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Funding for the GME Program - Where does it come from? How Graduate Medical Education Creates Community Service by Jimmy Hara - KP
Historical and Current Funding Historically, graduate medical education itself has been recognized as a community service and is therefore entitled to receive Medicare funding. In fact, Medicare has been a major source of funding for graduate medical education since the mid-1960s. Until 1983, Medicare paid for graduate medical education on a cost-reimbursement basis. With the enactment of the Consolidated Budget Reconciliation Act of 1985 (COBRA), Medicare replaced its cost-based funding formula with two types of discrete payments: direct medical education (DME) payments and indirect medical education (IME) adjustments. DME payments are intended to defray administrative costs associated with residency programs, and IME adjustments are intended to defray costs associated with the higher rates of morbidity associated with teaching hospitals and with the inefficiency inherent in teaching situations.
In the past, Medicare's payment to health maintenance organizations (HMOs) was based on adjusted average per capita cost (AAPCC) for Medicare beneficiaries in the fee-for-service sector. Before the 1997 budget reconciliation agreement took effect, health plans received revenue for patient care provided by residents and by their sponsoring institutions. Academic teaching hospitals have historically been critical of HMOs not directly engaged in graduate medical education, because these HMOs benefited from the AAPCC formula despite not actually educating residents. The 1997 budget reconciliation act encourages training in ambulatory settings by expanding eligibility for DME and IME at such sites; HMOs will no longer receive DME and IME payments through the AAPCC unless they actually participate in graduate medical education.
Source - How Graduate Medical Education Creates Community Service by Jimmy H. Hara, MD, FAAFP - Fall 1999 - Permanente Journal - External Affairs mirrored for historical purposes at: https://kaiserpapers.com/gme/external-affairs-gme.html