The direct costs of residency training in the United States are over $1 billion per year. These educational programs have been organized predominantly around hospital services and supported by hospital revenues. Pressure has been increasing to reduce the rate of increase in hospital expenditures or costs or both. This article describes alternative methods for financing graduate medical education. Debate over the current sources of financing reveals several troublesome issues: the presence of residents allegedly decreases the productivity of professionals and leads to overusage of ancillary services, proposed methods to pay for faculty salaries and services have created confusion and concern, and the financing of ambulatory-care training has been insufficient and poorly coordinated. The medical-education community must resolve these professional and educational problems so that financing issues can be debated and properly defended. (N Engl J Med 301:749–755, 1979) A REVIEW of the historical developments and current status of the role and importance of graduate medical education reveals that no central health-manpower agency — in either the private or public sector — has designed and directed the structure of graduate medical education. Similarly, the financing of graduate medical education has in many ways developed in a piecemeal manner. Consequently, as pressures to contain health-care costs increase, friends and foes alike are beginning to look carefully at the available sources of financing to evaluate alternative approaches. The debate has focused on three major issues: sources of financing for house-staff stipends,.
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