A high-level report recommending sweeping changes in how the government distributes $15 billion annually to subsidize the training of doctors has brought out the sharp scalpels of those who would be most immediately affected.

The reaction also raises questions about the sensitive politics involved in redistributing a large pot of money that now goes disproportionately to teaching hospitals in the Northeast U.S. All of the changes recommended would have to be made by Congress.

Released Tuesday, the report for the Institute of Medicine called for more accountability for the funds, two-thirds of which are provided by Medicare. It also called for an end to providing the money directly to the teaching hospitals and to dramatically alter the way the funds are paid.

The funding in question is for graduate medical education (GME), the post-medical school training of interns and residents required before doctors can be licensed to practice in any state. 

“We recognize we are causing some disruption,” said Gail Wilensky, a health economist and co-chairwoman of the panel that produced the report. “But we think we are doing so in a thoughtful and careful way,” including phasing in the payment changes over 10 years.

Some of the major players in medical education don’t see it that way, however.

“Today’s report on graduate medical education is the wrong prescription for training tomorrow’s physicians,” the American Hospital Association said Tuesday. “We are especially disappointed that the report proposes phasing out the current Medicare GME funding provided to hospitals and offering it to other entities that do not treat Medicare patients.”

The panel specifically proposes that funding for medical education be expanded beyond hospitals to clinics and other training sites in the community.  “Most, if not all residencies must train physicians to treat a wide range of patients – many of whom are under age 65 and not eligible for Medicare coverage,” the report says.

The American Academy of Family Physicians welcomed the proposal “to shift funding away from the legacy hospital-based system to more community-based training sites; including allowing funding to go directly to those organizations that sponsor residency training,” AAFP President Reid Blackwelder said in a statement. “By giving these organizations more control over how they train residents, the financial investment will better align with the health needs of a community.”

But the broader-based doctor group, the American Medical Association, reacted negatively, saying: “Despite the fact that workforce experts predict a shortage of more than 45,000 primary care and 46,000 specialty physicians in the U.S. by 2020, the report provides no clear solution to increasing the overall number of graduate medical education positions to ensure there are enough physicians to meet actual workforce needs.”

That’s because Wilensky’s panel didn’t agree with studies projecting a shortage of physicians. “There was not a consensus that there is a shortage going forward,” said Wilensky, noting that rapid changes in medical practice, including sharply higher use of non-physician health professionals such as physician assistants and nurse practitioners, might be enough to provide care to aging baby boomers and those obtaining coverage under the Affordable Care Act.

And even if a shortage occurs, the medical education system needs to better manage training since it now produces more specialists than primary care providers and leaves major areas of the country with too few practitioners, said Malcolm Cox, who recently retired from running the medical education program for the Department of Veterans Affairs. “Will an unregulated expansion produce the right physicians with the right skills in the right areas of the country?” he said at a panel discussion of the report.

Wilensky, who ran Medicare when Congress overhauled the physician payment system in the early 1990s, said the chances for making such changes depend very much on lawmakers from states that currently get less funding – which is most of them.

Given the fact that a disproportionate amount of current funding goes to institutions “in New York, New Jersey, and Massachusetts,” Wilensky said she’s surprised “that everyone else has tolerated this peculiar distribution of funds” for so long.

Whether change happens will depend on “whether some of the have-not states are willing to say ‘wait a minute’,” she said.

The New York teaching hospitals, in particular, are well-known for their clout on Capitol Hill.

“They are fantastically great in terms of their protection of their turf,” said Bill Hoagland, a longtime Senate Republican staffer and now senior vice president of the Bipartisan Policy Center. “People talk about the third rail of politics as not touching Social Security. I have found that you touch anything dealing with medical education you get bombarded.”

By far the most heated criticism of the report’s recommendations came from the Association of American Medical Colleges, which represents medical schools and the teaching hospitals they affiliate with.

“While the current system is far from perfect, the IOM’s proposed wholesale dismantling of our nation’s graduate medical education system will have significant negative impact on the future of health care,” said AAMC President and CEO Darrell Kirsh. “By proposing as much as a 35 percent reduction in payments to teaching hospitals, the IOM’s recommendations will slash funding for vital care and services available almost exclusively at teaching hospitals, including Level 1 trauma centers, pediatric intensive care units, burn centers, and access to clinical trials.”

But those supporting the IOM’s recommendations say the system is in major need of change. “The current system is unsustainable,” said Edward Salsberg, a former top official at the Bureau of Health Workforce at the Department of Health and Human Services. “Health care is moving to the community, but our system of financing graduate medical education is tied to inpatient care.”