THE CURRENT CLIMATE IN THE STATES AND MANAGED CARE INFLUENCING THE PHYSICIAN WORKFORCE

A number of significant changes affecting State and managed care markets in recent months and years have had an impact on, or have the potential to affect significantly, GME and physician supply. This section briefly describes the major changes and issues confronting GME and related public policy.

Rising Numbers of Uninsured and Increasing Health Care and Malpractice Insurance Costs

One in seven Americans now lacks necessary health insurance coverage, despite the fact that more than 80 percent hold jobs and almost a quarter earn $50,000 or more a year. Yet, 8 of 10 uninsured are in working families who cannot afford health insurance and that are not eligible for public assistance programs. The cost to society in the form of expanding uncompensated care, higher insurance premiums, and higher taxes is estimated at $35 billion annually.¹

The uninsured issue and its resultant cost are now viewed as a crisis in several States. One of California’s largest health insurers, Blue Shield, recently took the unusual position of calling for the State to provide universal coverage.² A 2001 survey of California’s physicians suggests that large numbers of physicians whose practices are suffering major financial problems soon plan to retire or leave the State. Most physicians surveyed also said that the high cost of living in many areas of the State affected practice recruitment.³

Overall health care costs are also increasing again at significant rates. In 2001 alone, premiums for employer-sponsored coverage rose 11 percent. In the past few years, huge increases in medical malpractice insurance rates also are driving physicians out of business temporarily or permanently in many States.⁴ A 2002 report on the practice environment in Massachusetts found that rising malpractice insurance premiums, home prices, and business costs were associated with more physicians’ leaving and fewer young physicians’ practicing in the State.⁵

In particular, the drastic rise in malpractice premiums is a growing crisis in many places. At least 60 specialists at the University Medical Center in Las Vegas walked off their jobs in the summer of 2002. This action forced the 24-hour trauma center, which treats as many as 11,000 people a year—victims of car accidents, major falls, and gunshot and stab wounds—to close its doors immediately. For Nevada lawmakers, who would meet in special session only days after the physicians ended their 10-day walkout, it was only one more controversy in a serious public health crisis made complex by its many parts.⁶

These trends may have important implications for physician training. Significant changes in physician supply and practice patterns in some States that result from these factors could require some GME programs to reexamine their size and curriculum.

Government Budgetary Shortfalls, Medicaid Fiscal Pressures, and Accountability of Public Funds

The explosion of health care costs and a deteriorating tax basis have resulted in budget deficits in a majority of States. Thirty-nine States and the District of Columbia (DC) faced budget shortfalls totaling about $30 billion at some point during Fiscal Year (FY) 2003, after the $49 billion shortage that States had to resolve when they were originally enacting their FY 2003 budgets. As of April 2003, 41 States and DC were projecting shortfalls that could exceed $78 billion. These fiscal problems have forced virtually every State to reduce significantly spending for Medicaid and other public health programs that account for 30 percent of State expenditures nationwide. Some experts believe that this trend will require major changes to these programs in the long term.⁷

States’ alterations to Medicaid may include reduced reimbursements to physicians and hospitals, increased control over prescription drug coverage, and eliminated or curtailed optional benefits or services such as payments for GME. A few States, such as Kansas, Nebraska, Texas, and Wisconsin, have very recently considered or actually eliminated or curtailed optional Medicaid payments for GME.⁸ Increased calls by States for the Federal Government to provide relief from soaring Medicaid costs prompted the Bush Administration in early 2003 to announce its own Medicaid reform proposal. The proposal would give States more freedom to decide what medical services are provided to Medicaid beneficiaries and would no longer require States to apply for Federal waivers to deviate from Federal Medicaid eligibility and benefits standards. In addition, the U.S. Senate in May 2003 approved $10 billion in temporary Medicaid funding to the States as part of its tax cut package and $10 billion to be allocated among other State programs.⁹

Such conditions and changes are likely to spur States to develop new means of accounting for spending on Medicaid and other State health programs. A few States, such as Colorado, are slowly abandoning their Medicaid Health Maintenance Organization (HMO) programs. Colorado now views its move to managed care in the mid-1990s to reduce Medicaid costs and improve spending accountability as a failed experiment that did not save the State enough money. It is not clear what impact such changes will have in these States on payments for physician services and GME.

Expanding Scopes of Practice and Practice Opportunities for Non-Physicians

There has been a dramatic increase in the supply of non-physician clinicians (NPCs) and in the extent of health care they deliver that previously was provided principally by physicians. These NPCs include nurse practitioners, certified nurse midwives, physician assistants, psychologists, optometrists, podiatrists, and nurse anesthetists, as well as practitioners from “alternative” or “complementary” disciplines such as chiropractors, naturopaths, and acupuncture practitioners.

Anecdotal evidence suggests that State support, as a revenue source, is very important to many schools that train these health professionals. In particular, many schools of nursing with master’s degree programs depend heavily on State funding. According to a 1997 study,¹⁰ about half of all nurse practitioner training programs received external support, and a large proportion of them obtained State government appropriations either directly or through their parent school of nursing. For these programs, the study found that State funding was very important to their financial livelihood. About two-thirds of these programs reported that they would have to close or severely curtail their program activities if State funding were withdrawn. NPCs—many who traditionally were used as physician extenders—now operate with a new degree of practice autonomy as defined by changes in the laws and regulations of many States. These are practitioners whose defined scope of practice often overlaps in varying degrees with that of physicians. In fact, their scope of practice may even compete with that of physicians. Many workforce experts believe that the growth in both supply and demand for NPCs, while presenting new opportunities for increased collaboration and interdisciplinary practice, is likely to dampen the demand for physician services. This might be the case particularly in managed care settings and from consumers seeking alternative or non-traditional forms of health care.

Shifting Specialty Supply and Persistent Shortages of Physicians Serving Low-Income and Rural/Inner- City Populations

Although the supply of physicians has grown rapidly for several decades, debate remains about the adequacy of overall physician supply, and in particular, the supply of specialists. Several recent reports suggest shortages exist in certain selected physician specialties such as pediatric subspecialties¹¹ and geriatric medicine.¹² There is also indication that the demand for primary care physicians is softening as managed care organizations (MCOs) become less centralized and emphasis on the primary care physician as “gatekeeper” changes.

Regardless of specialty mix in the physician supply, inadequate access to physician care by medically underserved populations nationwide is ongoing and likely to worsen. Maldistribution of physicians in many rural areas and inner cities continues despite efforts by the National Health Service Corps and other government programs to recruit and retain health providers to these communities. Physicians may be available in many places but located too far away to provide timely service, and clients may have difficulty finding transportation, even to a nearby service site. Alternatively, providers may not be willing to serve the uninsured or underinsured or may treat them differently from their privately insured patients. Individuals may also delay seeking care or fail to seek it because of a lack of knowledge about their own health needs or where those needs may be met.

Practice Location of Physician Graduates and the Importance of States as Markets

Despite the debates over whether the United States has too many or too few physicians overall, there is consensus that tremendous variation exists across the States in both the number of physicians in training and the number and specialty of physicians in practice. These variations in geographic and specialty distribution have been associated with unequal access to physician services.¹³

States remain concerned about the return on their investments in medical education and physician recruitment and retention for health professional shortage areas (HPSAs). To determine whether such investments by States and training programs make a difference in where physician graduates locate their practice—and if most physicians ultimately enter practice in the same State where they completed their medical school and GME training—the National Conference of State Legislatures (NCSL) conducted an analysis. NCSL recently analyzed the American Medical Association’s Physician Masterfile and found that a majority of generalist physicians and physicians in metropolitan areas practice in the same State where they completed their most recent GME. Although most States do not retain a majority (or import a minority) of their total physicians, some States fare better than others. Seventeen States retain at least half of all physicians who completed their GME in State.¹⁴

Data from the NCSL study suggest that there is a relationship between location of medical school training and location of most recent GME. Data also suggest that the existence of such a relationship would and does influence practice location. States with a higher percentage of physician residents from in-State medical schools are more likely to retain (or import fewer) physicians of all specialties and in all geographic locations. This finding suggests that location of medical school is important to location of residency training and practice. In 2001, nearly 40 percent of all allopathic residents graduated from an in-State medical school. Public medical schools appear to be more important to location of residency than private schools. The 12 States in which at least one third of physician residents are from in-State medical schools have a predominance of publicly supported schools.¹⁵