Mandatory Spending
Function 570 - Medicare
Consolidate and Reduce Medicare 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 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2025– | 2025– | |
Change in outlays | |||||||||||||
Establish a grant program, with growth of funding based on the CPI-U | 0 | -4 | -5 | -7 | -8 | -10 | -12 | -14 | -16 | -18 | -24 | -94 | |
Establish a grant program, with growth of funding based on the CPI-U minus 1 percentage point | 0 | -4 | -6 | -7 | -9 | -11 | -13 | -15 | -18 | -20 | -26 | -103 | |
This option would take effect in October 2025.
CPI-U = consumer price index for all urban consumers.
Hospitals with teaching programs can receive funds from Medicare 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. The Congressional Budget Office projects that total mandatory federal spending for hospital-based GME will grow at an average annual rate of 7 percent from 2025 to 2034 (about 5 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 Medicare payments for GME into a grant program for teaching hospitals. Total funds available for distribution in 2026 would be fixed at an amount equaling the sum of Medicare's 2024 payments for DGME and IME. CBO examined two alternatives for how the funding for the grant program would grow over time; both would result in less funding than what CBO projects for the existing programs under current law. 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.