Appendix C: Medicare and Graduate Nurse Education

An important component of Medicare is the graduate medical education program, which provides education dollars for health care providers. For fiscal year 1998, approximately $307 million in Medicare direct medical education (DME) payments to hospitals is support for nursing education programs, primarily hospital-based diploma schools. In contrast, total appropriations for fiscal year 1997 for Title VIII (nursing education) was $65 million, the bulk of which is spent on grants and loan interest programs at the graduate level. Due to the restrictive policies of Medicare, no funds are available under the DME payments to support clinical training of advanced practice nurses in hospitals or other training sites, and the bulk of the support for diploma programs is allocated to private, non-teaching hospitals located in five states. Most of the university-based nursing education programs and community college programs are not eligible for any Medicare support either at the undergraduate or graduate level due to the structure of the Medicare payments to provider education.

While hospital-based diploma programs have been an important source of registered nurses who provide care to Medicare hospital patients, advanced practice nurses are increasingly in demand to meet the needs of Medicare beneficiaries. An Institute of Medicine report on the role of nurse staffing in hospitals and nursing homes released January of 1996 found that "more advanced, or more broadly trained, registered nurses will be needed in the future . . . such training is essential like that now provided for registered nurses who receive certification as, for example, advanced practice nurses."1 As the health care delivery system continues its transformation from a fee-for-service, illness episode model focused on hospital care to a community-based, continuous care model operated by capitated, integrated networks of providers, the demand for more highly educated nurses will expand. Patients are increasingly those with chronic diseases and co-morbidities that require multiple skills and patient management abilities.

For all of these reasons, it is critical that educational programs for nurses have the resources to adapt their curricula and clinical training opportunities to the realities of today's health care delivery system. It is essential to expand the number of nurses enrolled in graduate level education programs in order to meet the needs of tomorrow's patients. This requires a commitment of stable funding for the clinical component of these programs, not subject to the uncertainties of the annual Federal appropriations process, on a par with what is currently provided to post-graduate physicians-in-training.

While there has been a great deal of discussion in the public policy area about support of clinical education for physicians, notably absent from much of this discussion is the need to support clinical education for nurses, particularly in light of the likely need for additional advanced practice nurses in settings where residency positions are eliminated. While there has been some attention to the need for transitional payments to clinical sites (primarily teaching hospitals) that experience cuts in support for graduate medical education, there has been little recognition of the need to increase the supply of advanced practice nurses in order to assure a transition that does not threaten patient access to needed primary and preventive care. Such a supply is critical to support the movement of care from inpatient settings to home and community-based sites.

ANA has long advocated for the establishment of an all-payer trust fund to provide broad-based and stable funding for clinical training of post-graduate nurses as well as post-graduate physicians. Contributions to the trust fund should come from Medicare funds as well as from a broad-based revenue source such as a health plan assessment, an excise tax, or a combination of sources that distributes the financing burden fairly and progressively. ANA recommends that the Medicare contribution to the trust fund be based on a phased-in reallocating of current Medicare payments for hospital-operated diploma nursing programs to graduate nurse education programs that are accredited by a national accrediting body. However, since there is a continued need for four-year BSN prepared nurses to play a variety of critical roles in the evolving health care system, ANA believes that the current Medicare funds reimbursing hospitals for those programs should be maintained. Furthermore, ANA supports funding those programs offering what is termed an RN-MSN bridge program. These are accelerated nursing education programs for diploma or associate degree nurses to become masters-prepared and hence, better able to meet the primary health care needs of the nation. These programs allow for a readily available pool of skilled health professions to become better educated as advanced practice nurses in a shorter period of time.

Allocation of the trust fund among the eligible health professions should be similar to the current allocation of Medicare direct GME payments. There must be a minimum of 11 percent for eligible nursing programs. ANA believes that it would be more appropriate to redirect up to 20 percent of GME funds to graduate nurse education to match the need for education of advanced practice registered nurses.

In summary, ANA believes that the nursing profession is especially critical to a smooth transition from an episode-based, hospital-centered delivery system to an integrated continuum of care model. However, the following policies are essential to ensuring an appropriately prepared nursing workforce:

Establish a new trust fund to support clinical education of nurses, physicians, and other health professionals, supported in part from existing Medicare contributions;

  • Ensure that new trust fund supports "RN to MSN" programs to provide career leaders for registered nurses and help meet the needs of the changing delivery system;

  • Maintain current Medicare funding for the clinical costs of hospital programs leading to a baccalaureate degree in nursing; and

  • Phase-in redirection of current Medicare funds allocated for direct education costs of diploma programs to support the clinical costs of graduate nurse education.

There is also a need for additional data on the requirements for the health professions taking into account the potential for increased collaborative and independent practice by advanced practice nurses and physicians. Workforce planning cannot be based exclusively on a physician model -- new delivery systems are already making broader use of an array of health professionals working within a managed care environment. Yet collection and analysis of data on workforce trends will be important to assure that public resources are supporting the educational programs that most appropriately meet our nation's needs.

1 Wunderlich, G.S., Sloan, F.A., Davis, C.K., Editors: Nursing Staff in Hospitals and Nursing Homes; Is It Adequate?, Institute of Medicine, National Academy Press, (Washington, DC: 1996, p. 97).