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Medicare IPAB: Rational or rationing?

The Independent Payment Advisory Board is designed to control runaway Medicare costs without cutting benefits, but physicians warn of unintended effects of cutting patient access.

By Charles Fiegl amednews staff — Posted Oct. 15, 2012

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A crowd had turned out for a campaign stump speech by vice presidential nominee Rep. Paul Ryan (R, Wis.) in The Villages, Fla., in August. Ryan’s 78-year-old mother, Medicare beneficiary Betty Douglas, stood by his side next to a podium emblazoned with a “Protect & Strengthen Medicare” sign.

Ryan spoke about how Medicare took care of his grandmother and is providing vital coverage for his mom, but he warned that the national entitlement program now is under attack and the Medicare guarantee no longer is a certainty. Then his well-practiced critique of President Obama’s health system reform plans posed another ominous warning to the crowd: “He puts a board of 15 unelected, unaccountable bureaucrats in charge of Medicare who are required to cut Medicare in ways that will lead to denied care for current seniors.”

For many in the audience, this might have been the first time they had heard a reference to the Medicare Independent Payment Advisory Board, an entity that exists in name only. Millions more heard GOP presidential nominee Mitt Romney criticize the board three times in his first debate against Obama in October. IPAB has no members and has yet to meet, but that has not eased the level of concern on both sides of the issue.

IPAB, authorized by the Affordable Care Act as a cost-containment provision, eventually might enable its commissioners to wield swift, significant power to change the course of Medicare policy without the need for congressional approval. Economists who support the board said it is crucial to implementing quality and efficiency reforms, although they said it is not nearly the imminent presence that some critics make it out to be. Even though congressional budget officials said it might remain largely idle for the remainder of the next decade, it will save Medicare for future generations, supporters said.

To physicians and other opponents of the panel, the law establishing IPAB granted it unprecedented, dangerous authority to cut Medicare pay rates and strangle access to care. Organized medicine groups strongly support efforts on Capitol Hill to repeal IPAB before any members are named to the panel. The American Medical Association has compared the board’s purpose to Medicare’s sustainable growth rate formula, another spending control mechanism developed by Congress that threatens to impose deep cuts to doctor pay.

“This new, arbitrary system is not what we need when patients and physicians are already struggling with a looming cut of nearly 30% from the broken Medicare physician payment formula,” said AMA President Jeremy A. Lazarus, MD, in a statement. “Ending the ongoing threat of drastic cuts from the physician payment formula and preventing new cuts from IPAB are important first steps to stabilize the Medicare system for patients.”

If allowed to operate, the panel will have tremendous influence over how physicians and hospitals are paid, said Jerry Kennett, MD, chair of the American College of Cardiology’s advocacy steering committee. Instead of concentrating power in one 15-member body, it would be better if Congress, beneficiaries and the health care sector worked together to develop solutions, he said.

Sparing Congress the tough calls

Removing Congress from the Medicare cost-control equation was precisely the intent of the IPAB architects who inserted its authorization into the 2010 health system reform law. Many observers have complained that lawmakers have proven unable to make difficult, unpopular decisions that are needed to ensure the long-term stability of federal entitlement programs. IPAB members, beholden to no voters, ideally would make the tough choices necessary to preserve Medicare for future beneficiaries, according to supporters.

IPAB is a congressionally approved, independent body that will act once Medicare spending exceeds certain limits, said Judy Feder, PhD, a professor of public policy at Georgetown University in Washington. She described it as not only a mechanism above the daily political fray, but also a necessity for the sake of the entire health care industry.

“IPAB is set up to provide a backstop against interest-group pressure on the Congress that makes it difficult to adopt cost-containment measures,” she said.

As a vehicle to fast-track Medicare payment reforms, the board has no natural constituency, said J.B. Silvers, PhD, a professor of health care finance at Case Western Reserve University in Cleveland. Silvers had served on the Prospective Payment Assessment Commission, the congressional board that predated the Medicare Payment Advisory Commission. Both commissions have offered nonbinding recommendations to Congress that it can choose to ignore.

The authority granted to IPAB means it can’t be ignored. It has been described as a fiscal fail-safe. ACA system reforms, such as shared savings pay models, are first-line approaches to solving out-of-control spending growth. But the board would act if those provisions failed to contain costs. “It’s a budgetary arrangement to make sure we don’t blow through the ceiling,” Silvers said.

The IPAB concept is modeled after a congressional panel that periodically recommends cuts in Defense Dept. spending — the Defense Base Closure and Realignment Commission, or BRAC. The nonpartisan BRAC makes unpopular decisions to shut down certain military installations to save money, providing political insulation to lawmakers who otherwise could be blamed for approving closures that might hurt local economies.

“IPAB was created for the same reason [that] BRAC was created — to remove strong interest that protects the status quo,” said Eric Seiber, PhD, a health services management and policy professor at Ohio State University.

IPAB does have more restrictions than BRAC, said Mark Pauly, PhD, a health care management professor at the University of Pennsylvania in Philadelphia. For instance, the Medicare board is not allowed to cut benefits or raise patient fees, meaning commissioners must look elsewhere to determine who must sacrifice. “The fears are if it tries to avoid doing harm, it will be ineffective,” he said.

How the board might work

If the IPAB authority is not repealed, the president will appoint members after consulting with Congress. The positions carry a six-year term and a $165,000 annual salary and are subject to Senate approval.

Board members are expected to be experts in health care finance and economics, actuarial science, management, health insurance, integrated delivery systems and payment models, according to a March Congressional Research Service report. In addition, members should have expertise in certain sectors of the health care system, meaning that a doctor, an expert on drug manufacturing, an employer representative, a third-party payer official or a patient advocate could be a nominee. However, the statute states that a majority of members should not be involved directly in providing Medicare services, limiting the participation of practicing Medicare physicians.

The Centers for Medicare & Medicaid Services chief actuary first would decide in 2013 if IPAB actions are needed. The actuary will calculate a Medicare per-capita growth rate and a target rate defined by statute. Starting in 2018, growth targets will be pegged to gross domestic product plus one percentage point.

IPAB would not be required to act as long as program growth remains under that target rate. If it exceeds the target, the board would be required to submit a cost-savings proposal that Congress must consider under special fast-track rules. The proposal would become law unless Congress passes an alternative with the same level of savings or overrides the proposal with a three-fifths vote in the Senate.

Those spending reductions could go into effect as early as 2015, but government actuaries said that is unlikely. The Congressional Budget Office projects that Medicare spending will not eclipse growth targets for years, and thus IPAB won’t be responsible for drafting a savings plan through at least 2021 if expected trends hold.

In the event that IPAB action is required, the board cannot recommend rationing health care services, raising patient premiums or fees, restricting benefits or altering eligibility. That means the board’s options are reducing fee-for-service pay rates, cutting subsidies to Medicare private insurers and drug plans, and implementing health delivery reforms. Furthermore, the law bans IPAB cuts to hospital pay until 2020, so physicians and other health professionals are the only ones exposed to potential pay cuts in the initial years.

Staunch opposition remains

The potential harm that could come from cutting pay for doctors and others has prompted many in Washington to oppose IPAB since before the ACA even was enacted. Dozens of GOP and Democratic lawmakers wrote then-House Speaker Nancy Pelosi (D, Calif.) a letter condemning the board’s inclusion in the legislation, which had originated in the Senate.

“To create an unelected, unaccountable Medicare commission as envisioned in the Senate’s [proposed bill] would end Congress’ ability to shape Medicare to provide the best policies for beneficiaries in our communities around the country,” the Dec. 17, 2009, letter stated.

But the IPAB had strong support from leaders in the upper chamber. Sen. Jay Rockefeller (D, W.Va.) and other Democrats were united in pushing a board tasked with controlling health care spending that would take politics out of the equation when balancing Medicare’s books.

“I firmly believe that creating an independent authority to help Congress make informed decisions about Medicare — not just cost decisions but also quality decisions — is absolutely critical to sustaining the program, protecting the promise we made to millions of seniors and bringing stability to the entire system,” Rockefeller said on the Senate floor in December 2009. IPAB survived in the final version of the reform bill.

Rep. Phil Roe, MD (R, Tenn.), recalled his Democratic and Republican colleagues in the House agreeing at the time that IPAB was a terrible idea. He introduced legislation to eliminate the board just two days after Obama approved the reform bill. The now GOP-controlled House has voted for repeal several times, but the Senate has not acted.

So far, IPAB authorization also has survived a legal challenge from the Goldwater Institute, a Phoenix-based group dedicated to a strict constructionist view of the U.S. Constitution that said the federal government overreached by delegating legislative powers to the administrative board. The case was thrown out by a district court judge after the U.S. Supreme Court in June upheld the ACA as constitutional, but the Goldwater Institute said it planned to appeal.

Dr. Roe insists that the board will ration care through payment policy. To save money, for example, IPAB will cut Medicare rates to physicians, hospitals and other health professionals, forcing them to stop accepting new Medicare patients and seek out more privately insured patients to make up the difference, he said.

“Who is going to be making decisions about health care?” he asked. “It should be the patient, the doctor, the family making those decisions. Not some economist, or some board or bureaucrat making health care decisions.”

But unlike the SGR formula, which is almost universally reviled by lawmakers, the IPAB has its champions in Washington. Even if an IPAB repeal bill were to pass the Senate, Obama has indicated that he would veto the measure as long as he still is in office. The president even has proposed strengthening IPAB’s charter in part by lowering the spending growth target to gross domestic product plus 0.5%, a move that would trigger board action more quickly.

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Staying under the IPAB target

Federal actuaries will compare Medicare spending growth against predetermined targets over five years to determine if the Medicare Independent Payment Advisory Board must act to restrain costs during a given year. IPAB action is triggered when the spending rate exceeds the target. The Congressional Budget Office says that probably will not happen for at least 10 years, but there are a few times during the decade when the rate is expected to come close, and any revision of the figures could mean cuts.

Year Spending Target Difference
2015 1.7% 2.8% -1.1
2016 1.7% 2.8% -1.1
2017 1.5% 2.9% -1.4
2018 2.7% 3.0% -0.3
2019 3.1% 3.2% -0.1
2020 3.6% 5.2% -1.6
2021 3.9% 4.9% -1.0
2022 4.2% 4.7% -0.5

Source: Congressional Budget Office cost estimate, Medicare Decisions Accountability Act of 2011, March 7 (link)

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The IPAB timeline

The health system reform law established a potentially rigorous schedule for the Medicare Independent Payment Advisory Board, the Dept. of Health and Human Services and Congress to follow. IPAB will continue to advise Congress on health policy even in years when Medicare spending growth does not exceed targets that would trigger cost-control action. Most of these items are necessary only if such action is triggered in the first year.

April 30, 2013: Medicare’s chief actuary determines if Medicare per capita spending exceeds target growth rate. (Required whether or not IPAB cost-control action is triggered in the first year.)

Sept. 1, 2013: IPAB submits a draft spending control proposal to the HHS secretary and the Medicare Payment Advisory Commission for review.

Jan. 15, 2014: IPAB submits its spending control proposal to the president and Congress. (If spending is under target, the board submits an advisory report to Congress.)

Jan. 25, 2014: The HHS secretary submits a contingency spending control proposal if IPAB fails to act.

March 1, 2014: The HHS secretary and MedPAC submit their comments to Congress on the IPAB spending control proposal.

April 1, 2014: Congressional committees report out legislation containing IPAB recommendations. Congress can develop its own proposal that meets fiscal requirements.

July 1, 2014: IPAB publishes annual report on costs, patient access, utilization and quality of care. (Required whether or not IPAB cost-control action is triggered in the first year.)

Aug. 15, 2014: HHS secretary begins implementing IPAB spending control bill if not overridden by Congress.

Jan. 15, 2015: IPAB submits recommendations to the president and Congress on slowing national health spending growth. (Required whether or not IPAB cost-control action is triggered in the first year.)

July 1, 2015: The Government Accountability Office reports on changes resulting from IPAB spending control law.

Feb. 1, 2017: Congress hits deadline to introduce joint resolution for discontinuing IPAB. (Required whether or not IPAB cost-control action is triggered in the first year.)

Aug. 15, 2017: Congress hits deadline to enact resolution discontinuing IPAB. (Required whether or not IPAB cost-control action is triggered in the first year.)

Source: “The Independent Payment Advisory Board,” Congressional Research Service, March 12 (link)

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External links

Congressional Budget Office cost estimate, Medicare Decisions Accountability Act of 2011, March 7 (link)

“The Independent Payment Advisory Board,” Congressional Research Service, March 12 (link)

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