Multiple Budget Functions
Consolidate and Reduce Federal Payments for Graduate Medical Education at Teaching Hospitals
CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.
|Billions of Dollars||2021||2022||2023||2024||2025||2026||2027||2028||2029||2030||2021–
|Change in Outlays|
|Establish a grant program, with growth of funding based on the CPI-U||0||-1.4||-2.0||-2.5||-3.1||-3.7||-4.3||-5.0||-5.7||-6.3||-9.0||-34.0|
|Establish a grant program, with growth of funding based on the CPI-U minus 1 percentage point||0||-1.4||-2.1||-2.8||-3.6||-4.3||-5.1||-6.0||-6.9||-7.6||-9.9||-39.9|
Under certain circumstances, hospitals with teaching programs can receive funds from Medicare and Medicaid for costs related to graduate medical education (GME). Medicare’s payments cover two types of costs: those for direct graduate medical education (DGME) and those for indirect medical education (IME). DGME costs are for the compensation of medical residents and institutional overhead. IME costs are other teaching-related costs—for instance, costs associated with the added demands placed on staff as a result of teaching activities and the greater number of tests and procedures ordered by residents as part of the educational process. Additionally, the federal government matches a portion of what state Medicaid programs pay for GME. The Congressional Budget Office projects that total mandatory federal spending for hospital-based GME will grow at an average annual rate of 5 percent from 2022 through 2030 (about 3 percentage points faster than the average annual growth rate of the consumer price index for all urban consumers, or CPI-U).
This option would consolidate all mandatory federal spending for GME into a grant program for teaching hospitals. Total funds available for distribution in 2022 would be fixed at an amount equaling the sum of Medicare’s 2020 payments for DGME and IME and the federal share of Medicaid’s 2020 payments for GME. CBO examined two alternatives for how the funding for the grant program would grow over time. Under the first alternative, funding for the grant program would grow with the CPI-U; under the second alternative, funding for the grant program would grow with the CPI-U minus 1 percentage point per year.