Medicare funding for medical education: a waste of money?

• Author: Gottlieb, Scott

By picking up the tab for training doctors, the government is making taxpayers pay instead of private industry having to bear the expense, as it should.

Medicare, the government's medical plan for senior citizens, is an ongoing political hot potato. Nevertheless, the calculus of Washington makes it certain that most Americans never will get close to learning anything useful about the workings of the program which, in many respects, is wasteful of the taxpayers' money.

Take, for example, one aspect of the behemoth health insurance program that is not publicized widely. Presently, the Federal government, through Medicare, explicitly subsidizes the cost of graduate medical education. In fact, almost $7,000,000,000 was spent on education in 1996, according to Congressional Budget Office estimates. This money is intended to cover the direct and indirect costs of medical education, including such things as salaries for residents and the extra time a surgeon takes as he or she goes slow to teach a procedure.

The money comes from two pots. The first is direct medical education (DME) payments, which cover Medicare's calculated share of the costs associated with the salaries and benefits of residents and the cost of teaching physicians. This includes money for conference and classroom space, additional equipment and supplies, and allocated overhead.

The second funding mechanism is through a so-called indirect medical education (IME) adjust meet. Recognizing that the additional missions of teaching hospitals raise their costs, Congress established in 1983 the IME adjustment as an add-on factor to Medicare in-patient payments. This was intended to compensate teaching hospitals for certain intangible and difficult to quantify expenses associated with graduate medical education programs. According to the original bill, this included such expenses as in creased diagnostic tests, more aggressive use of diagnostic services, higher staffing ratios, additional record-keeping, research, and the fact that teaching hospitals generally attract a more acute patient case mix.

Since these governmental payments are calculated to cover the teaching costs associated only with publicly insured patients, some portion of the expenses of medical education has been passed on through the higher charges that academic medical centers typically have collected from private payers. Though the precise amount they contribute from their own clinical revenues remains to be measured carefully, one estimate placed this figure at $1,700,000,000, of which about $1,000,000,000 goes to undergraduate medical education--the four years of medical school--and $700,000,000 to graduate medical education or residency training.

By all accounts, medical training is an expensive enterprise. Yet, exactly how much medical education...