Home

Summary of Resource Paper

The Effects of the Balanced Budget Act of 1997 on Graduate Medical Education

Continued

  1   Page 2   3  

PROVISIONS OF THE BBA AFFECTING GME

Congress passed the BBA in 1997 partly in order to place some controls on the continuing growth of GME positions. The BBA contains several important changes in the GME funding mechanisms, designed to affect the number and mix of residents trained. The relevant provisions are:

1. A cap on total residents funded by Medicare. The number of residents for whom DME and IME can be claimed is limited to the full-time equivalent (FTE) count of residents enrolled in the hospital program in the hospital's most recent cost reporting period ending on or before December 31, 1996 and was made effective in the first cost reporting period beginning on or after October 1, 1997.

2. A reduction in the IME Medicare adjustment factor from 7.7 percent per 0.1 intern/resident-to-bed (IRB) ratio in FY 1997 to 7.0 percent in FY 1998, 6.5 percent in FY 1999, 6.0 percent in FY 2000, and 5.5 percent in FY 2001 and subsequent years.

3. A cap on the IRB ratio, which is used in calculating the Medicare IME payment. A hospital's IRB ratio is limited by the prior year's IRB ratio, which then acts as an IRB cap, making it essentially a one-year lagged cap.

4. GME payments to non-hospital settings. Qualified non-hospital providers such as federally qualified health centers (FQHC), rural health clinics (RHC), and Medicare+Choice organizations, are permitted to receive DME payments for resident training that takes place in those settings if the non-hospital provider bears all or substantially all of the costs of training in the non-hospital setting (Table 1).

5. Medicare IME payments to hospitals (as well as the DME payments they were previously able to get) for the time residents train at non-hospital ambulatory sites (such as health centers, HMOs, physician offices) if the hospital incurs all or substantially all the training costs at that site (Table 1).

6. An ability for hospitals to affiliate for the purpose of establishing an aggregate full-time equivalent (FTE) cap. Hospitals under common ownership, or in the same or contiguous Metropolitan Statistical Areas (MSAs), or jointly listed as sponsors of a residency program, can affiliate to combine their FTE caps to create an "aggregate cap." Each hospital has its own FTE residency cap, but hospitals that do not fill their caps may affiliate with hospitals that want to exceed their caps, if all hospitals in the affiliated group agree. The total number of reimbursable residents for all the hospitals in the affiliated group may not exceed the aggregate cap.

7. A three-year rolling average (two years for a hospital's first cost-reporting period beginning on or after October 1, 1997) for calculating the number of residents for DME and IME payments to hospitals to soften the impact of reductions in numbers of residents.

8. Making available Medicare+Choice DME and IME funds that used to go to managed care organizations to teaching hospitals for Medicare+Choice patients. This "carve-out" increases in 20 percent increments from 20 percent for portions of the hospital cost reporting period beginning on or after January 1, 1998 to 100 percent in 2002.

9. A voluntary resident reduction program where hospitals in the U.S. that voluntarily reduce residents by at least 20 percent over the five-year period, are eligible for transition funding. This could allow hospitals transitional funding to hire replacement staff or redesign services. (This program was modeled after the New York Medicare resident reduction demonstration.)

10. A GME demonstration project involving several consortia. The Secretary of the Department of Health and Human Services (DHHS) will establish a demonstration project that will pay DME payments to a small number of consortia. On January 5, 2000, a solicitation for participation in the demonstration was published in the Federal Register.

11. A DHHS study of the large variation in DME payment levels by facility. The Health Care Financing Administration (HCFA) is currently in the process of writing that report to Congress.