ABSTRACT
Most proposals for the reform of health care delivery have focused on issues of cost control, access, and quality; relatively few have addressed the education of physicians. Over time, however, the size and quality of the health care system depends on maintaining an adequate work force. Undergraduate medical education is funded from state and local sources, federal grants and contracts, hospital support, student tuition, and clinical outcome. Medicare is the major single source of support for the unique costs of teaching hospitals. It does so primarily through two mechanisms: direct graduate medical education (DGME) offsets, and the indirect medical education (IME) adjustment. The IME adjustment is a payment associated with each Medicare inpatient discharge. IME payments have been the subject of considerable debate and legislation. Cost containment began in earnest when, in 1983, Medicare was ratcheted down by the switch from fee-for-service to prospective payment, which established set fees for 467 diagnosis-related groups (DRGs).
