The August agreement to raise the debt ceiling puts intense focus on the new congressional super committee and its charge to cut federal spending. The 12 lawmakers on this panel will have no choice but to recommend changes in Medicare, and they should start by repealing the harmful and misguided rationing board created in the new health law.
President Obama’s health overhaul legislation created the Independent Payment Advisory Board (IPAB) in order to take difficult decisions about cutting Medicare spending out of the legislative process. In so doing, it gives unprecedented authority to a panel of unelected technocrats to make payment policy involving hundreds of billions of dollars and impacting tens of millions of seniors.
The decisions by this board inevitably will force physicians to be accountable to the bureaucracy rather than to patients and distort their decisions about providing the medical care that is in the best interest of their patients. The IPAB is to be composed of 15 experts to be confirmed by the Senate who will have the authority to make cuts in Medicare payments, starting in 2014, if per capita spending exceeds defined targeted rates.
The power is unprecedented because there is to be no judicial, administrative, or realistically, congressional review over the board’s decisions.
The law does give Congress a route to override the IPAB’s recommendations, but it sets up timelines that are unrealistic and vote thresholds that are so high that, in practice, it would be difficult for Congress to override the board’s recommendations. If Congress does not approve, modify, or reject the IPAB’s recommendations in the required timeframe, its cuts automatically will go into effect, giving the IPAB’s decisions the force of law.
A powerful board whose hands are tied
The unelected board’s decisions ultimately will determine whether millions of seniors have access to the care they need. They have the power to ratchet down payments, which would limit patients’ access to physicians, medicines, and other treatments. The IPAB creates one more hurdle for companies creating new drugs and medical devices, and this threat inevitably will stunt innovation and development of new and better medical technologies.
The IPAB is a blunt instrument that does not have the tools to address the real drivers of Medicare spending growth, primarily an outmoded payment model that rewards inefficiency and waste.
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 is unlikely to score 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 to beneficiaries.
And the IPAB is even limited in the kind of spending it can cut. Between 2014 and 2020, the health law directs the IPAB to achieve its targets through payment reductions primarily in Medicare Advantage, the Part D prescription drug program, 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.
Opposition to IPAB Grows, and Better Solutions Exist
Opposition to the IPAB crosses party lines. Rep. Frank Pallone (D-NJ), the top Democrat on the Energy and Commerce Health Subcommittee, said recently he has no interest in defending the board. “I’ve never supported it, and I would certainly be in favour of abolishing it.”
The more people learn about the IPAB, the more they want to see it repealed and replaced with better solutions. What is needed is a plan that will achieve the goal of moderating Medicare spending, but in a way that is not destructive to patient access to care, to quality, and to innovation.
We have a working model for a solution in the popular Medicare prescription drug program, in which private companies compete to offer prescription drug benefits to seniors. This is a market-based solution – not a centrally-planned solution like IPAB.
Created in 2003, Medicare “Part D” provides a subsidy to allow seniors to select the drug plan that best suits their needs from a range of choices offered by private plans which are competing on benefit design and price.
Medicare Part D is a proven model for reducing costs to both the government and seniors. The CBO found in 2011 that the costs of benefit payments are 46% lower than it initially projected they would be by this year. Meanwhile, the average monthly beneficiary premium for Part D coverage will be $30 in 2011, far below the $53 forecast originally, and an increase of only $1 over the 2010 average premium of $29.
Empowering Patients, Not Bureaucrats
Spending on Medicare and other entitlement programs must be contained. The question is whether it will be through IPAB and the rationing built into the president’s health care law, or through a market-based solution that uses competition to reduce health costs, as in Medicare Part D. The president takes a top-down approach that puts a small number of independent experts in charge of decisions that will impact tens of millions of seniors and progressively limit their access to care.
IPAB is the wrong approach. A smarter approach should be a Part D model that to cultivates individual choice, forcing providers to compete to offer seniors the best value in health care, and providing a path to sustainability for Medicare.
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.
Do we trust doctors and patients with decisions about their own care, with new incentives to be partners in managing their health spending? Or do we entrust those decisions to a government-appointed panel of experts in Washington?
It is a clear choice.