Financing graduate medical education: an update and a suggestion for reform.

This article reports data pertinent to three issues in the financing of graduate medical education: sources of funds for house staff support, the financing of faculty salaries for educational activities, and reimbursement bias in favor of care provided in inpatient settings. Using data from a 1979 hospital survey, we estimate that total expenditures for house-staff stipends and fringe benefits were almost $1.6 billion. Eighty-seven percent of these funds were derived from patient care revenues. Faculty salaries for educational activities added another $376 million to the cost of graduate medical education. Teaching hospitals collected 81 percent of their charges for inpatient care, but only 72.8 percent of charges for outpatient care. However, Medicare and Medicaid reimbursed approximately the same proportion of charges in both settings. The article concludes by arguing that a unified-charge system for paying teaching hospitals would eliminate most of the issues currently associated with the financing of graduate medical education as matters of public policy.