The U.S. should expect a nationwide shortage of tens of thousands of physicians by 2025, according to a report published on Tuesday by the Association of American Medical Colleges (AAMC) – and that shortage could threaten the integrity of the nation’s health care system, urged the organization’s leaders on a press call that coincided with the report’s release. But the usefulness of such warnings – which the group has put forth repeatedly in the past – may be greatest to those same leaders as they lobby Congress to boost payments to teaching hospitals by $10 billion in the coming decade through a program that has been criticized for a lack of accountability.  

“Obviously, they are an interest group and their main task is to encourage a flow of money to their members,” Uwe Reinhardt, a health economist at Princeton University, says of the group's latest alert.

For the past five years, the AAMC has cautioned of an impending doctor shortage and simultaneously supported legislation that would funnel more federal money toward its members, which include 400 of the nation’s teaching hospitals and 141 medical schools. The legislation they have supported, dubbed the Resident Physician Shortage Reduction Act of 2011, which was proposed again in 2013, calls for Congress to provide $1 billion a year to support 3,000 more medical residents at such hospitals. On a press call for the report, Dr. Darrell Kirch, president and CEO of AAMC, and Dr. Janis Orlowski, chief health officer, once again urged Congress to “act now” and provide more funding to stave off a shortage.   

"It's what they do. That's what they're paid to do,” Gail Wilensky, a health economist who served as a senior health adviser under President George H.W. Bush, says. “They haven’t exactly been successful in terms of getting the legislation passed that they would like.”

That legislation would add money to a long-running program that subsidizes the professional training of the nation's aspiring physicians. Since passing a law in 1965, Congress has used Medicare and Medicaid to help fund the one-year residencies that roughly 28,000 medical school graduates complete each year at the nation’s 1,100 teaching hospitals to become certified as doctors. The AAMC says it takes about $152,000 to train a resident and the government reimburses hospitals for a portion of that cost through direct and indirect payments in a program called Graduate Medical Education (GME). In 2012, the government spent $15 billion on GME through Medicare to support medical students, according to the Institute of Medicine.

Dylan Roby, a health policy expert at University of California, Los Angeles, says estimates have shown that the amount of direct payments that hospitals receive per resident is around $100,000 when state and federal support is combined, though the AAMC says that Medicare only gives about $40,000. The direct payments that these hospitals receive support salaries of $42,000 to $80,000 for residents as well as overhead costs and a portion of the salaries of the hospital staff for training them.

On top of that money, the government also gives hospitals indirect payments to cover extra expenses that they may incur for their educational efforts – including buying the latest technology or treating patients with complex conditions so that residents can learn from rare cases. Indirect payments are sent in the form of a fee that is tacked on to every Medicare bill that a teaching hospital files, and typically adds about 5 percent to the cost of those bills, though that rate can vary depending on the number of residents and patients in a hospital.

All together, these payments can add up – Boston Medical Center received $41.6 million through GME in 2010 to support about 450 full-time residents, according to the Robert Graham Center, a policy arm of the American Academy of Family Physicians. The AAMC says that the direct and indirect training costs associated with running a residency program far exceed this support and top $43 billion a year for America’s hospitals and has strongly advised against any cuts to these payments in the past. But Reinhardt suggests there is one important piece missing from their calculations. “Graduate students are cheap labor -- they produce highly valuable services that the hospital can sell and yet they are paid less than the janitor on an hourly basis,” Reinhardt says. "The services they produce are worth at least $100,000 to $150,000 a year."

Perhaps a bigger problem with the AAMC’s proposal to create more slots for residents through GME is that the indirect payments granted through the program have come under fire for wasteful spending and lack of accountability. Direct payments operate much like a grant, Roby says -- teaching hospitals must report back on how the money is used and could lose it if their residents drop out or don’t pass their boards. But indirect payments are another story -- there are no reporting requirements or performance-based standards associated with this money.

Just last summer, the Institute of Medicine conducted a review of the GME program and found no "credible evidence" for a looming physician shortage like the one that AAMC has proposed but did unearth a disturbing degree of opacity surrounding these indirect payments. The report states: “Although the scale of government support for physician training far exceeds that for any other profession, there is a striking absence of transparency and accountability in the GME financing system for producing the types of physicians that the nation needs.”  The AAMC has supported legislation in the past that called for greater accountability, but only if it was part of a larger deal that also included a bigger budget for these payments in the first place.

Even though it’s hard to know exactly how teaching hospitals are using the money from indirect payments, the Medicare Payment Advisory Commission, which regularly reviews aspects of Medicare in order to advise Congress, has found that $3.5 billion of these payments granted to teaching hospitals are extraneous and “above their empirically justified costs for indirect medical education.” The organization recommends that this money instead be rerouted to a transparent fund that would reward the most productive and innovative residency programs and more directly benefit residents' education.

Reinhardt adds that AAMC's advocacy doesn't necessarily negate the findings of their report. “The shortage of primary care physicians is certainly not their own invention -- many other people have said that,” Reinhardt says. The nation currently lacks 8,200 primary care physicians and 2,800 psychiatrists according to the U.S. Department of Health and Human Services. And Dr. Eric Skye, a professor and coordinator of educational programs in the department of family medicine at University of Michigan, says his students feel the pinch of limited funding for residencies, especially as the number of medical school graduates has grown from three new medical schools that have opened in Michigan in the past five years.

Nevertheless, critics say the AAMC report can't be considered an independent review. "These are issues that are important,” Wilensky, who contributed to the Institute of Medicine report, says. “It would be good to have more groups that are not directly benefiting from more money try to make some of these assessments.”