Why Obamacare’s Death Panel Debate Won’t Die

Why Obamacare’s Death Panel Debate Won’t Die

iStockphoto/The Fiscal Times

The debate over the nefarious "death panel" is back.

Controversy over Obamacare’s Independent Payment Advisory Board, or IPAB – the cost-controlling group derided by critics as a veiled bureaucratic cudgel to ration care – has heated up in recent weeks. Former Democratic National Committee Chairman and presidential candidate Howard Dean has called for the panel to be abolished. Dean, a physician and former Vermont governor who now advises a Washington lobbying firm, wrote in The Wall Street Journal July 28 that "getting rid of the IPAB is something Democrats and Republicans ought to agree on."

Loathed by conservatives, some Democrats and health-care providers, the panel was set up as part of the Affordable Care Act, known as Obamacare, to suggest ways to reduce costs within Medicare. While none of the panel's recommendations are binding without Congressional review, that hasn’t quelled critics.

The heart of the IPAB's mission is to find alternatives to fee-for-service care, which many health-care economists claim is at the root of overspending in American medicine. While Dean favors a move away from fee-for-service medicine, he opined that the IPAB is not the right path to achieving that goal.

There does have to be control of costs in our health-care system. However, rate setting — the essential mechanism of the IPAB — has a 40-year track record of failure…Most important, once again, these kinds of schemes do not control costs. The medical system simply becomes more bureaucratic.

Echoing the ire doctors have with top-down, rate-setting — witness the industry's staunch resistance to the sustainable growth rate for physicians — Dean says the IPAB won't save any money for Medicare before 2021, based on Congressional Budget Office predictions.

Frustration over the panel appears to run deeper, even among those seeking ways to reduce health-care costs who take a less polarized approach. The panel may have little or no power to actually overhaul the way medical care is paid for, and its "death by a thousand cuts" approach may not lead to fundamental change.


The IPAB is composed of 15 members, including doctors, government officials and patient advocates. The panelists serve six-year terms and are paid $165,300 each.

When the IPAB was grafted into the Affordable Care Act, it was prohibited from setting policies that raised taxes, cuting benefits and increasing premiums and cost-sharing. Under complex trigger mechanisms, the board would draft proposals that would reduce costs when per-capita Medicare spending exceeded certain levels, beginning in 2015. On the major cost-cutting policies proposed by IPAB, Congress would have the power to accept or reject IPAB suggestions, so the popular idea that the panel would unilaterally ration care is false.

While debate continues over how — or if — the IPAB will fully exercise its duties (some 22 House Democrats agree with Republicans it should be abolished), the idea of an independent body providing some input on comprehensive health-care savings is not far-fetched. It's almost akin to a blue-ribbon committee used to decide which military bases to close at the end of the Cold War.


In defense of the IPAB, Peter Orszag, former White House Budget Director now a chairman of the financial strategy and solutions group at Citigroup (writing in Bloomberg View), favors keeping IPAB.

As one of the architects of the panel, Orszag said the "core rationale" of the group was to orchestrate a move away from fee-for-service medicine.

Orszag's conception of the board isn't as draconian as the picture painted by its critics. He sees the IPAB "tweaking payment systems" and determining whether other pieces of the Affordable Care Act work over time to reduce costs while enhancing care. Several experiments such as bundled payments for health episodes and accountable-care organizations that coordinate care are currently underway.

The former budget director's stance is modestly supported by the fact that Medicare spending has moderated: Costs have only climbed 2.7 percent, in nominal terms, in the most recent fiscal years. Although no one is sure if that relatively low spending will continue, the trend has provided ammunition for the backers of the Affordable Care Act who claim that the law's more than 60 provisions to address Medicare spending are slowly working.

Disagreeing with Dean on whether the board will make a lasting impact on costs, Orszag doesn't place much faith in Congress to resolve Medicare spending issues.

Dean seems to think that Congress will be perfectly able to fine-tune Medicare’s shift away from fee-for-service payment, despite there being nothing in its 50-year record of legislating on Medicare to support such a belief.

Although it's highly unlikely Congress will do anything to address the IPAB debate this year, it will fester as one of the reasons Affordable Care Act critics love to hate Obamacare.

No matter how the controversy is resolved, Congress will still have to craft fair, meaningful strategies to reduce the overall cost of care in not only Medicare, but in the private system as well. At the moment, the only clear position is that a top-down approach is becoming increasingly unpopular. Although nothing in national health-care policy is insulated from politics, an independent consensus on how best to stem the tide of growing expenditures may be best produced outside of the Beltway.