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The Effects of the Balanced Budget Act of 1997 on Graduate Medical Education Continued
The provisions that appear to have raised the most concern are the per-hospital cap on the number of residents and the reduction in the IME adjustment factor. The cap on the number of residents discourages facilities from adding or expanding residency programs. It is an across-the-board cap that limits the total numbers of residents, but in the process, can hamper expansion of primary care specialties when hospitals do not make corresponding cuts in specialists. Although beneficial from the standpoint of curbing an oversupply of residents being trained and funded by Medicare, the limitation on primary care residents may conflict with the general goals of the Council on Graduate Medical Education (COGME) to promote the education and training of a mix of physicians consistent with current and future health care needs including in rural areas. Nevertheless, if the provisions lead to a slowdown in the growth rate of the physician workforce, while maintaining or increasing the number of primary care physicians, then the legislation is in line with COGME recommendations.2
The decreasing IME adjustment factor reduces IME payments to teaching hospitals. The IME adjustment factor is linked to the IRB ratio, which particularly affects academic health centers because they typically have the highest resident-to-bed ratios. The resulting reduction in IME payments will be offset to some extent by the Medicare "carve-out" provision, which secures a major source of GME funding for teaching facilities, by removing the GME portion of payments to managed care organizations and providing them to teaching hospitals for treating Medicare managed care enrollees. IME payments amount to approximately two-thirds of the $6.8 billion for GME paid annually by Medicare to teaching hospitals. In FY 1997 they totaled $4.6 billion.5 The changes in the calculation of IME as a result of the BBA would have resulted in a 29 percent reduction in IME funding to hospitals at the end of the five-year
All hospital outpatient facilities affiliated with a hospital are paid by hospital inpatient rules.
The BBA provides for the establishment of a consortium demonstration project. This is in alignment with a previous COGME recommendation that the federal government fund twelve consortium demonstrations. In COGME's recommendation, the projects must be committed to providing a cost-effective administrative framework within which education and workforce reform can occur.7
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