Teaching and training the next generation of physicians is expensive work. And commercial insurers are footing more than half that bill in Vermont through their payments for care, according to an independent analysis.
Nearly $82 million of commercial insurance dollars went toward the $161 million cost for UVM Medical Center to run its medical education programs last year, analysts said in a recent memo. That number is on track to reach $88 million for 2026, the memo estimates.
The question of how Vermont pays for medical education is a complicated one with few clear answers. With one medical school in the state, the cash flow from Vermonters to the state’s student doctors is more pronounced here than in many states, though the way commercial payers support medical education is not unique to Vermont.
Still, it is difficult for insurers and the insured to know just how much they are paying for medical education. With renewed attention to this relationship recently, regulators, independent analysts and the medical school itself agree this financial relationship should be more transparent and more responsive to the needs of Vermont’s physician workforce.
The problem is one of a balance Vermont has long struggled to strike: Vermont needs to recruit clinicians, especially for primary care, but it also wants to curb commercial insurance premiums, which are some of the highest in the nation.
“Medical education is incredibly important. We need doctors,” said Rep. Alyssa Black, D-Essex Town, who chairs the House’s healthcare committee, in an interview with VTDigger. “I just wonder: Do Vermonters know that when they pay their insurance premium that a part of that is paying for medical education … of someone who probably will never practice here?”
‘Black box’
Medicare, Medicaid and other federal sources cover a big portion of medical education, but payments from commercial insurers make up most of the difference. This support is not in explicit line-item sums passing from insurers to an academic medical center; rather it is built into the charges an insurer pays for clinical care — a small fraction of the amount that the hospital charges an insurer for, say, a CT scan.
“It’s not specified that you’re paying for medical education as well as clinical care,” Nancy Kane, a health policy professor at the Harvard T.H. Chan School of Public Health, told VTDigger.
Kane is a member of the three-person independent liaison group that wrote the memo detailing how much commercial money goes toward medical education, as part of the team’s assignment to oversee the UVM Health network’s budget-setting process. Kane specifically dug into the medical education issue.
“I’m kind of obsessed with how we’re funding academic medicine, because I actually think the model we’ve used in the past is about to implode,” she told the Green Mountain Care Board, which regulates hospital spending, during an early August hearing.
Kane expects the costs to fall more heavily on commercial insurers in coming years, because Medicaid matching funds for medical education are predicted to decline for 2027. Unless the cut in Medicaid funds is matched with a decline in academic expenses, she estimates that commercial insurers’ support to UVM Medical Center’s medical education could rise to $92 million for 2027.
Medical education at UVM encompasses the training at the Larner College of Medicine; the residency and fellowship programs at the University of Vermont Medical Center; and education for nurses and other clinicians. Part of this broad umbrella — and the distinction between the medical center and the medical college — is what makes the movement of money so murky.
Kane said she spent nearly six months determining how UVMMC subsidizes medical education.
Even after running the numbers, the process that UVM Medical Center and the medical school take to decide how money moves from the hospital to the school is still a bit unclear to her. She told regulators, in an Aug. 3 care board hearing, that ultimately it seems to come down to private conversations among the leaders of each of those related entities: Dr. Steven Leffler as president of UVMMC, Dr. Ramsey Herrington as president of UVM Health’s physician group and Dr. Richard Page at the head of Larner.
“These aren’t numbers they keep track of,” Kane told VTDigger. “Not because they’re derelict, but because people don’t think of them that way.”
In 2022, the university and the health network renewed a 10-year affiliation agreement, updating a relationship that has been in place since 1995, Herrington told VTDigger.
In that most recent agreement, the two bodies established a flow of money from the medical center to the college of medicine, increasing 2% every year or at the rate of the consumer price index, whichever is higher, Herrington said, but he didn’t provide dollar figures.
The costs of providing medical education include payments for faculty to supervise; resident and intern stipends; the “oversight infrastructure” required for teaching doctors; and indirect costs that can come from more novice patient care — such as if a doctor in training orders a more expensive test than necessary.
Tuition to the medical school covers a slew of classroom costs separate from the medical center’s. But the medical center needs to come up with the funds to cover its costs, Kane said. Medicare and Medicaid pay a portion through federal earmarks for graduate medical education. Last year, Medicare paid $13 million and Medicaid paid $66 million toward graduate medical education at UVM Medical Center and Larner College of Medicine, Kane found.
“And then — you have the rest,” she said in an interview with VTDigger. “And where does that come from? That’s the black box. The only major other source that’s coming from is commercial payers.”
Those payments, embedded in the costs of patient care, make up the $82 million figure Kane found for 2025. Still, it’s a small fraction of what commercial insurance pays overall: The medical center’s current commercial revenue, according to its presentation to the care board, is nearly $1.07 billion.
Herrington told VTDigger that he and his colleagues collaborated closely with Kane and the liaison group. Although he couldn’t say the team’s numbers were “exactly right,” they were “directionally pretty close to right,” he said.
‘Vermonters are healthier’
Herrington emphasized how important it is that the medical school and the medical center are training physicians who can fill gaps in Vermont’s healthcare ecosystem. He said it’s something he did when he led UVMMC’s emergency department and established its residency program in 2019, which has yielded a fresh crop of Vermont-grown emergency doctor hires. He wants to replicate that in gastroenterology, obstetrics/gynecology, psychiatry and oncology, he said.
“Our educational training strategy should match what it is that we’re looking to do for the state of Vermont as we look forward, and I’m here to put those things together,” he said.
About one-third of physicians currently practicing in Vermont graduated from Larner College of Medicine or did their residency at UVM Medical Center, according to a report from the Department of Health. Each year, the medical school graduates about 120 doctors and trains more than 320 residents and fellows. Over the past five years, nearly half of UVM Medical Center’s residents and fellows have stayed to practice in Vermont, the school says.
Beyond its ability to produce local doctors, the academic medical center has a value to Vermonters simply because it is an academic setting. Its teaching mission attracts specialists and highly regarded clinicians to the state, Leffler told regulators recently.
“We do believe strongly that Vermonters are healthier and have greater access to specialty care due to our (graduate medical education) programs,” he said. “You would not be able to have specialties and subspecialties available in Vermont without being an academic medical center.”
Basil Waugh, a spokesperson for the University of Vermont, echoed the importance of being able to combine the missions of the medical center and the college of medicine.
“The opportunity to combine clinical practice with teaching, research and training future physicians helps Vermont attract physicians and sustain a breadth of specialty care that would otherwise be very difficult for a state our size to support,” Waugh wrote in a statement to VTDigger.
‘Don’t squander this asset’
Still, as insurance premiums in Vermont — and across the country — reach new, unaffordable highs for so many, Kane thinks commercial insurers will eventually need to cap what they contribute to the medical school. Representatives at the state’s largest insurer, BlueCross BlueShield of Vermont, declined to comment to VTDigger about the funding of the medical school.
At the very least, Kane and her colleagues on the liaison team say that if Vermonters are contributing so much to support UVM’s medical education, there should be more ways to ensure that the medical education supports Vermont back.
The team’s memo calls for more public accountability for the cost and benefits of medical education that so many Vermonters are paying into through their premiums to insurers. The authors suggest that the state develop a governance model more strongly linking medical education with the state government’s health planning.
Nearly 20 states already have some version of a statewide graduate medical education strategy, housed in a state agency, workforce organization or academic institution, the liaison group said in its memo.
“Everyone is being challenged right now by the supply and demand mismatch for clinician workforce,” Herrington said. “The state should really lean on the (UVM Health) Medical Group to meet that need and solve the problem of getting care to Vermonters as close to home as possible. But you can’t lean on us to do that job without the backbone of the college of medicine or our (graduate medical education) programs.”
Mike Smith, who leads the three-person liaison team, said the state should develop a more formalized way for those beyond the UVM network to weigh in on how the medical center and medical school use Vermonters’ money to train new doctors, in ways that meet the state’s specific gaps in care.
“What does the state need? How can we get there?” Smith asked. “Don’t be so closed in the process. We’re not talking about not funding medical education. We’re talking about how to fund it in a more transparent and efficient way.”
“If there’s transparency and accountability, it’s a great opportunity to do things for the state of Vermont,” Smith continued. “What we’re saying is this (medical education) is an asset; use it as an asset. Don’t squander this asset.”
