ALTERNATIVA III:

Overview

Debt loads for many health care provider groups have been on the rise, and some studies have shown that real income has been falling.100 For context, the average debt load of a graduate from dental school in 2010 was $177,144.101 Assuming a relatively low blended interest rate of 7%,102 a dentist would have to pay over $2,000 per month on a standard 10-year repayment plan. Furthermore, the suggested minimum annual salary to cover these payments is over $300,000, which is more than double the median annual salary for dentists in the United States in 2010.103 Given statistics like these, it is understandable why loan repayment programs have been utilized as an attraction and retention mechanism for health care workers. According to a Government Accountability Office report on the National Health Service Corps (NHSC), “the risk of turnover for clinicians in a loan repayment program was 1.67 times lower than that of clinicians in scholarship programs,”104 indicating that loan repayment can also be an effective mechanism to keep health care supply in critical areas of need. Kentucky’s current loan repayment programs are almost entirely federally funded. For example, the NHSC program includes a loan repayment incentive and is used as a way to improve distribution of a diverse set of health care workforce, from dentists to primary care physicians to LCSWs and more in Kentucky’s HPSAs. There is also a small state-funded loan repayment program open to a broad range of health care provider types, but it can only reach a small number of providers due to funding limitations.105

Potential Next Steps

• Expand State-Funded Loan Repayment Program: The majority of loan repayment programs available

to health care practitioners in the Commonwealth are federally funded and are tied to HPSA designation areas. Expansion of federally funded programs may be limited at the federal level, but many states have started to invest in state-funded programs, including Kansas, Arkansas, Oklahoma, and Texas.106 Expanding Kentucky’s current state-funded loan repayment program, which is very small, would help Kentucky to target bringing specific types of practitioners to specific areas, without the restrictions of federally funded programs.

• Benchmark Kentucky Loan Repayment Programs Versus Neighboring States: In looking to expand

Kentucky’s loan repayment programs, one variable to consider is how current and potential programs compare against those in neighboring states. Conducting additional studies to understand the

100 _{See for example “Medical School Tuition and Young Physician Indebtedness”. American Association of Medical Colleges, 2004.} 101 _{American Dental Association website. Last accessed on March 22, 2013. http://www.ada.org/5767.aspx.}

102 _{See http://www.finaid.org/loans/ for a description of federal loan programs and interest rates. The interest rate on the Federal} Direct PLUS Loan is 7.9%.

103 _{Bureau of Labor Statistics website. Last accessed on March 22, 2013. http://www.bls.gov/ooh/health care/dentists.htm.} 104 _{Workman, Chris “Kentucky Health Workforce Health Workforce Working Group: Brainstorming and Analysis of Four Professions}

[Whitepaper]”. October 10, 2012.

105 _{Discussions with representatives of Kentucky Health Care Access Branch.} 106 _{www.acep.org/content.aspx?id=22472#sthash.taILTp7L.dpuf.}

competitiveness of these incentives could help the Commonwealth calibrate any future repayment programs to increase effectiveness.

• Explore Public/Private Partnerships to Fund Additional Programs:Given that both state and federal

funds can be limited, another avenue to fund program expansion could be the development of public/private partnerships. In instances where private institutions stand to gain through the attraction of certain workforce types, it could be possible to structure cosponsored repayment programs. This collaborative approach could yield opportunities to both create new sustainable incentives programs as well as extend current programs to improve competitiveness.

Potential Challenges

• Funding: Expansion of the current state-funded loan repayment program or the development of

additional state-funded programs will require additional funding.

• Increased Administration: As programs expand, there may be increased administrative burden. One

way to address this challenge could be to centralize all administration of loan repayment programs under a single department to promote administrative efficiency.

• Prioritization Across Workforce Groups: This study has shown that there are diverse workforce supply

needs across all workforce groups. Finding an effective way to prioritize new programs to reach the highest need areas with the highest demand workforce groups will require careful prioritization. The ways in which program decisions are prioritized may cause concerns among specific workforce groups. The Commonwealth should develop a transparent mechanism for driving prioritization decisions.

• Retention Impact Not Guaranteed: While loan repayment programs can encourage a practitioner to

stay for the period of time during which the incentive is active, there is no guarantee that a recipient of loan repayment will continue to practice in the same area in which the incentive is applied. While some studies do indicate that loan repayment is an effective mechanism, especially in relation to

scholarships, retention outcomes should be monitored on an ongoing basis to determine long-term program effectiveness.

Unique Workforce Group Challenges and Observations

Loan repayment, especially when not restricted to federally funded programs, can be applied broadly to all workforce groups under consideration in this report. The current loan repayment programs within the Commonwealth already impact a diverse range of practitioners. For example, the list of NHSC program participants includes MDs and DOs, LCSWs, PAs, dentists, and more.107 Average debt loads are higher for some groups, such as physicians, but earning potential should also be taken into consideration. For example, the hourly mean wage for a general dentist in Kentucky in 2011 was $62.31, but for a MFT was only $19.21, according to Bureau of Labor Statistics data.108 For an individual with 50,000 dollars in student loans, the impact of a repayment incentive may be very different based on earning potential.

107 _{List of NHSC program participants provided by Kentucky Health Care Access Branch on March 7, 2013.}