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Medical Care

$15 Billion Physician Training System Needs Overhaul

The U.S. should significantly reform the federal system for financing physician training and residency programs to ensure that the public’s $15 billion annual investment is producing the doctors that the nation needs, says a new report release in July 2014 by the Institute of Medicine. Current financing — provided largely through Medicare — requires little accountability, allocates funds independent of workforce needs or educational outcomes, and offers insufficient opportunities to train physicians in the health care settings used by most Americans, the report says.

A release from the National Academies notes that all medical school graduates must complete at least one year of “graduate medical education,” or residency training, to become licensed to practice. Board certification in a specialty often requires three to seven years of training. Medicare and Medicaid provide more than 90 percent of federal funding to support physician residency training, with Medicare providing $9.7 billion per year.

Public financing of this training should remain at its current level for now, but Congress should amend Medicare laws and regulations to move to an accountable, modernized financing system over the next decade that rewards performance and spurs innovation, said the committee that wrote the report. Continued Medicare funding should be contingent on its demonstrated value and contribution to the nation’s health needs. Although public funding also comes from other federal and state sources, the committee focused primarily on Medicare because as the largest funder, it provides the most leverage.

“America’s health care system is undergoing profound change as a result of new technologies, and the recent implementation of the Affordable Care Act will further increase the focus on primary and preventive care,” said Gail Wilensky, co-chair of the committee, economist and senior fellow at Project HOPE, and former administrator of the Centers for Medicare and Medicaid Services. “It’s time to modernize how graduate medical education is financed so that physicians are trained to meet today’s needs for high-quality, patient-centered, affordable health care.”

For decades, teaching hospitals have received the majority of Medicare’s funding for physician training, and these hospitals control how the funding is spent. Funds are distributed through complicated formulas linked to the volume of Medicare patients treated. The funding formulas discourage training at clinics or community-based settings where most people now seek care, including children’s hospitals and other institutions that care for non-elderly patients. Several surveys indicate that recently trained physicians in some specialties have difficulty performing simple office-based procedures or managing routine conditions, the report says.

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