IPAB: Fix It, Don’t Repeal It

August 8th, 2011 | Sources: Commentary

In recent weeks, several Democrats and some health reform advocates including the AMA have joined Republicans in calling for a repeal of provisions in the new health law that create the Independent Payment Advisory Board (IPAB). For these people, IPAB represents the worst aspects of the new law–an unelected, centralized planning authority empowered by government to make decisions about the peoples’ health care. Arbitrary cuts to providers, short-sighted decisions that stifle innovation and rationing of care are sure to follow, they claim.

While it’s true that the rules governing IPAB are flawed and should be fixed, eliminating IPAB altogether would be a mistake.

Created by the Affordable Care Act, IPAB is a fundamental part of the law’s plan to control health care cost escalations. The law contemplates that each of the Board’s 15 members would be appointed to a 6-year term by the president. Members are to include providers, health policy and public health experts, and consumer representatives. Each would have to be confirmed by Congress, much like Supreme Court justices. And unlike a frightening, wizard-like bureaucrat operating behind a curtain-as critics would have you believe-the IPAB chairperson would be required to appear before any committee of Congress that desires a hearing, just as the President’s cabinet members are required to do.

IPAB’s mandate would be to recommend ways to prevent excessive escalations in Medicare expenditures. Specifically, whenever these costs grow faster than targets established by the Affordable Care Act, IPAB would propose ways to reduce Medicare spending by up to 1.5%. When that happens, Congress can either approve those recommendations, develop alternatives with the same impact, or simply allow Medicare costs to accelerate. In the last instance, a 60% majority of the Senate would be required to overrule the IPAB recommendation.

Some sort of cost-governing approach is mandatory, because we want to offer comprehensive coverage to Medicare beneficiaries within some reasonable cost structure, and because Congress has shown no inclination to do so, for example by enacting quality- and efficiency-based payment models. As Jonathan Cohn points out, Congress is unlikely to do this going forward, because its members are heavily influenced by lobbyists whose job it is to maintain the lucrative status quo. IPAB members, shielded as they would be from such influences but still wholly accountable to Congress, may well succeed where lawmakers have not.

Some of those who are now calling for a repeal of IPAB predict it will release “treatment edicts” that prevent folks from gaining access to expensive procedures, cancer drugs and so forth. These predictions are unlikely. The Affordable Care Act prohibits IPAB from modifying Medicare benefit schemes or any other behavior that could be construed as “rationing.” It also prohibits IPAB from raising premiums, restricting benefits or modifying eligibility.

So What Will IPAB Do?
When medical research suggests that certain treatments are more effective, or cost-effective (I provide an example involving coronary stenting here), IPAB is authorized to recommend changing reimbursement rates under Medicare to promote such treatments. These recommendations do not ration care. Providers can practice medicine as they see fit. The new reimbursement scheme will incent providers, however, to heed the research sooner, and more comprehensively than would otherwise be the case.

Let’s not forget that all payers, private and public, already routinely decide what procedures to cover. In effect, IPAB can increase input by scientists and cuts down input by lobbyists when it comes to coverage decisions.

Critics have also charged that by cutting reimbursement to providers, IPAB might indirectly foster rationing. According to this argument, cash-strapped providers will begin turning-away Medicare beneficiaries if their payment is reduced too far. As Cohn points out however, these criticisms have never raised above the anecdotal stage. Most doctors still see Medicare patients; in fact they are more open to seeing such patients than to many of those insured through private carriers.

Is there room to improve current legislation governing IPAB? Yes, there is. According to Henry Aaron, IPAB can’t make recommendations governing acute and long-term care hospitals, psychiatric facilities and inpatient rehabilitation until 2020. It can’t do that for clinical labs until 2016. In their current form, IPAB rules also prevent recommendations that drive up costs in the short run, even though they might save money in the long run. These rules should be fixed, for obvious reasons. But repeal IPAB altogether? Heavens no!

It is ironic that the loudest critics of health reform–the ones who claimed it didn’t have enough teeth to control Medicare cost escalation–are the same ones who now demand that IPAB, a key element of the law’s cost-control strategy, be repealed.

If none of this is persuasive, consider the alternative proposed by Paul Ryan and supported by Republicans in the House. Rather than empowering a commission to improve Medicare efficiency, it severely reduces the scale of the entitlement program altogether. It offers seniors a voucher that provides less comprehensive coverage than today’s Medicare, and forces seniors to fend for themselves in the private insurance market, just as they did before LBJ created Medicare in the first place.

Few if any seniors want to revisit those days.



  1. Tom | 10/11/11

    Unfortunately, we can’t seem to get our elected representatives to work together long enough to fix the simplest legislation, much less health care reform. If only they would ratchet down the rhetoric and cut through the party-line politics, cooler heads might prevail long enough to actually get something done. Thanks for an insightful post.

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