A little over two weeks ago, while most of you were paying attention to the debate about how to raise the debt ceiling, those of us who study health care policy were following hearings before the House Budget Committee. The purpose of the hearings was to scrutinize the Independent Payment Advisory Board, a commission that the Affordable Care Act created as part of its apparatus to control health care costs. And the hearings produced some genuinely interesting testimony on everything from the scope of the board’s authority to the limits of its legal power. If we were in the middle of a dialogue about how to improve the board’s structure and function, that testimony would be extremely useful.

But we’re not having a discussion about whether to reform the IPAB. We’re having a discussion about whether to repeal it. Opponents of the Affordable Care Act see the IPAB as an instrument of, and metaphor for, everything that is wrong with the new health care law. The problem with this law, they keep saying, is that it tries to solve the health care cost problem through “central planning.” At best, they say, this strategy will misallocate resources in ways that stifle innovation and make access to care more difficult. And at worst? It will ration care in ways that deny life-saving treatment to people who need it. As one Republican lawmaker put it recently, “It will destroy the very core of what has made our medical system the best in the world.”

Yes, these arguments should sound familiar. They are the same ones critics began making in the summer of 2009, when enactment of the law first seemed imminent. And since neither the argument nor the people making it are going away, maybe it’s a good time to take a step back and remind everybody what the IPAB is; how it will work; and why it (or something very much like it) is essential to making health care accessible to all seniors and, eventually, all Americans.

Despite the fanciful attacks from some conservatives, the IPAB will not be a modern-day Politburo that brings Soviet-style management to American health care. It will be, instead, a board comprised of 15 experts on health care policy, including consumer representatives. The president will appoint the members, subject to Senate confirmation, and they will serve six-year staggered terms. Their job will be to issue recommendations on how Medicare can spend its money more wisely.

A similar commission already exists. It’s called the Medicare Payment Advisory Commission, or MedPAC. But its recommendations, however intelligent, usually end up collecting dust on the bookshelves of policy wonks like me. IPAB’s proposals shouldn’t meet the same fate. Whenever the cost of Medicare grows faster than the targets set by the law, IPAB will make proposals that would reduce the program’s spending by as much as to 1.5 percentage points, depending on the circumstances. At that point, Congress would have three choices: Allow the recommendations to take effect, come up with alternatives that would achieve the same savings or opt to let Medicare costs grow up faster than planned. The one key caveat is that the final course of action, allowing Medicare to grow without further restraint, would require a three-fifths vote in the Senate.

The thinking behind this structure reflects a long-standing consensus among health care experts that Medicare needs better, smarter management. Relative to private insurance, the program has actually done a pretty good job of managing costs overall, thanks to the natural efficiencies of such a massive program and the lack of investors to satisfy with profits. But Medicare is still getting too expensive, too quickly — and there’s a ton of data to suggest it doesn’t do a very effective job of fostering good quality. Probably the best known evidence along these lines are the Dartmouth Atlas studies, which show that Medicare spends far more in regions like Miami than in regions like Minneapolis, but without achieving better results.

If we want to keep providing seniors with comprehensive coverage, while still getting the program’s costs under control, the obvious way to do it is to operate the program more carefully. One way to do this is to adopt payment models that reward quality and efficiency. And that’s not something Congress is likely to do on its own, particularly with lobbyists for every health care special interest, from device makers to local hospitals, crawling all over Capitol Hill. The hope is that an independent commission of experts, insulated from politics but still accountable to the president and Congress, can succeed where our lawmakers have failed.

The more extreme critics of IPAB claim it will abuse its power — that it will issue treatment edicts that keep the sick and elderly from getting cancer drugs, expensive surgeries and the like. But the new health law explicitly prohibits IPAB from changing the program’s benefits or imposing anything that would amount to “rationing.” Besides, all insurance plans, public and private, must choose what to cover and what not to cover. That includes Medicare, which already exercises this power routinely. At most, IPAB would increase the influence of scientists and reduce the influence of lobbyists over these decisions. Would critics really prefer it the other way around? (Actualy, maybe some would. Many IPAB critics, including Democrats, have benefitted from large health industry donations.)

The less extreme, more honest criticism of IPAB is that it will encourage payment schemes that lead to indirect rationing, by restricting access to the people who provide care. According to this argument, doctors are already turning away patients because of low reimbursements. Once IPAB ratchets down payments further, they’ll turn away even more patients. But the stories about doctors turning away Medicare patients turn out to be mostly anecdotal, at least at this point. The best data available, from MedPAC among others, suggests most doctors still see Medicare patients — and are more open to them than they are to privately insured patients. Particularly given the Affordable Care Act’s other reforms, which provide financial incentives that reward efficient styles of care, providers should be able to offer care as good if not better than what they offer now — while charging less money per patient.

But what if the critics are right? What if IPAB changes really did make it more difficult for seniors to see providers? That would be a problem, obviously. But the alternative is to cut spending on Medicare in ways that will affect beneficiaries more directly and more severely. The House Republican budget, which most of these critics support, is a prime example. Instead of introducing a commission to manage Medicare more efficiently, it eliminates the government program and hands seniors a voucher that, according to every reliable estimate, would provide far less financial protection. Even if competition among plans reduced the cost of care, seniors would still have a far tougher time getting care — with large numbers forced to choose between health care and other necessities, much as they were in the days before Medicare came into existence. Somehow I think that’s not a reality most seniors would like.

Jonathan Cohn is a senior editor at The New Republic .

This article originally appeared at Kaiser Health News, and is a collaboration between KHN and The New Republic.

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39 Responses for “Why IPAB Is Essential — A Timely Review”

  1. steve says:

    The IPAB needs to be strengthened before it can effectively reduce Medicare spending. Let it ration as much as private insurers. Let’s also keep Medicare Advantage around so that seniors can buy the much more expensive option if they want.

    Steve

  2. …and then there are those who oppose IPAB on the grounds that elected representatives should not be absolved of their duties, and the country should not implicitly accept a political system where lawmakers are by definition corrupt.

    And if Medicare needs better management, then Medicare should hire, and Congress should allow appointment of, better leadership within Medicare.

  3. DeterminedMD says:

    Who is this guy, what is his allegiance to, and quite frankly, will he come to this thread, be transparent and make a disclaimer he does not profit from this IPAB operating as intended?

    Otherwise, I interpret silence to legitimate questions as above to be validation that the speaker is not unbiased and objective, just selling a message that benefits the few and to be well off by controlling health care decisions while not directly impacted by such decisions.

    Which just continues my impression this site has sold out. Sad, but seems unfortunately true, until someone of sizeable importance either refutes my impression with facts and balanced posts to oppose partisan positions, or, just is frank and states this alleged agenda is fine and dandy.

  4. Ian Spatz says:

    There is a reasonable position that repeal of IPAB is preferrable to its currently flawed mission. Most significantly, IPAB’s hands are tied in that it must focus its cuts on a relatively small slice of all Medicare spending. Also, it must find one-year savings, preventing it from recommending any ideas that would have short term costs but long term savings.

  5. Barry Carol says:

    “most doctors still see Medicare patients”

    Sure, most doctors still see established Medicare patients and, probably, commercially insured patients who age into Medicare. The issue is of most concern to people who move to a new location or need to see a doctor in a specialty that they’ve never needed to see before or who need to find a new doctor after their previous one retired or died. So, what we need to know is how many doctors are not accepting any NEW Medicare patients other than those who age into the program that they have treated for years before? What’s the trend in that number?

  6. Patrick Mac says:

    Barry,

    Even established Medicare patients may need to find a new doctor if the Medicare SGR-dictated 30% cut goes into effect next year. I doubt it will.

    however, look at the Medicare cost projections in Fig 2 in this link http://roadtohellth.com/2011/05/medicare-as-we%E2%80%99ll-know-it/
    Who can believe that providers will be able to see Medicare patients who will pay only 40% of the average private insurance payment in less than 20 years, and about 30% by 2060?

    • steve says:

      How do we cut Medicare spending without affecting physician earnings? Please be specific.

      Steve

      • Nate Ogden says:

        Freeze physician earningsand let inflation bring it back to balance

        Reduce physician expenses so an equal reduction in gross earnibngs doesn’t effect net earnings

        if 30% of today’s care is wasteful in theory we could eliminate 30 of their work and replace it with valuable care and everyone would be happy. With the pending retirements and baby boom hitting Medicare it might be important we figure out how to do this.

        I assume your not talking about the doctors engaging in fraud, that should be cut from 10+% to 1-2% without any complaints.

        How do you look at earnings? Would doctors accept a reduction in earnings if it came with a redcution in work?

        While a negative total dollar growth would be nice I think most people would be happy with a flat expense line. Eliminate the waste and fraud and excess a little every year and don’t increase spending with the population growth. Couple in some plan reform, if people are going to start living to 150 they can’t start on Medicare at 65.

      • MD as HELL says:

        Remove the prohibition against balance billing.

        Beneficiaries will be more careful with their purchases. A “market” might actully occur instead of an all- you- can -eat buffet.

    • Where do those projections come from?
      Should take quite a bit of “data” to project costs 70 years in the future…

      • Patrick Mac says:

        Margalit Gur-Arie: “Where do those projections come from?”

        From the same government that years ago projected a sustainable Social Security and Medicare system. See: http://www.cms.gov/ReportsTrustFunds/Downloads/2011TRAlternativeScenario.pdf

        I chuckled when on page 5 of the report I read: “The payment rates paid by private health insurers are assumed to be unaffected by the reductions in the Medicare payment rates for this illustration (see Fig 2).” I guess the authors realize that at these Medicare payment rates cost-shifting to private insurance would be an impossibility. To be fair to the authors, they agree that under current SGR law, Medicare is not sustainable.

  7. Nate Ogden says:

    “Jonathan Cohn is a senior editor at The New Republic .”

    Another liberal journaliust that doesn’t understand healthcare or bother to reserach before writing. Maybe I should take that back, does The New Republic pretend to be journlist or are they admiting their propoganda now? Some of this stuff is easily dismissed with a simple google search. For the more conplex stuff lets see if he even tried to defend it.

    “Despite the fanciful attacks from some conservatives, the IPAB will not be a modern-day Politburo that brings Soviet-style management to American health care.”

    How do you know this? More importantly how can you guarantee this? Their are numerous governemnt agencies interfering in daily life in a manner no one would have ever thought possible when they were created.

    Jonathan in 1930 when the FDA was estanlished do you think anyone could imagine them ever going after farmers for selling raw milk? Raiding Amish farms for selling Milk, do you think that was in the plans when it was created? Yet here they are today with the power to do so. You can’t assure us that IPAB won’t turn into a Communist central rationing murder committee 15 years from now once it has its power.

    In fact history supports enformed individuals concern.

    “But the new health law explicitly prohibits IPAB from changing the program’s benefits or imposing anything that would amount to “rationing.”

    This is where not knowing healthcare really gets you in trouble. The new law AS WRITTEN TODAY explicitly prohivits IPAB from changing the program’s benefits….

    Why did you leave those three oh so important words out? Obvisouly they destroy your argument. Lets look at some Medicare history to see if we should be concerned;

    “In the 1965 House hearings, Rep. Wilbur Mills (D., Ark.) put the control issue clearly. First he quoted the bill’s provision that “Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided.” Then he quoted other language in the bill specifying that amounts paid by the government to “any provider of services” under the bill “shall be the reasonable cost of such services, as determined in accordance with regulations establishing the method or methods to be used, and the items to be included, in determining such costs for various types or classes of institutions, services, and agencies.” Mills concluded that “In spite of what we say here the Secretary has to get into some kind of an agreement with hospitals or hospital as to what the reasonable costs of taking care of a patient are” (U.S. House Hearings 1965: 136, 139, 142; emphasis added).”

    Originally to get AMA support Medicare promised;

    “Prior to 1972, the Secretary’s regulations contemplated reimbursement of the entirety of a provider’s services to Medicare patients unless its costs were found to be “substantially out of line” with those of similar institutions”

    7 years in Medicare was blowing past cost projections so they just took that little EXPLICIT promise out. Look what else Medicare use to promise;

    “To counter this fear, the bill’s authors drafted a provision specifically disavowing such control, the same strategy used to secure passage of public education bills in 1958 and 1965 (Twight 1996). Questioned about whether the 1964 bill represented socialism, Celebrezze directly addressed the issue of control, stating: “There is nothing in this bill which tells a doctor whom to treat or when to treat him…. There is nothing in this bill by which the Government would control the hospital, and as I understand socialism, it is Government control and operation of facilities. … It is merely a method of financing hospital care, and that is all” (U.S. House Hearings 1963-64: 50). He added,

    We are a paying agency and I don’t see where you get any control of any kind out of that. Naturally, … there will be minimum requirements like these which are required now under Blue Cross. I see no evidence where this would lead to control over the doctors [U.S. House Hearings 1963-64: 54].”

    Any doctors on here feel Medicare doesn’t have any control over who and how you treat?

    So Jonathan, in light of Medicare History, what is this explicit prohibition really worth when it can just be taken out when it gets in the way?

    • steve says:

      I have relatives who lived under real communism. I served in a country with a real monarchy. There is zero comparison between our democracy and those kinds of governments. Disagreements about raw milk is not communism, just like Bush was not really a Nazi. These bizarre comparisons harm our political discourse.

      “Any doctors on here feel Medicare doesn’t have any control over who and how you treat?”

      Not very much. We follow the PQRI initiatives, but they have been shown to provide better patient outcomes. Cannot think of anything similar in my field from private insurers. Who we treat? They have to have Medicare. That’s about it.

      Steve

      • Nate Ogden says:

        ” There is zero comparison between our democracy and those kinds of governments.”

        I don’t see where anyone made any such comparisons. I did say no one can guarantee we would never become one though, which is a completly different statement then a comparison.

        • steve says:

          “You can’t assure us that IPAB won’t turn into a Communist central rationing murder committee 15 years from now once it has its power.”

          You cannot assure us that your plans won’t have us all dead in two years. Can you assure me that your plan will not result in only the ten richest people in the country receiving health care?

          You can do better. Give up this nonsense.

          Steve

          • Nate Ogden says:

            Then stop making claims like this on the left,

            “Despite the fanciful attacks from some conservatives, the IPAB will not be a modern-day Politburo that brings Soviet-style management to American health care.”

            We are more likely to get Soviet-style management then we are half the success liberals are claiming its will achieve. Its common argument for the left to dismiss arguments like can’t win.

          • steve says:

            Sigh. We had actual Communists running around in the 30s. We had populist anger at the bankers who ruined the economy. We had politicians with real socialist views. We did not end up with communism. We are a strongly anti-communist country. It has zero chance of happening in my lifetime. We argue about tax rates of 35% or 40%, not communism. We argue about providing health care for everyone through govt because private insurance has failed to do so. No one advocates for communism. While the ACA may fail at achieving its goals, it will not result in communism.

            Steve

    • Patrick Mac says:

      Nate: The comparison of the IPAB to the Politburo is a good one. See:
      http://covertrationingblog.com/healthcare-reform/what-does-the-ipab-tell-us-about-progressives

  8. Nate Ogden says:

    “Relative to private insurance, the program has actually done a pretty good job of managing costs overall, thanks to the natural efficiencies of such a massive program and the lack of investors to satisfy with profits.”

    Again you obviously don’t know anything about healthcare or its history.

    Correct me if I am wrong but your arguing since private insurance has increased at a greater percentage then Medicare then Medicare has performed better.

    As a simple liberal talking point for propoganda, true. As an honest comparison useful for policy not at all. Your first flaw is comparing Medicare benefits which have changed very little since 1965 to Private insurance which has undergone substantial improvements. Out of pocket has gone from 50% in 1965 to 13% today. If Private insurance covers more its cost will increase quicker.

    Next you have benefits, for example private insurance covers Rx which has higher inflation then medical care, when did Medicare start covering Rx?

    Next you have provider reimbursement, 1972 Medicare stoped paying providers an agreed upon amount, private insurance still does.

    What does Medicare pay in Premium tax compared to Private insurance? Hint state premium tax is much higher today them it was in 1965.

    Medicare use to cover people as soon as they turned 65, then they couldn’t afford that so they passed a law saying Private employer insurance was primary.

    I could go on for another few days but you get the point, its not an educated argument and its not true.

    One last thing, natural efficencies, you are unaware about the 10% fraud and all the waste?

  9. Nate Ogden says:

    Final debunking/educational post for Jonathan.

    “At most, IPAB would increase the influence of scientists and reduce the influence of lobbyists over these decisions. Would critics really prefer it the other way around?”

    subsitute Liverpool Care pathways for IPAB and you can’t tell the difference.

    None elected committe……check
    Scientist instead of politicians and lobbyist….check
    no public input and decisions made out of public view……..check

    It sounds like you have never heard of Liverpool Care Pathways and death panels?

  10. Barry Carol says:

    “How do we cut Medicare spending without affecting physician earnings? Please be specific.”

    Steve –

    Here are some ideas:

    1. Prescribe generic drugs instead of brands when available.

    2. Avoid unnecessary imaging and labs.

    3. Minimize referrals to expensive academic medical centers and a community hospital can do the job just as well.

    4. Minimize marginal useful or totally worthless therapy for nursing home patients that drive revenue for the homes but don’t benefit patients.

    5. Make Medicare’s claims database, including payments by individual provider, available to outside analytics firms to help root out fraud, especially for services never provided or grossly upcoded.

  11. Barry Carol says:

    Oops. #3 should have said: when a community hospital can do the job just as well.

  12. Patrick Mac says:

    Margalit Gur-Arie: “Where do those projections come from?”

    From the same government that years ago projected a sustainable Social Security and Medicare system. See: http://www.cms.gov/ReportsTrustFunds/Downloads/2011TRAlternativeScenario.pdf

    I chuckled when on page 5 of the report I read: “The payment rates paid by private health insurers are assumed to be unaffected by the reductions in the Medicare payment rates for this illustration (see Fig 2).” I guess the authors realize that at these Medicare payment rates cost-shifting to private insurance would be an impossibility. To be fair to the authors, they agree that under current SGR law, Medicare is not sustainable.

    Nate: The comparison of the IPAB to the politbuor is a good one. See:
    http://covertrationingblog.com/healthcare-reform/what-does-the-ipab-tell-us-about-progressives

  13. Patrick Mac says:

    Steve:

    I’d add to Barry’s list:

    1) Better end of life planning, fewer futile heroic measures.

    2) Governmental mandate that the US pays no more than the average worldwide price for every medicine. Why must we subsidize the rest of the world?

    3) Minimize the overreaching governmental regulations that make doctors less efficient (Read Doug Perednia’s book “Overhauling America’s Health Care Machine” to see numerous examples of how government interference is a major contributing factor to health care cost inflation)

    4) Focus on the roughly 5% of the population that consume 50% of the health care dollars (most of these patients are on Medicare). Look for efficiencies to lower the cost of this small faction of Medicare patients that are consuming such a large percentage of the Medicare budget. This is in part related to #1.

    5) Better governmental drug policies. For example the FDA fostered a program that allowed pharmaceutical companies to gain exclusive rights to some generic meds. For example generic colchicine use to cost 10 cents a pill, now it cost $5 a pill. Allowing Medicare to cover Provenge, at over $90,000 a treatment course, that on average prolongs the life of patients with advanced prostate cancer by 4 months. Medicare paying $1,593 per dose for Lucentis for treating macular degeneration, when Avastin at $42 a dose is as effective.

    6) Tort reform to decrease the practice of defensive medicine.

    • Nate Ogden says:

      “Focus on the roughly 5% of the population that consume 50% of the health care dollars”

      Any Medicare enrollees with claims over 40K or co-morbidities should be pulled out of normal medicare and assigned to administrators more like private insurance. Case management, closer attention to fraud, direct contact with the member.

      Sounds a little crazy but maybe we should try to actually manage these cost?

    • MD as HELL says:

      Allow balance billing.

  14. Barry Carol says:

    At the very least, I’m willing to give IPAB a chance to rein in Medicare’s cost growth. It’s pretty clear that Congress isn’t up to the job. In fact, if it were up to me, I would not pay for Provenge at $93,000 for a course of treatment. If it were priced at $40,000-$45,000, I probably would pay for it. Suppose Dendreon priced it at $500K instead of $93K. Should taxpayers be obligated to pay for it just because it won FDA approval for being somewhat more effective than a placebo? We have to draw the line somewhere as we can’t afford to give everything to everyone no matter how expensive. People who want what Medicare won’t pay for can still self-pay if they can afford to or they can try to find a charity to pay on their behalf.

    If IPAB overreaches, Congress can always change the law in the direction of giving it less power or even put it out of business altogether. Remember the experience when Congress passed catastrophic health insurance for seniors. It was quickly repealed when seniors objected to the cost that would have to be paid by higher income beneficiaries.

    • How about drawing the line for Dendreon instead, and telling them that we will pay $40,000-$45,000 at the most? Or they can try their luck on the charity sponsored market….

    • MD as HELL says:

      Allow balance billing and you will not have to have a board do anything.

      • Paolo says:

        Even if you have balance billing, you still need a board to determine how much to subsidize the patient. Should Medicare pay $40,000 or $80,000 or $20,000 for a patient who needs Provenge? In general what is the appropriate payment that Medicare should make for a patient that is X years old and has Y condition? That is a difficult question that Congress is not capable of resolving. Hence you need an independent board of experts.

      • steve says:

        This would make sense if we had evidence that private insurance was holding down costs.

        Steve

        • MD as HELL says:

          No insurance is holding down costs. The very existence of insurance is why costs skyrocket. Only the patient can hold down costs: They must refuse to buy it if it costs too much for them.

          Unfortunately healthcare is like beach property. If you want oceanfront, you will have to pay for it. Third row is cheaper, but you can get to the beach. Inland means you live cheaper but pay up from time to time just to be there for awhile.

  15. tim says:

    “The hope is that an independent commission of experts, insulated from politics but still accountable to the president and Congress, can succeed where our lawmakers have failed.”

    Oh dear. You cannot be a rational adult and believe sentences like these. This is logically indistinct from “The hope is that the elephant, which is heavier than air, can flap its ears and fly.”

    If it is accountable to anyone to the president and Congress, it is not independent. If it is accountable to elected people, it is not insulated from politics. And can never be. Ever.

    (By the way, the 3/5 requirement is reversible by the next Congress. Congress cannot bind a future Congress.)

    Also, our lawmakers have not failed. That’s a convenient and naive way to avoid admitting the truth about people. The politicians have done exactly what they are elected to do, which is create an influx of money to their constituents which is greater than the outflow. Every single congressperson is elected based on the implied or explicit promise to “fight for you”. This means nothing more than “go to Washington and get you money.” It is utterly predictable that atoms with Ponzi charges will build a Ponzi molecule.

  16. DeterminedMD says:

    Is this site defunct? I have not seen a new post in over a week now. ???

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