Ryan’s Attack on IPAB

In defending his controversial proposal to turn Medicare into premium support for buying private insurance, Rep. Paul Ryan, R-Wis., on Meet the Press last Sunday took a potshot at the Independent Payment Advisory Board, which is the key cost control component of President  Obama’s health care reform law.

Premium support would give seniors the power to choose the level of care in their plans, Ryan asserted. “The alternative to that is a rationing scheme with 15 bureaucrats the president is going to appoint next year on his panel to ration Medicare spending. We don’t think we should give the government the power to ration care to seniors.”

The House Budget Committee chairman didn’t explain why faceless bureaucrats working for insurance companies would be any different or better than their counterparts in government in choosing what should or should not be covered.  But a group of more than 100 academic and think tank health care experts  has rallied to the defense of the board,  which won’t swing into action until 2015.

Their ranks include liberal economists like Brookings scholar Henry Aaron and Harvard’s David Cutler, who was one of the architect’s of the health care reform law. But they also include former Congressional Budget Office chief Alice Rivlin, who has her own version of a premium support plan, and Harvard’s Joseph Newhouse, who has been a big booster of private insurance plans over the years.

In a letter sent late last week to the House and Senate leaders of both political parties, the experts encouraged Congress “to keep, and indeed strengthen, IPAB’s role.” “To carry out its job effectively, Congress should mobilize the expertise of professionals who can assemble evidence on how payment incentives affect care delivery and suggest sensible improvements,” the letter stated.

Democrats on Capitol Hill have been suspiciously quiet about the IPAB, which is the backstop mechanism for enforcing cost control in the Affordable Care Act. The law’s payment reforms are designed to cut Medicare costs by  nearly $500 billion over the next decade and another $1 trillion in the decade beyond.

Republicans seized control of the House in last year’s election in party by categorizing those savings as unjustifiable “cuts.”  But whether savings or cuts,  they would stem from delivery system efficiencies that may or may not materialize under the health care reform law. That’s where the IPAB comes in. The new law calls for the presidentially-appointed panel – comprised of representatives from hospitals, physicians, patients, drug and device companies and other health care constituencies – to recommend program changes that will hold Medicare spending increases to  levels that are no greater than the pace of economic growth (GDP) plus one percent. In his April speech embracing many of his deficit commission’s goals, President Obama slightly raised the cost-saving goal.

Either way, the board’s proposals are only recommendations. They eventually go to Congress, which can either a) accept them; or b) vote them down and substitute its own proposals for bringing Medicare costs down to that level.

Ryan’s own proposal for cutting Medicare would limit the growth on government spending on vouchers to the consumer price index (CPI) plus one  percent. In virtually all years except the rare recession where prices continue to rise, the Ryan plan’s cost controls would be far more stringent than a GDP-based formula since health care costs without external controls have generally risen at twice the rate of GDP. That’s why CBO, in scoring the Ryan proposal, predicted seniors would wind up  having to pay for about 68 percent of their health care costs by 2033, up from about 20 percent today.

The letter from the experts gave their view on how the IPAB would work. Reform “sets up many demonstrations and pilot programs to learn how to structure payment to encourage more efficient delivery of quality care,” they wrote. “As Medicare undertakes payment demonstrations and pilots, we must aggressively analyze their impact, replicate successes, and bring demonstrably better payments methods into national policy.

“Giving a body of experts the capacity to propose ways to slow spending growth will not diminish the power of elected officials, because Congress may approve, disapprove, or replace the IPAB’s proposals with alternatives that achieve the same objectives,” the letter stated.  “Having the IPAB, however, will force debate on difficult choices that Congress has not thus far addressed.”

Merrill Goozner has been writing about economics and health care for many years. The former chief economics correspondent for the Chicago Tribune, Merrill has written for a long list of publications including the New York Times, The American Prospect, The Washington Post and Financial Times. You can read more pieces by him at GoozNews, where this post first appeared.

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