Will Your Health Insurer Pay to Train Your Doctor?

Lost in the weeds of President Obama’s budget proposal is a 10-year, $11 billion reduction in Medicare funding for graduate medical education (GME). GME is the “residency” part of medical training, in which medical school graduates (newly minted MDs and DOs) spend 3-7 years learning the ropes of their specialties in teaching hospitals across the country.

Medicare currently spends almost $10 billion annually on GME. One-third of that is for “Direct Medical Education” (DME), which pays teaching hospitals so that they in turn can provide salaries and benefits to residents (current salaries average around $50,000/year, regardless of specialty; there are variances by region). No problem there.

The proposed cuts come from the Medicare portion known as “Indirect Medical Education” (IME) payments. Though IME accounts for two-thirds of the Medicare GME pie, it’s not easy for hospitals to itemize what exactly it is they provide for this significant amount of funding. Instead, hospitals bill Medicare based on a complex algorithm that includes the ‘resident-to-bed’ ratio, among other variables.

A 2009 Rand Corporation study commissioned by Medicare to evaluate aspects of residency training called on the government to tie IME payments directly to improvements in educational and hospital quality, lest the money be perceived to be going down a series of non-specific sinkholes. That idea has caught on, and legislators in both parties now see the healthy IME slice of Medicare education funding as a plum target for cost-cutting, as the direct benefits are difficult to enumerate, let alone quantify.

This has medical educators very worried that we will have to do more with much less (disclosure: I am one).

One potential solution to the impending GME funding crisis is rather novel: Health insurers should pay to train doctors. After all, insurers and their beneficiaries stand to benefit from well-trained, high quality, cost-effective physicians.

One proponent of such a plan is Kenneth Shine, Executive Vice Chancellor of the University of Texas Health System. In a panel at Internal Medicine 2013, the American College of Physicians’ annual meeting (which took place April 11-13 in San Francisco), he proffered the idea that insurers like United Healthcare are looking at using premiums not spent on health care (known in industry parlance as the “Medical Loss Ratio“) to fund doctors’ training, provided HHS will allow it under the Affordable Care Act.

Shine knows of what he speaks: he sits on the company’s board.

John H. Schumann, MD is a general internist and medical educator at the University of Oklahoma School of Community Medicine in Tulsa, OK . He is also author of the blog, GlassHospital (@GlassHospital), where this post originally appeared.

8 replies »

  1. Health insurers (who are already significantly raising their rates) will probably see it differently. But really, this and other health care arguments go round and round and round until they eventually end up in the laps of the people. Why doesn’t the government just raise taxes and pay for all health care. After all, money out of your pocket is money out of your pocket no matter how you slice it.

  2. Great piece.

    With the growing physician shortage, is it possible insurance revenues paying for medical training could boost the numbers for incoming providers?

  3. The drafters of the ACA felt that they could not raise income taxes or raise payroll taxes and still pass any kind of bill.

    Therefore they had to go diving through the federal budget to find cats and dogs of ‘savings’ to make their bill have even a fighting chance to pay for itself.

    The reductions in education subsidies cited here is one example.
    The reductions in safety-net hospiital subsidies is another.

    This is entirely the wrong direction for health care. The government should be paying for nearly all medicai education, and could probably do so with a tax increase of $30 billion a year, well under 1%.
    The government should be covering the entire budgets of true safety net hospitals, so that they do not live or die on Medicaid reimbursements or be forced to send poor patients to bill collectors.

    Part of me feels that if the American people were not willing to pay higher taxes for health care, maybe we should not have had a bill with so many hidden time-bombs.

    There is a counter argument that we will muddle through, and the ACA will bring progress anyways.

    We’ll see, I guess.

    Bob Hertz, The Health Care Crusade

  4. Why not a fund with contributions from pharma companies, insurers, device companies and health IT folks …???

  5. One would assume the insurers will get naming rights, logo exclusivity, billboard monopoly, and all the other perks that typically go with corporate sponsorship?