Health Affairs

Michelle Obama has made it clear that, unlike Hillary Rodham Clinton, she will not be a first lady who regularly mixes it up with public policy issues that vex her husband’s administration. But, invaribly, she will be drawn into issues on subjects of personal interest or that derive from her varied professional career as a lawyer, community activist, and teaching hospital executive at the University of Chicago.

One such issue that might capture her attention — or at least of which she will undoubtedly be made aware — focuses on the support that Medicare provides every year to teaching hospitals for the cost of the advanced training new medical school graduates must complete before becoming licensed as full-fledged, independent physicians. Through Medicare, the federal government is the largest single earmarked financing source for graduate medical education (GME). In 2008 Medicare provided support totaling about $8.9 billion to teaching hospitals for their GME programs and related missions.

In the grand scheme of federal policy making, the money Medicare provides to support GME is barely visible, but to teaching hospitals it is real money nestled into their annual budgets. However, now that President Obama has made clear that his administration will aggressively tackle reform of the federal entitlement programs (Medicare and Social Security), every component of these vast enterprises will come under much closer scrutiny.

Over the years, the most controversial form of support that Medicare has provided to teaching hospitals is an indirect medical education (IME) adjustment, which carried a price tag of $5.8 billion in 2008, the bulk of which went to about 200 major teaching hospitals. These monies adjust upward Medicare payments for services delivered to individual patients to compensate hospitals for unmeasured differences in patients’ severity of illness, the greater number of tests and procedures ordered by residents, and the greater use of emerging technologies. (In addition, hospitals that conduct GME programs received another $3 billion in direct support from Medicare to help cover stipends for residents, salaries for teaching physicians, and related overhead expenses.)

Among budget reductions sought by the Bush administration in its fiscal 2009 budget was a 60% decrease over 3 years in Medicare’s IME payments. These payments are based on the number of residents each teaching hospital employs. In 2008, for every 10 residents per 100 beds, a teaching hospital received a 5.5% add-on adjustment to its Medicare payment rate for care provided Medicare beneficiaries. The administration’s budget proposed the lowering of the add-on IME payments from 5.5% to 2.2% — yielding estimated savings to Medicare of $12.9 billion over five years.

Congress has not yet addressed this proposal but its rationale is consistent with an analysis by the nonpartisan Medicare Payment Advisory Commission (MedPAC), which concluded in its June 2008 report that “the current [IME] adjustment is set at more than twice what can be justified empirically, directing more than $3 billion in extra payments to teaching hospitals with no accountability for how the funds are used.” At its most recent meeting (January 8-9), MedPAC recommended to Congress that Medicare “should reduce the IME adjustment in 2010 by one percentage point to 4.5% per 10% increment in the resident-to-bed ratio.” Such a cut would represent a reduction of 21.6% in the IME adjustment — a total of an estimated $1 billion annually. Unlike the substantial savings to Medicare the administration’s proposal would yield, MedPAC recommended that the reduction in the IME adjustment be used to fund a quality incentive program for which teaching hospitals would be eligible.

The Association of American Medical Colleges (AAMC), which advocates on behalf of the nation’s 130 allopathic medical schools and some 300 major teaching hospitals, strongly opposes any reduction in Medicare’s IME adjustment. In a letter dated December 23, 2008, to MedPAC commissioners, the AAMC wrote: “If the draft recommendation is approved” (it was) “and implemented by Congress, the payment cut would directly — and dramatically — affect teaching hospitals’ financial status, which could affect their missions of patient care, education and research. . . . Teaching hospitals are already under intense financial pressure.”

The issues surrounding Medicare policies in relation to supporting the costs of GME date back to the beginning of the program. At the time of its enactment in 1965, Congress determined that educational activities in teaching hospitals should be regarded as a reimbursable expense by Medicare until “the community [society at large] undertakes to bear such education costs in some other way.”

Now, some 44 years later and despite attempts by teaching hospitals to broaden the explicit sources of support from private insurers for training new physicians, no policy has ever been crafted to achieve this goal of academic medicine. Private insurers do support GME implicitly through the higher payments they negotiate with teaching hospitals on behalf of the inpatients they cover.

In The Battle Over Aid To GME, A History Of Powerful Champions For Teaching Hospitals

While it may seem far-fetched to think Michelle Obama would ever become involved in future Medicare policy in relation to GME, it is well to recognize that the academic medical community has counted on powerful public figures to protect its flanks when it comes to maintaining the program’s current policies. Over the years, among teaching hospitals’ most reliable congressional champions have been former Chicago Congressman Dan Rostenkowski, when he served as chairman of the House Ways and Means Committee; the late New York senator, Daniel Patrick Moynihan, in the years when he served as chairman and a senior member of the Senate Finance Committee; Representative Charles Rangel of New York, the current chairman of the House Ways and Means Committee; as well as Senators Charles Schumer and Hillary Rodham Clinton of New York. All but Rangel and Schumer have departed the Congress, and Rangel’s position as committee chair may be threatened by virtue of alleged ethics violations that are under investigation.

Another important figure who has been an influential but largely invisible figure in the saga over Medicare’s GME policy is Ralph Muller, the former chief executive officer of the University of Chicago Hospitals. (Muller currently is CEO of the University of Pennsylvania Health System.) As a MedPAC commissioner from 2001 to 2007, Muller played a prominent role in helping persuade this advisory body to Congress not to recommend a reduction in Medicare’s IME adjustment. In part through his efforts, MedPAC did not recommend such a reduction until the last year he served on the commission.

Muller is more than an acquaintance to the Obamas. Michelle Obama oversaw relations between the University of Chicago’s teaching hospital and its surrounding community. She held several executive positions at the hospital from 2002 until she resigned during her husband’s successful campaign for the presidency. By pointing out this connection between the Obamas and Muller, I am certainly not suggesting anything troublesome about this tie but merely point that the confluence of events sometimes leads individuals down paths they never suspected could bring them together at some future point in a different place.

 Email This Post  Print This Post

This entry was posted on Wednesday, January 21st, 2009 at 4:35 pm and is filed under All Categories, Medicare, Physicians, Policy, Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.