Graduate Medical Education Financing Policy

Principle 1: Provide an adequate number of family medicine residency positions to meet U.S. primary care health care needs. 

Support for Principle 1: Effective health care systems have a physician workforce comprised of roughly 50% primary care and 50% subspecialty. The current U.S. physician workforce is 31% primary care (228,936 of 730,026 in 2021). Of the primary care physicians, 40% are family physicians (91,037 of 228,936). The number of graduates from ACGME accredited residency programs of all specialties in 2021 was 48,072. The number of first year family medicine residency positions in 2023 was 5107 based upon the number of positions offered at Accreditation Council for Graduate Medical Education (ACGME)-accredited family medicine residency programs in the Match. The number of family medicine residency positions needs to increase significantly to fulfill our future U.S. health care needs.

Principle 2: Establish accountability for federal GME payments to correct the historical maldistribution of federal GME financing by ensuring new positions are allocated to mitigate rural/urban and other geographic and specialty imbalances to reduce health professional shortage and medically underserved areas. (new)

Support for Principle 2: It is crucialto address the current maldistribution of the physician workforce because it is contributing to lower health care quality and health disparities. The type and location of GME training is predictive of eventual practice location. There is an opportunity to collaborate with stakeholders at the federal, state, and community levels to identify and share what is working well currently and to identify what would work if additional or redistributed investments through GME payment models were available. One successful example is the Teaching Health Center Graduate Medical Education (THCGME) model. In addition, because current federal policy is often a barrier to development of new rural residency programs, it is important to advocate for the federal government to further study how its GME investments are contributing to the health and socioeconomic status of people living and working in underserved rural and urban communities. There is also a need for development of an entity to create and monitor GME financing strategies to accomplish national workforce goals. This entity should establish accountability measures that would be utilized as a condition for sustained GME payments.

Principle 3: Create new funding collaborations between federal, state, and nongovernmental stakeholders investing in primary care GME to positively impact factors such as health disparities, primary care access, workforce maldistribution, health equity, infant mortality, and social determinants of health and value based primary care. Private equity GME funding sources must be carefully monitored to ensure that funds are being allocated accordingly and that resident education is not being compromised. These new funding sources should be in addition to reallocation of Medicare and Medicaid GME funds to support primary care residencies.

Support for Principle 3: The traditional allocation of GME funding is not well aligned with the geographical or specialty needs of the United States. Many states have had success developing and supporting new primary care residency programs to reduce physician workforce maldistribution. Funding these residencies was accomplished through state Medicaid GME payments and other initiatives such as utilizing unique state funds and other assessments (e.g., tobacco taxes, hospital/insurance assessments, other grant programs). In 2018, 43 states made Medicaid GME payments. The proportion of GME Medicaid payments made under managed care continues to exceed those made under fee for service, and several states have included these payments in managed care organization capitation rates. Any newly created or local funding support should be additive and supplemental, not meant to replace or decrease federal support.

Many hospitals and health systems have also committed to expanding family medicine GME as a foundational approach to addressing workforce concerns and population health. There has been an increase in private equity ownership of health systems, and from 2015 to 2019, investor owned for profit hospitals increased by 19%. The private equity impact on teaching hospitals has resulted in residency closures, prompting heightened scrutiny of these private funding arrangements to assure that resident education is not compromised.

Along with this funding, policymakers and stakeholders are increasingly concerned with the financial and social accountability of public GME funding. In 2018, 35 states collected data on the costs of teaching programs, and three states documented the impact of Medicaid GME funding on their state’s health care workforce. Therefore, identifying and communicating successful innovations in GME financing are important complements to optimizing current federal, state and private investments in GME

Principle 4: Make permanent and increase funding to the Teaching Health Center Graduate Medical Education (THCGME) program to ensure stability, growth, and long-term sustainability of the program. (new)

Support for Principle 4: The THCGME program was created under the Patient Protection and Affordable Care Act (ACA) and reauthorized through fiscal year 2022 to increase the number of primary care residents who train in community-based ambulatory patient settings. It is important that this program be permanently funded within the Medicare GME system and not be subject to periodic reauthorization and appropriated funding. Currently, the Health Resources and Services Administration (HRSA) awards funds to eligible teaching health centers for the purpose of covering both direct and indirect GME costs for new or expanded community-based primary care residency programs. The U.S. Department of Health and Human Services (HHS) is required by law to establish formulas for determining separate Direct Graduate Medical Education (DGME) and Indirect Medical Education (IME) payment formulas for the THCGME program. As of April 2023, HHS had not yet established rules on such payment formulas. Instead, it has been making payments using an interim annual payment rate of $160,000 per resident, with reductions when appropriated funding levels do not allow the full per-resident amount (PRA).

According to a 2018 study, the median cost per resident per year was approximately $180,000 and the cost estimate in 2022-2023, given inflation, has been updated to $209,000. To maintain GME program stability and sustainability, it is imperative for THCGME funding to be predictable, secure, and reliable. Currently, THCGME funding is being supplemented through the American Rescue Plan Act of 2021 through the 2022 fiscal year. This funding source is temporary and no subsequent legislation has been passed to create permanent funding to the THCGME program. Residency programs rely on a continued funding stream for residents to complete their residency training. Without reliable support, residency programs are unable to plan for residency class sizes and may have difficulty finding funding for each resident for their full length of training. Lack of consistent funding is disruptive and detrimental to creating a family physician workforce, particularly in primary care shortage areas.     

Principle 5: Modernize GME financing by replacing Indirect Medical Education (IME)/Direct Graduate Medical Education (DGME) payments with a per-resident payment (PRP) and relaxing of GME caps for primary care residencies in Health Professional Shortage Areas (HPSA’s). 

Support for Principle 5: Modernizing GME payment methodology is necessary to make strategic investments that support a more equitable, rational physician workforce and support the development of training at non-hospital sites. Consistent with the Institute of Medicine’s (IOM’s, now known as National Academy of Medicine) 2014 recommendation to replace rigid statutory formulas that were developed in an era when hospitals were the central site for physician training, the AAFP advocates for combining IME and DGME financing streams into a single payment, with funds distributed as a national per-resident payment. The PRP should be evidence based, transparent, and predictable.  

Additionally, relaxing the caps on Medicare-funding residency positions by eliminating or extending the time window for the cap for programs in HPSA shortage areas would allow larger caps and more residents training at hospitals in areas where physicians are needed most. Rural and under-resourced hospitals in health care shortage areas often face challenges in recruiting faculty and ensuring a variety of educational experiences. Further, by increasing the number of trainees in these HPSA shortage areas, the distribution of primary care access to these underserved areas will be improved.

Principle 6: Support stabilization and growth of family medicine residencies by restructuring Centers for Medicare and Medicaid Services GME funding to prioritize first-certificate residency training with an emphasis on primary care specialties.

Support for Principle 6: Because the public resources available through existing Centers for Medicare and Medicaid Services (CMS) GME funding are finite, residency training must emphasize first-certificate programs that substantially benefit population health. Current CMS GME funding should be restructured in ways that support existing, expanding, and new first-certificate residency programs, prioritizing programs in primary care specialties. CMS GME funding can be redistributed from second-certificate or fellowship training to increase funding for all first-certificate residency programs. CMS can allocate tiered payment rates to sponsoring institutions, providing higher reimbursement rates or incentives for first-certificate residency spots compared to second-certificate or fellowship residency spots. CMS can fund initiatives that foster innovative or outcomes-based education in first-certificate programs.

(2018 COD) (October 2023 COD)