Will Your Health Insurer Pay to Train Your Doctor?

Lost in the weeds of President Obama’s budget proposal is a 10-year, $11 billion reduction in Medicare funding for graduate medical education (GME). GME is the “residency” part of medical training, in which medical school graduates (newly minted MDs and DOs) spend 3-7 years learning the ropes of their specialties in teaching hospitals across the country.

The Health Insurance gnome.

The Health Insurance gnome.

Medicare currently spends almost $10 billion annually on GME. One-third of that is for “Direct Medical Education” (DME), which pays teaching hospitals so that they in turn can provide salaries and benefits to residents (current salaries average around $50,000/year, regardless of specialty; there are variances by region). No problem there.

The proposed cuts come from the Medicare portion known as “Indirect Medical Education” (IME) payments. Though IME accounts for two-thirds of the Medicare GME pie, it’s not easy for hospitals to itemize what exactly it is they provide for this significant amount of funding. Instead, hospitals bill Medicare based on a complex algorithm that includes the ‘resident-to-bed’ ratio, among other variables.

A 2009 Rand Corporation study commissioned by Medicare to evaluate aspects of residency training called on the government to tie IME payments directly to improvements in educational and hospital quality, lest the money be perceived to be going down a series of non-specific sinkholes. That idea has caught on, and legislators in both parties now see the healthy IME slice of Medicare education funding as a plum target for cost-cutting, as the direct benefits are difficult to enumerate, let alone quantify.

This has medical educators very worried that we will have to do more with much less (disclosure: I am one).

One potential solution to the impending GME funding crisis is rather novel: Health insurers should pay to train doctors. After all, insurers and their beneficiaries stand to benefit from well-trained, high quality, cost-effective physicians.

One proponent of such a plan is Kenneth Shine, Executive Vice Chancellor of the University of Texas Health System. In a panel at Internal Medicine 2013, the American College of Physicians’ annual meeting (which took place April 11-13 in San Francisco), he proffered the idea that insurers like United Healthcare are looking at using premiums not spent on health care (known in industry parlance as the “Medical Loss Ratio“) to fund doctors’ training, provided HHS will allow it under the Affordable Care Act.

Shine knows of what he speaks: he sits on the company’s board.