GME Financing

Learn about AAIM/ACP's recommendations to better align GME financing with workforce needs and IOM's report on financing GME.

AAIM, ACP Recommend Ways to Better Align GME Financing with Workforce Needs

AAIM and the American College of Physicians (ACP) released a new policy paper May 3 calling for changes that better align funding for GME with the nation’s health care workforce needs. The paper, Financing US Graduate Medical Education, was published in Annals of Internal Medicine July 19, 2016.

The new paper offers nine recommendations aimed at addressing the current problems with GME financing.

  • Medicare GME funds should be linked to meeting the nation’s health care workforce needs.
  • All payers, public and private, should be required to contribute to a financing pool to support residencies.
  • A thorough evaluation of the true cost of training physicians is required before any decisions are made regarding how GME funds are distributed.
  • Medicare’s direct graduate medical education (DGME) payments to hospitals and the indirect medical education (IME) adjustment should be combined into a single, per resident amount with a geographic adjustment.
  • GME funding should follow trainees across training setting, minimizing barriers to residents training in sites that would broaden their experience and expose them to a greater variety of practice settings.
  • GME caps should be lifted in order to allow for the training of an adequate number of primary care physicians, including internal medicine specialties and other specialties facing shortages.
  • The concept of a performance-based GME payment system should be explored, but it would need to be achieved without destabilizing the system of physician training.
  • Pilot projects should be used to evaluate potential changes to GME funding and to promote innovation.
  • Internal medicine and internal medicine-pediatrics residents should receive primary care training in well-functioning ambulatory settings that are financially supported for providing training.

GME plays a major role in addressing the nation’s workforce needs, as GME is the ultimate determinant of the output of practicing physicians. The federal government is the largest explicit provider of GME funding, with the majority of support coming from Medicare, which currently provides approximately $10 billion annually. The costs of GME are recognized by Medicare under two mechanisms: direct graduate medical education payments (DGME) to hospitals for residents’ stipends, faculty salaries, administrative costs, and institutional overhead; and an indirect medical education (IME) adjustment developed to compensate teaching hospitals for the higher costs associated with teaching. The number of Medicare-supported positions at institutions is capped at 1996 levels. The existing caps on the number of Medicare-funded GME positions have been criticized as not allowing GME training positions to increase by the numbers needed to slow or reverse growing shortages of physicians in primary care and other specialties.

Read the Position Paper