COD E R E D

Graduate Medical Education ProgramAnother, albeit indirect, mechanism for the provision of indigent health care in Texas is theGraduate Medical Education (GME) program. GME funds are provided to teaching hospitals bythe federal government to help offset the costs associated with the training of medical students(the payments are provided as a supplement to regular Medicaid and Medicare payments). TheGME payments have effectively enabled teaching hospitals, many of them public hospitals orhospital district hospitals, to provide medical care to the medically indigent, by allowing them toincrease their staff using medical and surgical residents. Changes to this program in recentyears may have limited this provision of services.Disproportionate Share Hospital ProgramIt should also be briefly noted that hospitals providing a disproportionate share of health care toindigent individuals may also receive Disproportionate Share Hospital (DSH) funds to partiallycompensate them for their services. The disproportionate share program is discussed in detailin the main text of this paper.Tobacco Settlement Trust FundCounties also receive some funds from the state’s settlement in 1998 with tobacco companies,which established the Tobacco Settlement Trust Fund. Counties, cities, and hospital districtssigned an agreement reserving some funds for entities responsible for the provision of indigenthealth care — hospital districts, other local political subdivisions owning and maintaining publichospitals, and counties in Texas. The total settlement amount of $2.8 billion was to be receivedover a five-year period. The funds were split into two payment methods, a series of lump-sumpayments and a trust fund. The lump sum payments paid a total of $450 million over 1999-2001. 14 Another $1.8 billion was deposited in a permanent trust fund. The return on trust fundinvestments is to be paid to counties in perpetuity, depending on how much unreimbursed careeach provides. In 2001, the first year of interest payments, a total of $13 million was paid.County tobacco money has no spending requirements, except within hospital districts, whichmust use it for health care. 15 As a whole, in 1999, counties (those who reported) spent at least$940 million of tobacco money on indigent health care.SFY 2002 was to be the first year in which tobacco payments to counties were solely from thepermanent trust fund created with the initial amount of $1.8 billion. However, due to the pooreconomic circumstances of 2001 and heavy investment of the fund in stocks, the fund not onlyfailed to gain interest, it lost a net $30 million in principal. 16Other Indigent Health Care ProvidersOther providers of indigent health care services in the state include non-profit and for-profitprivate hospitals (322 in 1997) and clinics, state facilities (hospitals run by state agencies andclinics — MHMR, TDH, prisons), hospitals and clinics run by public universities (e.g., UTMB),specialty services (HIV/AIDS), federally qualified health centers (FQHCs), rural health clinics,free clinics, private physicians, and local health departments. Together these entities providedroughly $4.3 billion in uncompensated health care in 1997. While this figure is dated, it is agood indication of the extent to which these other resources are contributing to indigent care inTexas.Funding for these entities comes from a variety of sources. For private hospitals, revenuecomes primarily from payers — out-of-pocket payers, insurance companies, DSH, Medicare andMedicaid. The state facilities are funded through these same means but also through stateB-50