Who Foots the Bill for Graduate Medical Expenses?

Posted April 10, 2015 at 5:32pm

Teaching hospitals and ambulatory settings in the United States are responsible for training physicians after they complete medical school, through several years of hands-on residency programs in various areas of medicine. Because they rack up significant expenses in training these residents, teaching hospitals receive some additional funds from other sources to cover the costs.

The government helps pick up part of the tab in a variety of ways, which has been a source of debate in Congress. According to an Institute of Medicine report released in 2014, the government provided around $15 billion for residency training programs. Here are the primary types of federal payments made to GME:

Medicare Direct GME payments: Direct payments are meant to cover Medicare’s share of what it costs teaching hospitals to educate residents, such as stipends, fringe benefits, overhead expenses and salaries of faculty who train residents or administrative staff. Medicare, the federal health care program for the elderly, pays hospitals based on a portion of the “per resident amount” but has a limit on how many residents it supports.

Medicare Indirect Medical Education payments: Medicare pays additional money to hospitals to compensate for adjustments in expected operating costs for being a teaching hospital. The formula is based on a resident-to-bed ratio.

Medicaid payments: Medicaid, the federal health program for the poor, accounts for a smaller portion of funding for teaching hospitals. However, the payment amounts and funding calculations vary by each state.

Veterans Health Administration: The health program under the Department of Veterans Affairs also provides some support for residency training programs.