A service of the California Health Care Foundation

Some Fear IPAB Will Be Error of Commission

A pair of national magazine pieces this month spotlighted challenges within the Senate and suggested that the chamber suffers from “broader dysfunction” and more “paralysis” than ever before.

Critiquing Congress isn’t a new phenomenon, but both articles — which were much buzzed-about in the nation’s capital — underscored that senators generally are voting in party lock-step, hesitant to cross the aisle on big-picture legislation and willing to push off the most-taxing issues (like spending cuts) to future sessions. The possibility that Democrats will lose at least a handful of Senate seats this fall might create further gridlock.

Even the most budget-conscious senators seem hesitant to make tough fiscal decisions that could affect their constituencies.

Sen. Kent Conrad (D-N.D.), chair of the Senate Budget Committee and a noted fiscal conservative, in 2009 held up health reform legislation over cost concerns. However, Conrad reportedly agreed to allow budget reconciliation measures for health reform — a crucial provision for the bill’s ultimate passage — if the law boosted Medicare reimbursements for providers in “frontier states” like North Dakota.

Against this backdrop, Congress has faced lingering questions about the cost of the health overhaul and lawmakers’ willingness to tamp down future health spending. While Medicare trustees recently reported that health reform extends the life of the Medicare Trust Fund by a dozen years, those projections rely on the Senate carrying out productivity cuts or defaulting to recommendations from the newly created Independent Payment Advisory Board (IPAB).

CMS Chief Actuary Richard Foster disputed the trustees’ report and, in an unprecedented development, released alternative projections that are significantly more pessimistic, warning that Congress is unlikely to make productivity adjustments. Lawmakers have a poor recent track record of following through on called-for Medicare spending reductions; Congress annually pushes off mandated cuts to physician payments, Foster and other critics have noted.

Congress Accepts Guidance, but Keeps Authority

Congress currently receives non-binding guidance on payment decisions from the Medicare Payment Advisory Commission, better known as MedPAC and a potential forerunner to IPAB. Created in 1997 to consolidate two earlier advisory committees on Medicare hospital and physician payment, MedPAC is “sometimes inappropriately dismissed because Congress does not appear to act on its annual payment recommendations,” says Alec Vachon, a former Senate Finance Committee staffer. However, that perception reflects a contrast between MedPAC’s routine reports and Congress’ “spasmodic” approach to making Medicare policy, Bruce Vladeck, a former administrator of Medicare and Medicaid, tells California Healthline.

Vladeck notes that by offering non-binding recommendations, MedPAC has earned “credibility” with Congress and CMS and can float ideas outside of the political conversation that eventually gain traction, like pay-for-performance reimbursement. Many structural ideas proposed by MedPAC eventually found their way into the health care overhaul, such as accountable care organizations and payment bundling.

IPAB Represents New Front for Cost-Control …

IPAB, slated to launch in 2014, would provide a check on Medicare spending. Ratcheted down from its early and politically problematic conception as “MedPAC on steroids,” with broader rate-setting authority, the board still represents “the most aggressive effort lawmakers have ever made to control Medicare’s costs,” says Washington Post columnist Ezra Klein.

Beginning in 2014, IPAB must recommend Medicare spending cuts if the program’s growth rate exceeds the average of the consumer price index and the Medical Care CPI. Barring congressional action to make equivalent cuts, IPAB’s recommendations would become law. The board would exempt decisions affecting hospitals and other provider groups until 2020, but the Congressional Budget Office estimates that IPAB still could hold down Medicare spending by $15.5 billion between 2015 and 2019, according to a new report from Stephen Zuckerman of the Urban Institute.

… and Debate Over Political Role

Lawmakers rarely cede significant authority to an outside commission, although the strategy has been employed to ensure a wave of politically risky military base closures. Given that members of Congress represent vocal constituencies like hospitals and physicians, many observers wonder if lawmakers will ultimately retain their influence over health care spending and attempt to modify IPAB’s authority before the board takes effect.

A group of high-ranking Senate Republicans last month introduced a bill to abolish IPAB, saying that “unelected, unaccountable bureaucrats” should not be given such significant power over Medicare. Even some who supported the broader health reform law say that IPAB must be repealed.

Rep. Pete Stark (D-Calif.), who voted for the overhaul, says that the board is a “dangerous provision” that “sets [Medicare] up for unsustainable cuts” and endangers patients’ health. “I intend to work tirelessly to mitigate the damage that will be caused by IPAB,” Stark adds.

More Legislation May Be on the Table

Writing on The Health Care Blog, health care consultant Roger Collier suggests one potential future for IPAB: that Congress will probably follow the board’s recommendations and “occasionally loose[n] payment restrictions” to ease beneficiaries’ access to care, which would produce some expected savings, but “only a fraction of the CBO estimate.”

Conversely, Devon Herrick of the National Center for Policy Analysis tells California Healthline that IPAB could force Medicare rate cuts that make providers hesitant to care for beneficiaries and leave the elderly and disabled “in the same position as Medicaid enrollees — who often are forced to get all their care at community health centers and safety net hospitals.”

Between stakeholders’ concerns and lawmakers’ hesitation, more legislation may be on the way. The reform law took a “spaghetti approach to cost control,” noted Jonathan Gruber, an economist at MIT. Lawmakers essentially threw “a bunch of stuff against the wall [to] see what will stick” and need to revisit cost cuts like IPAB in “health care, round two.”

While experts and lawmakers debate the role of IPAB in curbing health spending, here’s a look at what else is happening in health reform.

Insurance Industry Pushback

  • A newly formed group of small and midsize insurance companies — called the States Alliance for Balanced Insurance Regulation — has begun opposing federal regulation of the insurance industry and lobbying against provisions of the federal health reform law that boost federal oversight of the industry. SABIR plans to target the Office of Consumer Information and Insurance Oversight, an HHS department created under the reform law that is tasked with setting rules for insurers that participate in state-based insurance exchanges (Reichard, CQ HealthBeat, 8/11).
  • Last week, America’s Health Insurance Plans circulated an issue brief urging the Obama administration to reinterpret the federal health reform law’s “grandfather” provisions to allow consumers to retain their current health insurance and better manage rising premium costs. Under grandfather status, health plans in place when the overhaul took effect in March are exempt from certain mandates included in the law, such as offering full preventive care coverage and creating processes for enrollee appeals (Reichard, CQ HealthBeat, 8/13).

Questions Over Reform Costs

  • A recent Medicare trustees report shows that Part D, the program’s prescription drug benefit, has cost much less than estimated five years ago. Some experts have said the report could mean that the recently enacted federal health reform law also could cost less than budget expectations. Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities, said the report could foreshadow that the health reform law will end up costing less than projected because the state exchanges rely on competition between private insurers to keep premium costs down (Dinan, Washington Times, 8/16).
  • As more hospital systems and physician practices strive to form accountable care organizations in an attempt to reduce health care costs, some experts have argued that the new care model could lead to network monopolies and subsequently make services more costly. Under ACOs, hospitals and physicians join together to increase efficiency by integrating and coordinating patient care. The federal health reform law stipulates that Medicare reward ACOs that improve the quality of care for patients while reducing costs (MacGillis, Washington Post, 8/16).

Eye on the States

  • Last week, the Health IT Policy Committee‘s enrollment work group recommended that states follow the lead of federal agencies as they work to set up electronic health insurance exchanges under the health reform law. Work group members noted that the Department of Homeland Security, the Internal Revenue Service and the Social Security Administration all use Web services or electronic interfaces to verify eligibility for various programs (Mosquera, Government Health IT, 8/16).
  • Numerous colleges and universities in Maryland will share $2.3 million in federal funding to train nurses and geriatric care specialists. The funding is part of a nearly $160 million training initiative included in the federal health reform law dedicated to educating, training and increasing diversity for nursing and geriatric care programs. The recipients include Johns Hopkins University ($840,000), University of Maryland ($378,000), University of Maryland School of Nursing ($249,000), Coppin State University ($374,000) and Salisbury University ($14,000) (Graham, Baltimore Business Journal, 8/10).

Categories: Health Care Costs, Road to Reform, The Health Law

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