President Obama is doubling down on one of the most dangerous provisions in his 2010 health overhaul law. In his proposed budget, he plans to give even greater powers to the Independent Payment Advisory Board (IPAB), a panel created by the new health law to contain Medicare spending.
The IPAB is one of the most egregious parts of ObamaCare because it puts rationing of care on auto pilot. A House subcommittee, chaired by Rep. Joe Pitts (R-PA), is expected to vote today on a bill that would repeal the IPAB entirely. The Ways and Means Committee also will vote, and then it will go to the full House of Representatives for a vote, likely next month. After that, the legislation faces an uncertain fate in the Senate, where Sen. John Cornyn (R-TX) just introduced an IPAB repeal bill.
Opposition to the IPAB crosses party lines. Rep. Frank Pallone (D-NJ), the top Democrat on the Energy and Commerce Health Subcommittee that will consider the bill today, has said he has no interest in defending the board: “I’ve never supported it, and I would certainly be in favor of abolishing it.”
The IPAB is to be composed of 15 appointed officials who will have the authority to make cuts in Medicare payments if per capita spending exceeds defined targeted rates. The U.S. Constitution gives the power of the purse to Congress so that elected representatives can be accountable to the voters for their decisions. The IPAB would turn this principle upside down.
In creating the IPAB, the president and Democrats in Congress wanted to take difficult decisions about cutting spending on Medicare out of the legislative process. In so doing, they gave unprecedented authority to unelected experts to make Medicare payment policy involving hundreds of billions of dollars and impacting tens of millions of seniors.
The power is unprecedented because there is to be no judicial, administrative, or realistically, congressional review over its decisions. IPAB is supposed to take decisions outside the political arena so they are made by people less likely to feel the tug of popular opinion.
Ironically, the tools available to the IPAB members are limited. The board cannot make structural recommendations to improve how Medicare operates. It is barred from making changes that would modernize the program’s outdated fee-for-service structure or change beneficiary incentives.
While the law says the IPAB can try innovative approaches to modernize care, the Congressional Budget Office does not count these programs as achieving any meaningful cost savings. Because the IPAB will be required to make changes that demonstrate actual savings in a one-year time frame, the only tool the board will realistically have will be to cut Medicare payment rates for those providing services and medicines to beneficiaries.
And the IPAB is even limited in the kind of spending it can cut. Between 2013 and 2020, the health law directs the IPAB to achieve its targets through payment reductions primarily in the Part D prescription drug program, Medicare Advantage, and skilled nursing facility services. Since the board is forced to reduce overall Medicare spending by focusing only on these relatively smaller segments of Medicare spending, the cuts would have to be very deep to achieve overall per capita spending reductions. Access to care inevitably will be impacted.
President Obama’s 2013 budget describes the IPAB as “a key contributor to Medicare’s long-term solvency.” Specifically, the White House wants to lower the preset annual spending limit that Medicare has to hit before IPAB can kick in. And the administration calls for the creation of more cost-cutting “tools” for IPAB, including alterations to design benefits.
IPAB is the wrong approach. Far from being strengthened, IPAB needs to be repealed. It should be replaced with market-oriented reforms that actually address the pernicious incentives now driving Medicare off a fiscal cliff.
A smarter approach would be to make changes to Medicare on the model of the program’s Part D prescription drug program that cultivates individual choice, forces providers to compete to offer seniors the best value in health care, and provides a path to sustainability for Medicare.
Serious reform proposals that would give seniors more choice and control over their health coverage have recently been offered by Rep. Paul Ryan (R-WI) and Sen. Ron Wyden (D-OR) and by Sen. Tom Coburn (R-OK) and Sen. Richard Burr (R-NC).
Instead of one-size-fits-all government plans, individual seniors could purchase of a health plan of their choosing from among competing plans. All of the programs would be structured to protect seniors who are older, poorer, and sicker. Seniors would be empowered to shop for coverage that best fits their particular medical needs. And Medicare would harness the same competitive market forces that have brought down prices and driven up quality in virtually every other sector of the American economy.
The President’s budget goes in completely the opposite direction by strengthening its centralized government command-and-control approach. Instead of instituting reforms that would address the real cost problems in Medicare, he is funneling power to a select group of unelected experts who would surely make changes that could seriously compromise access to care and innovation.
Repeal of IPAB is the first step to clear the path for the modern reforms that put doctors and patients, not government bureaucrats, in charge of decisions.
UPDATE: Members of the House Energy and Commerce Committee’s Subcommittee on Health voted on Wednesday, February 29, to approve legislation repealing the IPAB (H.R. 452, the “Medicare Decisions Accountability Act of 2011”). The vote was 17-5 in favor of the measure, with two Democrats joining all the Republicans present in sending the measure to the full committee for consideration.
Posted on Forbes: Health Matters, February 28, 2012.