Healthcare Business News

IPAB not so scary?

If spending trend continues, payment board may not meet in this decade

By Jessica Zigmond
Posted: January 12, 2013 - 12:01 am ET

Opponents of the healthcare reform law's Independent Payment Advisory Board warn that its unilateral decisions could be disastrous for the industry and Medicare patients. But if Medicare spending keeps going the way it has the past few years, the board will never hold a meeting.

Unpopular in Congress and the healthcare industry, IPAB was created as a backstop measure if Medicare spending per beneficiary grows at a rate of gross domestic product per capita plus 1%. The board's recommended cuts would become law unless Congress acts to achieve the same level of savings through other means.

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A year ago, President Barack Obama's annual budget suggested changing that level to GDP per capita plus 0.5%, a provision that has not been adopted. Meanwhile, Congress has hosted a series of hearings on IPAB, and the House of Representatives voted to repeal it last year.

Shortly after Obama won re-election and Republican leaders largely resigned themselves to the Patient Protection and Affordable Care Act staying on the books, House Majority Leader Eric Cantor (R-Va.) suggested in a letter to House GOP members that an IPAB-repeal measure could resurface in 2013.

New numbers from HHS suggest there's not much to fear about the still-unnamed panel of policy experts. On the same day last week that the CMS released its annual healthcare spending statistics, a separate analysis from HHS' Office of the Assistant Secretary for Planning and Evaluation used the CMS numbers to compare annual increases in Medicare spending-per-beneficiary with GDP per capita—the very measurement used to determine whether IPAB would need to step in and make recommendations to slow the rate of growth.

The findings showed Medicare spending-per-beneficiary rose at a rate of 3.6% in 2011 (up from 1.8% in 2010), while GDP per capita rose at a rate of 3.2%. Using adjusted figures from the CMS Office of the Actuary for spending growth in 2012, the ASPE's analysis showed an even lower Medicare-per-beneficiary growth rate for that year: 0.4% compared with a GDP per-capita rate of 3.4% in 2012. Both sets of figures fall well within the target outlined in the law.

“CBO (Congressional Budget Office) said very clearly that the IPAB would not be called into play in any year in the next 10 years,” said Paul Van de Water, a senior fellow at the Center for Budget and Policy Priorities in Washington. “That's uncertain and speculative, but again these new numbers from CMS don't argue to the contrary,” he continued. “They do suggest that healthcare spending growth continues to be relatively subdued.”

Van de Water said he doesn't expect any changes for IPAB in the near future, but that the new numbers provide an opportunity to question what the future holds for the panel. “There remains the concern that Congress may not always be willing to take the additional steps that need to be taken to control cost, so the notion was IPAB was this process if Congress couldn't agree on better things,” he said. “That's also a useful approach to have in reserve.”

But Douglas Holtz-Eakin, former director of the nonpartisan CBO, said IPAB could stifle innovation and operations in healthcare. For example, he suggested, innovators who develop biologics, devices or therapies—all of which require upfront costs—might hold back under concerns that IPAB would “randomly decide” not to reimburse expensive devices that aren't used by many patients.

IPAB is a problem because it relies on provider cuts as a tool to control costs, Holtz-Eakin said. “It's a really bad set of policy in the way it's constructed,” he said. “If it's used, it's bad news."

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