The Balanced Budget Act (BBA) of 1997 created the Medicare Payment Advisory Commission (MedPAC) and the National Bipartisan Commission on the Future of Medicare. Both are designed to closely examine Medicare and make recommendations to Congress to preserve and reform the program. Among other issues, both Commissions plan to closely examine and possibly reform Medicare payments to Graduate Medical Education (GME). For that reason, GME is likely to see extensive discussion and possible activity this session of Congress.

National Bipartisan Commission on the Future of Medicare: On March 16, the Bipartisan Commission sunsetted without making formal recommendations to Congress. The Commission’s 17 politically appointed members were instructed by the BBA of 1997 to provide their recommendations by March 1, 1999. The Commission required an 11-member majority to make formal recommendations to Congress but the final vote on Senator Breaux’s proposal was only 10 to 7. However, many of the Commissioners hold seats on the Senate Finance Committee and announced their intentions to continue to push the Breaux proposal as legislation. President Clinton, anticipating the failure of the Commission the afternoon before the final meeting, announced his own intentions to develop a plan to "strengthen Medicare for the 21^st century" to present to Congress this year.

Despite the failure of the Commission to formally make recommendations to Congress, the Breaux/Thomas proposal may remain politically alive. As mentioned above, the Congressional budget resolution directs Congress to consider the proposal, signaling the GOP’s interest in pursuing these policy alternatives. The PPC will continue to work to maintain the safety of graduate medical education including freestanding children’s hospitals. For more information, please see the Commission’s web site at <medicare.commission.gov/medicare>.

MedPAC: Also required to provide recommendations to Congress, Medicare Payment Advisory Commission [MedPAC] must produce its report by August 5, 1999. Gail Wilensky, former Administrator of the Health Care Financing Administration [HCFA] serves as the chair of MedPAC and has publicly stated that she remains unconvinced that GME should be funded by federal subsidies. [Note: MedPAC replaces the Prospective Payment Assessment and the Physician Payment Review Commissions.] While MedPAC has yet to solidify its recommendations for GME funding, several Commissioners have hinted that now may be the time to "divorce" Medicare and the funding of GME. The Commission’s next meeting will be April 29 and 30. For more information, please see the Commission’s web site at <www.pprc.gov>.

Graduate Medical Education/Children’s Hospitals: Freestanding children’s hospitals, those that do not share a Medicare provider number with an adult health care institution, do not qualify for the substantial GME support afforded to teaching institutions through the Medicare program. In response to the proposals of the National Bipartisan Commission on the Future of Medicare, the pediatric community has joined the National Association of Children’s Hospitals in seeking interim federal support for GME programs for freestanding children’s hospitals.

The Clinton Administration has offered a proposal in its FY 2000 budget submission to Congress to address the problem of underfunded graduate medical education programs in freestanding children’s hospitals. The President’s FY 2000 budget proposal included a $40 million temporary fix to provide GME payments to children’s hospitals as part of the Health Resources and Services Administration, Department of Health and Human Services. This proposal will require authorizing legislation and HRSA is currently developing their proposal. Under the President’s budget proposal this new program is funded with discretionary dollars [as opposed to the Medicare trust fund] and it appears that it may come at the expense of other valuable HRSA health professions training programs, such as Title VII. As part of its monthly conference call, in April, the PPC had a conference call with the staff of the Division of Medicine/HRSA to discuss this proposal and its ramifications for Title VII. The PPC will closely monitoring this issue.

On February 8, 1999, Senators Bob Kerrey (D-NE) and Kit Bond (R-MO) along with 15 other senators introduced S. 391 the Children’s Hospitals Education and Research Education Act of 1999. The bill would provide general revenues for graduate medical education for time-limited support for independent children’s teaching hospitals. The bill establishes a four-year fund "which will provide children’s hospitals with Federal teaching payments that are based on there per resident costs and the complexity of their patient population."

Other GME Legislation: Representative Ben Cardin (D-MD) along with five other cosponsors has introduced H.R. 1224, the "All Payer Graduate Medical Education (GME) Act," a bill to fund graduate medical education through an all-payer fund. Similar to Representative Cardin’s bill from the 105^th Congress, this legislation would fund GME through both the Medicare system and through a separate trust fund, with a 1% tax on all health care plans. This would produce approximately $3.2 billion in revenue for direct and indirect medical education.

The bill would create a new formula for direct graduate medical education payments (DGME) using the total number of residents, a new per resident formula, and the private payers’ share of GME costs. The new per resident formula would use the national average of resident salaries and fringe benefits, adjusting for inflation and wage indices. The private payers’ share of the GME costs would be based on the ratio of a hospital’s private payer revenues to total revenues. After the direct graduate medical education payments are determined, the remainder of the total trust funds monies would be distributed as IME payments based on Medicare’s IME formula.

Medicare’s contribution to GME would continue but the DGME formula would be changed. Medicare’s DGME payment would be based on a national average per resident amount. Faculty supervision costs would no longer be allowable cost to include in calculations for either Medicare or the trust funds per resident amount. Although 20% of the newly calculated DGME money from both the Medicare and the trust fund would be required to compensate physicians for teaching. The Cardin bill also reduces from 5.5% to 4.8% starting in FY 2001 the Medicare IME payments. The bill also includes a provision to reform DSH payments by including the costs of uncompensated care and redistribute the payments accordingly.

H.R. 1224 directs the Secretary of Health and Human Services, along with others in the community, to develop and implement a plan to reduce the number of residency training positions by 110 percent of American medical school graduates by 2005.

On January 19, Senator Patrick Moynihan (D-NY) introduced S. 210, the Medical Education Trust Fund Act of 1999, also in an effort to produce a viable education trust fund for GME. At this time, this legislation has one cosponsor, Sen. Barbara Mikulski (D-MD). It has been referred to the Senate Finance Committee. The bill proposes to establish a Medical Education Trust Fund. From this source, payments could be made to Medical Schools, Teaching Hospitals and non-Medicare Teaching Hospitals. A new 1.5% tax would be levied on health insurance policies to provide necessary funds. In addition, the legislation would mandate a transfer of funds from Medicare to the new Education Trust Fund. Finally, the bill would establish a Medical Education Advisory Commission to develop new and innovative ways to train medical school graduates.

Council on Graduate Medical Education (COGME): Both the September and December 1998 meetings of COGME addressed two critical issues: increased training of residents in ambulatory settings and the growing pressure on the physician workforce from the nonphysician workforce. In discussing the Council’s 15^th Draft Report at the December meeting, the Council determined that an in-depth look at training in ambulatory settings was required. In contrast to the Bipartisan Commission and MedPAC, COGME members stated their belief that GME was an obvious public good. It is unclear at this time what role COGME will play in the GME policy debate on the horizon. During COGME’s most recent meeting on April 14 and 15, council members examined the financing of ambulatory training programs and the 15^th Draft Report. In addition, they examined the Administration’s interim solution and Senator Kerrey’s legislative fix for GME financing in independent children’s hospitals.

Title VII – Health Professions Training Grants – Reauthorization: In the flurry of activity at the conclusion of the 105^th second session, Congress passed and the President signed S. 1754, the Health Professions and Education Partnership Act of 1998 [PL 105-392]. The bill reauthorized several public health service programs, including Title VII, health professions training and education. Among other reforms, the legislation clusters the primary care disciplines together, including family medicine, general internal medicine, general pediatrics, physicians assistants, general dentistry, and pediatric dentistry and legislates a funding level "floor" for each member of the cluster. As a result, appropriators can not fund a member of the cluster below the FY 1998 funding levels. For general pediatrics/general internal medicine, the floor rests at $17.7 million.

Members of the pediatric community, AMSPDC, the Ambulatory Pediatric Association, the Association of Pediatric Program Directors and the Academy, continue to actively be engaged in discussions with the Division of Medicine, Bureau of Health Professions, at Health Resources and Services Administration [HRSA] on the implementation of PL 105-392. Along with the general internal medicine community, the pediatric community has and will continue to participate in on-going conversations with the Division of Medicine to address such issues as: (1) how should the Division direct the limited funds for general internal medicine and general pediatrics; (2) how should the Division implement a number of newly mandated funding "priorities"; (3) what should be the charge to the new Advisory Committee on Primary Care Medicine and Dentistry. The pediatric community will continue to insure that Title VII is implemented in the most effective means possible.

Title VII – Appropriations: Working with the Health Professions and Nursing Education Coalition, the pediatric academic societies recommend $316 million in FY 2000, a modest 4 percent increase above current level funding [$304 million]. Moreover, the pediatric community is urging Congress to appropriate at least $30 million for general internal medicine/general pediatrics. Unfortunately, in President Clinton’s FY 2000 budget proposal, Title VII received a substantial cut, including zero funding for the primary care medicine/dentistry and public health workforce development "clusters." The primary care cluster includes general pediatrics training dollars. Staff is currently exploring other options with members of Congress to protect Title VII from such a devastating cut.

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Last Modified: March 14, 2001