REPORT OF THE COUNCIL ON MEDICAL EDUCATION
CME Report 3-I-01
Subject: Medical School Financing and Student Debt – A Progress Report
Presented by: Rebecca J. Patchin, MD, Chair
----------------------------------------------------------------------------------------------------------------- 1 Recommendation 9 of Council on Medical Education Report 2 (I-00) asked our American 2 Medical Association (AMA) to work with other concerned organizations to promote legislation 3 and regulation with the aims of increasing loan deferment through the period of residency, 4 promoting the expansion of subsidized loan programs, eliminating taxes on aid from service-5 related programs, and restoring tax deductibility of interest on educational loans. 6 Recommendation 10 asked that Policy H-310.934 (AMA Policy Database) which states that the 7 AMA elevate the issue of medical students debt to one of the top legislative priorities on its 8 agenda, and that Policy H-305.946, which states that the AMA encourage society and payers for 9 health care to recognize the cost of medical education and develop a stable funding source 10 specifically dedicated to support the education of medical students, be reaffirmed. The 11 recommendation asked that a report on the measures taken by the AMA to implement these 12 policies be developed for the 2001 Interim Meeting. This informational report responds to that 13 directive.
15 There has been activity by the AMA and other organizations related to medical student debt relief 16 and medical school financing. Federal legislation has resulted in some positive outcomes, and 17 additional opportunities are pending.
19 Reducing the Cost of Loan Payback
21 In the winter of 2001, bills were introduced in the House and Senate that allow individuals with 22 higher incomes to deduct the interest paid on student debt. A February 14, 2001, AMA press 23 release thanked the sponsors of this legislation and stated that the issue of debt relief was a “high 24 priority for the AMA.” In support of this and other legislation, medical students, resident
25 physicians, and fellows visited with members of Congress during the March 2001 National 26 Leadership Conference. Residents were given talking points on the issue of debt relief by the 27 Resident/Fellow Section and were briefed by staff from the AMA Washington Office. On June 7, 28 President Bush signed the bill “Restoring Earnings to Lift Individuals and Empower Families Act 29 of 2001, now Public Law 107-16, which raised the income level for eligibility to deduct the 30 interest from student loans. For single taxpayers, the income level was raised from $50,000 to 31 $65,000 and for married taxpayers filing joint returns, the level was raised from $100,000 to 32 $130,000. The income phase-out ranges will be adjusted for inflation after 2002. The bill also 33 repealed the five-year limit on the length of time that interest on a qualified educational loan can 34 be deducted and repealed the restriction that voluntary interest payments are not tax deductible. 35
36 The staff of the AMA’s Washington Office has prepared draft legislation on loan deferment,
37 which has been reviewed by the Council on Legislation. A legislative sponsor for this bill is 38 actively being sought. The bill would allow more individuals to defer, rather than forbear, 39 payments on their loans. During the deferment period, the borrower is not required to make 40 payments on a loan and, for subsidized loans, interest will be paid by the government. During 41 forbearance, payments are not required or are reduced, but interest accrues.
CME Rep. 3-I-01--page 2
1 Public Law 107-16 also addresses the tax deductibility of financial aid under the National Health 2 Service Corps (NHSC) Scholarship Program. Payments made to individuals for tuition, fees, and 3 related expenses will no longer be included in their gross income for tax purposes. 4
5 In June 2001, reauthorization legislation was introduced for the NHSC that would eliminate 6 taxation of payments made under the NHSC loan repayment program. The NHSC program 7 provides funding to be used for repayment of the loans of physicians in selected specialties (and 8 some other health professionals) who provide care in underserved areas.
10 Additional loan repayment programs recently have been introduced by the federal government. 11 For example, the National Institutes of Health announced the Extramural Clinical Research Loan 12 Repayment Program, which is for health professionals from disadvantaged backgrounds who 13 agree to engage in clinical research for at least two years. The Loan Repayment Program for 14 Health Disparities Research is for individuals who agree to conduct research on minority health 15 disparities, or other health disparities, for at least two years. These programs will repay up to 16 $35,000 per year of student loan principal and interest.
18 Support of Medical Education and Teaching Hospitals
20 Various bills are pending that would provide enhanced funding for medical education. In April 21 2001, Senator Reed (Rhode Island), along with Senators Clinton and Schumer from New York, 22 S.743, “Medical Education Trust Fund Act of 2001.” This legislation would create a Medical
23 Education Trust Fund that would be supported by contributions from all payers for health care 24 (Medicare, Medicaid, private payers). Private-payer funding would come from a 1.5% 25 assessment on all accident and health insurance premiums. The bill creates five separate funding 26 “accounts”: the Medical School Account, the Medicare Teaching Hospital Direct Account, the 27 Medicare Teaching Hospital Indirect Account, the Non-Medicare Teaching Hospital Direct 28 Account, and the Non-Medicare Teaching Hospital Indirect Account. The Medical School 129 Account and would be used to maintain and develop quality educational programs. The concept
30 of a trust fund in support of medical education that receives contributions from all payers is 31 consistent with AMA Policy H-305.935.
33 S.839, “The American Hospital Preservation Act,” was introduced in the Senate in May of 2001, 34 with a companion bill (H.R.1556) in the House. The bill would amend title XVIII (Medicare) of 35 the Social Security Act to maintain the indirect medical education adjustment (IME) to 6.5%. 36 The IME is a modifier to DRG payments in teaching hospitals. The Balanced Budget Act of 37 1997 had reduced the IME from 7.7% to 5.5%, to be phased in over a four-year period. 38 Legislation in 2000 froze the IME at 6.5% for FY2001 and 2002, before reducing it to 5.5% in 2,339 FY2003. As of July 2001, S.839 had 24 cosponsors and H.R. 1556 had 94 cosponsors.
41 In June 2001, Representative Cardin from Maryland and 11 cosponsors introduced the “All Payer 42 Graduate Medical Education (GME) Act” (H.R. 2178). The bill creates an all payer fund through 43 a 1% tax on premiums. Medicare’s contribution to support GME would be reduced based on the 444 availability of funds from the all payer pool.
46 In summary, there is pending legislation in support of medical education that is consistent with 47 AMA policy. The Council on Legislation discussed S. 743 and its June meeting and H.R. 2178 at 48 its meeting in September.
CME Rep. 3-I-01--page 3
1 Plans for the Future
3 As described in the original Council on Medical Education Report 2-I-00, “Medical School
4 Financing, Tuition, and Student Debt,” a multifaceted approach is needed: (1) to limit the debt 5 burden incurred by medical students and carried by young physicians during residency and into 6 practice and (2) to ensure a stable funding stream for medical education programs. The American 7 Medical Association will continue to implement the recommendations in CME Report 2-I-00, 8 including taking the following actions:
9 ; Advocate for legislation and regulation to decrease the costs of medical education (for 10 example, programs that provide financial aid in return for service) and the costs of loan 11 repayment.
12 ; Collect and disseminate information on successful strategies used by medical schools to 13 reduce or cap tuition and on available opportunities for medical students and resident 14 physicians to obtain financial aid for emergency and other related purposes. 15 ; Monitor the provision of financial planning/debt management counseling for medical 16 students and resident physicians.
17 ; Advocate for stable sources of medical education funding.
References are available from the Medical Education Group.