SOSR / COSR Joint Regional Meeting Clearwater Beach, FL

Matthew Shick AAMC Senior Legislative Analyst Anne Porter Southern Region Chair Reem Nubani Central Region Chair Arun Iyer Southern Region Legislative Affairs Delegate Thomas Selby Central Region Legislative Affairs Delegate

Agenda
Update from the Hill Matthew Shick GME Funding Overview How is GME currently funded? Impact of 2012 Budget/Debt Reduction Legislation How does the SGR affect Medicare payments? What does (or doesnt) the health care reform of 2010 do for Medicare? GME and the Affordable Care Act GME and the workforce pipeline Future Changes What is the future outlook for medical students? What are alternate proposals for GME Funding?

Updates from Capitol Hill

GME Funding

GME Funding Overview

How is GME currently funded? Impact of 2012 Budget/Debt Reduction Legislation

How does the SGR affect Medicare payments?

Financing of Resident Education and the Special Missions of Teaching Hospitals Comes from Multiple Sources
Medicare (largest explicit payer) Medicaid Childrens GME program

Private patient care revenues

VA/DoD Other Federal and state programs

Medicare Makes Two Specific Payments with an Education Label

Direct GME Payments (DGME)

Partially compensates for residency education costs $3.0 billion annually Indirect Medical Education (IME) Payments Partially compensates for higher patient care costs due to presence of teaching programs $6.5 billion annually

TOTAL: $9.5 billion annually

Source: CMS Office of the Actuary

Medicare Covers 23% of Direct Costs

DGME Cost per trainee (Medicare cost reports)

$145,000 per trainee, per year on average Medicare uses PRA of about $94,000 a year

Direct costs of training in US teaching hospitals

$13 billion per year

Current Medicare DGME payments

$3 billion per year $2 billion per year underpayment for Medicares share

Medicares Investment in GME

2.50% 2.00%

1.50%

1.00%

0.50%

0.00% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 DGME as a % of Medicare IME as a % of Medicare

Just What Happened in 2011?

Super Committee Progress?

Super Committee Must Submit Legislation Identifying $1.2 Trillion in Deficit Reduction by November 23 and Congress and President Must Approve Legislation by December 23

Yes, saves at least $1.2 trillion

Yes, but does not save all $1.2 trillion

No Agreement

Process Ends

Achieve Balance of Savings via Across-the-Board Cuts FYs 2013-2021

50% Defense/50% Non-Defense Excl. Medicaid, Social Security; limits Medicare cuts to 2%

Automatic budget cuts, aka Sequestration are triggered for FYs 2013-2021
Excl. Medicaid, Social Security; limits Medicare cuts to 2%

Process Ends

Process Ends

Under Sequestration
Sequestration reductions up to: $720 million/yr payments to teaching hospitals (i.e. members of the Council of Teaching Hospitals, or COTH) for inpatient services $250+ million/yr practice plan payments $1.5 billion/yr to NIH funding to institutions Up to 14% reduction in other discretionary spending
The good news: Sequestration limits Medicare cuts to 2% for services rendered (other government agencies will take a bigger hit, Medicare is partially protected) Special paymentsDGME, IME, DSH, Outlier, EHR?
[T]he percentage reduction for the Medicare programs specified in section 256(d) shall not be more than 2 percent for a fiscal year.

Section 256 of Balanced Budget and Emergency Deficit Control Act of 1985.

12

 We still do not expect

that [we will reach] the debt limit until quite late in the year, significantly after the end of the fiscal year but before the end of the calendar year.
Treasury Secretary Timothy

Geithner testimony before Senate Budget Committee, 2/16/12

Sustainable Growth Rate Formula (SGR)

The issue that wont go away (yet)

What is SGR?
A cost control measure implemented by Congress in 1997 In short, the Sustainable Growth Rate Formula calculated

Medicare physician reimbursement to keep payments in line with national economic growth When expected GDP growth > physician payments physician payments increased [this actually happened in 2002] When payments > GDP growth SGR reins things in by cutting reimbursement Sounds unpalatable? It has been. Cuts called for by the SGR formula are frowned upon by voters, so congress grants on a reprieve, but the cuts dont disappear. They keep compounding. Unless SGR is repealed (or Congress votes again to delay cuts), current estimated cuts of 29% will go into effect in Dec. 2012 These payment cuts affect all physician services, including payments to Teaching Hospitals

Major Teaching Hospitals & Faculty

Clinical
Council of Teaching Hospitals (COTH) includes only six percent of all

hospitals, but accounts for1: 41% of charity care 23% of all discharges 28% of all Medicaid discharges 19% of all Medicare discharges 79,529 full-time MDs work in clinical departments at medical schools2.

Education
More than 75% of residents train at a COTH hospital3

Research
Nearly 2/3rds of NIH Extramural Research Training Awards go to a COTH

hospital or AAMC member medical school4 About $68 million in AHRQ grant dollars received by COTH hospitals or AAMC member medical school5
Notes: 1Source: AAMC analysis of American Hospital Association Survey Database, FY2008. Data reflect short-term, general, nonfederal hospitals. COTH hospitals reflect integrated and independent COTH members. 2Source: AAMC Faculty Roster Full-Time Faculty, December 2009. This number excludes part-time and volunteer faculty. It also excludes PhDs and MD/PhDs. 3Source: AAMC analysis of Medicare Cost Report Data, June 30, 2010 Release. 4Source: AAMC analysis of 2006 National Institutes of Health awards data (accessed at: http://report.nih.gov/award/trends/AggregateData.cfm?Year=2006) 5Source: Agency for Health Care Research and Quality, Federal Fiscal Year 2006 data

GME & ACA

Health Care Reform in 2010 included the following provisions:

1.

65% redistribution of unused positions

- majority will go to primary care, general surgery

2. $230 million over five years for teaching health

centers via HRSA

- authorized, not funded

No increase in Medicare GME funding No increase in Medicare GME caps

GME & Physician Workforce

AAMC Position on GME Funding

The U.S. must make a greater national investment in residency training through GME while at the same time looking for more efficient, effective ways for teams of health professionals to deliver high-quality care to all patients. Congress and the administration must do their part and allow Medicare to resume paying its share of the costs by creating additional residency training positions at teaching hospitals. AAMC urges Congress and the administration to do their part and increase funding for Medicare-supported residency positions. Cutting the deficit is important, but sustained investment in doctor training is critical to the health of all Americans.
Match Day Statement AAMC President and CEO Dr. Darrell G. Kirch

Worsening Physicians Shortage

Medicare Funding in the Future

Fiscal Commission Recommendation (Simpson

Bowles Commission)
2/3 Reduction = 10-year $60 billion cut in GME support

Even a small reduction in GME financing has a

significant impact
1% change in IME payment calculation (5.5% 4.5%)

eliminates over $1.2 billion in annual teaching hospital support

Examples of One-Year Impact of IME Cuts: States Largest Teaching Hospitals

State
Arizona Delaware Florida Iowa Kansas Maine Massachusetts Michigan New Jersey New Mexico New York North Carolina North Dakota Oklahoma Oregon South Dakota Texas Utah Washington West Virginia

Aggregate IME Loss (in millions)

$29.2 $12.6 $72.1 $17.7 $9.0 $10.5 $205.8 $149.9 $79.9 $6.6 $576.3 $86.1 $1.8 $5.5 $12.9 $1.9 $80.2 $9.9 $21.4 $18.1

Lost Jobs
689 350 1,772 396 212 272 5,115 3,748 2,018 142 17,787 2,019 41 117 308 45 2,028 223 515 426

Lost State/Local Tax Revenues (in millions)

$6.2 $3.2 $16.0 $3.6 $1.9 $2.4 $46.0 $33.7 $18.2 $1.3 $160.1 $18.2 $0.4 $1.0 $2.8 $0.4 $18.2 $2.0 $4.6 $3.8

Total Economic Impact/Loss (in millions)

$103.4 $52.5 $265.8 $59.4 $31.8 $40.8 $767.3 $562.2 $302.6 $21.3 $2,668 $302.8 $17.5 $6.1 $46.2 $6.8 $304.1 $33.5 $77.3 $63.9

Medicare Funding in the Future

ACGME survey If funding stayed at 2011 levels

majority of responding sponsors (61%) would sponsor the same number of core and subspecialty positions
17% would increase number of residency programs, and 30.1% would increase number of residency positions No programs reported they would close core residency programs

2011 ACGME Survey

Attempt to estimate impact of reductions in GME funding of the

magnitude under discussion on the education of physicians

680 programs filled out survey

Survey asked programs to indicate how future federal funding would

affect their institutions programs and positions

3 funding scenarios: stable at 2011 levels, funding reduced by 33%, and

funding reduced by 50% Asked to identify potential impact on programs and positions in each scenario

Slight reductions = 10% decrease Significant reductions = 33% decrease Complete closure of program / position = 100% decrease

ACGME Survey Results

Effect on Residency Positions

The Potential Impact of Reduction in Federal GME Funding in the United States: A Study of the Estimates of Designated Institutional Officials.Thomas J. Nasca, M.D., MACP, Rebecca S. Miller, M.S., Kathleen D. Holt, Ph.D. The Accreditation Council for Graduate Medical Education. Chicago, IL.

ACGME Survey Results

Effect on Residency Programs

The Potential Impact of Reduction in Federal GME Funding in the United States: A Study of the Estimates of Designated Institutional Officials.Thomas J. Nasca, M.D., MACP, Rebecca S. Miller, M.S., Kathleen D. Holt, Ph.D. The Accreditation Council for Graduate Medical Education. Chicago, IL

ACGME Survey Results

http://www.acgme.org/acwebsite/home/ImpactReductionFederalGMEFundingTJN.pdf

Best Case Scenario

Stable funding is needed
Increased funding is ideal, and necessary to support

growing demand for medical care

Goals for the future

Increase number of training positions AAMC advocates for an increase in Medicare-funded GME positions by 15% 115,000 Research needed ensure that supply matches

improvements in health care delivery

- assessment of needs

Must confront the two major issues of allocation of

spots for US graduates and how to fund those positions

Alternative funding proposals for GME

Proposal #1: Free Medical Education

Premise: Cost of medical education and amount of

medical student debt are deterring strong candidates from choosing medicine as a career and primary care specialties Solution: Redistribute GME funds from non-primary care specialties and fellowships towards medical school education. Trainees would pay for specialty and fellowship training. System similar to other countries. Barriers to Implementation: Politics, set up of current system, quality of medical education, cost of medical education, payment system to hospitals and medical schools

Proposal #2:
Premise: Long-standing problems of GME funding

based on substantial differences in per-resident costs and no re-calibration of payment since 1983, formulas are outdated Solution:
Reanalysis of true direct costs of resident training
Separation of hospital operating revenue and resident

training funds Separate budgets per hospital per GME program Tie funding to annually assessable GME standards Would ultimately reveal lack of alternate funding sources for GME training

Proposal #3: Three-Fold Approach

Three competing proposal revolving around either

market-based, incentive-based, or regulatory-based model. Each of these three models would pose different difficulties and likely could not be implemented individually Rational policy goals include: Broad-based stable funding of DME, direct federal support to program sponsors, target funds at specific market dysfunction or innovations, and strengthen federal workforce goals