Institute of Medicine urges reform to physician education financing

The federal government devotes significant resources toward the education and training of physicians, primarily through the Medicare program. Graduate medical education (GME) programs currently receive guaranteed federal financing totaling over $15 billion each year, which is used to finance the residencies and fellowships that physicians complete in pursuit of state licensure and board certification.

A recent Institute of Medicine (IOM) report grew out of several concerns surrounding the state of the GME system. The report highlights a number of challenges facing medical education, including: physician specialization unsuited to meeting the needs of the population; insufficient geographic distribution of physicians; lack of diversity in the physician workforce; new physicians lacking the competencies needed in a newly patient-centered and quality-driven medical practice landscape; and lack of fiscal transparency.

Additionally, the IOM report found that since a 1997 cap on the number of Medicare-supported residency slots was set by Congress, funding of GME has remained concentrated in the northeast United States. Since Medicare distributes GME funds to teaching hospitals, according to the report, little GME training takes place in community-based settings, contributing to a gap between training and workplace competency.

“The committee recognizes that reforming GME and its governance and financing cannot — on its own — produce a high-value, high-performance health care system. However, appropriate preparation of the physician workforce is an essential component of this transformation.”

Jill Eden and colleagues, Institute of Medicine

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The IOM recommends maintaining existing operational funding of GME (adjusted for inflation) initially, while phasing out the current payment system and replacing it with a “modernized” performance-based methodology with geographical adjustments. The committee also recommends mandating transparency and accountability in Medicaid GME dollars, where states have a great deal of discretion.

The Peterson Center on Healthcare and KFF are partnering to monitor how well the U.S. healthcare system is performing in terms of quality and cost.

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