IPAB Repeal: Does the Health Law Still Need A Cost Savings Board?

Efforts to repeal the Independent Payment Advisory Board (IPAB) have intensified over the last few weeks, culminating in two House committees passing a repeal bill and clearing the way for a floor vote next week. This newly aggressive effort to deep-six IPAB— a 15-person independent commission whose job, starting in 2014, is to advise Congress on how to slow Medicare cost growth—is reigniting charges of rationing, death panels and “pulling the plug on Granny.”

The repeal effort, for an advisory board whose function may be limited if Medicare cost growth continues to abate, seems timed for maximum political effect; highlighting a provision of the Affordable Care Act that conservatives use as the poster child for government over-reach and collateral damage to seniors.

Here’s an excerpt from a video series called “Ask Peter” released by Rep. Peter Roskam (R-IL) that “educates” his local constituents about IPAB:

“In a nutshell, it’s 15 unelected bureaucrats who have one job and that is to push cost out of Medicare. While that sounds nice, it will have a direct impact on reimbursement rates which will ultimately impact how doctors practice medicine.

“There was an expert on IPAB that came in and testified before a Committee that I was present, and he said this: IPAB will absolutely restrict a doctor’s ability to administer healthcare. And he went on to say that IPAB will lead to rationed care.”

It’s clearly necessary to revisit the real facts about IPAB and shed some light on Pete’s and his fellow scaremongers’ rationing charges:

1) IPAB’s cost-cutting recommendation process isn’t triggered unless Medicare spending grows faster than the gross domestic product (GDP) plus 1 percent. As Sarah Kliff explains in Ezra Klein’s WonkBlog, “For a while, keeping Medicare cost growth to GDP plus 1 percent was thought to be absurd. Medicare cost growth vastly outstripped the rest of the economy.” But in the last two years, she writes, “health-care costs have grown more slowly than any other point in the past five decades. They rose 3.8 percent in 2009 and 3.9 percent in 2010.” The GDP, meanwhile, grew at 4.2%.

2) The board, which will include health policy experts and consumer representatives, has no authority to limit Medicare benefits; for example, it can’t force Medicare to stop paying for cancer drugs or cut off life-saving treatments to the elderly.

3) The board cannot increase beneficiaries’ out-of-pocket costs.

4) The board is explicitly barred from “rationing” care.

5) IPAB can propose legislation that affects provider payments—for example, adopting payment policies that reward quality and efficiency

6) If Congress fails to enact IPAB’s proposed recommendations, it must come up with its own legislation that achieves the same cost savings.

7) If Congress fails to enact IPAB’s recommendations and fails to come up with it own cost saving measures, then it can decide to let costs continue to rise unchecked. The catch is that this opt-out decision must be approved by three-fifths of the Senate.

8) If this vote fails, then the Secretary of the Department of Health and Human Services must implement IPAB’s recommendations.

9) This action cannot be overruled by the judicial nor the executive branches

The current repeal effort was, until recently, billed as a bi-partisan movement. The board’s ability to bypass Congress if it fails to act is what persuaded some 20 Democrats including Barney Frank (D-MA), Allyson Schwartz (D-PA), Pete Stark (D-CA), the ranking Democrat on the House Ways and Means Health Subcommittee, and Frank Pallone (D-NJ), the ranking Democrat on the House Energy and Commerce Health Subcommittee to sign on to the repeal bill.

As Pallone tells Forbes; “IPAB, like other independent commissions, encroaches upon legislative authority.” Stark, quoted in the same article says, “Congress has always stepped in to strengthen Medicare’s finances when needed. I see no reason why Congress would or should hand that authority over to the executive branch. To do so undermines the separation of powers.”

But as Kevin Outterson explains in the Incidental Economist, the Affordable Care Act created IPAB precisely because Congress has not always acted to strengthen Medicare’s finances (the continual punting of the “Doc Fix” is one recent example):

“Medicare is beset by special interest groups that fight for the continued flow of funds to their narrow range of CPT or DRG codes, without much real concern for the overall health of the program or population. Some Medicare cuts become a political quagmire (DME [durable medical equipment] competitive bidding demonstration projects come to mind) or result in political horse-trading without a coordinated plan.”

Outterson continues, “This is why Congress created the IPAB – choosing to have their hands tied like Odysseus, lest they respond to a Siren song by lobbyists.”

Interestingly, in recent days the House Democrats have mostly abandoned their support for IPAB repeal. That’s because in order to offset the $3 billion that the Congressional Budget Office projects repeal will add to the budget deficit, Republicans are now including malpractice reform to the proposed legislation. They are calling for a cap on punitive damages in health care lawsuits to $250,000 or two times the amount of economic damages awarded, whichever is greater. Tort reform should delight the American Medical Association, which already strongly opposed IPAB and was lobbying for repeal, but adding it to the bill was a deal-breaker for the Democrats. Barney Frank told TPM that the repeal bill had lost his support–and likely that of other Democrats; “He said the two measures are unrelated and decried the move to link them ‘an overreach to appease the right wing.’”

Perhaps the Democrats have also come to realize that jumping on the repeal bandwagon will never end well. They may have thought that showing bipartisan support for an effort to rid the health care law of an unpopular—and maybe unneeded—provision would signal flexibility to voters. But conservatives don’t just want to repeal IPAB; they want to undo all of the health reform law and are using this one small provision to rally their troops as the election approaches and the Supreme Court gets ready to start hearings on the individual mandate and other parts of the ACA.

Their righteous outrage at this “rationing board” is especially galling because in the past, Republicans have embraced and even proposed boards similar to IPAB. For example, Outterson cites the example of the Defense Base Realignment and Closure Commission (BRAC)—an independent board that since 1990 has been evaluating military base requirements and makes recommendations to the President about which ones to close. If the President disagrees with the recommendation, it is sent back to the BRAC. If the President agrees with the recommendation, it goes to Congress. “The Secretary of Defense is then required to follow the BRAC report unless Congress passes a joint resolution of disapproval within a limited time under pre-defined House and Senate rules…The reports have been implemented every time.”

And the idea of an independent board that conducts cost-effectiveness and quality research and then drafts policy and payment guidelines—separate from Congress—is actually an idea that originated in the Republican-sponsored Patient’s Choice Act of 2009. This legislation, sponsored by Rep. Paul Ryan and others, created two oversight boards; the Health Services Commission, and a Quality Forum and included a subcommission comprised of “15 individuals nominated by private sector health care organizations,” with representatives from the health insurance industry, provider groups, non-profits and rural health organizations. According to Don Taylor, also writing for the Incidental Economist, “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)…”

Taylor wrote more recently; “IPAB is a prime example of a policy idea that ended up in the Affordable Care Act (ACA) that had its genesis in a Republican sponsored bill, or line of policy thought. It is an example of something that appeared to be bipartisan in policy terms (the need for boards insulated from Congress) that became politically toxic once it appeared in the ACA.”

Support for repeal—especially from Democrats—could also stem from reasoning by some legislators that since health care costs are now rising more slowly than the gross domestic product (GDP), the IPAB is irrelevant. They argue that fundamental changes already taking place in pricing, payment reform and care delivery are responsible for the slowing we’ve seen in the rise of health care costs. But this could be short-sighted. There is also evidence that the weak economic recovery is playing a role. More people are unemployed, uninsured or have insurance policies with larger co-pays and deductibles. They hold back on going to the doctor, buying medication and undergoing outpatient procedures. As Jack Rowe, former CEO of Aetna and now a professor of health policy at Columbia University’s Mailman School of Public Health asks, “Is this the new normal or an effect of the recession?” His answer; “Most people I know believe we will have a return to the increases we’ve seen in the past.”

If that is even partially the case, then the argument that IPAB is irrelevant doesn’t hold much weight.

In the end, this is not the time to repeal IPAB. This is not the time to scale back on any of the health law’s provisions or to dilute federal power to enact reform. Instead, it is time for the Obama administration and the ACA’s supporters to do a better job educating the public about the law’s benefits and dispelling the rumors and threats spread by its opponents.