Myth: Obamacare creates a secretive board of bureaucrats with power to cut off grandpa’s dialysis or grandma’s chemotherapy.

 

Bill Keller of The New York Times examines this and other myths in his article “More Myths of Obamacare.”

You don’t hear the phrase “death panels” much any more, but variations of that fallacy persist, like sightings of Sasquatch. The new law establishes an Independent Payment Advisory Board of health care professionals to propose ways to curb the growth of Medicare spending. It operates in public and makes systemic recommendations, which Congress can overrule. The board can reduce the amount Medicare pays health care providers for services and propose innovations to cut waste. It has no say in the treatment of any individual; it cannot change eligibility for Medicare, reduce benefits or raise premiums.

Q&A

1. Will the IPAB Limit My Private Health Benefits?

No, the board is not empowered to make any decisions or make any recommendations regarding private or employer sponsored health plans.

The board is designed to improve healthcare delivery. Rather than restrict the choices of either physicians or beneficiaries, its recommendations could prompt both providers and patients to pay more careful attention to the latest research findings. IPAB could propose higher payments for treatments and prevention activities that are found to be more cost-effective.  IPAB could also recommend payment methods that would reward providers for quality and efficiency and offer incentives for consumers to choose more efficient providers or procedures.

2. Will The Board Ration Healthcare?

No, The board’s proposal (or that of the Secretary) may not include any recommendation to ration health care.  The IPAB makes Congress less likely to consider blunt proposals that would significantly shift costs to beneficiaries, such as sharply increasing Medicare premiums, deductibles, and co-insurance and raising the Medicare eligibility age. The board will not change the way that Medicare pays for coverage. If the law’s cost-growth target is missed, IPAB is charged with developing proposals to produce the requisite savings while shielding Medicare beneficiaries from increases in premiums or cost sharing or reductions in benefits.

It will not ration healthcare as the Romney/Ryan plan, which would provide vouchers for Medicare that will not keep with inflation, since the inflation rate for healthcare is higher than the rate of general inflation. Once a senior’s healthcare dollar allotment runs out, (s)he must pay out of pocket.  Efforts to repeal IPAB, if successful, could lead to more draconian steps, such as replacing guaranteed Medicare benefits with a premium support system, or voucher, whose value would fall farther behind the cost of health care each year.

3. Will Bureaucrats Make Decisions To Cut Healthcare Coverage?

No, the Independent Payment Advisory Board is not a bureaucratic entity, but an expert body charged with developing and submitting proposals to:

  • Slow the growth of Medicare and private health care spending, and
  • Improve the quality of care.

Contrary to critics’ claims, IPAB will not usurp the role of Congress in setting Medicare policy, nor will it limit Medicare beneficiaries’ access to care.

The board must include physicians and other health professionals, experts in health finance, health services researchers, employers, and representatives of consumers and the elderly.  To prevent control by special interests, health care providers may not constitute a majority of the board’s membership. To prevent politicization, the board’s 15 members will be nominated by the president and require Senate confirmation. To prevent bureaucratic entrenchment, they will serve staggered six-year terms.

Starting in 2015, the board is also required to make advisory recommendations at least every other year for slowing the growth of non-federal health care spending while preserving or enhancing the quality of care.  These recommendations do not go into effect automatically and can be implemented only through discretionary actions by the federal government, state or local governments, or private-sector entities.

The board’s recommendations will go into effect automatically unless Congress passes, and the President signs, legislation to modify or overturn them.  Congress may consider, on a fast-track basis, an alternative proposal that achieves the same amount of savings; if the alternative proposal achieves a smaller amount of savings, approval requires a three-fifths vote of the Senate.  If the board recommends changes that the President supports, the President can veto legislation to block them, and as is always the case, a two-thirds vote of the House and Senate would be required to override a veto.

4. Will The Board Shift Costs to Seniors or Reduce Quality of Care?

No, the board’s proposal (or that of the Secretary) may not include any recommendation to ration health careincrease Medicare premiums or cost-sharing, cut Medicare benefits, or restrict eligibility.   It must focus exclusively on proposals for achieving savings in the payment and delivery of health care services — not shifting costs to beneficiaries.

5. How Does It Reduce Healthcare Costs?

The health reform legislation enacted in 2010 (the Affordable Care Act, or ACA) establishes the Independent Payment Advisory Board, or IPAB to help slow the growth of Medicare costs if those costs are projected to exceed a specified target level.

If the projected growth in Medicare costs per beneficiary for 2015 and thereafter exceeds a specified target level (computed as a five-year moving average), the board must produce a proposal to reduce or eliminate the difference.  If the board fails to submit the required proposal, the Secretary of Health and Human Services (HHS) must submit one instead.  For 2015 through 2019, the target growth rate is the average of overall inflation and medical inflation.  After that, for 2020 and thereafter, the target is the rate of increase in gross domestic product (GDP) per capita plus one percentage point. 

6. Does The Law Put an Inflexible Cap on Medicare Spending?

No, the required reductions may not exceed 0.5 percent of Medicare spending in 2015, 1.0 percent in 2016, 1.25 percent in 2017, and 1.5 percent in 2018 and thereafter. Thus, the target growth rate does not necessarily represent a binding cap on Medicare spending. Other cost-control measures included in the ACA will likely produce most or all of the savings needed to meet the spending target, but IPAB serves as an important backstop to contain costs if these measures prove inadequate.

Both CBO and the Administration project that the ACA’s explicit reductions in Medicare payment rates to providers will produce most or all of the savings needed to meet the law’s spending targets and that IPAB recommendations will not be needed in the next few years.

7. What Cost-Control Measures Can the IPAB Take?

The ACA puts in place several complementary approaches to slow the growth of Medicare costs.

1. Covered services are updated annually based on increases in the prices of the goods and services purchased by providers.

The ACA reduces the annual payment updates to account for improvements in economy-wide productivity in those cases where the updates did not already incorporate such adjustments.  The productivity adjustments will have a big effect over the long run, reducing the growth of payments to providers by about one percentage point per year.

The ACA also makes further reductions in the payment updates for hospitals through 2019: In addition to the productivity adjustments, it reduces overpayments to Medicare Advantage plans (the private insurance plans that participate in Medicare), and revises payments for home health care.

2. The ACA begins to restructure the health care payment and delivery system to stop paying providers for more visits or procedures and begin rewarding effective, high-value health care.

Among other steps, it reduces Medicare payments to hospitals with high readmission rates, creates new payment models to reward accountable care organizations (physician-led organizations that take responsibility for the cost and quality of care), and initiates pilot programs for bundling Medicare payments to hospitals and other medical facilities for services they provide during a single episode of care.

A Center for Medicare and Medicaid Innovation will identify and foster new ways to increase the value of care and better coordinate care for low-income Medicare beneficiaries who also are enrolled in Medicaid. The HHS Secretary has authority to implement approaches that prove successful in reducing costs and maintaining health-care quality.  The Congressional Budget Office (CBO) has not estimated savings from these provisions in the next ten years because their effects are not yet proven, but they hold promise to slow the growth of Medicare spending over the long run.

The third element of cost-control is the Independent Payment Advisory Board, which serves as a backstop or fail-safe mechanism.  Only if the first two approaches do not hold the growth of Medicare spending to the targets will the IPAB process be triggered.

8. Will The Board Need To Act Immediately to Help Keep Medicare Solvent?

No, the IPAB is prohibited from proposing cuts in hospital payments through 2019.  Congress included this limitation in the ACA because hospitals agreed to other reductions in their payment rates to help pay for health reform and to strengthen Medicare’s finances.  The measure restricting IPAB from proposing reductions in hospital payments through 2019 will have little practical significance anyway if IPAB is not required to recommend significant savings during these years.

Both the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS) and Congressional Budget Office (CBO)  project Medicare spending reductions that will not require the Board to be called upon to achieve additional savings to hit the Medicare spending target between 2018 and 2019.

However, since projections are uncertain, CBO estimates that the cost to repealing IPAB could still be about $3 billion over the next ten years.

According to the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS), Medicare spending per beneficiary is projected to grow by about 3% a year over the next ten years, well below its average of 7% a year during the previous decade and also below the projected rate of growth of private health care costs.  Both the 2011 Medicare trustees’ report and the President’s fiscal year 2013 budget project that IPAB will be called upon to reduce Medicare spending for 2018 and 2019 — but not in any other year. CBO projects that Medicare expenditures per beneficiary will grow by an average of just under 3% per year from 2015 through 2022 and that IPAB will not be needed to achieve additional Medicare savings to hit the Medicare spending target in any of those years.

9. Will The IPAB Usurp the Role of Congress?

One criticism of IPAB is that it will usurp the role of Congress and place too much power in the hands of unelected government officials, but this charge is highly exaggerated.

1. It Limits Special Interest Pressure on Congress Regarding Medicare Payment Policy:  Many times in the past, efforts to reform Medicare payments have been slowed or stopped by health-care interests that have successfully lobbied Congress to protect their income stream at Medicare’s expense.  Examples include attempts to institute such basic, common-sense reforms as use of competitive bidding for durable medical equipment and measures to reduce overpayments to private insurance plans, secure better prices for prescription drugs, and place limits on physician-owned hospitals (which typically focus on highly profitable services and healthier patients).  IPAB can give Congress political cover for making necessary but controversial decisions such as these that are opposed by special interests that can finance high-powered lobbying campaigns and make substantial campaign contributions.

2. Congress Still Has the Final Say for 3 reasons:

  1. If Congress wishes to, it can structure the Medicare program so that it meets the spending targets without having to call upon IPAB.  According to current projections, actions that Congress has already taken in enacting the ACA will do precisely that for much of the coming decade.
  2. Even if the IPAB process is triggered, Congress can always substitute its own proposals for those that IPAB recommends.
  3. The law places tight restrictions on what IPAB may propose. The board may not make recommendations to ration health care, cut benefits, increase premiums and cost sharing, or restrict eligibility for the program.

A group of over 100 health policy experts has written:

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.

As Rep. Henry Waxman (D-CA) has put it:

Congress has the final say over Medicare policy.  And Congress has the final say over all IPAB recommendations.

As Rep. George Miller (D-CA) observed:

Congress retains its role in health care — but in an improved, more efficient fashion.

10. Aren’t There Better Alternatives Out There to IPAB, such as Vouchers?

If IPAB is repealed, the alternatives are likely to be much worse for Medicare beneficiaries. For instance, proposals by Romney/Ryan, for instance would actually limit beneficiaries’ access to care.  The IPAB is an alternative to such proposals to impose across-the-board, poorly targeted cuts in payments to providers or increases in beneficiaries’ premiums or cost sharing.

IPAB Improves the efficiency of the health care payment and delivery system

According to the Center for Budget and Policy Priorities, the studies, demonstrations, and pilot projects initiated by the ACA shows that the IPAB is an important piece of the ACA’s strategy to slow the growth of health care costs through delivery system reforms, such as accountable care organizations, bundled payments, and comparative effectiveness research.

As noted above, if IPAB were repealed, Congress would be more likely to consider blunt proposals that would significantly shift costs to beneficiaries, such as sharply increasing Medicare premiums, deductibles, and co-insurance and raising the Medicare eligibility age.

Vouchers Passes Costs to Seniors: Repealing IPAB would fuel pressure to replace the current Medicare guarantee with a system of vouchers or premium support, under which beneficiaries would bear the brunt of efforts to control costs.  Premium support would replace Medicare’s guarantee of health coverage with a fixed payment, or voucher, that beneficiaries would use to help them purchase either private health insurance or traditional Medicare. It would achieve budgetary savings by limiting the growth of the voucher to less than the rate of growth of health care costs.  As a result, Medicare beneficiaries would have to pay more in premiums or receive less in benefits with each passing year — precisely the outcome that IPAB is directed to avoid.

Not only would premium support shift costs to beneficiaries, but it would deny Medicare much of its ability to serve as a leader in controlling health-care costs by depriving it of the considerable market power it enjoys based on its large enrollment.  Thanks to Medicare’s role as the largest purchaser of health care, adoption by Medicare of IPAB recommendations is likely to lead in many cases to their adoption by private insurers as well, which have proven much less effective in driving cost control on their own, and who have often looked to Medicare to institute cost-containment measures first and then followed suit.  Even if traditional Medicare were retained as an option, premium support would substantially reduce enrollment in traditional Medicare, dilute its buying power, and likely result in increases rather than decreases in overall health care costs.

11. Would The IPAB Be Subject to Corruption?

Opponents have erroneously claimed that IPAB members could accept gifts of money or property from lobbyists. The law makes clear that IPAB members are subject to the same ethical standards as officers of the executive branch — including a prohibition on receipt of gifts.  Some critics have described the salaries of IPAB’s members as “generous,” while others have argued that the board won’t pay enough to attract a sufficient number of well qualified members.   IPAB membership will be a full-time position, and members will be compensated at the rate for level III of the Executive Schedule, currently $165,300 a year.

This doesn’t mean that the IPAB has no room for improvement.  For instance, changes could be made to allow IPAB to focus less on short-term savings and more on proposals to slow the growth of costs in the long run.  Medicare has frequently been the key leader in developing innovative ways to reduce costs, such as developing the prospective payment system for hospital care that was later adopted by private insurers, so IPAB could be improved to help accelerate that trend and influence the private sector, which could help it play an expanded role in promoting payment and delivery reform throughout the health care system. Who better than a body of healthcare experts to make such recommendations?

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