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What is the Independent Payment Advisory Board?

Of all the major provisions in the new health law, probably the least understood is the Independent Payment Advisory Board. A quick Google search for “IPAB” explains why– the first two pages of results are almost entirely conservative blogs bashing the idea as “rationing,” “a death panel,” and of course “socialism.” In reality it’s nothing that drastic– it’s simply a solution to a problem health law expert Timothy Jost describes in The New England Journal of Medicine:

Market forces alone, it is argued, cannot control health care costs, and Congress is too driven by special-interest politics and too limited in expertise and vision to control costs.  

Who will serve on the IPAB?
The board will have 15 full-time members:

  • Twelve of them will be appointed by the President, and confirmed by the Senate, for six-year terms
  • Three will represent the Department of Health and Human Services (HHS). These three don’t have to be approved by Congress.

According to Jost, “IPAB members are supposed to be nationally recognized experts in health finance, payment, economics, actuarial science, or health facility and health plan management and to represent providers, consumers, and payers.” Less than half the board members can be health care providers.

What will the IPAB do?
The Affordable Care Act sets targets for slowing Medicare spending to a certain level (the targets are figured through a complicated formula based on inflation and later the GDP). Starting in 2015, if Medicare costs are projected to grow too quickly, then the IPAB, will make recommendations for ways to reduce spending.

These recommendations will go into effect automatically, unless Congress either:

  • passes alternative cuts of the same size; or
  • the Senate overrides or amends the cuts with a three-fifths majority.

What will the IPAB not do?
It will not “ration” or “cut services” as Congressman Paul Ryan put it, because legally it can’t. Maggie Mahar, author of  Money Driven Medicine, explains:

The Accountable Care Act specifically prohibits IPAB from recommendations that would:

  1. ration health care;
  2. raise revenues or increase Medicare beneficiary premiums or cost sharing; or
  3. otherwise restrict benefits or modify eligibility criteria.

In other words, IPAB cannot “cut services.”

Really the only option it has for controlling costs is by focusing on Medicare payments to providers. So for example, it could recommend cutting payments to certain providers. Or it could consider changes in the way providers are paid– say one of the trial programs in the Affordable Care Act that moves away from fee-for-service is super successful, then the the IPAB could recommend implementing that new payment method for all of Medicare. Or it could suggest that Medicare negotiates for lower prices on prescription drugs.

But even in making changes to how providers are paid, IPAB’s powers are limited. For example, until 2020 it can’t propose reducing payment rates for providers that have already been targeted by the Affordable Care Act. That includes hospitals– by far the biggest driver of costs.

The Fiscal Times’s Merryl Goozner sums up the IPAB’s limitations this way:

“The problem isn’t that IPAB has too much power. It’s that it doesn’t have enough.”

Why is the IPAB so controversial?
Members of Congress are complaining that the IPAB takes power away from them. Says Senator Jon Cornyn (R-TX) who introduced a bill to repeal IPAB, it “punts difficult decisions on health spending to an unelected, unaccountable board of bureaucrats.”

Representative Allyson Y. Schwartz (D-PA), who’s leading the charge against the IPAB among the few Democrats who oppose it, said:

“It’s our constitutional duty, as members of Congress, to take responsibility for Medicare and not turn decisions over to a board. Abdicating this responsibility, whether to insurance companies or to an unelected commission, undermines our ability to represent our constituents, including seniors and the disabled.”

A couple of points. For one, the board members may be unelected, but they’re not unaccountable. Congress has to approve all but three of them. The IPAB’s recommendations are open to comment from outside the group: a ten-member Consumer Advisory Council will advise the IPAB on the impact of payment policies on consumers after holding public meetings, and the respected Medicare Payment Advisory Committee will also be able to comment. By contrast, says Maggie Mahar:

The RVS update committee, or “RUC,” that currently sets Medicare fees for physicians, flies under the radar, meeting behind closed doors and keeping no minutes. The RUC is truly “unaccountable”, and typically, more than 90% of the RUC’s recommendations are accepted and enacted by CMS).

As for Schwartz’s complaint that the board will usurp Congress’s power, well… that’s kind of a stretch.  As over 100 academics and think tank health care experts wrote in a letter to Congressional leaders of both parties:

“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. Having the IPAB, however, will force debate on difficult choices that Congress has not thus far addressed.”

In other words, the IPAB isn’t “usurping” the power of Congress– it’s forcing Congress to use its power to rein in health care costs. One of the reasons Medicare costs are out of control is that efforts to control costs by one Congress are often overturned by subsequent Congresses. Or reforms are blocked by politicians who have been swayed the health care industry, which makes big financial contributions to their campaigns. (For example, The New Republic’s Jonathan Cohn notes that a quick look at Schwartz’s campaign finance history shows that the health care industry is “her top source of political action committee contributions and her fourth largest source of contributions overall.”)

As Senator Jay Rockefeller (D-WV), one of the architects of the IPAB put it:

“Medicare payment policy should be determined by experts, using evidence, not by the undue influence of special interests.”

UPDATE: In a post titled “When did the IPAB become so controversial?“, The Incidental Economist’s Don Taylor points out that Rep.Paul Ryan (R-Wisc.), one of the biggest critics of the IPAB, proposed something similar back in 2009:

The PCA [Ryan’s bill] also proposed two governmental bodies to broadly apply cost effectiveness research in order to develop guidelines to govern the practice of, and payment for, medical care. The bodies proposed in the PCA had more teeth, including provisions to allow for penalties for physicians who did not follow the guidelines, than does the Independent Payment Advisory Board (IPAB) that was passed as part of the Affordable Care Act.

Taylor goes through the text of Ryan’s bill, pointing out similarities with the IPAB, then concludes:

Obviously Rep. Ryan can change his mind, and seems to have done so. However, going from proposing what could be thought of as IPAB-on-steroids to deriding the general approach as rationing-that-is-harmful is quite a big change. What happened to change Rep. Ryan’s mind?

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