Will the health reform law slow spending?
A newly published paper by the Urban Institute says the Independent Payment Advisory Board, with the power to dictate to Congress spending targets for Medicare, may be one of the most important cost-containment tools to come out of the health reform law.
As Stephen Zuckerman, a senior fellow for the public policy not-for-profit organization, explains, the Patient Protection and Affordable Care Act gives Congress leeway on how to achieve the advisory board’s recommended savings—but they must achieve the savings. “Congress would not have the ability to ignore the IPAB recommendations in the interest of protecting provider payments,” he says.
The advisory board could save $15.5 billion in the next decade even with some temporary limits placed on its reach (hospitals remain exempt until 2020), he said. (Read more on the advisory board here.)
Zuckerman is cautious in his analysis of cost-control provisions in the law beyond those that will cut Medicare payments. The mix of market regulation, incentives and payment demonstrations and pilots are “less well-tested and, as a result, have greater uncertainty about their likely effects,” he writes.
He also notes that some of the law’s success will depend on how consumers, commercial insurers and providers respond. Health plans in insurance exchanges have incentives to compete on cost and quality; consumers with premium subsidies through exchanges have an incentive to make subsidies go further with lower cost plans, he writes.
Commercial plans and providers may also wrestle over rates as Medicare reduces payments to providers, he notes, (Bargaining leverage after reform was the subject of a recent blog post.)
Nonetheless, the report itemized savings estimated by the Congressional Budget Office for some provisions: accountable care organizations, $4.9 billion; avoidable hospital readmissions, $7.1 billion; avoidable hospital-acquired conditions, $1.4 billion; and the Center for Medicaid Innovation, $1.3 billion.
