Medicare Cost Control: A Panel of Paper Tigers
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The Fiscal Times
June 9, 2011

Medicare’s 15-member Independent Payments Advisory Board (IPAB) , a key component of President Obama’s health care reform law is coming under attack from both ends of the political spectrum.

To Paul Ryan, the conservative Republican chairman of the House Budget Committee, the IPAB is “15 unelected bureaucrats who will ration Medicare."  To Max Richtman, chief executive officer of the National Committee to Preserve Social Security and Medicare, an organization which lobbies for no changes in the two big entitle programs, IPAB “turns Medicare into a scapegoat.”

Last year, in their continuing effort to discredit Obama's health care reform law, Republican attack ads convinced millions of seniors that a proposed provision to pay physicians to help seniors write advanced directives for end-of-life health care planning, which are already quite common, was actually a government plot to pull the plug on granny.

In similar fashion, the IPAB has been lampooned by critics.  The actual significance of the new board may prove to be much less than its political opponents claim, since health care experts on both the left and right say the prospective body has very little chance of blunting the upward march of health care costs. “The IPAB has both hands tied behind its back with one finger loose, which it can shake,” said Joseph Antos, a health policy expert at the conservative American Enterprise Institute.

“The IPAB is limited to dealing with the payment side as opposed to limiting benefit or increasing premiums,” agreed Timothy Jost, a professor of law at Washington and Lee University, who writes frequently on the Affordable Care Act for the pro-reform New England Journal of Medicine. “It’s a real problem.”

The independent advisory board was given the explicit task of trying to reduce the rate of growth in Medicare, the national health insurance program for seniors, without affecting coverage or quality. Unlike MedPAC, which makes recommendations for changes in Medicare reimbursement rates that Congress can ignore, the new system requires Congress to either accept IPAB cost-cutting proposals or come up with its own package of similarly-sized reductions in spending.

Critics say the IPAB would be granted far too much power , and several House Democrats have joined Republicans in support of a bill to repeal the panel.  But opponents of the new agency may be greatly overstating its potential impact on health care costs.

The Congressional Budget Office’s projection for IPAB savings gives one clue to its ineffectuality. CBO expects the cuts that result from IPAB’s work will result in less than $16 billion of savings between 2015, when its first recommendations would go into effect, and 2019. That’s less than four percent of the more than $400 billion in overall Medicare savings identified in the law, most of which will come from reduced payments to hospitals, reduced payments for drugs, and bringing payments for private insurers serving Medicare patients in line with the rest of the program. That level of savings hardly qualifies as rationing.

The viciousness of the attacks is curious given IPAB’s pedigree. The idea of creating an independent board that would come up with ways of holding down Medicare spending had been banging around Washington for more than a decade before being taken up during the last session of Congress. The idea behind it was to insulate Medicare decision-making from stakeholder pressure, whether patient and senior advocacy groups on the one side or hospitals, doctors and other providers on the other. All of those groups deploy powerful lobbyists in Washington and seem to have near unstoppable powers to influence Congress.

To get around that opposition to cost control, the Medicare commission of the late 1990s headed by then Sen. John Breaux, D-La., and then House Ways and Means Committee chairman Bill Thomas, R-Calif., proposed putting teeth in the annual recommendations made by the Medicare Payments Advisory Commission (MedPAC). The moniker given IPAB during last year’s health care reform debate was “MedPAC on steroids.”

spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.