Recently, the Institute of Medicine and the National Research Council reported that Americans die earlier and live in poorer health than people in other industrialized countries.  This is the latest evidence of the urgent need for health reform, as embodied in the Affordable Care Act.

The ACA’s recent enactment has triggered a series of new and concerted efforts to address some of the many challenges relating to health care cost, access and quality that the U.S. faces today. One of the most important challenges involves the number and mix of health providers that will be needed to meet the demand resulting from changing demographics, more expansive availability of health insurance, and a new emphasis on wellness and preventive care.

In this post, I discuss some of the factors that bear on this challenge, and I suggest some policy steps that we could take to help develop the workforce needed for the post-health reform world.

The Backdrop

Two facts in particular inform the debate and are relevant to finding the correct solutions.  The first is that the country will require a very diverse mix of health care providers in the future. Primary care physicians, nurse practitioners, physician assistants, nurses and pharmacists are going to be in greater demand.  The second fact is that, while the need for a diverse workforce is clear, the right balance is not.

Given the dramatic changes in the way health care services will be offered and paid for, it may take years for the country to determine the appropriate mix of providers.  The ultimate resolution depends on answers to several important questions.  How many physicians plan to retire in the coming decade? Given demographics, the retirement of baby boomers, and the implementation of new health services under the Affordable Care Act, how many more Americans will be seeking additional care? What kind of care? How much more efficiency can be achieved with new health care models? How much unnecessary care could be eliminated? How much more responsibility in the new health paradigm can be given to providers who are not physicians?

The Association of American Medical Colleges (AAMC) predicts that the need for physicians within the country will increase substantially over the coming decade. They argue that this is especially true of pediatricians, internists, family physicians and general practitioners.  According to the AAMC, by 2020, the number of additional providers required will exceed 90,000, half of them primary care providers, and by 2025 we will need an additional 130,000, again half in primary care.  That is roughly a 14 percent increase over the more than 950,000 physicians who practice today.

But a growing number of health experts argue that, because physicians have increased their patient-load capacity through team-based approaches and a larger support staff with increasing efficiency, these numbers are inflated and unnecessary.  In addition, because the health care work force is being transformed, nurse practitioners, physician assistants and other primary care providers are at long last taking on larger roles.

With no resolution in sight, enrollment in U.S. medical schools is cautiously inching upwards. First-year enrollment in U.S. medical schools rose last year by 1.5 percent to over 19,500 students. Annual increases have averaged approximately 2 percent since 2006, and the number of medical students who now seek a specialty in family medicine continues to slowly rise. Reports vary, but with over 2700 primary care residency slots available, almost 2600 have been filled. There is cautious but growing optimism that the goal to increase enrollments 30 percent by 2016 is within reach.

As part of the enactment of the Affordable Care Act, the administration is now implementing a new program designed to address the primary care shortage.  The Teaching Health Center Graduate Medical Education program was authorized under the Act and began to operate in 2011. It provides an additional $230 million over five years to support primary care and dentistry residencies.

Regardless of the differences of opinion on the projected need for additional health providers, there is no debate that our current system denies tens of thousands of applicants the opportunity to enter medical school. There were over 45,000 students who applied for medical school in 2012 and over 25,000 who failed to be admitted.

The problem isn’t limited to medical schools. An increasing number of medical school graduates are now being denied entry into a residency program. That is largely due to the current cap on the number of residencies that the federal government finances through its Graduate Medical Education (GME) program. There are approximately 115,000 physicians engaged in residencies at a per-resident cost to the federal government of over $100,000 a year, or a half-million dollars over each entire residency.

The GME program has long been funded in two separate mechanisms. The government provides approximately $3 billion in direct GME payments, largely for the salaries of residents and supervising physicians.  It also provides $6.5 billion in indirect medical education payments to qualifying hospitals to subsidize other expenses associated with running training programs, such as longer inpatient stays and more use of tests.

In recent years, there has been increasing scrutiny of GME funding amid unprecedented budgetary pressure on both Congressional and administration policy makers.  MedPAC, the Simpson-Bowles Commission and other reputable organizations have called for a substantial reduction in indirect GME funding. Some have suggested both reducing the federal commitment and consolidating the two programs.

The number of international medical graduates who now compete for available slots exacerbates the problem.  In recent years, nearly 7,000 of these graduates have competed with American medical school graduates for the limited number of residencies available.  Today, approximately 25 percent of all physicians who practice in the United States have received their medical training in foreign countries. While some of these graduates are U.S. citizens, there is increasing concern that this country, along with many others, is taking the best and brightest medical talent from countries that arguably need it even more.

The Way Forward

So what do we do?

I would propose five specific actions that, taken collectively, could be consequential in addressing this complex problem. Unfortunately, each proposal recognizes that there are no easy answers and that achieving any solution poses a great challenge in itself.  But unless the country considers our options and gets on with addressing these challenges, it will miss the opportunities that this transformational and historic time offers for meaningful reform.

Increasing transparency. First, the entire health sector requires far more transparency. One can’t fix what one can’t see, and many of the solutions to the problems involving health costs and provider availability are impossible to ascertain as a result.  How many providers would we need if we could eliminate unnecessary care as a result of our volume-driven health care infrastructure?

Transparency would also assist in understanding the need for better utilization of all primary care practitioners. However, both government and private analytic organizations should make a concerted effort to determine with far greater clarity what the anticipated and appropriate need will be for each category of practitioners.  Only by starting here can we make an appropriate fundamental judgment about the proper provider balance while setting realistic goals on how to achieve it.

Reforming the GME program. Second, given the need to find significant savings throughout the health sector, a broad agreement on the need to do more with less through greater efficiency and meaningful reform of the GME program is critical.

Excessive payments for indirect medical education must be reduced. Residents provide free labor to hospitals and enhance their reputations. For Medicare to spend six billion dollars per year on the program can no longer be justified.

Aggressive efforts should be made to streamline and reduce the cost of residency training. Proposals to combine direct and indirect payments should be carefully considered.  Pay-for-performance programs should be implemented that adjust GME payments based on the quality of training.  GME programs should also be required in non-hospital settings.

We must broaden the funding base for the GME program.  Since both the private and public sectors benefit enormously from the residency programs offered to medical school graduates, both sectors ought to have some responsibility for funding it.  There is little likelihood that, given current budgetary constraints including sequestration, the federal government can fund an expansion of the program.

Diverting some of the resources to Teaching Health Centers would also be a laudable beginning.  That could allow for an opportunity for all primary care practitioners to be included and be given equal access to education and training required to meet anticipated workforce levels.

As a better understanding of the appropriate mix of additional providers is acquired, the National Health Care Workforce Commission that is called for in the Affordable Care Act should make specific recommendations to the Secretary of Health and Human Services. The Secretary should then be empowered, subject to Congressional review and legislative veto, to raise or lower the ceiling based upon an annual assessment of workforce availability and the long-term projected demand for health care services.

In addition, policy makers should recognize that proficiency is not necessarily guaranteed with prescribed lengths of time. The Commission and the Secretary should consider providing qualified residents with the option of “testing out” of certain levels of training to accelerate their residency experience and reduce costs.

Encouraging primary care. Third, beyond programs in education, more incentives must be created to guarantee even higher numbers of primary care providers in all health-related schools: doctors, nurses, physician assistants, and pharmacists.  Primary provider payments in all health settings should reflect the greater need and appreciation for the health services that they offer.  “Scope of practice” laws should allow all primary care practitioners to practice to the fullest extent of their training. Finally, we should ensure that primary care and wellness programs are offered in all health benefits insurance plans.

Promoting team-based care. Fourth, our health subsystems should accelerate the team-based approach to health care delivery.  Patient-centered and team-based health care, in addition to accountable care organizations and similar models, should be embraced and utilized in virtually every health care setting. Only in doing so can we be assured of greater efficiency and more successful utilization of all health care providers.

The team-based model involves not only shared responsibility but should always require clearly defined and shared goals. It must be outcomes-driven with an emphasis on value that is clearly defined as an outcome per dollar expended.

Relying less on international medical graduates. Fifth, let us de-emphasize the increasing reliance on international medical graduates in addressing the health provider shortage in the United States.  Developing countries are increasingly sensitive to the problems associated with the emigration of providers from the developing world.  While embracing open immigration laws, we should not continue to exacerbate the critical shortages of primary care providers in the developing world by taking the best and the brightest health workers when other more suitable solutions exist.

In this important and transformational time, the U.S. has an opportunity to reconstruct our health paradigm in the most meaningful and consequential way.  The country must seize the moment, recognizing the many challenges that encumber our effort.

And when we do, Americans will live better and longer while acquiring far greater health care value than we have today.