A Balanced Budget Act? Not quite

The 1997 law funding residency programs gets more lopsided with time: more aging patients, fewer MDs.

By Robert Calandra, Contributing Editor

Five years after it passed the Balanced Budget Act of 1997, Congress darned the law’s first “patch”; lawmakers adjusted the Medicare Sustainable Growth Rate section of the law.

The SGR formula, used to calculate physician fees, would be “patched” 16 more times before Congress finally replaced it last year.

Now, say medical school educators and at least one medical association, it’s time for Congress to reconsider another part of the 1997 law — Medicare’s financial contribution to the residency positions.

“The challenge of growing the residency positions was really made difficult by the Balanced Budget Act of 1997,” says Atul Grover, MD, chief public policy officer of the Association of American Medical Colleges (AAMC). “Essentially it said that however many doctors you are training now [1996] at an institutional level, Medicare is only going to pay for that number of residents” going forward.

But with a growing — and aging — population, the odds of that becoming problematic have always been great.

How did we get here?

When Medicare became law in 1965, Congress included a provision to pay for additional residency slots. Congress realized the country would need more doctors because many senior citizens who previously didn’t have health insurance would take advantage of their new coverage.

In 1983, Congress broke the payment into two sections. One part paid for the costs incurred for hands-on physician training. The other was, more or less, a subsidy for hospitals that trained the slower, less efficient residents.

During the economic boom of the late 1990s, concern grew that America was producing too many doctors. Wanting to rein in Medicare costs and balance its budget, Congress decided to freeze the residency program payment at the 1996 level. It seemed a good solution for two vexing problems.

“We all thought that everybody was going to be in tightly-managed-care organizations and that we’d have strong gatekeeping and good primary care and prevention,” says Dr. Grover, who was a medical student at the time. “People wouldn’t need surgeons, and people wouldn’t need cardiologists and oncologists.”

But people still need surgeons and specialists. Since the law passed, an estimated 10,000 training slots have been created that Medicare hasn’t funded. For years, teaching hospitals used revenue from patient care to finance slots and private grants to underwrite training. But that money started drying up in 2006.

That same year, the AAMC recommended that medical schools expand enrollment by 30% over early 2000 levels. The AAMC expected that Congress would recognize the need to lift or remove Medicare’s cap. It didn’t. In 2008 the country was in the throes of its worst recession.

“Over the past several years the payment squeeze has been fairly significant, and the [training] centers are not really in the position to completely self-fund an expanded need for residency training slots,” says Katie Orrico, Washington, D.C. director for the American Association of Neurosurgeons and the Alliance of Specialty Medicine, which includes the American Society of Cataract and Refractive Surgery.

The Veteran’s Administration Reform Bill, which passed two years ago, included money for residency slots. In fact, the VA currently pays for 10% of all residency positions.

“The congressman was very supportive of creating additional residency slots in the Veteran’s Administration through the VA Reform bill two years ago,” says Tiffany McGuffee Haverly, communications director for U.S. Rep. Phil Roe, (Tenn.), MD, a gynecologist and co-chair of the GOP’s Doctors Caucus.

Forecast for fewer surgeons

Society has changed since the Balanced Budget Act’s passage. For one, patients are skewing older, as are doctors. Advocates say that unless Medicare boosts its residents-training payment, America will face a deficit of physicians, ranging between 40,000 and 90,000, by 2025.

Most people, including some members of Congress, focus on primary-care physicians when thinking about the looming shortage. In fact, primary care will constitute about one-third of the missing doctors, says Ms. Orrico. It’s the allied professions — nurse practitioners and physician assistants — who are expected to fill much of that gap. “Really, as a group, one of the biggest shortages will be in the surgical specialties,” Dr. Grover says, such as cataract and refractive surgeons.

The proposed fixes

Staving off the looming doctor deficiency will require funding 15,000 new residency slots over the next five years, Ms. Orrico says. That means Congress will have to remove, or at the least, lift the law’s Medicare cap. Two bills addressing the issue are circulating in the House of Representatives and Senate.

The Resident Physician Shortage Act of 2015 (HR 2124), sponsored by Rep. Joseph Crowley of New York, has 100 bipartisan co-sponsors. Florida Sen. Bill Nelson’s bill with the same identification (S1148) has about a dozen Democratic co-sponsors.

Congressman Roe says he is concerned “about the need for additional residency slots.” But, his spokesperson says he “hasn’t reviewed H.R. 2124 specifically.” And, with the current political climate in Washington and the fact that 2016 is a presidential election year, those hoping for either bill advancing this year can, “forget about it,” Ms. Orrico says.

What happens next

Dr. Grover says medical school graduates and some patients are already feeling the shortage. Last year, Dr. Grover says, 600 medical school graduates could not find a residency program. Patients in vulnerable rural and underserved urban communities have been hard pressed to find specialists.

“We’re increasingly talking to communities where they say, `Yeah, we can’t get a primary care physician. But now we’re dealing with not being able to have access to a general surgeon or oncologist or cardiologist,’” he says. “It is becoming more apparent.”

Even as it gets harder to find the money to pay for residency training, more medical schools have opened. U.S. medical schools educate about 120,000 students each year and about 27,000 accredited residencies slots are open annually — Dr. Grover says the combined MD and DO first-year medical school enrollment this year was about 27,000.

“Policy makers see there is a new medical school that is being opened or they hear that class size has been increased at the medical school,” he says. “But they don’t make the connection that that is only one step. No one can finish [medical school] and start taking care of patients. They have to do residency training.” But Medicare shouldn’t be “the almighty entity” paying for resident training, Ms. Orrico says.

Yet Medicare’s rolls are swelling and will be for years to come as wave after wave of baby boomers hit the shore. According to the Pew Research Center, the oldest baby boomers started turning 65 on Jan. 1, 2011, and “for every day for the next 19 years, 10,000 boomers will reach age 65.” That means between now and 2035, the percentage of Americans 65 and older will grow from 13% to 18%. And advances in medicine means …

“We kind of lost track of the fact that people would eventually get old and that by doing a good job with them early on they were going to live longer,” Dr. Grover says. “That was real shortsightedness.”

In addition, physicians, including cataract and refractive surgeons, are getting older. In Ms. Orrico’s specialty, 45% of board-certified neurosurgeons are 55 and older.

“Our pipeline is seven years in residency. Add one or two years on top of that for fellowship training,” she says.

The pipeline for cataract and refractive surgeons includes a residency often followed by a yearlong fellowship before they practice on their own.

Conclusion

For now Dr. Grover and Ms. Orrico sound resigned that Congress, at least for the foreseeable future, will not consider unfreezing Medicare’s resident contribution. In the meantime they, along with medical school deans, faculty and even students will continue to educate lawmakers on the importance of residency training and Medicare’s role in funding it.

“We’ll still continue to press the issue at the top of our agenda working for a positive outcome but also to prevent back sliding, which I think is more of a threat,” Ms. Orrico says. “Another challenge for the specialists is to make sure that policy makers fully appreciate that it is not just about primary care; it’s about specialty care, especially in the elderly.” OM