consistent with the precedent of the 1995 Balanced Budget Act. It is also consistent with the committee's principles, and with the use of some source of funds to address the non-Medicare shortfall in support of GME and related functions. In addition, it makes for a better plan in, for example, leveling the variability due to Medicare caseload in IME payments.

If non-Medicare funds are not included, the committee's plan is less faithful to its principles, but is still an implementable improvement. The approach to uniformity for DME funding will provide support for more sponsoring institutions and is still reasonable in theory, though less so. The expanded eligibility for DME funding provides a GME system that is more open to allowing training opportunities in new and innovative settings. The incentives to continually expand residencies will be diminished by an annually defined fund and the DME changes. The problem of capitated patients outside of the PPS will be eliminated, and AAPCC decisions and GME decisions about the amounts of funding will be separated. Importantly, a controlled academic hospital GME payment system will have been devised for Medicare that will allow consideration of academic health center issues separate from overall hospital or health care services sector issues.

THE BALANCED BUDGET ACT OF 1995

Although the committee did not analyze every past legislative initiative, there was a sense that some effort should be devoted to reviewing the GME provisions of the Balanced Budget Act of 1995. These provisions were enacted by the 104th Congress but were vetoed by President Clinton. Further, the request for advice from the House Ways and Means Committee implied consideration of a similar trust fund presumably reflecting some of the thinking if not the precise provisions of the 1995 act.

The act established five funds using Medicare and general revenue sources. Two funds would continue present Medicare DME and IME distributions, but at reduced levels. Two general revenue funds would allocate a predetermined amount based on the proportion of an institution's payout during an historical period (1992–1994). A fifth fund would pay hospitals in proportion to their service to Medicare managed care (''MedicarePlus'') patients. DME support of consortia would be permitted, but other expansion of DME eligibility was not included. The general funds would not fluctuate with changing resident or bed numbers or institutional Medicare or non-Medicare caseload. Resident number would be capped. The act is more prescriptive for the work force in other ways as well. The MedicarePlus fund would vary only with respect to Medicare managed care and would be unrelated to the size of a training program. This could allow substantial payments to hospitals in regions with high numbers of capitated patients, a small training effort, and little of the public value associated with a developed teaching program or support of unsponsored clinical research and innovation. The increasing amount of revenue for the fifth fund assumed a



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