EXECUTIVE SUMMARY

Significant changes in the financial climate of State governments may adversely influence their continuing support of graduate medical education (GME) and the resultant physician supply. The role of State government in supporting medical education is well established. Since the late 1940s, States have subsidized loan and scholarship programs as financial incentives for medical students and physicians in training, and most States have provided some level of institutional support through general appropriations for undergraduate medical education. Several States also provide matching funds for the support of federally funded Area Health Education Centers (AHECs). Furthermore, most States elect to provide some level of support for GME, primarily through Medicaid payments to teaching hospitals. This paper looks at different innovative strategies adopted by various States to support GME programs and to ensure the production and distribution of the supply of physicians and other health professionals appropriate to their individual needs.

Most States now earmark funds for training in family medicine and other primary care residencies. At least 15 States have enacted laws that specifically encourage or mandate creation of departments of family medicine or other family practice training programs in State-supported schools. More than 40 States have created special grant programs for family physician training and about half of all States specify appropriations for family practice education. Nearly all States have in place scholarship and loan forgiveness programs targeted to placing small numbers of primary care professionals in medically underserved areas. Many States with few primary care residencies, or with such residencies that have fewer filled positions, are offering loan repayment incentives to medical students who select in-State primary care residencies.

The explosion of health care costs and a deteriorating tax basis have resulted in budget deficits in a majority of States. These deficits have forced nearly every State to reduce significantly spending for Medicaid and other public health programs that account for 30 percent of State expenditure. Increased pressure for accountability of public monies will result in increased scrutiny of all health care expenditures, including monies provided to support GME. This paper concludes with a Statement of Principles for GME payment policies by Federal and State governments.