The IPAB Bomb

How’s this for a bitter pill?

For Republicans looking for cures for Medicare spending growth, one of the best places to look is one of their least favorites: in the legislative pharmacopeia that is Obamacare.

There are many things opponents of President Obama’s health reform law detest, and topping the list is the Independent Payment Advisory Board, or IPAB.

Before we get to the reasons why, it is good to remember that, as sketched into the law, the singular goal of the IPAB is — guess what? — to control Medicare spending growth.

Nothing actually happens under the provision unless (i.e., until) the $525 billion per year program exceeds growth targets, and the earliest any IPAB-directed actions could take effect is 2015. But if everything really is on the table as both sides work to avoid the next in a series of fiscal embarrassments, why not a major dose of economic medicine — properly defined and administered — that is already written into law and embraced by the president?

The biggest obstacle for Republicans is political or, more precisely, optical. Although IPAB’s stated goal is to contain Medicare spending growth, the provision is the embodiment of everything Republicans do not like, not just about Obamacare, but about “Big Government” generally. IPAB is a Board! — sufficient criticism for many — of 15 “bureaucrats” who will operate beyond the reach of Congress or the public. They will make arbitrary decisions about what Medicare will or will not pay for. They will use payment to come between you and your doctor. They will take away your health care!

Maybe so. The IPAB as drafted today is a black box, not a blueprint, a plan to make plans to save money, later. And for critics, black boxes are whatever they want them to be: death panels in drag, roulette wheels for rationing care, medical-industrial phantasmagoria straight out of Kafka and Huxley. Even among health industry supporters of Obamacare — patient advocacy groups, insurers, the major provider and drug lobbies — the IPAB is worrisome because it is all cost-containment mission and few particulars. If done right, it could save not only billions of dollars but thousands of lives from needless and dangerous medical interventions; if done wrong, it could mean arbitrary intrusions into medical care and a death knell for whole spheres of medical innovation.

The need for clarity today about how the IPAB will work years from now is one more reason the White House and Congress can and should mobilize — in the service of deficit reduction — the biggest potential mechanism for Medicare cost containment already written into law. Federal budget negotiators need the vehicle; those rushing to implement Obamacare need to flesh out how the IPAB will work; and those investing — or afraid to invest — in medical innovations need to know what impact IPAB will have on the future of Medicare.

How best to proceed with accelerating this provision of Obamacare and apply it like economic medicine to the deficit disorder? The clearest guideposts for properly defining and administering IPAB have been described well — by the provision’s more informed critics.

First, do no harm. Do not use IPAB to apply ham-fisted controls to broad classes of medical interventions or new medical technologies, simply because they are expensive. This will be accomplished if IPAB is staffed by more physicians than accountants, and run in ways sensitive to clinical nuance. A frequent criticism of IPAB is that its 15 members will be “bureaucrats, not doctors” — one among many demagogic fantasies conjured by Obamacare’s opponents.

Reality check: The actual law does not say IPAB members cannot be doctors, merely that its majority cannot be, to avoid the self-dealing by physician specialties that has crippled Medicare payment reforms for decades. But it also does not stipulate that any member must be a doctor — something fixable in one sentence in deficit reduction language acknowledging and expanding IPAB.

Second, work with what works. Every “payment advisory” issued by IPAB should be based not on technocratic theories or clinical wishful thinking, but on what works in real-world health care settings. Health insurers and provider organizations large and small, commercial and non-profit, all around the U.S. are working to find ways to prevent hospitalization, rationalize cancer care, improve heart surgery outcomes, reduce unnecessary tests, and manage chronic disease. IPAB should root out the best of these market-based innovations and promulgate them nationally through the power of payment.

Third, operate in broad daylight. A frequent criticism of the IPAB is its lack of accountability: its 15 members are appointed for fixed terms and its decisions are final. The goal was to avoid the predicament of Medicare’s traditional payment advisory panel which — despite glaring conflicts such as self-dealing by specialty physician groups over primary care physicians — has made countless earnest proposals to reduce costs, only to have them beaten down by lawmakers, i.e., by lobbyists for affected industry segments. A deliberate lack of political permeability puts the IPAB beyond this political corruptibility — the main reason it was created in the first place. Members cannot be bought by health industry groups whose payments they are advising on, nor manipulated by legislators who have been. Today, politicians have the final say on any and all changes to Medicare payment. The economic consequences are self-evident.

IPAB’s uncharacteristic detail on this political independence was inspired by years of hard experience for Medicare administrators who tried to use payment means to improve quality and reduce cost. Unfortunately for patients and taxpayers, for every hospital that wins, another loses. And every losing hospital has a Congressman who, in the name of “political accountability,” knows exactly whom to call at Medicare to kill the experiment. The same goes for the inevitable winners and losers among physician specialties, drug companies, and medical technology providers. IPAB may be beyond the reach of politics, but that also puts it beyond the reach of the highest bidder.

This is exactly how it works with many of the hundreds of mini-IPABs operating today across the health insurance industry, in secret. No drug reps, no boondoggles, no contact with industry.


That’s right — we already have IPAB, in miniature, all doing the exact same things; they’re just not called that. One of health care’s many dirty little secrets: there are dozens of Boards of “faceless bureaucrats” making decisions about our medical care right now, one for every health insurer of any significance. They operate in secret, they may or may not have any doctors involved, and they are accountable only to the insurer’s executives and shareholders.

By contrast, IPAB can and should operate in full view — it’s work vetted, peer-reviewed and published, in much the same way the federal government regulates the approval of drugs and medical devices. It is not a pretty process, and it is certainly not perfect, but it works. This would also provide cover-fire for the better of those mini-IPABs — while driving the bad ones into the obsolescence they deserve – bringing clarity and consistency to rationales for health coverage where today chaos and confusion reign.

A good place for IPAB to start is where everyone agrees: some medicine is not only not worth it, but actually bad for you. We spend somewhere between an estimated $192 and $325 billion per year on what different researchers call “overtreatment” or “unwarranted use” — care that is not only unnecessary but potentially dangerous. This represents up to 13 percent of medical care spending today; if applied to Medicare, we just found some percentage of $66 billion per year for deficit reduction — and an unknown but certain number of lives spared scalpels, radiation and chemistry that would have done more harm than good. In the end, IPAB can and should not be about cutting costs, but protecting patients from harm.

If there is an obstacle to transforming the IPAB from a murky Obamacare provision into a win-win deficit reduction device, it would be steeped not in policy but politics. Republicans have an obsessive desire to cut spending at what appears to be almost any cost — but it may not outweigh their obsessive hatred of Obamacare.

Much of that hatred is ideological, but much is also steeped in legitimate concerns about how things like IPAB will work. Negotiations to prevent sequestration and deal with long-term Medicare spending would be the perfect time to address those concerns with clarifying legislative language, and apply the proceeds to the service of deficit reduction.

Good fiscal medicine all the way around? Of course. But it may be too bitter a pill for the opponents of Obamacare to swallow.

J.D. Kleinke is a pioneering health care information entrepreneur, medical economist, author, policy expert, and business strategist.

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18 replies »

  1. So not really on the same topic as your post, but I found this today and I just cant resist sharing. Mrs. Agathe’s dishwasher quit working so she called a repairman. Since she had to go to work the next day, she told him, I’ll leave the key under the mat. Fix the dishwasher, leave the bill on the counter, and I’ll mail you the check. Oh, and by the waydon’t worry about my Doberman. He won’t bother you. But, whatever you do, do NOT under ANY circumstances talk to my parrot! When the repairman arrived at Mrs. Agathe’s apartment the next day, he discovered the biggest and meanest looking Doberman he had ever seen. But just as she had said, the dog simply laid there on the carpet, watching the repairman go about his business. However, the whole time the parrot drove him nuts with his incessant cursing, yelling and name-calling. Finally the repairman couldn’t contain himself any longer and yelled, Shut up, you stupid ugly bird! To which the parrot replied, Get him, Spike!

  2. Tempting as it is to just say “Buh-bye”, let me briefly respond – hopefully for the last time.

    First, I have no “King’, thanks anyway. Why you guys keep insisting that anyone who agrees with Obama – and I don’t always – considers him their King, savior and second coming is beyond me. Get over it, will you please?

    Second, I previously owned and managed clinics where we dealt with prior authorizations all the time. We also accepted Medicare, Medicaid and free care patients as a cost of doing business. We didn’t fear regulation, we learned to use it to our advantage.

    Third, the sky isn’t falling, doc. You sound like your hysterical predecessors of fifty years ago who predicted Medicare would bring the end of civilization as we know it.Take a chill pill.

    And, yeah, bye.

  3. What did you say, John? Your opinion and agenda are the only ones to consider?

    The usual partisan platitudes of those interested in agenda, not public welfare. Nice projection effort though!

    And now your King is trying to backtrack, good luck with that. Did he notify all those insurers of the plan today November 14 regarding people keep their plans FOR JUST ONE MORE YEAR first? Doubtful is a nice term, unlikely the realistic one, “why should I care what the insurers think” on the mark per what Obama has done here before his announcement!!!

    By the way, per the tone of your first rebuttal to me, doubt you have ever been impacted by an authorization matter, more to me a “bureaucratic intrusion into patient-physician relations” matter, but as I continue to note to readers unbiased and objective, not corrupted by partisan agendas, when it doesn’t directly affect the defender of disruptive issues, as was said so perfectly by the uncaring observer in the first Spiderman movie, “I missed the part (where your problem) where that was my problem”

    I doubt you are at least a practicing clinician, if one at all, knowing what the IPAB will do to health care interventions.

    The time to be nice and respectful to a group who’s agenda is as far from nice and respectful is way gone to me!

    Won’t be coming back to debate further until an up to date post reeducates readers to what this part of PPACA will do! Bye!

  4. Here is the profoundly disingenuous defense of legislation solely written by a minority percentage of a political group, claiming it met all these alleged litmus tests to be valid and just.

    1. Only Democrats voted it in place, made no sincere effort to include anyone else not completely subservient to the democrat agenda, and altered the Senate process to get it through that part of Congress.
    2. They told the American people all these overt lies, it wasn’t a tax and people’s insurance coverage would not be affected probably the biggest whoppers.
    3. Related to #2, they got the Supreme Court to declare it constitutional solely on that lie it was in fact a tax, and have since tried to argue against the other part of the ruling that the Feds can’t dictate State’s choices and are incessantly bitching how such states not agreeing to the sign up process are causing the primary disruptions.
    4. Now they are insulting and demeaning individual choice by telling us that 5% of the population losing coverage are either inconsequential or insignificant, and letting their King by his overt defiance of the political process by altering the bill at his own discretion without any Congressional participation and refusing to dialogue until the electorate is threatening retaliation by not reelecting these selfish and disruptive jerks.
    5. Finally, let me educate readers what personality disordered people like these rigid , inflexible, and insensitive rulers show by their defenses in trying to validate this legislative insult on the public they as alleged representatives are outwardly refusing to participate in with the public:
    Denial , projection, minimizing, deflecting, and just pure pathological rationalizing per their twisted, disturbed logic they themselves know better than the public what we think, act, and pursue.

    And you what, the Goebbels and Alinsky tactics pervasively being used to deride, dismiss, demean, and dictate are just waking up the part of the public who won’t genuflect to Democrat agendas and control.

    Just like what the Republicans went through when the public got sick of the endless Middle East wars decimating the military, and adding to the bankruptcy of this country.

    The IPAB is a twisted and perverse agenda to strangle America with this bad law. Blind loyalty is as appropriate a term for those with lack of insight and no genuine concern for public welfare.

    The dialogue by Democrat loyalists has elements of the same dialogue by tyrannical regimes like Nazi Germany and Stalin Russia.

    Keep mocking the analogies, I think it strengthens my position!

  5. The late-comers to this party seem a bit…unhinged.

    Lyndon LaRouche and the Hitler analogies? Yikes!

    And Dr. Hassman – after copying and pasting from a West Virginia CPA consultant as his impeccable source – felt compelled to make an analogy to cuss words we dare not speak on THCB?

    He seems to resent any form of third-party authorizations of medical practices. And it’s not a case of “two wrongs making a right” unless he can prove it’s a wrong in the first place. Just because he doesn’t like it doesn’t prove it’s wrong.

    The CPA he cites as his IPAB authority also doesn’t seem to understand the difference between the cost-containment measures the iPAB is charged with delivering and the laws that Congress is charged with enacting.

    And they’re designed to take effect unless Congress substitutes other cost-containment measures precisely because Congress is such a wimp on such matters – as we’re about to witness yet again with the annual SGR circus on physician payments.

    Like Obamacare itself, the IPAB’s less than perfect. But they’re both vast improvements over the medical status quo Dr. Hassman appears to defend.

  6. Wow, I find this such a disingenuous post about the IPAB, when it has such serious and long term consequences. Let someone else point out these consequences:

    “The Independent Payment Advisory Board (“IPAB”) was established by the Patient Protection and Affordable Care Act (“PPACA”). The IPAB will be comprised of 15 individuals appointed by the President. The responsibility of the IPAB is to make recommendations to Congress that must be acted on within a designated time frame or the recommendations become law. Bad idea; think about it:

    1) Fifteen (15) political appointees will have the ability to make laws relating to the delivery of healthcare, Medicare covered services, and Medicare payments for covered services. I was always under the impression that this was the responsibility of the legislative branch of the federal government, individuals that were elected by the citizenship, not political appointees.

    2) While Congress can take action to avert any potential actions of the IPAB, most Americans have seen how Congress deals with controversial issues, e.g. the increase in the debt ceiling, healthcare reform, etc. It would be easy for Congress to avoid any issue and blame the impact on the IPAB when their recommendations become effective.

    3) Potentially the IPAB may find itself examining and making recommendations, which could become lase, relating to narrowly focused healthcare related issues that ignore broader issues.

    4) The IPAB will not be accountable. An unanswered question would be the ability of consumers, healthcare providers, and others to provide meaningful input.

    5) The qualifications of the members of the IPAB become significant given the power they eventually yield over Medicare benefits, coverage, payments, etc. Such unaccountable powers should definitely not be placed with persons highly experienced with various healthcare-related issues. The individuals should not be, in any way, associated with special interest groups whereby they are influenced directly or indirectly from those who may benefit from such recommendations.

    Many potentially impacted groups have expressed their opposition to the formation of the IPAB, including the National Association for Home Care & Hospice (NAHC) and the Leadership Council of Aging Organizations (LCAO). Healthcare providers and consumers alike should take pause and recognize the inappropriateness of the formation of such a powerful group of political appointees with no effective oversight process.”

    From this link: http://healthgroup.com/the-independent-payment-advisory-board-bad-idea-with-potentially-significant-consequences/

    Again, everyone is so preoccupied, and rightly so by the leaders of the debate who want this travesty to prevail, that NO ONE is paying attention to what is coming that transcends premiums, deductibles, and doctor access. IPAB will replace a well known swear word that evokes discomfort and irritation when hearing it, starts with an “f” and ends with a “k”. IPAB will be the perfect synonym if stays in place!!!

    Let’s try it, shall we? “What, my prior medication to control ______ (fill in the blank chronic illness that has been stable until now) is not approved?! I have been IPABed by the government!”

    For this above post author to use the fact that insurers have been playing the authorization game is the lamest “well 2 wrongs make a right” defense this administration plays perfectly like a fiddle.

    Strummed by the legions of the netherworld leaders!!!!

  7. A very wise man, commenting on ACA, said: “Obamacare is a horror show. A complete farce. It’s so self-contradictory, it’s not actually implementable. The only solution is to throw Obama out. Impeach him, that will eliminate the problem.”

    That wise man is Lyndon LaRouche, spearheading a national citizen’s drive to get rid of Obama who, by the stroke of the pen, bureaucratically, that is, seeks to murder the citizens of the United States. Hitler is Obama’s predecessor and Hitler’s T-4 program, which began the genocide by first denying healthcare to the elderly, mentally ill, homosexuals, etc. is the model of the ACA Obamacare program.

    Today, any smarmy politician, policy maker or the like, who promotes actuarial accounting methods to apply to human life is in the same category as Hitler and Obama, both murders on behalf of the equally murderous Wall Street, the force behind the drive for austerity and “deficit reduction” suggested by JD. The best deficit reduction plan is to immediately pass Glass Steagall and stop bailing out the bankrupt system of Wall Street.

    LaRouche has already laid out the plan for genuine economic revival and growth based on great projects that would put 10 million people to work immediately thereby completely eliminating all the lemmings’ arguments of how best to implement a program that would accomplish one thing: a horror show of population reduction.

  8. I almost stopped reading at this – “Members cannot be bought by health industry groups whose payments they are advising on,” But i managed to stop laughing and continued only to find this – “IPAB may be beyond the reach of politics, but that also puts it beyond the reach of the highest bidder.”

    Oh puhleeze – i thought I was naive …

    All depends on who does the appointing to the board – as if that would insulate it from the political process – and then there are all those medical experts who, if not “bought”, have certainly been “influenced” by all the drug companies and device makers out there – will there be a check list of what potential appointees have to sign off on, e.g, whether and to what extent they have ever received anything form these “interests”? That would certainly shorten the list – so what happens when the recognized “expert” in a field also happens to have “a few” honoraria from “the industry”?

    And finally we have – “IPAB can and should operate in full view — it’s work vetted, peer-reviewed and published, in much the same way the federal government regulates the approval of drugs and medical devices.”

    Final coup de grace, IMO, especially if the first rule “IS first do no harm” – if this board is to work in “much the same way” as the FDA ….

  9. it would be great if the IPAB folks combined with the Choose Wisely initiative, as they are already on the case and it is the leading physicians who are recommending what should not be covered, thus giving “cover” to the process for those who worry about it. Choose Wisely is in process a list of 90 things that should not be covered and if CMS is smart they should latch onto that right away, IPAB or no. http://www.choosingwisely.org/doctor-patient-lists/

  10. Great points, JD. I agree that in order for the IPAB to stop becoming a shady Obamacare oversight board it’ll take more politics than policy (if there is a difference). Although I agree that the IPAB will undoubtedly fall victim to visceral partisan politics in due time, I believe (perhaps naively so) that there are ways for the board to maintain integrity. Even in this comment thread, it’s obvious that we all expect there to be irrational partisan influences, and that the IPAB should always remember “to do no harm” and put patients first. Perhaps we should trust that whoever is appointed to board would have the common sense to think the same. But as one of the other comments say…let’s not hold out breath…

  11. Interesting article. I’m glad he points out that all major insurers effectively have IPABs behind the scenes, and I agree with the call for federal IPAB to operate transparently.

    It’s not clear to me, however, how to operationalize “do no harm” (or why that means put clinicians on the IPAB, although that would certainly be a good idea, esp if they are clinicians with a primary care background, well versed in policy and public health).

    Nor is it clear how to implement “work with what works”; are we talking about for future procedures or for the existing ones which are possibly waste (how exactly to stop unwarranted treatment)? There are plenty of procedures now widely in use of unclear clinical benefit which Medicare now covers, like carotid ultrasounds and yearly echos in my dementia patients who are wasting away. (Did I already say put PCPs on the board and not too many proceduralists? yes I did.)

    So as usual, the devil is in the details. It’s one thing to broadly identify overtreatment, esp retroactively and at the population level. It’s another to implement it prospectively on the ground, when patients and providers will insist something should be covered. I’m not against the IPAB, but given the history and culture of medicine here in the U.S., the challenges are formidable.

    Last but not least, I wish JD would’ve mentioned how other country’s IPAB-like agencies approach this issue. Would be nice to learn from others, even though we have our own constraints and challenges here.

  12. Well done indeed, JD. Nicely articulated. But I share the doubts of others that the IPAB will end up being all that helpful. I pin my hopes much more on the shift from “volume to value.” To the extent that the industry stops getting paid fee-for-service, these unnecessary surgeries, tests, and pharmaceuticals shift from being profit centers to being costs, and costs which also drag down the quality statistics by needlessly endangering patients.

  13. Well done, JD. But I think the Republicans’ problem with the IPAB goes beyond optics and visceral disdain for anything Obama gets enacted. it’s much more rooted in their constituency of suppliers of goods and services – what some might call “moneyed interests”. The IPAB would cut payments to such suppliers, whereas their “solutions” all entail cutting benefits for consumers, whether by Medicare vouchers or otherwise. They view the IPAB as failing to address the real problem, which isn’t suppliers, of course, but those awful consumers (aka patients).

    As for the IPAB’s likely effectiveness, I’m less sanguine about Washington’s ability to actually allow it to be insulated from political influence. Washington runs on money, which means lobbyists generally prevail. And even if it manages to survive intact, it doesn’t even begin to address the biggest cost center – hospitals – until 2020. Think the hospital lobby had anything to do with that?

    Like ACOs, the IPAB is likely to disappoint when it comes to making a serious dent in our medical misspending. And we don’t need an IPAB to stop overpaying specialists and underpaying primary care docs or paying for useless spinal fusion and knee surgeries that even the surgical societies admit are worthless.

    All we need is political leadership with the integrity and courage to do the right thing – and I wouldn’t hold my breath waiting for THAT.

  14. Once again J.D. strikes to the heart of an issue. This article should be required reading by Congressional staffers interested in actually solving health care problems.

    In 2009 Congress accepted $1.2 billion from health care interests in exchange for influence over the shape of the law, and the industry got exactly what it wanted. We added coverage at public expense for another 10% of our population while undermining any meaningful attempt to control health care’s excessive cost. The IPAB was the one provision that was specifically designed to use our knowledge of what works and what doesn’t to guide what we should and shouldn’t pay for. So has been demonized politically, but almost certainly with the quiet but full support of the industry.

    Kleinke’s gift here is articulating for thoughtful people of all political persuasions why carefully shaping IPAB in the public interest is our best shot at empowering an ACA structure to properly make health care cost less, and by doing so help avert the larger fiscal disaster that health care is driving.

    I hope somebody listens.

    JD, please streamline this article and submit to the WSJ’s op-ed page.

  15. “The need for clarity today about how the IPAB will work years from now is one more reason the White House and Congress can and should mobilize — in the service of deficit reduction — the biggest potential mechanism for Medicare cost containment already written into law.”

    Clarity? At this point expecting clarity from our elected officials is a stretch. If experience teaches us anything, it is that clarity is not Washington’s strong suit. I share your hope, but have my doubts …