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Chapter ~ HOW THE MEDICAL STUDENT FINANCES EDUCATIONAL EXPENSES Mary A. Fruen Introduction Most medical schools are increasing tuition because their costs have been escalating very rapidly, federal funding is dropping, and the ability to draw on new resources is becoming limited. Scholarship assistance to students is declining; the National Health Service Corps ~ NHSC ~ scholarship program with service-payback provisions is be ing phased out, and low-interes t loans are being curtailed. Thus, it is projected that the amount medical students borrow will dramatically increase and will be at substantially higher interest rates over the next few years. Aspiring medical students could be discouraged by the prospect of large debts and a less certain future, and thus the entry of economically disadvantaged applicants, including minorities, could decline. Financial concerns could affect medical school performance, the medical graduate with higher debts may need to select a more lucrative career field, and the practicing physician may adopt a practice style that assures sufficient income. This chapter explores these issues. The first section discusses trends in institutional support, with emphasis on the role of tuition. The next section presents data on medical students' sources of support and summarizes changes in sources of support as a result of shif ts in public policy. Next, current loan and scholarship programs are described, as well as difficulties anticipated with high-cost programs. The final section examines the likely effects of increasing s tudent indebtedness . Medical School Revenues 1980 Revenues In 1980/81, medical schools ' revenues totaled $6.4 billion (Table 1~. Of this, $1.9 billion (29.3 percent) was derived from the federal government, the largest single source of support. State and local governments contributed $1.3 billion (20.9 percent); medical service funds, $1.0 billion (15.6 percent); and tuition and fees, $0.3 billion (5.4 percent). Revenue Source Trends Proportional contributions to medical school revenues by various sources have changed considerably over time. Table 1 shows the sources of support for selected years between 1960/61 and 1980/81. 198

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During the 1950s and early 1960s the federal share of medical support gradually increased to a high of S4 percent in 1965; thereafter, the share contributed by the federal government has generally been declining. Coincident with the decline in federal share, the share provided by state and local sources rose from 15 to 20 percent, and the share contributed by medical services income increased from 3 to 15 percent. Two major trends in sources of support since the late 1960s have been summarized as follows: The first change is the diminished role of the federal government in the financial structure of U.S. medical schools. . . . Grants and contracts for research, teaching and training, and public service have all decreased in relative importance during this time period. The other major change is the expanded role the medical schools and universities have assumed in providing for their financing. . Nearly all of this increase represents revenues for providing health care services, either through formal, organized medical practice plans or via agreements with school-owned hospitals or affiliated hospitals. The prospect of federal government budget cutting, should it continue to constrain funding for biomedical research, strongly suggests that the patterns just described will continue for the foreseeable future.1 Federal institutional support for undergraduate medical education provided both institutional and special project grants during the late 1960s.2 In the early 1970s capitation payments to medical schools were introduced to further encourage enrollment expansions and to provide a stable base of support. These contributions to institutional support allowed smaller tuition raises. The direct institutional support for medical education generally increased until 1974, but it has subsequently been declining. Capitation has been phased out, so that other funding sources will have to make up for the loss of these funds. Trends in Tuitions Medical students' tuition and fee payments have been repaying only a small proportion of the costs of their medical education.* Educational costs are subsidized by payments for medical services, research, etc. However, because of financial pressures on the institutions and declining direct federal support of medical education, students' tuition and fees have *Current Association of American Medical Colleges (AAMC) estimates suggest an average cost of educating a medical student at $20,000 per year.3 However, this is only a rough approximation, because no recent study has undertaken the complex process of attempting to allocate medical education costs separately from research or patient-care costs.4 200 ~

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been increasing more rapidly. In the past decade tuition and fee income has increased more than five-fold' rising from $56 million in 1969/70 to $308 million in 1979/80 (Table I). It more than doubled in constant dollars. * This represents an increase in revenue share from 3.6 percent to 5.4 percent. It is anticipated that many medical schools will be forced to make especially high tuition raises as other funding diminishes. Individual Student's Tuition Costs, Indebtedness, and Sources of Support Tuition Tuitions vary widely across medical schools.5 Private schools, with a median tuition in 1981/82 of $9,337, are substantially more expensive than are state-supported public schools with a median tuition of $2, 458 for residents (Table 2 ~ . In 1981/82, 11 schools charged entering tuition of $10, 000 or more, the two most expensive being Georgetown and George Washington Universities, at Ill, 950 and $15,000, respectively. Table 2 shows trends in median tuition since 1960/61. Private school tuition increased nine times, rising from $1,050 to .9,337. Public school tuition showed a fivefold increase from $498 to $2,458 for residents. Inflation-adjusted figures show a nearly threefold constant-dollar increase in private school tuition and an increase of 1.6 times in public school tuition for residents. This overall trend in medical school tuition is reflected in rising indebtedness of graduating medical students. Indebtedness A greater proportion of medical students have been incurring debts by graduation, and the amounts of indebtedness are rising. AAMC surveys show that the percentage of medical students reporting indebtedness rose from 72 percent in 1971 to 83 percent in 1982 (Table 3~. Among those reporting debts, the average indebtedness increased from $5,500 to $21,100. This represents a rise of about 1.6 times in constant dollars. Indebtedness is expected to exceed $25,000 for 1982 graduates.6 Obviously, these aggregate data obscure individual variation. It is uncertain how much of the increase in proportion with debts and average indebtedness reflects Guaranteed Student Loan (GSL) borrowing for discretionary purchases. Cheap, subsidized GSL loans likely *Most of this increase can be attributed to a 67 percent rise in entering class enrollments during that period (Table 10~. 201

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TABLE 2 United States Medical Schools Median Tuition and Fees, First-year Students, 1960-1981 Consumer Private Schools Public Schools School Price Resident Nonresident Year Index Actual AdjustedC Actual AdjustedC Actual AdjustedC 1960/61 88.7 $1,050 31,050 $ 498 $ 498 $ 830 $ 830 1965/66 94.5 1,440 1,352 600 563 1,000 939 1970/71 116.3 1973/74 133.1 1975/76 161.2 1976/77a 170.5 181.5 1,440 1,352 2,000 1,525 2,500 1,667 3,075 1,692 3,450 1,795 1,025 1977/78 181.5 4,150 2,028 1,200 1978/79b 195.4 5,994 2, 721 1,473 1979/80b 217.4 6,725 2,744 1,750 1980/81b 246.8 7,910 2,844 2,079 1981/82b 272.4 9,337 3,041 2,458 a Tuition only. b Data obtained in the fall, after school year had begun. Figures for other years obtained prior to the start of the school year. c Ad justment for the academic year was made using the CPI for the first calendar year of which the academic year is a part; although the CPI f igures used had 1967 as a base year, the data were adjusted to constant 1960 dollars. SOURCES: Data provided by Association of American Medical Colleges staff; calculated from Medical School Admission Requirements, and Economic Report of the President for CPI figures. 600 683 850 960 563 521 567 528 533 586 669 714 747 800 1 ~ 300 991 1 ~ 846 1 ~ 231 2~060 1~134 2~160 2 ~ 343 3~400 3~761 4~118 5~108 1~124 1~145 1~543 1~535 1~481 1 ~ 663 202

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TABLE 3 Indebtedness of Graduating Medical Students Reporting Debt, Selected Years, 1971-1982 Seniors Reporting Year Indebtedness Ac tual Ad Justeda Average Average Indebtedness Indebtedness - 1971 72: ~ 5~500 $ 4~000 1975 71 9~000 5~000 1978 76 13~800 6~300 1979 76 1980 77 1981 76 1982 83 15,800 6,400 17,200 6,200 19, 700 6, 400 21,100 NA aAdjustment for the academic year was made using the CPI for the first calendar year of which the academic year is a part; although the CPI figures used had 1967 as a base year, the data were adjusted to constant 1960 dollars. SOURCE: Association of American Medical Colleges, Unpublished survey data. attracted some who would not have borrowed in the absence of such a program. Also, it would be useful to have further breakdowns of indebtedness figures to determine the numbers of students with debts in several ranges above the median (e . g ., $40 , 000 to $50 , 000 ~ . Sources of Support Over the past two decades, there have been major changes in how medical students f inance their education. Until the 1960s, medical students and their families paid most of their educational expenses, negotiating private loans if necessary.7~8 Since that time medical education costs have escalated rapidly, and medical students have increasingly relied upon loans and scholarships from outside sources. Table 4 summarizes results from surveys of how the individual medical students financed their education between 1963/64 and 1977/78. The average proportion of income derived from the student's own or family resources declined from 78 percent in 1963/64 to 69 percent in 1967/68 and remained at that level in 1974. By 1977/78, the most recent survey year, the average share contributed by medical students and their f amities had fallen to about 59 percent.9 Unfortunately, no more recent data are available. It is particularly important to collect new data on both indebtedness and sources of support now that medical students' indebtedness is sharply increasing and some shortage of financial aid may occur. 203

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National Loan and Scholarship Programs Historical Overview of Programs Financial assistance for medical students has grown markedly and has changed in nature over three decades. During the 1950s, some loan and scholarship funds were available from states, medical school funds, and private sources.7 In 1962, the first national program of financial support for medical students was instituted by the American Medical Associationt s Education and Research Foundation (AMA-ERF) . This program guaranteed loans made by private lenders, with funds obtained mainly from practicing physicians. The Health Professions Educational Assistance Act of 1963 (P. . L. 88-129) authorized the first direct federal funding of medical education, under the impetus of perceived physician shortages. This funding included a student loan program to improve access to the profession by students from lower socioeconomic backgrounds. By the mid-1960s, these health professions loans constituted more than half of all loan and scholarship funds for medical students (Table 5~. Subsequent renewals expanded this program and instituted an option to have loans forgiven for service in a physician-shortage area.2 In addition, a scholarship program was established for students with extreme financial need. The evolution of the medical student's financial assistance ref. lects changing public policy during the 1960s and 1970s. In the early 1970s loan repayment and forgiveness provisions were revised. A ma jor shif t in the philosophy of student assistance programs recognized concern that physicians were maldistributed geographically and by specialty despite growing physician supply.1O Therefore, provisions of student loans and scholarship programs were geared toward improving access to physicians' services. Public Health Service and National Health Service Corps (NHSC) scholarships were established, with awards contingent upon an agreement to practice in a physician-shortage area . Similarly, recipients of Armed Forces Health Professions scholarships incurred a military service obligation. These service-conditional scholarships were the first large-scale federal grants to be awarded medical students without regard to need (Table 6~. These programs, however, proved inadequate to encourage sufficient numbers of medical students to commit themselves to less lucrative, underserved-area practices. Consequently, the Health Professions Educational Assistance Act of 1976 (P.L. 94-484) greatly expanded the NHSC scholarship program and increased its awards. Recipients agreed to serve in a designated physician-shortage area for one year in exchange for each year of support. In addition, this legislation created a new program of nonrepayable grants for freshman medical students of "exceptional financial need," in amounts equivalent to the NHSC scholarships. When the Health Education Assistance Loan (HEAL) Program was instituted, federally insured HEALs, at market interest rates, began to replace the subsidized Health Professions Student Loans (HPSLs). 205

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TABLE 6 Amounts of Loans and Scholarship Punds, 1975/76, by Source Not administered by schools Scholarships Armed Forces HPSb $ 21,012,672 14.1 Public Health Service/ lIPSb 16,624,949 11.2 Physician Shortage Area 2,051,522 1.4 National Medical Fellowships 1,700,134 1.1 Other 5 ~ 707,077 3.8 Subtotal ~ 47,096,354 31.1 Loans AMA-EREC ~ 5,926,143 3.9 Guaranteed loans 36,529,783 24.6 Other loans 5,253,652 3.5 Subtotal $ 47,709,578 32.1 To tal S 94,805,932 63.7 Administered by schools Scholarships Health Professions Scholarships $, ],863,373 1.3 Robe rt Wood Johnson Scholarships I ,314,417 .9 School funds 15,068,178 10.1 Other scholarships 2,161,529 1.5 Subtotal 3 20,407.497 13.7 Loans Health Professions Loans $ 20,077,418 13.5 Robert Wood Johnson Loans 1,006,213 e 7 Guaranteed loans 4,069,035 2.7 School funds 6,373,045 4.3 Other funds 2,046,739 1.4 Subtotal S 33,572,450 22.6 Total ~ 53,979,947 36.3 Grand total 148 ~ '879 lOOeO all3 schools reported. bHPS indicates Health Prof essions Scholarship . CAmerican Medical Association-Education and Research Foundation. SOURCE: Medical education in the U. S. JAMA, 1976. 207

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Though some HPSLs remained available, eligibility was limited to students in exceptional need. Overall, the loan and scholarship provisions had the effect of increasing the proportion of medical education costs borne by the s tudent ,10 Federal f inancial assistance programs were being scaled down. The cost of borrowing money rose for all but the most needy medical s tudents, so that NHSC scholarships with service commitments looked relatively attractive to many. Over the past couple of years federal priorities have again been changing, so that student assistance programs are being reappraised. Currently, health care costs comprise nearly 10 percent of GNP, a near doubling of its share in two decades. Some policymakers forecast an overall surplus of physicians, and postulate that one contributor to health care cost inflation is the rapid growth in physician supply relative to population. 11 The shrinking number of people per physician is also beginning to alleviate physician availability problems in less-populated areas .12 Thus, federal programs to subsidize medical education are being cut back as a result of changing priorities, general economic problems and budgetary constraints, and reluctance to support medical students whose pro jec ted incomes are so high.l3 Aggregate Loan and Scholarship Data The total amount of loans and scholarships paid medical students has risen from $15 million in 1963/64 to $402 million in 1980/81 (Tables 5, 7~. This represents more than a ten-fold increase in inf lation-adjusted consent dollars. This substantial increase can be explained by rising tuitions and other expenses and by the expanding availability of financial assistance from federal sources. In 1980/81, loans totaled $264 million, which represents 65.7 percent of all combined loans and scholarships. Those scholarships with service commitments amounted to $99 million (24.8 percent); other scholarships $37 million (9.2 percent); and work-study $1.4 million (0.4 percent). The Guaranteed Student Loans (GSLs) in 1980/81 totaled $189 million, 71.7 percent of all loan funds. National Direct Student Loans ~ NDSLs ~ and HPSLs contributed 6. 0 and 8. 6 percent, respectively. HEALs comprised 5.8 percent, and other sources made up the remaining 7.9 percent (Table 7 ~ . Current Status of Federal Loan and Scholarship Programs Former . Secre tary of Health and H''n'~ n Services Schweiker sort rized the administration's position on financial aid for medical students as follows: 208

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Effects of Changes in the Availability of Financial Assistance Programs Entering Class Characteristics Federal financial aid for medical students has been predominantly aimed at achieving specif ic policy goals--expanding physician supply or ameliorating maldistr~bution. Only programs for the exceptionally needy were intended specifically to meet financial needs; even those programs have the social purpose of increasing access to the medical profession for the economically disadvantaged, including minorities. Policymakers have offered a further underlying rationale for these programs--that recipients are more likely to practice among medically underserved populations in rural and inner-city areas. Past efforts to increase the number of medical school graduates, including the stimulus of financial incentives, were successful. First-year medical school enrollments doubled over the past two decades, rising from 8,298 in 1960/61 to 17,204 in 1980/81 (Table 10~. For the past few years, annual growth in entering class size, however, has slowed to less than 1 percent, and this year entering class size dropped.22 During this period the composition of medical school classes changed, with increases in minorities, women, and those from less affluent backgrounds. Increased minority enrollments resulted f ram attempts to broaden the socioeconomic diversity of entering medical classes and to expand educational opportunities for racial ethnic groups underrepresented in medicine.23 Special programs were instituted for minorities and other disadvantaged applicants, to recruit them, to provide exposure to medical careers, and to address educational deficiencies.24 Financial aid was also very important in eliminating financial barriers to medical school entry for minorities and others from less affluent families. The number of underrepresented minorities enrolled in first-year classes increased more than five times, rising from 292 in 1968 to 1,548 in 1980 (Table 10~. This represented a tripling of the proportion of minority students from 3.0 percent to 9.0 percent, and the proportion of women more than tripled from 9.0 to 28.9 percent. Koleda and Craig8 reported some increases in medical students from low-income families* between 1963 and 1975, but the gains were "not as substantial as is perhaps commonly assumed." The "very disadvantaged" (lowest one-fifth of families) progressed greatly from 4.8 to 8.5 percent. The proportion of medical students from the lowest two-fifths of American families *They caution that these data suffer from three weakness: (1) the relativity of any definition of "low income," (2) the infrequency with which family income data are collected, and (3) the questionable reliability of reported income data. 213

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Table 10 Medical School Firat-year Enrollment Data, ~ 960/61 Through 1980/81 First-Year First-Year Underrepresenteda Class Enrollment Minorities Women 1960/61 8,298 1961/62 8,483 1962/63 8,642 1 o4 8,772 1 ~~65 8,856 1965/66 8,759 1966/67 8,964 19~7/68 9,479 1968/79 9,863 292 1969/70 10,401 501 1970/71 11,348 808 1971/72 12,361 1,063 1972/73 13,726 1,172 1973/74 14,185 1,301 1974/75 14,963 1,473 1975/76 15,351 1,391 1976/77 15,667 1,400 1977/78 16,134 1,450 1978/79 16,620 1,443 1979/80 17,014 1,547 1980/81 17,204 1,548 1981/82 17,268 1,671 1982/83 17,254 1,626 (3.0) (4.8) (7.1) (8.6) (8.5) (9.2) (9.8) (9 1) (8.9) (9.0) (8.9) (9 1) (9.0) (9.7) (9.4) 887 948 1~256 1~693 2~315 2~743 3~260 3~656 3~876 4,149 4,184 4~748 4~970 5~317 5 ~ 462 . (9 eO) ( 9 e 1 ) (11 ~ 1 ) (13.7) ( 16 e 9 ) (19 e 6) ( 2 2 e 3 ) (23.8) (24 e 7 ) (25 a 7 ) (25e 2) (27 e 9 ) ( 28 e 9 ) (30 e 8 ) (31.7) aIncludes blacks, American Indians, Mexican Americans, and mainland Puerto Ricans; includes 11 to 15 percent repeating firat-year class. SOURCES: Medical education in the United States. Journal of the American Medical Association. Annual Reporta--1978 and 1981; Association of American Medical Colleges, Office of Minority Affairs. 214

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in income only increased from 16 to 19 percent (Table 11~. Comparable recent data are needed. Ef fects of Higher Medical Education Costs on Admissions Hadley25 reviewed the available research on the ef fects on medical school application rates of the rate of return to investment . * TABLE 11 Family Income Distribution Among Students in Medical School; 1963 and 1975 Family Income Quintile Lowest Second Lowest Highest Fifth Lowest Fifth Two-Fifths Fifth . 1963 Income Dis tribut ion $0-$3,096 $3,096-65,200 $0-~5, 200 $9,969+ All families 20.0X 20.0: Medical student families 1975 4.8X 11.6X 40 ~ 0% 20.0: 16.4% 49.0% Income $0-36500 $6500-610,722 $0-610,722 $20,445+ Distribution All families 20.0X 20.0Z Medical student forties 40. ON 20.0: 8 Z 10.8% 19.3% 50.0% SOURCE: Reference is, p. 5 *In determining the anticipated rate of return, a phy~ician's expected lifetime net earnings and the number of working years would be estimated. Costs incurred in training and possible practice time given up during the training period are deducted in estimating present values of expected earnings. 215

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The conclusions reported were as follows: "Studies of medical school application rates show a positive and statistically significant relationship between physicians' incomes (or the rate of return to becoming a physician) and the number of applicants." This suggests that the applicant pool will diminish as medical students' indebtedness rl seq. Ayers and colleagues studied the impact of very high tuition at Georgetown University School of Medicine on applicants and enrolled medical students.26 The quality of applicants and enrollees, as evidenced by science grade point averages and Medical College Admission Test scores, remained stable despite tuition increases much more rapid than those at most other medical schools. Overall, the sudden rise in tuition and corresponding financial aid requirements caused little change in socioeconomic diversity of matriculants. However, the impact may be greater as the major support for their students, scholarships with service commitments, is curtailed. In the future, potential applicants from lower-income families may be discouraged by the prospects of high costs and large debts. They would be entering medical school anticipating a four-year program followed by residency averaging nearly four years, with a less certain future in practice. Currently, the postulated effects of these financial factors on application and entry into medical school are somewhat speculative; admissions officers have expressed concern about maintenance of socioeconomic diversity in entering classes. More data are needed on this question. Financial considerations are beginning to intrude into medical school admissions from the selection committee 's perspective as well. Traditionally, admissions committees have considered applicants on the basis of academic and personal potential to complete medical school successfully and become a good physician. A third factor--the ability to finance medical education--has been added to the admissions process in at least some of the more expensive medical schools. Many medical schools are no longer able to provide financially for their students; those without substantial personal resources are pro jected to incur increasingly larger debts at higher interest rates, and some may face cash-flow problems in residency and starting practice. Therefore, these admissions committees are concerned that the students have plans for securing appropriate f inancial aid, and a realistic understanding of their pro jected debts and payback requirements . Ef feces on Medical Students Medical schools facing serious financial problems increase tuition concurrent with declining f inancial aid and cutbacks in low-interest loans. Thu';, it in pro jected that medical students will dramatically increase the amount borrowed, at substantially higher interest rates, with serious payback problems. Curtailment of the NHSC scholarship program will affect minority medical students disproportionately. As Table 12 shows, 35.3 percent of NHSC scholarship recipience in 1980/81 were minorities as compared 216

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TABLE 12 Comparison of National Bealth Service Corps Scholarship Recipients and Total Medical Student Population, l9BO/81 Nat ive Asian White Black Hispanic American American Women Scholarship recipients (4,815 medical) 62.7: 22.02 9.9: 1.0: 2.4X 32.9X U. S. medical school population (65 189) 85.0: 5.7Z 4.2: 0.3: 3.0: 26.5% , SOURCE: Fifth Annual Report to the Congress on the National Health Service Corps Scholarship Program for Fiscal Year 1981. Health Services Administration, 1982. with 13.2 percent minority enrollment. Some medical schools will be particularly hard hit, including predominantly black Heharry Medical College with 159 scholarship recipients and Howard University with 95 recipients (Table 13~. Financial difficulties could have indirect effects on medical students' performance and retention. For example, a student with financial problems may work, worry, skip meals, or have an unpleasant environment, which could have spillover effects on academic performance. Some medical school administrators are concerned about the repercussions of students' financial difficulties, but only isolated instances of this problem have been reported to date. Indebtedness and Career Plans Physicians' incomes vary widely across specialties.27 Yet, existing studies show that the impact of income on specialty choice, if any, has been weak.28 (See Chapter 9.) However, anticipated earnings could be more influential in specialty selection by future medical graduates with significantly higher debts. One might hypothesize that those with particularly high debts may select a more remunerative specialty in order to afford debt repayments. Thus far, available data do not support this hypothesis. A study of the relationship of indebtedness to specialty of graduates has recently been completed at George Washington University School of Medicine, where tuition is highest nationally.29 Indebtedness of sensor students choosing relatively low-paying specialties (pediatrics, psychiatry, and family practice) differed only slightly f ram indebtedness of those planning more remunerative specialties (ophthalmology, radiology, anesthesiology, pathology, and surgery and its subapecialties). In fact, there was lower indebtedness for the group pursuing the more lucrative specialties in three of the four classes studied. 217

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TABLE 13 Medical Schools with the Greatest Number of National Health Serv ~ ~ ~ _ Medical School 1981/ 82 Ente ring Awards Class Tut Lion Meharry Medical College School of Medicine, Tennessee 159 $ 6, 500 Georgetown University 107 15,950 School of Medicine, Washington, D.C. George Washington University 105 15,000 School of Medicine, Washington, D.C. Lo ma Linda University 101 lo, 000 School of Medicine, California Tufts University 101 12, 125 School of Medicine, Massachusetts Howard University 95 3~000 College of Medicine, Washington, D. C. University of Puerto Rico 93 1,500 (resident) School of Medicine, 8,000 (nonresident) San Juan . Jefferson Medical College, 86 9,700 Pennsylvania Boston University 71 11,100 School of Medicine, Massachuse tts SOURCES: NESC Scholarship award data from Fifth Annual Report to the Congress on ~ ~ Services Administration, 1982. Tuition figures from Medical School Admission Requirements, 1983-84, AAMC, 1982. 218

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Among residents at the University of Michigan Hospital, no significant relationship was found between level of indebtedness and specialty.30 A national survey of medical residents also found no significant differences in mean debts between those in less lucrative specialties and those in more lucrative ones (anesthesiology, surgery, radiology, and pathology).31 The effects of high indebtedness on career activities should be monitored as indebtedness rises, borrowing terms worsen, and service payback options are cut. As medical students assume more substantial debt burdens, they will have increasing financial pressures to enter lucrative specialties regardless of preferences. Effects of High Indebtedness on Practice Rising indebtedness could also have negative repercussions for the physician's willingness to serve in underserved-area practice. Income levels in such areas have traditionally been relatively low. However, this question is complicated, because market factors related to growing physician supply may in part counterbalance the relatively low incomes in undernerved geographic areas.l2 Data are needed on the relationship of physician location choices to medical education indebtedness. It would be useful to separate out those who entered practices in inner cities and less populated, underserved rural areas in the absence of NESC service commitments or similar loan-forgiveness programs. Physician manpower planners have also been concerned about the decline in physicians entering medical research.32 The trend away f ram this less remunerative type of medical career could be further exacerbated by the need for new physicians to repay prodigious debts, in combination with the uncertainty of federal research funding. Finally, it is hypothesized that physicians with large medical school debts may attempt to recoup repayment costs through higher patient f ees, greater service intensity, or larger patient loads. Physicians are estimated to control the ma jority of medical care decisions, because consumers are relatively uninformed about their medical needs and treatment requirements, and insurance coverage lessens their immediate concern about medical care costs. With fee-for-service reimbursement for medical care services, the physician is rewarded with higher income for providing more intensive and costly services because of anomalies in the medical marketplace.35 Empirical evidence on the ability of physicians to induce demand is inconsistente33~35 However, unmanageable debt could provide additional incentive for the physician to prescribe more revenue-producing procedures. Summery Availability of low-cost student aid and assistance with service-payback provisions are dwindling at a time when many medical schools are facing financial difficulties and tuitions are rising 219

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rapidly. The National Health Service Corps scholarship program is being phased out. The subsidized Guaranteed Student Loans for medical students have instituted a needs test for those with family incomes over $30~000e Therefore, it is anticipated that medical students will rely increasingly on HEAL program loans at market interest rates, unless a lower cap on these loans insured by the federal government limits this source of funds further. If so, a signif leant shortage of loan f unds could result . Some medical students are projected to have prodigious debts, at high interest rates, with serious repayment problems. The prospect of sizable debts could be a major deterrent to medical school entry for those from less affluent backgrounds. The implications are particularly great for aspiring minority medical students because of their frequent economic disadvantage, their recent disproportionate reliance on NHSC scholarships, the aversion of some to undertaking large debta' and the attraction of alternative career choices that offer immediate income. Data on the parental income and occupational levels of recent entering classes should be analyzed, and these studies should be repeated periodically as debt burdens increase. Counneling may be appropriate for some students, to suggest debt management strategies that will not impair academic performance. Thus far, no relationship has been shown between indebtedness and specialty ~election, type of medical career pursued, or location choice. However, such analyses should be repeated in the future as medical students' debts increase substantially. The impact on practice patterns will be more difficult to ascertain, but massive debts could motivate the physician to maximize income generated. The combination of substantial debts and tight money could also pose problems for some new physicians attempting to start practice. New sources of financial assistance for medical students should be explored. Alternatives may be needed soon if federal loan and scholarship programs are curtailed further. If equity of access to the medical profession is to be maintained, a targeted program with greater subsidies may be needed. 220

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REFERENCES 1. Medical education in ache United States, 1980-81. Journal of the American Medical Association 246: 2926-2927, 1981. 2. Chronology of Health Professions Legislation, 1956-1979. DHHS Publication No . (HRA) 80-69. Hyatts~rille, Md.: Bureau of Health Professions, Health Resources Administration, 1980. 3. Feinberg, L. Panel to seek basic shif t in "brutal" medical school curriculum. Washington Post, Oct. 20, 1982, p. A2. 4. Fruen, M. A. An overview of the medical education system and its financing. In Hadley, J., ed. Medical Education Financing: Policy Analyses and Options for the l980s. New York: Prodist, 1980. 5. Medical School Admission Requirements 1983-84. Washington, D. C. Association of American Medical Colleges, 1982. 6. Editorial. Consequences of the student loan proposals in the adminis tration ' ~ f iscal 1983 budget . Journal of Medical Education 57: 418-19, 1982. 7. Association of American Medical Colleges. Report of the Task Force on Student Financing. Washington, D. C.: Association of American Medical Colleges, 1978e B. Koleda, M., and Craig, J. A new era in medical school finance, 197 6-80 : Looking Ahead Vol e 2, No . 4. Washington, D. C .: National Planning Association, 1976. 9. Gordon, T. L. Studies of Medical Student Financing, 197 7-78: Preliminary Report of October 1978. Washington, D . C.: A':~aciacion of American Medical Colleges, 1978. 10. LeRoy, L. Assessing Federal Health Hanpower Strategies for the l980s. Address to National Health Policy Forum, May 9, 1979. 11. Graduate Medical Education National Advisory Committee Final Report to the Secretary ~ DlIHS. Hyatteville , Md .: Health Resources Administration, 1981. 12. Fruen, M. A., and Cantwell, J. R. Geographic distribution of physicians: Past trends and future influences. Inquiry 19:44-SO, 1982. 13. Iglehart, J. K. Shrinking federal support brings new era to education in the health professions. The New England Journal of Medicine 305 :1027-1032, 1981. 14. Reference #13, p. 1029. 221

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15. The Student Guide: Five Federal Financial Aid Programs 1982-83, 1981. 16. Personal Communication. L. Paszkiewicz, Department of Education. 17. Kurtz, H. President yields to Congress, signs college student aid measure. Washington Post, Oct. 15, 1982, p. A3. 18. Heal th prof essions student loan program. Federal Rezister Allg. 31, 1982, pp. 38365-38368. 19. Fact Sheet--Health Education Assistance Loan (HEAL) Program. Hyattsville, Md. : Health Services Administration, 1981. 20. Personal Communication. N. Brooks, Health Services and Resources Administration. 21 . Personal Communication. A. Swif t, Health Services and Resources Adminis "ration. Medical education in the United States, 1981-82. Journal of the American Hetical Association 248:3203-3400, 1982. 23. Odegaard, C. E., Minorities in Medicine: From Receptive Passivity to Positive Action' 1966-76. New York: Josiah Macy Jr. Foundation, 1981. 24. Cadbury, W. E., Jr., Cadbury, C. M., Epps, A. C., and Pisano, J. C., eds. Medical Education Responses to a Challenge. Mount Kisco , N. Y.: Futura Publishing Company, 197 9. 25. Hadley, J., Physician supply and distribution. In Feder, J., Holohan, W., and. Marmor, T., eda. National Health Insurance and Cost Containment . Washington, D. C.: Urban Institute, 1979. . . 26. Ayers' W. Re ~ Stanger' A. C. ~ Dennis, J. and Henry, J. B. Impact of high tuition on medical school applicants and enrollees. Journal of Medical Education 56: 795-802, 1981. 27. Fruen, Me Ae ~ Medley, J. ~ and Korper, S. P., Effects of financial incentives on physicians' specialty and location decisions. Health Policy and Education 1 :148-159, 1980. 28. Mantovani, R. E., Gordon, T. L., and Johnson, D. G., Medical Student Indebtedness and Career Plans 1974-75. Washington, D. C.: ~s8OCiation of American Medical Colleges, 1976. 29. Keimowitz, R. I. Increased Tuition, The George Washington Experience. Address to the New York Academy of Medicine, Oct. 14, 1982. 30. French, F. The f inancial indebtedness of medical-school graduates. New England Journal of Medicine 304:563-565, 1981. 222

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31. Bough, D. E., Financial indebtedness of medical-achool graduates New England Journal of Medicine 304:1551, 1981. 32. Institute of Medicine. Clinical Investigations i Needs and Opportunities (Conference Summery) National Academy Press, 1981. 33. Greenberg, W., ed. Competition in the Health Sector. Md.: Aspen Systems Corporation, 1978. ____ Washington, D.C.: Germantown, 34. Hadley, J., Holohan, J., and Scanlon, W. Can fee-for-service reimbursement coexist with demand creation? Inquiry 16: 247-258, 1979. 35. Cotterill, P. G., The physician-induced demand and target income models : A survey of the issues. Profile of Medical Practice. Chicago: American Medical Association, l9i8. 223