII of the Public Health

Service Act in Section 799(H), as amended by

Title III of the Health Professions Extension

Amendments of 1992, requires that COGME

provides advice and makes recommendations

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to the Secretary and Congress on thefollowing:

1. The supply and distribution of physiciansin the United States.

2. Current and future shortages or excessesof physicians in medical and surgicalspecialties and subspecialties.

3. Issues relating to foreign medical schoolgraduates.

4. Appropriate Federal policies with respectto the matters specified in (1), (2), and(3) above, including policies concerningchanges in the financing of undergraduate

and graduate medical education programsand changes in the types of medicaleducation training in graduate medicaleducation programs.

5. Appropriate efforts to be carried out byhospitals, schools of medicine, schools ofosteopathy, and accrediting bodies withrespect to the matters specified in

(1), (2), and (3) above, including efforts for

changes in undergraduate and graduateeducation programs.

6. Deficiencies in, and needs for improve-ments in, existing data bases concerningthe supply and distribution of, and postgraduate training programs for, physicians

in the United States and steps that shouldbe taken to eliminate those deficiencies.

I

PREVIOUS REPORTS

Since its establishment, COGME hassubmitted or is in the process of completing

the following reports to Congress:

First Report of the Council, Volume 1and Volume II (1988).

Second Report: The Financial Status ofTeaching Hospitals and the Under-

representation of Minorities in Medicine

(1990).

Scholar in Residence Report: Reformin Medical Education and MedicalEducation in the Ambulatory Setting(1991).

Third Report: Improving Access toHealth Care Through Physician Workforce

Reform: Directions for the 21st Century

(1992).

Fourth Report: Recommendations toImprove Access to Health Care ThroughPhysician Workforce Reform (1994).

Fifth Report: Women and Medicine (late

1995).

Sixth Report: Managed Health Care:Implications for the Physician Workforce

and Medical Education (late 1995).

2

s

SUMMARY OF RECOMMENDATIONS ON MEDICAREAND PHS PROGRAMS

MEDICARE1. Continue to pay Medicare DME and IME

for all residents who are graduates of USmedical schools, but gradually reduceDME and IME for international medicalgraduate residents to 25 percent of the1995 levels.

(Estimated budget savings for 1996: $66million in DME, $170 million in IME.Savings for 1996 - 2000: $1.07 billion inDME, $3.09 billion in IME.)

2. Provide incentives for generalist trainingand increased teaching in non-hospitalsettings.

(Estimated budget savings for 1996: $37million in DME. $452 million in IME;Savings for 1996-2000: $263 million inDME. $4.14 billion in IME.)

a. DME and IME payments would bemade for physician resident time spent

in all nonhospital settings, to removethe disincentive for educationalprograms in such key nonhospitalsettings as physician offices, grouppractices, community health centers,and managed care facilities. Fundingwould follow the resident to his or her

site of training.

b. DME and IME payments for generalistresidents in their first three years would

be upweighted to 125% to enhanceprimary care teaching capacity. DMEand IME would be downweighted to75% for nongeneralist positions for the

lesser of five years or the trainingrequired for initial board certification.

c. All positions after the lesser of fiveyears or the training required for initial

3

board certification would be weightedat 50% for both DME and IME.

d.1ME calculations would not be allowed

to increase if the hospital's inpatientbed capacity decreases.

Estimated budget savings for thecombination of Recommendations

Nos. 1 and 2:

1996: $92 million in DME, $510million in IME.

1996-2000: $1.20 billion in DME,$6.13 billion in IME.

3. Establish a transition program to assistinstitutions providing essential serviceswhich are dependent on IMG residents.

4. Identify and remove the DME and IMEcomponents of the Average Adjusted Per

Capita Cost (AAPCC) from Medicare cap-

itation rates and utilize these funds specif-

ically for GME purposes.

5. Create demonstration projects to foster the

growth of consortia to manage medicaleducation policy and financing.

7

PUBLIC HEALTH SERVICE1. Reauthorize, at 1995 pre-recision appro-

priated levels, the National HealthService Corps, Title VII (HealthProfessions Education), and primary careresearch (estimated budget impact:current appropriation level of approxi-mately $493 million).

2. Consolidate Title VII programs andinclude the National Health ServiceCorps in the consolidation as recommend-

ed in the President's fiscal year 1996Budget Proposals and the Health

Professions Education Consolidation andReauthorization Act of 1995 (S. 555).

3. Title VII educational programs which arefunded either should have demonstratedeffectiveness, or through program designshould demonstrate a high likelihood ofachieving specified outcomes. Priorityshould be given to those primary caretraining programs which place a high per-

centage of graduates in primary carepractice, in rural communities, and inunderserved urban and rural areas.

4. Reauthorize the Council on GraduateMedical Education (COGME) as recom-

mended in the President's fiscal year 1996

Budget Proposal and the HealthProfessions Education Consolidation and

Reauthorization Act of 1995 (S. 555).

4

8

COGME MEMBERS AND STAFFDavid A. Kindig, M.D., Ph.D.Chair, COGMEProfessor of Preventive MedicineUniversity of WisconsinMadison, Wisconsin

Stuart J. MarylanderVice Chair, COGMEV. P. Hospital Services Division

Country Villa Services CorporationCulver City. CaliforniaCOGME Work Group Members

COGME Workgroup Members:

Lawrence U. Haspel, D.O.,Chair, WorkgroupExecutive Vice PresidentMidwestern UniversityOlympia Fields, Illinois

Paul C. Brucker, M.D.PresidentThomas Jefferson UniversityPhiladelphia. Pennsylvania

Jack M. Colwill, M.D.Professor and ChairmanDepartment of Family and Comm. Medicine

University of Missouri-ColumbiaColumbia, Missouri

Fitzhugh Mu Ilan, M.D.Director, BHPrHealth Resources andServices AdministrationRockville, Maryland

Elizabeth M. Short, M.D.Associate Chief Medical Director forAcademic AffairsDepartment of Veterans Affairs

Washington. D.C.

95

Barbara WynnDeputy DirectorBureau of Policy Development

Health Care Financing AdministrationBaltimore, Maryland

Other COGME Members:

JndyAnn Bigby, M.D.Division of General MedicineBrigham & Women's Hospital

Boston, Massachusetts

George T. Bryan, M.D.Dean of Medicine, V.P. Academic AffairsUniversity of Texas Medical BranchGalveston, Texas

Sergio A. Bustamante, M.D.Professor of PediatricsLouisiana State University School of MedicineNew Orleans, Louisiana

Peggy Connerton, Ph.D.Director of Public PolicyAFL-CIO Service EmployeesInternational UnionWashington, DC

Christine GasicielManager of Health Care PlansGeneral MotorsGM Building

Detroit, Michigan

Huey Mays, M.D., M.B.A., M.P.H.President, Strategic Health SystemsHarrisburg, Pennsylvania

Robert L. Summits, M.D.Dean, College of MedicineUniversity of Tennessee.

Health Science CenterMemphis, Tennessee

Eric E. Whitaker, M.D., M.P.H.ResidentPrimary Care. Internal Medicine

UCSF/San Francisco General HospitalSan Francisco. California

Modena H. Wilson, M.D., M.P.H.Director Division General PediatricsJohns Hopkins University School of MedicineBaltimore, Maryland

6

Staff.

Marc L. Rivo, M.D., M.P.H.Executive SecretaryDirector. Division of Medicine.

F. Lawrence Clare, M.D., M.P.H.Deputy Executive Secretary

Carol Bazell, M.D.Deputy DirectorOffice of Research and Planning

Carol S. Gleich, Ph.D.ChiefSpecial Projects and Data Analysis Branch

Jerald M. KatzoffStaff LiaisonManaged Care and Physician Workforce Issues

Paul J. Gilligan, M.H.S.Operations Research Analyst

Debbie M. Jackson, M.A.Staff LiaisonWomen and Medicine Issues

John Rodak, Jr.Staff LiaisonGeographic Distribution Issues

Stanford Bastacky, D.M.D.Staff Liason

Medical Licensure/IMG Issues

P. Hannah Davis, M.S.Statistician

Eva M. StoneCommittee Management A ant

Yveline Pierre -LouisSecretory

Anne PattersonSecretary

COGME 1995 PHYSICIAN WORKFORCE FUNDINGRECOMMENDATIONS FOR DEPARTMENT OF HEALTHAND HUMAN SERVICES' PROGRAMSThe purpose of this COGME report is torecommend to the Department of Health andHuman Services (DHHS) and Congress howcurrent public funds can be investedprudently to better match the physicianworkforce with its health care needs. Theproposals specifically address Medicare'sdirect and indirect graduate medicaleducation (GME) payments (currently $6billion annually) and the $500 millionallocated through the Public Health Service(PHS) towards targeted physician educationand primary care research goals.

Congress is considering significant reduc-tions in Medicare GME payments and in key

PHS workforce programs. such as Title VIIand the National Health Service Corps. To theextent Medicare GME cuts are made,

COGME believes that available fundingshould be targeted to train physicians in theright settings, specialties, and skills neededto meet the health needs of Medicare benefi-ciaries and the general public. Help shouldalso be provided to academic medical centers

and their teaching hospitals in restructuring.

COGME's major goals are to slow the growth

in the supply of physician specialists, toincrease the relative proportion of generalist

and minority physicians. and to improve geo-

graphic distribution. Figure 1 displays therapid growth in physician supply during thelast 25 to 30 years. Most of the increases have

come from the specialties while the general-ist-to-population ratio has remained relative-ly stable.

THE RATIO OF SPECIALIST PHYSICIANS TO POPULATION HASMORE THAN DOUBLED SINCE 1965

Fig. 1150

125 -

100 -

75 -

50 -

25

59.0

55.8

51%

1965

65.0

49.843%

79.2

94.4

54.7

39% 37%

1970

Specialist MD & DO/Pop

Generalist MD & DO/Pop

Source: 1965-1992 data AMA Physician Masterfile: AOA. Biographical Records - unpublished data

106.0

59.5

113.3

62.6

123.5

66.5

36% 36% 35%

1975 1980 1985 1990 1995

-100%

- 50%

0

Ez3 % of Patient Care Physicians as Generalists

The growth in physician supply will need tobe slowed if cost containment goals are to beachieved and before large numbers of physi-cians are left under- or unemployed. Ifcurrent trends continue, COGME projects ayear 2000 surplus of 125,000 specialists anda modest shortage of 20,000 generalist physi-

cians in an increasingly managed caredominated system. Figure 2 demonstrateshow maintaining the current level of resident

training will not bring the specialist supplyinto equilibrium with managed care staffing

patterns. If the current number of residentscontinues to begin training each year and 70percent of graduates continue to selectspecialty careers, the projected ratio of spe-cialist physicians to the population will sig-nificantly exceed projected staffing needsthrough 2020.

IF CURRENT TRENDS CONTINUE, COGME PROJECTS A

SUSTAINED SURPLUS OF SPECIALISTS RELATIVE TOPOPULATION NEEDS THROUGH AT LEAST THE YEAR 2020

2000 2005

30 Gen/70 Spec

8

2010Year

2015 2020

The number of residents has been growing at

approximately four percent per year. Figure 3shows that this growth has mainly come fromthe recruitment of international medical

graduates. The powerful financial incentives

in Medicare's payments for GME may havecontributed to this growth.

INTERNATIONAL MEDICAL GRADUATES (IMGs) AREINCREASING AS A PERCENTAGE OF ALL RESIDENTS

Fig. 3120

100 -

80 -

60-

40 -

20 -

95327

17%(16,016)

98867

18%(18,140)

102697

20%20,900)

108064

22%23,757)

100%

80%

60%

- 40%

-20%

1990-91 1991-92

Total Residents

1992-93 1993-94

22] 1MG as a Percentage ofAll Residents

Source: AAMC, SAIMS (Database 1994. plus unpublished updated material, AOA,Biographical Records - unpublished data)

9

0%

Unfortunately, at the same time that specialist

supply is exceeding demand, rural and innercity communities are facing worsening gener-

alist physician shortages. The generalistphysician-to-population ratios in counties offewer than 50,000 residents are substantially

lower than in the more populous counties. As

shown in Figure 4, these ratios have actuallydecreased since 1990. These declines in rural

counties indicate a special need for familyphysicians.

THE RATIO OF GENERALIST PHYSICIANS TO POPULATION INCOUNTIES UNDER 50,000 HAS BEEN DECLINING SINCE 1990

Fig.445 -

040-_

35 -

0

41-

30

25 -

20 -

151988 1989

0 25-49K0-- 10-24K

Source: AMA Master File

1990 1991 1992 1993

5-9.9K

6-- 2.5-4.9K

I0

<2.5K

Furthermore, the physician workforce could

be more representative of the general popula-tion's composition. Although minorityAmericans will compose almost one-fourth of

the population by the year 2000, theyrepresent only 12 percent of entering medical

students, seven percent of practicing physi-cians and three percent of faculty.

Finally, the physician workforce could bebetter prepared in the key practice competen-

cies needed to provide quality care in theevolving health care system. Surveys of HMO

medical directors, and of graduating medical

students and residents, indicate inadequatetraining in such key areas as prevention, cost-

effective practice and patient-education, andin community-based and managed caresettings.

Therefore, in targeting federal funding formedical education, COGME suggests that thenation should attain the following goals:

1. Decrease the number of specialiststrained.

2. Modestly increase the number of general-ist physicians trained and improve thequality of primary care teaching.

3. Increase minority representation inmedicine.

4. Improve physician geographicdistribution.

5. Train more physicians in ambulatory andmanaged care settings.

In making its recommendations to Congressand the DHHS Secretary, COGME identifiesthe following principles:

1. Target medical education funding tophysician workforce needs.

2. Provide options for budgetary savings that

promote physician workforce goals.

3. Simplify and consolidate DHHS medicaleducation financing and minimize regula-tion and micromanagement.

4. Provide incentives to expand education in

primary care, ambulatory, and managedcare settings.

5. Assist academic medical centers andteaching hospitals during the difficulttransition.

Based upon these goals and principles,COGME summarizes below the relevantDHHS authorities within HCFA and PHS andproposes a consolidated, coordinated, andtargeted set of legislative recommendations.

MEDICARE GRADUATE MEDICAL EDUCATIONPAYMENT POLICY

CURRENT LAW -FEE- FOR - SERVICE PAYMENTSUnder current law, Medicare pays hospitalsfor graduate medical education through twodifferent mechanisms.

Direct GME Costs: Under section 1886(h),Medicare payment for the costs of approved

medical residency training programs inmedicine, osteopathy, and podiatry are based

on a hospital-specific per resident amount(PRA). The PRA is based on a hospital'sallowable costs incurred in a base period and

updated by changes in the Consumer PriceIndex-Urban. OBRA 1993 eliminated theinflation update during FY 1994 and 1995 for

other than primary care residents andresidents in OB-Gyn programs. Section1886(hX4)(E) limits GME payments in outpa-

tient settings to instances where the hospitalbears the costs of that training program.Residents that are beyond the initialresidency period are counted as .5 FIT.

Indirect Costs (IME): An explicit paymentfor increased hospital operating costs in insti-

tutions with graduate medical education ismade as an add-on to the prospectivepayment rate for inpatient hospital services.Payments increase by approximately 7.7percent for each additional 0.1 increase in the

ratio of interns and residents per bed.However, this is higher than the analyticestimates of the actual effect of teaching oninpatient costs per case. All residentsworking in the acute care hospital (including

the outpatient department and some hospital-

sponsored ambulatory sites) are counted.Time spent outside the acute care hospital,such as in managed care settings andcommunity health centers, is not counted.

CURRENT LAW -RISK CONTRACT PAYMENTSMedicare's payment to HMOs is based on the

Adjusted Average Per Capita Cost (AAPCC)

for Medicare beneficiaries in the fee-for-service sector. The AAPCC includes theadditional payments made for both indirectand direct graduate medical education under

the Medicare prospective payment system for

non-HMO beneficiaries in the geographicregion. The HMOs negotiate the prices paidto hospitals for services furnished to theirenrollees.

MEDICARE PAYMENTS FORGMEThe following are the estimated Medicaredirect and indirect graduate medicaleducation expenditures for 1990-1995:

Medicare Direct and Indirect C11E Pa. anent-.1990-1997) 1-iiinatd)

FY 1991 FY 1992 FY 1993Type of Payment FY 1990

Direct GME $ 1.333 $1.420 11,555 $1,699

Indirect GME $ 2,939 S3,208 13,582 $3,775

Total GME $ 4.272 $4,628 $5,137 $5,444

$4,123 $4.537

$5,891 $6,374

Source: Estimates by the Health Care Financing Administration as 1 ituusary 1995

Medicare GME payment amounts in the table

do not include the amounts for GME implicit

in the AAPCC payments to risk-based HMOs,

which have been estimated at about $400million for FY 1995.'

' Statement by Ms. Barbara Wynn, Health Care Financing Administration, at the COGME meeting of April 27,1995.

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CONSEQUENCES OFGME POLICYThere are a number of unintended conse-quences with current Medicare GME policy:

1. Although consensus is widespread thatour nation faces a growing physiciansurplus, Medicare pays hospitals anaverage of $70,000 per resident per yearfor any US or foreign- trained resident they

are able to recruit whether or not thatresident will be needed in the health care

marketplace upon completion of training.

2. Although consensus is widespread thatthe nation faces a growing budget deficit,

current Medicare GME policy providessignificant incentives for teaching institu-

tions to increase the supply of residents intraining and thus increase Medicare GMEoutlays.

3. Although consensus is widespread thatnew physicians should be trained inambulatory, community and managed care

settings to better care for Medicare bene-

ficiaries and the public, both DME andIME payments are based on the number of

residents in hospital-based settings. As aresult, there is a powerful disincentive totrain residents in these essential non-hospital settings. In addition, currentAAPCC policy provides disincentives for

training in managed care settings.

COGME recognizes the need to analyze gov-

ernment programs to ensure that programobjectives are being met cost-effectively.COGME also recognizes that Congress is con-

sidering reductions in Medicare programs toensure its long-term solvency. In Medicare, it

is possible to achieve Medicare savings by

13

simply reducing Medicare expenditures forGME without giving attention to needs forworkforce policy changes. However, it is alsopossible to reduce Medicare expenditureswhile achieving policy goals. This would be apreferable approach, since COGME believesthat current Medicare incentives areoperating counter to critical public needs fora better prepared physician workforce.

?

COGME RECOMMENDATIONS ON MEDICAREGRADUATE MEDICAL EDUCATION FUNDINGBased on the above goals and principles,COGME proposes a consolidated, coordinat-ed and targeted set of legislative recommen-dations for relevant DHHS programs withinHCFA and PHS. These recommendationsemphasize the responsibility of the DHHS touse allocated funds wisely as a prudent buyer

and to maximize taxpayer investment inphysician training.

1. Continue to pay Medicare GMEproviders DME and IME for allresidents who are graduates of USmedical schools, but graduallyreduce DME and IME for inter-national medical graduate residentsto 25 percent of the 1995 levels.(Budget savings for 1996: $66million in DME, $170 million inIME.

Savings for 1996 - 2000: $1.07billion in DME, $3.09 billion inEKE.).

COGME believes that Medicare should limitboth direct and indirect GME in ways thatencourage a reduction in the numbers ofphysicians entering the workforce in thefuture. Support should be guaranteed to eachgraduate of a US medical school, but shouldgradually be reduced for graduates of foreign

schools. There are three reasons for thispolicy. First, the rapid growth in the physician

supply in recent years is primarily due toincreased numbers of international medicalgraduates (IMGs), while the output of U.S.schools has been relatively constant. Second,

projections of physician need in the UnitedStates suggest that there will not be work for

these additional physicians. Third, expendi-

ture of U.S. tax dollars to train non-U.S.citizens who will not be needed in thiscountry is a poor use of limited Medicaredollars (Medicare IME and DME paymentsaverage $70,000 per resident each year).

Congress is considering options to reduceGME payments. The Prospective PaymentAssessment Commission (ProPAC) has rec-ommended reduction of the Medicare Indirect

Medical Education (IME) adjustment byapproximately $500 million in FY 1996 byreducing the IME factor from 7.7 percent per

0.1 intern/resident per bed (IRB) to 6.6percent. ProPAC further recommended thatthe percentage ultimately be reduced to itsanalytically justified level of 4.4 percent,which at today's expenditure levels wouldgenerate approximately a $1.5 billionreduction in IME in FY 1996.3 TheCongressional Budget Office's analysis ofMedicare's IME payments discussed rates ofsix and three percent, which would save $930

million and $2.6 billion, respectively, in FY1996.

Simple reductions in the IME adjustment toits analytically justified level would generate

significant budget savings. However, thisapproach has some limitations. First, itprovides no effective cap on total IMEpayments. The budget calculations do nottake into account the possibility that teaching

institutions may respond by increasing thenumber of residents recruited and offset part

of the savings. Residents are cheap andhighly qualified labor for hospitals.Furthermore, the number of IMG applicantsand entrants has dramatically increased inthe past few years.

* Medicare budget estimates wen Intl by Gerard F. Anderson,lPh.D, under contract to the Bureau of Health Professions, basedon beOnning effective FY 1996. . estimates assume the reduction in the number of IMG first-year residents to take effect inFY 19% and to mil forum(' in succeeding yeah.

Estimate of $500 million reduction per percentage-point decrease provided by Dr. Stuart Altman. Chairperson. ProPAC. intestimony before theCommittee on Ways and Means Health Subcommittee. March 23,1995.

Congessional Budget Office: Reducing the Deficit: Spending and Revenue Options. Report to the Senate and House Committeeson the Budget. C.B0. February 1995

rBEST COPY AVAiLA2U

If the goal is to achieve budget savings, then

other policies could be implemented that bothattain this goal and produce a physicianworkforce which is better matched withhealth care needs (see recommendationnumber two).

The purpose of COGME's policy recommen-dation is to provide Congress with an optionthat generates budget savings while effective-

ly reducing the total number of Medicare-funded residents in training. This is a prudentpolicy since COGME projects a year 2000specialty physician surplus of about 125,000patient care physicians in a managed caredominated health care system given presenttrends in resident production.

In 1993-94, there were 84,307 USMGs ingraduate medical education and 23,757 IMGresidents. COGME has repeatedly supported

a policy recommendation that the totalnumber of Medicare-funded first yearresidents would be reduced from 140% to110% of US medical school graduates.Medicare has a legitimate role in supportingsome proportion of IMG residents, reflecting

their contribution to the care of Medicarebeneficiaries. We recommend that thepayments for IMG residents be graduallyreduced to about 25% of 1994 levels, to effect

a reduction in first year IMG residents from140% to 110% of US medical graduates.

The reduction in numbers of IMGs supported

by Medicare could be accomplished by twomethods: 1) reducing the numbers of individ-

uals that Medicare will pay for to 25% eitherby a selection process or by lottery; or 2)reducing payments to institutions to 25% ofwhat they had previously received for IMGresidents.

15

The first alternative would require the devel-opment of a selection process or lottery,perhaps through the Educational Commision

for Foreign Medical Graduates (ECFMG) orsome other sponsor, to certify the individualswho would be funded by Medicare forresidency training. The number would bereduced to 25% of current first year IMGresidents. Presumably, a selection processwould identify the most qualified individuals,

but it is not clear how this could be done. Alottery would be simpler, but would be blindto quality.

Alternatively, current DME and IME supportcould be gradually reduced for each teachinginstitution to 25% of payments for IMGresidents. The mechanism could be to pay atthe reduced level of 25% beginning with each

successive first-year resident class. Thiswould gradually reduce payments to the 25%level over three to five years. Such anapproach would not require the development

of an allocation system, but leaves in placepayments for an institution's historicalnumbers of IMG residents.

It should be noted that neither alternativeprevents teaching institutions from hiringadditional IMG residents with nonMedicarefunds. We believe, given the magnitude ofMedicare dollars in graduate medicaleducation, the recommended reductions willencourage those institutions with largenumbers of IMG residents to reduce thenumber of residents, although the extent ofthe effect cannot be predicted. Transitionstrategies are suggested below for thoseessential institutions for whom this mightcause Medicare beneficiary access issues.

1 5

2. Provide incentives for generalisttraining and increased teaching innon-hospital settings. (Estimatedbudget savings for 1996: $37 millionDME, $452 million DIE; Savings for1996-2000: $263 million DME,$4.14 billion IME.')

a. DME and IME payments would bemade for physician resident timespent in all nonhospital settings, toremove the disincentive to conducteducational programs in such keynonhospital settings as physicianoffices, group practices, com-munity health centers, andmanaged care facilities. Fundingwould follow the resident to his orher site of training.

b.DME and IME payments for gener-alist residents in their first threeyears would be upweighted to125%, to enhance primary careteaching capacity. DME and DIEwould be downweighted to 75%for nongeneralist positions for thelesser of five years or the trainingrequired for initial board certifica-tion.

c.All positions after the lesser of fiveyears or the training required forinitial board certification would beweighted at 50% for both DMEand DIE (see table for definitionsand percent payments).

d.IME calculations would not beallowed to increase if the hospital'sinpatient bed capacity decreases.

Estimated budget savings for

the combination of Recommenda-tions Nos. 1 and 2:

1996: $92 million in DME, $510million in IME.

1996-2000: $1.20 billion in DME,$6.13 billion in IME.

These recommendations reverse the currentdisincentives in Medicare GME policytowards primary, ambulatory and managedcare education and produce incentives totrain physicians in the appropriate specialties

and settings to meet Medicare beneficiaryand public needs. Despite the acknowledgedneed to train fewer numbers of specialistphysicians and to move training out of thehospital, a recent GAO study estimated that75% of Medicare GME payments go tospecialty training. The rapid growth and pop-ularity in managed health care andCongressional interest in increasing Medicare

and Medicaid managed care enrollmentmakes it essential that more generalist physi-cians be trained in community-based,managed care settings. COGME recommends

upweighting both DME and IME because the

significantly larger payments made underIME will provide greater incentives to change

the specialty mix. This payment policy caninitially be implemented in a budget neutralfashion.

Downweighting IME payments to 50% forresidents beyond the lesser of five years or the

time required for initial board certificationwould provide an important disincentivetoward specialty or subspecialty training.Furthermore, it would generate significantbudgetary savings. The final recommendation

is to ensure that the IME adjustment formula

Estimate by Gerard F. Anderson. Ph.D. Savings under Reocinmendations 1 and 2 are not additive.

16

not inadvertently increase as a result of thecontinued market-driven trend towardshospital downsizing.

The following presents COGME's definitions

for generalist training and recommendedweighting factors for Medicare direct andindirect graduate medical education funding:

lie-ident Category Direct IndirectMedical MedicalEducation Education

Generalist Training* 1.25 1.25

Non-Generalisttraining to lesser offirst board or 5 years

0.75 0.75

Non-Generalist 0.5training past lesserof first board or 5 years

0.5

Generalist training should include:- Residents in family practice. general inter-nod medicine.general pediatrics. medicine-pediatric and preventivemedicine trainingGeneralist graduates who take additional geriatrics orfaculty development felltnesitip

3. Establish a transition program toassist institutions providing essentialservices which are dependent onIMG residents.

COGME recognizes that IMG residents arenot distributed equally across states or typesof training programs, and that national goals

achieved through Recommendation 1 couldthreaten service provision in certain areasand institutions. COGME is particularlyconcerned about large public hospitals andacademic centers in metropolitan areas. Werecommend that a transition strategy bedeveloped for these institutions. Onecomponent could be an expanded NationalHealth Service Corps loan repaymentprogram to provide physician replacementsfor the IMG residents eliminated in selected

17

institutions. Another could involve start-upfunds to train physician assistants and nursepractitioners specifically as resident replace-ments in highly impacted areas. Another pos-sibility, designed for the substantial numberof institutions with small numbers ofprimarily IMG residents, is to award transi-tion support for institutions who agree tocease residency training entirely.

We recognize that such transition efforts will

add to budget outlays, and that they may notbe able to be made from Medicare TrustFunds. But they allow a gradual and appro-priate transition to lower support, and the netsavings across all expenditures would still besubstantial.

4. Identify and remove the DME andIME components of the AverageAdjusted PerCapita Cost (AAPCC)from Medicare capitation rates andutilize these funds specifically forGME purposes.

Medicare payment policy for risk HMO con-tractors is carried out through the AAPCCmechanism. AAPCC payments include anestimated $400 million that is based on DMEand IME payments, but which are not identi-fied in the AAPCC and which vary accordingto geographic region. As a result, MedicareGME funds are spread among all risk HMOcontractors without being focused on thosewhich actually have teaching programs, ornecessarily utilize teaching hospitals forservices.

These amounts should be removed from theAAPCC and made available for GME in awide variety of teaching settings, includingteaching hospitals, managed care organiza-

2.

tions with teaching programs, etc. This would

help rectify a possible inequity to teachinghospitals that provide care to Medicare bene-

ficiaries enrolled in risk contract HMOs butcurrently do not receive Medicare GME ontheir behalf. It would also eliminate thecurrent disincentives to HMOs who wish toestablish or expand residency training activi-ties but do not currently receive explicit reim-

bursement for their efforts.

5. Create demonstration projects tofoster the growth of consortia tomanage medical education policyand financing.

As health care increasingly becomesdominated by integrated managed health care

systems, graduate training opportunities will

change dramatically. COGME believes thatboth the accrediting bodies and HCFA should

encourage the development of arrangementsthat will undoubtedly provide more diverseand necessary training experiences thancurrently exist. COGME has previouslyencouraged the development of medicaleducation consortia or training networks todetermine the number and specialty mix ofresidents, to facilitate the more appropriateutilization of training settings, and to receive

and distribute GME funds to whoever bearsthe training costs, in a manner that simplifies

administration and maximizes flexibility inaccomplishing physician workforce goals.Demonstration projects could be utilized todevelop such a consortium approach toresidency training and GME management.

18 22

PHYSICIAN EDUCATION PROGRAMS IN THE PUBLICHEALTH SERVICE

Although spending for medical education byHCFA and PHS differs by orders ofmagnitude, certain PHS programs (theNational Health Service Corps (NHSC) underTitle III and Health Professions Educationunder Title VII) have had a significant impact

on the physician workforce. For example,targeted Title VII funding has contributed to

a 25% growth since 1980 in the number ofDepartments of Family Medicine and a 40%growth since 1990 in the number of requiredstudent clerkships in family medicine.Building such family medicine teachingcapacity has been cited by the GAO to beassociated with increased student selection of

generalist physician careers.' Targeted TitleVII funding has contributed to a 200%increase in underrepresented minority enroll-ment in health professions schools. Today, 3.8

million people who would otherwise lackaccess are receiving quality primary carefrom 1,900 NHSC professionals.

A significant number of PHS programsprovide institutional and individual incen-tives to attain COGME's national physicianworkforce goals. Title VII and the NHSC areperhaps the best known PHS programs thatsupport the following COGME goals toenhance:

generalist physician training

minority recruitment

geographic distribution

primary care faculty development

quality of practice

CURRENT LAWTitle VII of the Public Health Service Actcontains 40 authorities or program cyclessupporting health professions capacity devel-opment. Overall, Title VII provides anestimated $207 million in primary caremedical education, multidisciplinarytraining, minority/disadvantaged training,and student assistance related funding (seetable). Each of these programs has its ownspecial eligibility and project requirements.Within Title VII, 25 different authoritiesaddress aspects of COGME's physicianworkforce goals. Title VII programs areimplemented by the Bureau of HealthProfessions, of the Health Resources andServices Administration (HRSA).

Another HRSA program, the NHSC, supplies

primary health care providers for health pro-fessions shortage areas. Through service-obligated and volunteer programs, the NHSCrecruits, trains, and places primary careproviders in Community and Migrant HealthCenters, health care to the homelessprograms, federally qualified health centers,health departments, and free-standing private

practices that are tied into a health caresystem.' In 1995, the NHSC has a budget of$45 million and a "field" strength of 1,987health care practitioners. Eighty milliondollars were appropriated in 1995 for schol-arships and loans which provide incentivesfor physicians to practice in underservedinner city and rural areas.

Primary care research funding is supported inthe Agency for Health Care Policy andResearch (AHCPR). In 1995, AHCPR'sbudget was approximately $157 million.Major budget areas include: (1) research on

General MI:miming Office: Medical Education: Curriculum and Financing Strategies Need to Encounq,;e Primary Care Truining.GAO. Repent HENS-95-9. Washington. D.C., 1994.

2319

health care costs, quality and access, (2) the

National Medical Expenditure Survey

(NMES), and (3) medical treatment effective-

ness studies. Two percent of the NIH's

National Research Service Award's (NRSA)

funding is administered by HRSA (1%) andAHCPR (1%) to train primary careresearchers.

Plit-iviali Education/Prim:tr. Care Ilt.-4-arell Appropriation-(Selected Title III, VII & IX PlIS Program-,

Ili..tor.

History (in millions)

FY 1994 FY 1995ProgramAppropriations

FY 1993

Primary Care Programs'Family Medicine Departments & Training $38.2 $47.2 $472General Internal Medicine/Pediatrics 16.8 16.8 16.7Physician Assistant Training 4.9 6.6 6.6

Multidisciplinary Training Programs'

Area Health Education Centers 19.8 22.2 24.6Geriatric Education Centers 10.0 92 9.1Health Education and Training Centers 2.8 2.8 3.7Rural Health Interdisciplinary Training 4.0 4.0 4.0

Minority/Disadvantaged Health Professions Programs'Centers of Excellence 23.5 23.5 23.5Health Careers Opportunity Program 25.0 25.0 26.3Loans Repayment/Fellowships - Faculty 1.1 1.1 1.0

Student Assistance Programs'

Exceptional Financial Need Scholarships 10.4 10.4 11.1

Financial Assistance for Disadvantaged HP Students 62 62 6.6Loans for Disadvantaged Students 7.9 7.9 8.5Scholarships for Disadvantaged Students 17.1 17.1 18.3

National Research Service AwardsBureau of Health Professions 2.62 3.72 3.82

National Health Service Corps Field Program 42.0 44.7 45.0

National Health Service Corps Recruitment Program 73.4 79.3 80.1

Agency for Health Care Policy & Research 122.3 148.6 156.8

TOTAL PHS (Selected Programs) $428.0 $476.3 $492.9

'Title VII PHS Pwgrsms'FY 93 & 94 represents actual disbursements. FY 95 represents estimated disbursement.

MST COPY AVAIAKE 20

COGME RECOMMENDATIONS ON PHS PROGRAMS1. Reauthorize, at 1995 pre-recision

appropriated levels, the NationalHealth Service Corps, Title VII(Health Professions Education), andprimary care research (estimatedbudget impact: current appropria-tion level of approximately $493million).

Under the Public Health Service Act, TitleVII programs, the National Health ServiceCorps, and primary care research supportthrough the National Research ServiceAwards (NRSAs) and AHCPR have beencritical in achieving COGME's goals ofincreasing generalist physicians andphysician assistants, improving primary careteaching capacity, increasing minority repre-sentation, and reducing geographic maldistri-

bution. Current levels of funding for the above

programs need to be continued, at least forthe next five years until State and marketmechanisms have the possibility of replacingall or part of these incentives.

2. Consolidate Title VII programs andinclude the National Health ServiceCorps as recommended in thePresident's fiscal year 1996 BudgetProposals and the Health ProfessionsEducation Consolidation and Re-authorization Act of 1995 (S. 555).

Consolidation of Title VII programs will allow

simplification and flexibility of programadministration. It will assist in focusingscarce Federal resources on activities thathave a demonstrable impact on the produc-tion of primary medical care providers andpublic health workers. Demand is high forgeneralist physicians and major shortages

21

continue in rural communities and in under-served rural and urban shortage areas.

In addition to simplifying administration,consolidation of the primary care traininggrants will provide opportunities for morecooperative development of educationprograms within these disciplines as well ascontinuation of specialty specific programs.The Area Health Education Center Programwould focus on providing community-based

education in the health professions andretaining health professionals in rural com-munities and in underserved urban and ruralareas. Multiple existing minority and disad-vantaged authorities would be consolidatedinto a new authority that would encouragecompetition for awards to design orimplement cooperative arrangements and toprovide for creative demonstrations orstrategic workforce activities to increaseminority representation. Competitive fundswould reward institutions which commit toexpand much needed generalist teachingcapacity and produce practitioners for under-served communities.

COGME recommends the provisions in thePresident's proposal and S. 555 to include theNHSC in one of the proposed Title VIIclusters.

3. Title VII educational programs whichare funded either should havedemonstrated effectiveness, orthrough program design shoulddemonstrate a high likelihood ofachieving specified outcomes.Priority should be given to thoseprimary care training programswhich place a high percentage of

25

graduates in primary care practice,in rural areas, and in underservedurban and rural areas.

Specific national goals for Title VII programs,

common outcome measures and reportingrequirements are essential to the effective-ness and success of these programs inattaining workforce goals. This strategyfocuses Federal support upon training activi-ties of known effectiveness in producingneeded health care workers and in improving

geographic distribution and minority repre-

sentation.

4. Reauthorize the Council on GraduateMedical Education (COGME) asrecommended in the President'sfiscal year 1996 Budget Proposaland the Health ProfessionsEducation Consolidation andReauthorization Act of 1995(S. 555).

COGME has played a significant role inemerging physician workforce issues andidentifying critical elements in the changinghealth care system. COGME is currentlydeveloping key health policy recommenda-tions to Congress, the Secretary, Departmentof Health and Human Services, and otherimportant policymakers on generalist andspecialist physician supply and require-ments, women and medicine, the impact ofmanaged care on the physician workforce and

medical education, minorities in medicine,the geographic distribution of physicians inrural and inner city communities, and DHHSfinancing policies for medical education.

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