OP-ED

The Critics Are Wrong About IPAB

For Medicare, this has been a summer of good and bad news. On one hand, the program’s costs continue to rise remarkably slowly. So far this fiscal year, they have gone up by only 2.7 percent in nominal terms, the Congressional Budget Office reports.

On the other hand, opposition to the Independent Payment Advisory Board — created as part of the Affordable Care Act — continues to mount. And opponents continue to mischaracterize the whole point of the board.

What they seem not to understand is that the board is needed mostly so that that Medicare can continue to encourage slower growth in costs.

One reason costs have been rising so slowly is that systems for paying hospitals and doctors are changing. We’re moving away from the old fee-for-service plan and toward paying for value in health care — and we’re making the shift more rapidly than expected.

Redesigning the payment system is a fundamentally different approach to containing costs. The old way was to simply slash the amounts that Medicare pays for services. And here is where the criticism of the Independent Payment Advisory Board becomes somewhat Orwellian.

The point of having such a board — and here I can perhaps speak with some authority, as I was present at the creation — is to create a process for tweaking our evolving payment system in response to incoming data and experience, a process that is more facile and dynamic than turning to Congress for legislation.

Medicare Experiments
In particular, as Medicare experiments with accountable care organizations, bundled payments and other new strategies, the agency will inevitably need to make adjustments. Questions will come up, such as: How should the payments to doctors, hospitals and other providers be changed to reflect what is learned about the quality of care they provide? How much should the penalties or bonuses be? Is it better to have hospitals face all the costs associated with patient (as in an accountable care organization) or only the costs incurred during a specific episode of care (as in bundled payments)?


As even preliminary answers come in, the Independent Payment Advisory Board is supposed to make the adjustments, allowing Medicare to move as smoothly and quickly as possible toward an improved system for rewarding value in health care. Congress could never act so nimbly.

With that in mind, consider the recent attack on the Independent Payment Advisory Board in the Wall Street Journal by Howard Dean, the former chairman of the Democratic National Committee. His critique begins by claiming that the board “is essentially a health-care rationing body,” even though the legislation specifically states that the board is not allowed to make any recommendations that would ration care.

He goes on to argue that the board would use a bureaucratic rate-setting process to bluntly lower payments. Which is exactly what Congress does today. The board, in contrast, is mostly meant to navigate — outside the political realm — the two-steps-forward and one-step-back process of testing new payment structures.

Dean correctly notes that the board is not expected to save money over the medium term. This is not, as he implies, because it would engage in ham-fisted rate-setting. It is because the board is not meant to act until Medicare costs grow more rapidly than certain thresholds. The present slowdown makes it increasingly unlikely that cost growth will exceed those thresholds over the coming decade.

Care Rationale
Next, Dean argues that “If Medicare is to have a secure future, we have to move away from fee-for-service medicine, which is all about incentives to spend more, and has no incentives in the system to keep patients healthy.” Bravo! But what he fails to grasp is that the core rationale for the board is exactly to accomplish this shift.

Dean seems to think that Congress will be perfectly able to fine-tune Medicare’s shift away from fee-for-service payment, despite there being nothing in its 50-year record of legislating on Medicare to support such a belief.

The slowdown in health-care costs is a promising sign that efforts to move away from fee-for-service are working. But it’s still early in the game, and the next steps, taken in response to lessons learned, will need to be careful ones. That’s why the Independent Payment Advisory Board was created, and why it should not be eliminated.

Peter Orszag is vice chairman of corporate and investment banking and chairman of the financial strategy and solutions group at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration. This post originally appeared at Bloomberg.

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Joseph FleischmanJoseph Fleischman in MissoulaDennis DuganMaria E. Miltonalan t falkoff, md, faafp Recent comment authors
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Joseph Fleischman in Missoula
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Joseph Fleischman in Missoula

It behooves those who are against the IPAB to show how we can get a handle on Medicare costs without anyone having the power to limit them. And if it’s not a panel, would they prefer one person, as we have in corporations? And if it’s the latter, wouldn’t they be the first to holler “dictatorship!”? After that, what is it about the wording of the ACA, that the critics don’t understand? The legislation states that rationing, cuts in benefits, and quality of care are all illegal. This is about getting a handle on costs — should we not regulate… Read more »

Dennis Dugan
Guest
Dennis Dugan

Peter R. Orsag and Ezekiel Emanuel are both Eugenicists. The question for the America people is are they going to Impeach Obama Now or wait for Obama’s Hitler like T4 Healthcare Death Panels to kill millions? And then at someday in the future, there will be a modern day Nuremberg trial, where Obama, Emanuel, and Orsag are brought to justice for their crimes against humanity, and like those of the trials of 1945 to 1949, executed. This vision of the future can be stopped by Impeaching Obama Now! Obamacare Genocide in Action: What is Already Underway On June 24, 2009,… Read more »

Maria E. Milton
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Maria E. Milton

Pennsylvania Doctor Releases Statement Against “Murderous Obamacare” October 24, 2013 • 11:57AM Statement released by Mark Shelley, M.D., D.A.B.F.P. 1 Willow St., Port Allegany PA For more information: (267)218-5655 stevekomm@gmail.com DOCTORS AGAINST MURDEROUS OBAMACARE As a physician and an American, I feel compelled at this time of peril, to address the changes that I see in the process of the actual delivery of health care to the American people. From my perspective as a general practitioner of medicine, and from my concern as a citizen for my fellow man, I must speak out to explain the dangers that I see… Read more »

alan t falkoff, md, faafp
Guest

To Mr orzag: you are wrong, so very very wrong

Tanya
Guest
Tanya

Too much red tape to get care. Patients with unique diseases will suffer. IPAB will be like Congress, making laws about which they know nothing and are educated by those who stand to gain the most $$$$ and contribute the most, eg HIM$$.

Dr. Rick Lippin
Guest
Dr. Rick Lippin

Both Howard Dean and Peter Orzag have much to bring to the US health care reform issue. However on the need for an IPAB I must side with Mr.Orzag

I agree with my friend Vik Khanna that the IPAB must be as transparant as possible but disagree with Vik that the IPAB would not “touch” the “obviation” of death issue. Vik- Americans are ready for a long overdue serious dialogue on the death and dying and resultant humane policies and practices. Surely the IPAB can be of assistance on that very ripe issue.

Dr. Rick Lippin
Southampton,Pa

MFreeman
Guest
MFreeman

This article is from someone living in a different world than mine. I don’t even know how to respond. The whole thing is translucent spin…please…I know better…I do the work.

Richard L. Reece, MD
Guest

I do not agree with Orszag that Obamacare, the shift away from fee-for-service, the emphasis on value-based care, and changes in hospital behavior are responsible for the slow growth in Medicare. Rather I attribute this decline in health care inflation to slow economic growth due to Obamacare and other Obama policies and to cost-sensitivity of middle-class health consumers whose incomes are declining by 5% in recent years. The 25% annual rise in health savings accounts with high deductible is another factor. Nor do I agree with Orszag’s position on the IPAB, But since he “was present at the creation” he… Read more »

Vik Khanna
Guest

I can think of no topic on which I agree with Howard Dean, but we may have found one. I have never bought into the conservative narrative about the dangers of the IPAB, but I do know a thing or two about coverage and reimbursement policy, and the IPAB does not appear to solve our dilemma, to the extent that it is solvable at all. Coverage and reimbursement policy-making (they are two separate decisions), in both the public and private sectors, is, by definition, a politicized process. Biotech/pharma/device companies have for decades hired armies of reimbursement consultants (full disclosure: I… Read more »

Leslie Kernisan, MD MPH
Guest

Interesting issue and thought-provoking comments! Vik, you mention that “‘The US health care system in unfixable because each American views it as his or her own personal tool to obviate death, and they each expect that obviation to take place on someone else’s time and dime.’ That’s what needs to be fixed.” What do you think are the most promising avenues for fixing this issue? I do a fair amount of counseling patients and families re facing mortality and reassessing benefits/burdens of medical care…do we need to find a way to massive scale up these types of conversations? Or put… Read more »

Vik Khanna
Guest

Leslie: I don’t know that I have an answer to the problem you raise. Speaking from personal experience, I can only attest to how important it is for families to have this dialogue openly. I knew exactly what my parents wanted and my family and close friends know exactly what I want, and it’s all documented in writing. I guess that makes our family an exception and that’s unfortunate. I think more physicians need to take the approach you take of helping patients and families talk about mortality. Would be better if more patients and families started the conversation, I… Read more »

Leslie Kernisan, MD MPH
Guest

Many would agree that among other things, clinicians should help families discuss these issues. Changing clinician behavior is hard though (as is changing patient/family behavior).

Speaking of change, Atul Gawande’s recent New Yorker article on the diffusion of ideas and change in medicine is very relevant, and he esp mentions “unsexy” work that “demands painstaking effort without immediate reward.”
http://www.newyorker.com/reporting/2013/07/29/130729fa_fact_gawande?currentPage=all

His new think tank/lab wants to improve end-of-life care; should be interesting to see what they come up with.

Joseph Fleischman
Guest
Joseph Fleischman

Some things are more amenable to being fixed than others. The ACA has effectively zeroed in on the low-hanging fruit of those things that are driving our insanely high health-care costs — approx 17% of GDP, when no other country exceeds 12% of their GDP. The first low-hanging fruit is our hospitals — they charge whatever they want, Then it’s big-pharma, who does the same, and the medical device industry which follows suit. Finally, the insurance companies have always charged too much for administrative costs.
Joseph in Missoula

Mike Miesen (@mikemiesen)
Guest

Mr. Orszag, Two thoughts/questions: 1) Is there a functional difference between the IPAB and MedPAC in the years when spend is lower than the trigger? It seems that the IPAB could issue advisory, non-binding recommendations that couldn’t be fast-tracked, which sounds a lot like what MedPAC does. But if that’s the case, then the main benefit of the IPAB you discuss above – of greasing the cogs undergirding the shift from FFS to outcomes-based payment – will be rendered impotent much of the time – maybe even the next decade, when it would theoretically be needed the most. In other… Read more »

Whatsen Williams
Guest
Whatsen Williams

Pardon me but your judgment and analysis is flawed when you make a statement that moving away from fee for service is the basis for a whimsical decrease in costs of health care.

Fee for service predominates. However, since the cost burden has shifted to the patient with higher copays and denials, elective care is being shunned.

Vik Khanna
Guest

Whatsen Williams is right on, and the other major additive factor has been the lingering impact of the recession. While it is possible that some systemic changes are taking place in response to, and anticipation of, full implementation of the ACA, it is sheer fantasy to think that they’ve percolated throughout the system so deeply as to have already had a lasting impact.

Joseph Fleischman
Guest
Joseph Fleischman

The cost burden has actually shifted AWAY from the patient, as co-pays are reduced (catastrophic insurance isn’t legal anymore) and denials are much, much less — e.g. no more pre-existing conditions. Premiums have also been reduced because of the extremely high government subsidies which average $5,000 per year.
In other words, you don’t know what you’re talking about.
Joseph in Missoula

Al Lewis
Guest

Remember the Graduate? Well, I have one word for you: dialysis.

If there is one place where the vendors are always a step ahead of the government in reimbursement, it’s dialysis centers. A global payment for these patients might be the easiest fix relative to the amount of money at stake that IPAB could do, to show its value.

Vik Khanna
Guest

Not only have vendors in the dialysis space been one step ahead of the government for, oh, about 20 years, they’ve helped determine which way the government will move, the size of the stride, and the shoe size that the bureaucrats will wear. Al is right that this would be a great place to demonstrate value.

Lisa Suennen
Guest
Lisa Suennen

If people looked at Medicare/the government as a healthcare payer and not as “the government”, this would not even come up as a discussion. The functions that IPAB are intended to perform are now performed quietly by insurance companies and self-insured employers every single day without the public controversy. The real challenge and legitimate reason to fear is that decisions might be made without meaningful data about clinical outcome to inform those decisions. This is not good, as decisions about what to cover and in what amount should be informed by medical evidence. But if this piece can be integrated… Read more »

Bubba for President
Guest
Bubba for President

I can kind of see why the idea of the Independent Payment Advisory Board appeals to people with your world view.

The problem is–everything we know about how Washington works tells us that this experiment will now perform in ways we don’t expect. If it could be another way, I think we’d all be on board.

But how can something like this possibly work given the realities on the ground in the health care system and in Washington?