If Not IPAB, Then What?

The Affordable Care Act’s Independent Payment Advisory Board is once again being targeted by lawmakers.

IPAB is a 15-member panel of health care experts established under the ACA to make cost-cutting recommendations for Medicare annually if program spending exceeds a target growth rate. The recommendations would take effect unless Congress develops an equivalent alternative.

As with any legislation that seeks to change the ACA, there is no guarantee that President Obama will sign it. However, with Democratic support for this measure, there might be enough votes to override Obama’s veto. The measure currently has 235 bipartisan cosponsors.

As it stands, IPAB is one of the few bodies that can act to limit Medicare’s spending growth. What other options are out there? This edition of “Road to Reform” takes a look.

For more information on IPAB, see today’s news story.

Premium Support

One idea that has gained traction among members of the GOP is defined contributions, alternatively known as “premium support” or “vouchers,” depending on your political bent.

According to the Heritage Foundation, the premium-support model “would be based on a defined government contribution to a beneficiary’s chosen plan, and it would be characterized by predictable and stable financing,” similar to the Federal Employees Health Benefits Program.

Such an idea has been featured in several recent GOP budget proposals and most recently was included in a budget proposal unveiled by House Budget Committee Chair Tom Price (R-Ga.) in March. The idea also has long been put forth by Price’s predecessor, Rep. Paul Ryan (R-Wis.).

The Heritage Foundation argues that the premium-support model boasts “several attractive features,” including:

  • A wide variety of health plans from which to choose;
  • Consumer protections equal to or greater than those enjoyed by lawmakers, federal workers and federal retirees;
  • Little “bureaucracy and red tape”; and
  • Significant “flexibility” in how to administer the program.

However, not everyone is on board. For example, Peter Orszag, vice chair of global banking at Citigroup and former director of the White House Office of Management and Budget, has maligned the idea of premium support. In 2012, after Ryan included the proposal in a GOP budget plan, Orszag called premium support a “falsely attractive approach that appears to save tons of money fast, even though mostly it’s just by shoving the dirty laundry under the bed than actually putting it through the washer.”

Opponents of premium support argue that it saves money by shifting part of the cost of care onto Medicare beneficiaries. Although supporters say this “skin in the game” will help control costs, opponents say it would lead to higher premiums and make it easier for plans to “cherry pick” the healthiest beneficiaries.

‘Doc Fix’ To the Rescue

Ironically, one of the other alternatives to control Medicare spending was included in legislation that received the most bipartisan support of any bill in recent memory: HR 2, which permanently replaced Medicare’s sustainable growth rate formula. The measure, called the Medicare Access and Children’s Health Insurance Program Reauthorization Act, was approved by a 392-37 vote in the House and a 92-8 vote in the Senate.

John O’Shea, a senior fellow at the Heritage Foundation and a practicing surgeon, said the SGR legislation includes “a lot of incentives in there to … move into alternative payment models.” He added, “I think if these models are designed and implemented correctly, they certainly can do a lot to reduce spending in Medicare.” And while “it’s kind of early yet to make any conclusions” on such efforts, O’Shea said he “think[s] they certainly show some promise.”

For example, the measure includes provisions that would:

  • Provide a 0.5% annual raise through 2019 for providers who participate in Medicare before transitioning to an incentive-based payment system; and
  • Encourage providers to participate in alternative payment models focused on patient outcomes, with providers participating qualifying models receiving a 1% annual rate increase beginning in 2026.

Of course, if those ideas sound familiar, perhaps that’s because many similar initiatives are ensconced within the ACA.

Does It Really Matter if IPAB Goes Away?

Meanwhile, some have suggested that eliminating IPAB is a matter of semantics. After all, IPAB doesn’t technically exist yet. The panel’s 15 members have not been named. Further, Medicare spending, at least so far, has not grown quickly enough for it to trigger any action from the (as yet non-existent) panel.

Even estimates of IPAB’s sole purpose — slowing Medicare spending — show less confidence. In 2009, the Congressional Budget office estimated that IPAB would result in $28 billion in savings by 2019. However, current projections don’t have IPAB garnering any savings until 2022, at the earliest.

Despite that, O’Shea said it is “reasonable to think that [IPAB] will be triggered,” noting that recent data have indicated the slowdown in health care spending might be coming to an end. And because of that, O’Shea argues that eliminating IPAB is imperative, for the same reason that the SGR ultimately was dropped. He said, “The idea of spending targets is a bad idea … SGR’s proven that. Global spending targets along with the correction being reducing prices just doesn’t work,” adding, “IPAB is … extremely similar to SGR, even in terms of tying the spending targets to GDP.”

IPAB Has Its Supporters

Despite bipartisan support for eliminating IPAB, not everyone agrees getting rid of the panel is a good idea.

For example, Orszag recently penned an opinion piece in support of IPAB. In it, he argued that data indicating the possible end of the slowdown in health care spending growth is exactly the reason IPAB should be kept around. And while he writes that “it’s crucial to move more forcefully away from fee-for-service payments and toward payments that reflect the value of care” — those same ideas that exist in the SGR bill — he argues that IPAB could help, too. IPAB could make “Congress … more likely to act if members know that failing to do so means the IPAB will step in,” he writes. Further, he expresses doubt that Congress will “become much more adept at complicated payment reform than it has ever been in the past.”

Meanwhile, Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities, has called repealing IPAB “unwise.” Countering criticism that IPAB is an unaccountable, unelected board of bureaucrats, Van de Water notes that “Congress can modify IPAB’s proposals through legislation.” Further, he calls IPAB an “important backstop” to the alternative payment models that seek to control costs, noting that if those methods “fall short,” IPAB can step in.

Around the Nation

Making mergers. There’s been more attention in recent weeks on mergers between health insurers. This week, both CNBC’s “Trading Nation” and the New York Times‘ “Dealb%k” have examined the ACA’s role in health insurance consolidation.

Leaving a legacy. The New York Times‘ Michael Shear looks at President Obama’s legacy, and how the upcoming King v. Burwell decision could affect it.

Talking prevention. NPR’s “Shots” talks to Michael LeFevre, a primary care physician who chaired the U.S. Preventive Services Task Force for 10 years, about how the ACA “thrust [its members] into the political hurly-burly” by requiring that anything it scored with an “A” or “B” grade must be covered by health plans with no out-of-pocket costs. 

Related Topics

Health Care Costs Medicare Road to Reform The Health Law