Now that everyone in government is aggressively looking for cost savings, graduate medical education is again in the crosshairs. Just Google “Medicare and GME funding,” and you will see a number of educated (and uneducated) pundits opining on the pros and cons of the current system of financing.

Medicare has recognized the costs of training physicians and the higher patient care costs of teaching hospitals since its creation. When Medicare switched to a Prospective Payment System, a complex set of formulas for payment were created; payment formulas have been adjusted downward for the past 25 years. The current Medicare funding methodology is well delineated in briefs available on the AAMC website.

Approximately $3 billion a year is spent by Medicare to defray its share of the direct cost of training physicians. We have approximately 110,000 residents and fellows currently in training, at least 10,000 of whom are not supported by federal dollars. This represents approximately $25,000 per year per trainee, which pays about one-third of first-year salary and benefits.

Medicare also allocates $6.5 billion to defray the higher patient care costs incurred by teaching hospitals because of more acutely ill patients and the services they require. These “indirect” costs of GME are inaccurately labeled as “education” payments but represent approximately 15 percent of Medicare reimbursement for patient care in teaching hospitals. You could add in the Medicaid GME support, which is state-specific and has been eliminated in many states given the current budget crisis, which would amount to about $100,000 per year when compared to the number of trainees. Total costs of training are about $13 billion a year; total indirect costs of specialized care are about another $20 billion.

Lessons From Military Training Costs

These residents do not, overall, generate revenue; the educational and clinical environment necessary for training creates both inefficiencies and efficiencies in hospital operations, depending on the resident’s experience and skill level. Thus it is not unreasonable that the indirect support for the training environment is almost twice the direct support for salaries and benefits. If you research what it takes to train a soldier in the United States, you see that the fielding costs are far higher than the direct salary costs. This information is difficult to find.

For simplicity’s sake, assume that you can train a basic infantry soldier in one year at a minimum of $40,000. Add the eight support staffers who provide the back office infrastructure so that soldier can be on the front lines and include the equipping, and fielding of each solider, US-issue Army recruit will cost over $250k. “Add in healthcare benefits, life-insurance and disability insurance, wear-and-tear of equipment, ammunition, moral and transportation costs and a single soldier training and serving in the most basic capacity costs $400,000+.”

A GAO 2005 report to Congress also found that calculating the real costs is incredibly complex and would require retrieving information from over a dozen US agencies.

These “fielding costs” for resident training are embedded in the costs of running teaching hospitals, which represent 6 percent of acute care hospitals but care for more than 40 percent of the uninsured in this country. The residents in training staff trauma units and emergency rooms and spend every fourth night in the hospital, waiting to for an “all hands on deck” — emergency medical or surgical intervention. They go through incredibly intense professional and personal experiences that demand commitment and take a toll both physically and emotionally.

And yet, after three to five years, we graduate what many would say are the best health professionals in the world. Our system produces people who exhibit great commitment and empathy as general internists and family docs, skilled surgeons who work miracles, and sophisticated specialists who combine clinical care with cutting-edge research. They are heroes in the eyes of many. They work very hard their first few years in practice to defray their $180,000 of medical school debt, and try to play catch-up on the many life experiences they put on hold during medical school and residency training.

We still have much to do to improve our system of training. We must figure out how to do more with less, train more physicians in specific specialties, distribute them to underserved geographies, increase diversity, and give them the skills that will allow them to practice and shape the future of healthcare.

A Good Deal For The Country

But does what we have done for the past 50 years really need to be totally dismantled? You are welcome to get in the weeds and examine what your specific hospital receives through indirect and direct medical education funding. This information is in publicly available Medicare cost reports. But on its face, it doesn’t look like a bad deal for the country: Training physicians costs $75-$100,000 per year. Training soldiers costs $400,000. There are some similarities and lots of differences; I would not disrespect the sacrifices of soldiers to make any glib comparisons …but really aren’t they both important public goods? Can we imagine a strong society without them?