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Medicare at 50: Medical education funding faces physician shortage problems

In 2012, taxpayers contributed $15 billion to support residency training, with $9.7 billion coming from Medicare and $3.9 billion from Medicaid.

As the programs turn 50, Medicare and Medicaid's long role in funding medical education is finding itself stretched thin by looming nursing and physician shortages.

In 2012, taxpayers contributed $15 billion to support residency training, with $9.7 billion coming from Medicare and $3.9 billion from Medicaid. But in the coming years, $15 billion may not be enough.

Medicare has become a big financial driver of physician internships, residencies, subspecialty and fellowships and, along with reimbursement for complex patient care, helped support the rise of U.S. academic medical centers, which pioneered advanced surgery, trauma units, neonatal ICUs, burn centers and cancer hospitals.

[Also: Medicare at 50: 5 challenges for the future]

The provider shortage is already a problem in Texas, outside of the rich cities like Dallas, Fort Worth and Houston. Texas, the second most populous state with 26 million people, has the fifth-lowest representation of doctors per capita. The state would need to add another 12,000 physicians to meet the national per capita supply of 226 docs per 100,000 people, and the Texas Medical Association predicts that the state could be short as many as 6,500 primary care physicians by 2030.

"Without increases, Texas will not produce enough physicians to meet the state's growing demand," said the association. "Texas must build an adequate homegrown supply of appropriately trained physicians."

Texas universities are actually opening new medical schools to meet the demand, with enrollment growing more than 10 percent between 2010 and 2010. Nationwide, medical school enrollment has grown by 8 percent between 2010 and 2014, to more than 85,000. 

As many as four new medical school programs could also join the current eight in Texas by 2018. (New programs are opening in other states, too.)

"This state, however, is at a clear disadvantage in its capacity to grow its own workforce,"said the Texas Medical Association. Even with more medical school graduates, there's not a guarantee those new docs will stay. They're "stymied by serious limitations in educational infrastructure and funding."

In 2013, there were a total of 1,611 residency slots in Texas, enough for the state's 1,587 medical school graduates (should they want to stay) and new docs from other states. With enrollment growing, students who would otherwise get trained in Texas and maybe stay might end up leaving. A bill up for consideration in Texas would allocate state money to help add as many as 125 new slots, but that may still not enough.

[Also: Medicare at 50: Medicare's long pull on medicine and the economy]

"This is probably going to be something we have to continue to work at and work at," as Dan Varga, MD, chief clinical officer of Texas Health Resources, told the Dallas/Fort Worth Healthcare Daily. "If we can incrementally continue to support through increased funding slots, hopefully that's going to help us increase the number of medical residents who end up remaining in Texas and practicing here."

Congress actually capped Medicare's graduate medical education allocations in 1997, amid fears of spending and creating an oversupply of physicians. Some other medical professions may be facing an oversupply of the workforce, perhaps most notably new pharmacists in what has been dubbed a "pharmacy school bubble."

But there is a clear need for more physicians and nurses, mostly in primary care, both because of increased demand from patients and because the professions are themselves aging. 

Almost half of the 800,000-plus doctors in the U.S. are over the age of 50, and around 25 percent are older than 60. The Association of American Medical Colleges predicts that the United States will face a shortage of between 46,000 and 90,000 physicians by 2025.

[Also: Medicare at 50: Advocates make case for lowering eligibility to 50 years old]

Likewise among nurses, a generation of nurses started working in the 1970s (most of them women) and are getting ready to retire after many had delayed taking off amid the Great Recession.

"There will be far more registered nurse jobs available through 2022 than any other profession, at more than 100,000 per year," according to the American Nurses Association. Through 2022, about 500,000 new RN openings will come from growing demand and another 500,000 openings will be replacements for retirees.

As in physician residencies, funding problems have created challenges in nursing training. Each year more than 70,000 qualified applicants get turned away from nursing programs because of faculty shortages, according to the American Association of Colleges of Nursing. Waiting lists in many programs are common.

"We're seeing mixed signals today in the nurse employment market," said American Nurses Association president Pamela  Cipriano, RN. "There have been layoffs by  some hospitals at the same time that 'registered nurse' ranks as the most advertised position nationwide."

The ANA suggests that Congress should increase funding for nursing training programs via the Nurse Training Act of 1964 (passed before Medicare). Funding in that program has declined by about 2 percent over the last four years, the ANA said.

Many hospitals have invested their own resources in nursing and allied health training in concert with federal and state programs, and nursing programs are among the most popular programs in many community and state colleges.

GME funding for physician training is perhaps a larger problem, because it's more complex and expensive.

For hospitals, the cost of training a medical resident averages $152,000 and Medicare's payments cover around only $40,000, which is about what the physicians earn as a salary, according to the Association of American Medical Colleges. The AAMC estimates that teaching hospitals' direct costs of training are roughly $16.2 billion a year, of which Medicare medical education funding accounts for $3.3 billion.

There are a variety of ideas for increasing funding and spending the money more wisely as a way to train more doctors. The AAMC supports expanding and refining the current model, with additional federal funding and an increase in the number of residency slots, by 1,500 per year.

The Institute of Medicine recently made a host of recommendations to reform medical training, including the creation of a single Medicare GME fund with two subsidiary funds, one for current training programs and another for pilot "alternative payment" GME financing models.

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Whatever those models, though, the IOM committee believes more than just funding needs to be reformed.

The U.S. graduate medical education system has perpetuated "a mismatch between the health needs of the population and specialty makeup of the physician workforce," a "persistent geographic maldistribution of physicians," and "lack of fiscal transparency," the IOM report found.

The actual training needs to be re-designed for the type of healthcare that local populations need, the IOM recommended.

"There is worrisome evidence that newly trained physicians in some specialties have difficulty performing simple office-based procedures and managing routine conditions," the IOM wrote. "In addition, medical educators report that GME curriculums lack sufficient emphasis on care coordination, team-based care, costs of care, health information technology, cultural competence, and quality improvement -- competencies that are essential to contemporary medical practice." 

Twitter: @AnthonyBrino

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