Medical Residency Ruling Will Hurt Hospitals, Care

Last week, the Supreme Court ended a long-standing debate over whether or not doctors-in-training, better known as medical residents, are “students” or “employees.” The nation’s high court, in its misguided wisdom, concluded residents should not be classified as students. With as much as $700 million annually in tax revenue at stake, the classification has never been just semantics. Among the unintended consequences, this decision will deprive the health care industry of badly needed funds and could harm the future of graduate medical education.

The Federal Insurance Contribution Act exempts Social Security taxes for “service performed in the employ of a school, college or university” by a “student who is enrolled and regularly attending classes at such school, college or university.” Historically, medical residents qualified for this exemption. In 2004, however, the U.S. Treasury Department ruled that those working at least 40 hours per week would not qualify as students under the FICA Student Exemption. This exclusion included medical residents who routinely work twice that many hours.

The Mayo Foundation for Medical Education and Research and the University of Minnesota both filed petitions challenging the Treasury’s regulation. Four circuit courts had decided that medical residents could qualify for the student exemption. The Supreme Court ruled, however, that the Treasury Department acted within its discretionary authority.

The justices made a supremely wrong decision. Residents are students within any dictionary definition. They may have significant patient care responsibilities, but a main goal of these responsibilities is to learn via hands-on patient care.

In addition, residency consists of didactics, lectures and assigned readings. Just as in any basic class, there are evaluations and tests.

Few medical students would be ready to practice independent medicine upon graduation from medical school, without some residency training, and none would be able to legally do so.

People with other advanced degrees such as in law or business can choose to participate in postgraduate programs to strengthen their resumes or broaden their experience — if they want to — but they do not have to in order to make a living.

But for doctors, residency is not an optional supplement to their education: Doctors must do a residency before they can start their careers. This requirement separates residency from other postgraduate opportunities and suggests that government licensing boards do in fact view residency as training — not as an independent vocational experience, but a necessary extension of a physician’s education.

Residents’ salaries also reflect student status in that they are not commensurate to the time and investment residents have already committed to their education. The remuneration hovers just above hourly minimum wage and is significantly lower than that of other hospital staff including nurses, nurse practitioners and physician assistants. The purported justification of the below-market wage is that residents are at teaching hospitals to learn and hence are students. Unfortunately, the Supreme Court did not see it this way.

At the very least, the decision means hospitals across the country will continue to pay Social Security and other federal deductions for each resident. This will leave them with hundreds of millions of dollars less to devote to caring for sick patients. Over time, the ruling could also cause residency training programs to de-emphasize education and the teaching aspect of the residency experience. This in turn could ultimately result in lowering the quality of care provided.

Patients and medical residents in Connecticut and nationally would both have been better served if the Supreme Court had ruled differently.

 — Jason D. Fodeman, M.D., 27, of Hartford is an internal medicine resident at the University of Connecticut Health Center and a former Graduate Health Policy Fellow at the Heritage Foundation.

Published in the Hartford Courant, Jan. 19, 2011.

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