A report by the Institute of Medicine shows that the U.S.  should significantly reform the federal system for financing physician training and residency programs to ensure that the public’s $15 billion annual investment is producing the doctors that the nation needs.

Current financing – provided largely through Medicare – requires little accountability, allocates funds independent of workforce needs or educational outcomes, and offers insufficient opportunities to train physicians in the health care settings used by most Americans, the report says.

For decades, teaching hospitals have received the majority of Medicare's funding for physician training, and these hospitals control how the funding is spent. Funds are distributed through complicated formulas linked to the volume of Medicare patients treated. The funding formulas discourage training at clinics or in community-based settings where most people now seek care, including children’s hospitals and other institutions that care for non-elderly patients.

Public financing of this training should remain at its current level for now, the report says, but Congress should amend Medicare laws and regulations to move to an accountable, modernized financing system over the next decade that rewards performance and spurs innovation. Continued Medicare funding should be contingent on its demonstrated value and contribution to the nation’s health needs. Although public funding also comes from other federal and state sources, the committee focused primarily on Medicare because as the largest funder, it provides the most leverage.

The focus of this funding should be on primary and preventive care, said the co-chair of the IOM committee that issued the report. It is time to modernize how graduate medical education is financed so that physicians are trained to meet today’s needs for high-quality, patient-centered, affordable health care, said Gail Wilensky, co-chair of the committee and former administrator of the Centers for Medicare and Medicaid Services. 

To read the report, click here.