The debate over Medicare payments for graduate medical education has been conducted under the premise that such payments cover the added costs of training. Standard economic theory suggests that residents bear the costs of their training, implying that the additional costs of teaching hospitals are not attributable to training per se but to some combination of a different patient care product, unmeasured case-mix differences, and the costs of clinical research. As a result, payment for the additional patient care costs at teaching hospitals should come from the Medicare trust fund; any subsidies for training should come from general revenues.
