OSR

OSR Legislative Affairs UpdateSOSR / COSR Joint Regional Meeting Clearwater Beach, FL

Matthew Shick AAMC Senior Legislative AnalystAnne Porter Southern Region ChairReem Nubani Central Region ChairArun Iyer Southern Region Legislative Affairs DelegateThomas Selby Central Region Legislative Affairs DelegateAgendaUpdate from the Hill Matthew ShickGME Funding OverviewHow is GME currently funded?Impact of 2012 Budget/Debt Reduction LegislationHow does the SGR affect Medicare payments?What does (or doesnt) the health care reform of 2010 do for Medicare? GME and the Affordable Care ActGME and the workforce pipelineFuture ChangesWhat is the future outlook for medical students?What are alternate proposals for GME Funding?Updates from Capitol Hill

GME Funding

GME Funding OverviewHow is GME currently funded?Impact of 2012 Budget/Debt Reduction LegislationHow does the SGR affect Medicare payments?Financing of Resident Education and the Special Missions of Teaching Hospitals Comes from Multiple SourcesMedicare (largest explicit payer)MedicaidChildrens GME programPrivate patient care revenuesVA/DoDOther Federal and state programs

6Medicare Makes Two Specific Payments with an Education LabelDirect GME Payments (DGME)Partially compensates for residency education costs$3.0 billion annuallyIndirect Medical Education (IME) PaymentsPartially compensates for higher patient care costs due to presence of teaching programs$6.5 billion annuallyTOTAL: $9.5 billion annually

Source: CMS Office of the Actuary 7DGME: Residents stipends/fringe benefits, Salaries/fringe benefits of supervising faculty, Other direct costs, Allocated overhead costs

IME: Compensates teaching hospitals for higher inpatient operating costs due to: unmeasured patient complexity not captured by the MS-DRG system, other operating costs associated with being a teaching hospital (lower productivity, standby capacity, etc.). Also, percentage add-on payment to basic Medicare per case (MS-DRG) paymentMedicare Covers 23% of Direct CostsDGME Cost per trainee (Medicare cost reports)$145,000 per trainee, per year on averageMedicare uses PRA of about $94,000 a year

Direct costs of training in US teaching hospitals$13 billion per year

Current Medicare DGME payments$3 billion per year$2 billion per year underpayment for Medicares share

Medicares Investment in GME9Just What Happened in 2011?

Super Committee Progress?Super Committee Must Submit Legislation Identifying $1.2 Trillion in Deficit Reduction by November 23 and Congress and President Must Approve Legislation by December 23No AgreementYes, but does not save all $1.2 trillionAchieve Balance of Savings viaAcross-the-Board CutsFYs 2013-202150% Defense/50% Non-Defense

Excl. Medicaid, Social Security; limits Medicare cuts to 2%Process EndsYes, saves at least$1.2 trillionProcess EndsAutomatic budget cuts, aka Sequestration are triggered for FYs 2013-2021Excl. Medicaid, Social Security; limits Medicare cuts to 2%Process Ends 11Sequestration reductions up to:$720 million/yr payments to teaching hospitals (i.e. members of the Council of Teaching Hospitals, or COTH) for inpatient services$250+ million/yr practice plan payments$1.5 billion/yr to NIH funding to institutionsUp to 14% reduction in other discretionary spendingUnder Sequestration12The good news: Sequestration limits Medicare cuts to 2% for services rendered (other government agencies will take a bigger hit, Medicare is partially protected)Special paymentsDGME, IME, DSH, Outlier, EHR? [T]he percentage reduction for the Medicare programs specified in section 256(d) shall not be more than 2 percent for a fiscal year. Section 256 of Balanced Budget and Emergency Deficit Control Act of 1985.

We still do not expect that [we will reach] the debt limit until quite late in the year, significantly after the end of the fiscal year but before the end of the calendar year.

Treasury Secretary Timothy Geithner testimony before Senate Budget Committee, 2/16/12

The issue that wont go away (yet)Sustainable Growth Rate Formula(SGR)

What is SGR?A cost control measure implemented by Congress in 1997In short, the Sustainable Growth Rate Formula calculated Medicare physician reimbursement to keep payments in line with national economic growthWhen expected GDP growth > physician payments physician payments increased [this actually happened in 2002]When payments > GDP growth SGR reins things in by cutting reimbursementSounds unpalatable? It has been. Cuts called for by the SGR formula are frowned upon by voters, so congress grants on a reprieve, but the cuts dont disappear. They keep compounding. Unless SGR is repealed (or Congress votes again to delay cuts), current estimated cuts of 29% will go into effect in Dec. 2012These payment cuts affect all physician services, including payments to Teaching Hospitals

ClinicalCouncil of Teaching Hospitals (COTH) includes only six percent of all hospitals, but accounts for1:41% of charity care23% of all discharges28% of all Medicaid discharges19% of all Medicare discharges79,529 full-time MDs work in clinical departments at medical schools2.EducationMore than 75% of residents train at a COTH hospital3ResearchNearly 2/3rds of NIH Extramural Research Training Awards go to a COTH hospital or AAMC member medical school4About $68 million in AHRQ grant dollars received by COTH hospitals or AAMC member medical school5

Major Teaching Hospitals & FacultyNotes: 1Source: AAMC analysis of American Hospital Association Survey Database, FY2008. Data reflect short-term, general, nonfederal hospitals. COTH hospitals reflect integrated and independent COTH members.2Source: AAMC Faculty Roster Full-Time Faculty, December 2009. This number excludes part-time and volunteer faculty. It also excludes PhDs and MD/PhDs.3Source: AAMC analysis of Medicare Cost Report Data, June 30, 2010 Release.4Source: AAMC analysis of 2006 National Institutes of Health awards data (accessed at: http://report.nih.gov/award/trends/AggregateData.cfm?Year=2006)5Source: Agency for Health Care Research and Quality, Federal Fiscal Year 2006 data

So I think in the story, this point comes toward the end. Namely as these cuts come down, we must remember that there is a societal benefit the AMCs provide that could suffer.but tell that only after the cuts and other challenges are named.

18GME &ACA

65% redistribution of unused positions- majority will go to primary care, general surgery

$230 million over five years for teaching health centers via HRSA- authorized, not funded

No increase in Medicare GME fundingNo increase in Medicare GME capsHealth Care Reform in 2010 included the following provisions: The Patient Protection and Affordable Care Act of 2010 did not increase the number of Medicare-funded GME positions. Provisions that were included in the bill: (1) Redistribution of unused positions; (2) $230 million in funding for teaching health centers through the Department of Health and Human Services Health Research and Services Administration (DHHS-HRSA). At most these measures increase the number of GME positions by a few hundred. This is far short of the 15% increase (an additional 15,000 positions) supported by AAMC. 20GME & Physician Workforce

AAMC Position on GME FundingThe U.S. must make a greater national investment in residency training through GME while at the same time looking for more efficient, effective ways for teams of health professionals to deliver high-quality care to all patients.Congress and the administration must do their part and allow Medicare to resume paying its share of the costs by creating additional residency training positions at teaching hospitals.AAMC urges Congress and the administration to do their part and increase funding for Medicare-supported residency positions. Cutting the deficit is important, but sustained investment in doctor training is critical to the health of all Americans.

Match Day Statement AAMC President and CEO Dr. Darrell G. Kirch

Worsening Physicians ShortageMedicare Funding in the FutureFiscal Commission Recommendation (Simpson Bowles Commission)2/3 Reduction = 10-year $60 billion cut in GME support

Even a small reduction in GME financing has a significant impact1% change in IME payment calculation (5.5% 4.5%) eliminates over $1.2 billion in annual teaching hospital support

Examples of One-Year Impact of IME Cuts:States Largest Teaching HospitalsStateAggregate IME Loss(in millions)Lost JobsLost State/LocalTax Revenues(in millions)Total Economic Impact/Loss(in millions)Arizona$29.2689$6.2$103.4Delaware$12.6350$3.2$52.5Florida$72.11,772$16.0$265.8Iowa$17.7396$3.6$59.4Kansas$9.0212$1.9$31.8Maine$10.5272$2.4$40.8Massachusetts$205.85,115$46.0$767.3Michigan$149.93,748$33.7$562.2New Jersey$79.92,018$18.2$302.6New Mexico$6.6142$1.3$21.3New York$576.317,787$160.1$2,668North Carolina$86.12,019$18.2$302.8North Dakota$1.841$0.4$17.5Oklahoma$5.5117$1.0$6.1Oregon$12.9308$2.8$46.2South Dakota$1.945$0.4$6.8Texas$80.22,028$18.2$304.1Utah$9.9223$2.0$33.5Washington$21.4515$4.6$77.3West Virginia$18.1426$3.8$63.9Medicare Funding in the FutureACGME surveyIf funding stayed at 2011 levels majority of responding sponsors (61%) would sponsor the same number of core and subspecialty positions17% would increase number of residency programs, and 30.1% would increase number of residency positionsNo programs reported they would close core residency programsAfter supercommittee failure and MedPAC and Simpson Bowles Comission recommendations were given, ACGME sent out survey to residency programs to estimate the impact of reductions in GME funding of the magnitude under discussion in our nations capital on the educationalpipeline for physicians.262011 ACGME SurveyAttempt to estimate impact of reductions in GME funding of the magnitude under discussion on the education of physicians680 programs filled out surveySurvey asked programs to indicate how future federal funding would affect their institutions programs and positions3 funding scenarios: stable at 2011 levels, funding reduced by 33%, and funding reduced by 50%Asked to identify potential impact on programs and positions in each scenarioSlight reductions = 10% decreaseSignificant reductions = 33% decreaseComplete closure of program / position = 100% decreaseACGME Survey Results

Effect on Residency PositionsThe Potential Impact of Reduction in Federal GME Funding in the United States: A Study of the Estimates of Designated Institutional Officials.Thomas J. Nasca, M.D., MACP, Rebecca S. Miller, M.S., Kathleen D. Holt, Ph.D.The Accreditation Council for Graduate Medical Education. Chicago, IL.Stable funding: Majority will increase or stay constant33% decrease: Majority decrease in some respect, virtually no increases50% decrease: Majority have significant reduction, virtually no increases28ACGME Survey Results

Effect on Residency ProgramsThe Potential Impact of Reduction in Federal GME Funding in the United States: A Study of the Estimates of Designated Institutional Officials.Thomas J. Nasca, M.D., MACP, Rebecca S. Miller, M.S., Kathleen D. Holt, Ph.D.The Accreditation Council for Graduate Medical Education. Chicago, ILStable: increase or stable number of programs / fellowships33% decrease: 45% stable number of core, ~45% have reduction. Similar for Fellowships50% decrease: majority have reductions, start to see >10% of closure of ALL sponsored programs29ACGME Survey Results

http://www.acgme.org/acwebsite/home/ImpactReductionFederalGMEFundingTJN.pdfWorst case scenario is >50% reduction that has been offered by some committees. Majority of states are estimated to lose over 100 positions. Larger losses in states with the most positions available (California, Texas, Illinois, Florida, New York). 30Best Case ScenarioStable funding is neededIncreased funding is ideal, and necessary to support growing demand for medical careIncrease number of training positionsAAMC advocates for an increase in Medicare-funded GME positions by 15% 115,000

Research needed ensure that supply matches improvements in health care delivery- assessment of needs

Must confront the two major issues of allocation of spots for US graduates and how to fund those positionsGoals for the futureAlternative funding proposals for GME

Proposal #1: Free Medical EducationPremise: Cost of medical education and amount of medical student debt are deterring strong candidates from choosing medicine as a career and primary care specialtiesSolution: Redistribute GME funds from non-primary care specialties and fellowships towards medical school education. Trainees would pay for specialty and fellowship training. System similar to other countries.Barriers to Implementation: Politics, set up of current system, quality of medical education, cost of medical education, payment system to hospitals and medical schoolshttp://www.nytimes.com/2011/05/29/opinion/29bach.html?scp=2&sq=medical+school+education+bach&st=nyt34Proposal #2: Premise: Long-standing problems of GME funding based on substantial differences in per-resident costs and no re-calibration of payment since 1983, formulas are outdated Solution: Reanalysis of true direct costs of resident trainingSeparation of hospital operating revenue and resident training fundsSeparate budgets per hospital per GME programTie funding to annually assessable GME standardsWould ultimately reveal lack of alternate funding sources for GME trainingSource from 2002 article in Society of General Internal Medicine - http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1495035/35Proposal #3: Three-Fold ApproachThree competing proposal revolving around either market-based, incentive-based, or regulatory-based model. Each of these three models would pose different difficulties and likely could not be implemented individuallyRational policy goals include: Broad-based stable funding of DME, direct federal support to program sponsors, target funds at specific market dysfunction or innovations, and strengthen federal workforce goalshttp://aspe.dhhs.gov/health/reports/06/AltGradMedicalEdu/report.pdf

From 2006, actually, has much more detail on plan36