The IPAB punching bag

Amid all the anger aimed at the Patient Protection and Affordable Care Act, no aspect of that wide-ranging statute has drawn more ire than the Independent Payment Advisory Board.

In its short non-existence (President Barack Obama has yet to name his appointees to the 15-member panel; Speaker of the House John Boehner and Senate Minority Leader Mitch McConnell officially notified the president in May that they won't bother), its severest critics have blasted the cost-control board as a “death panel” designed to deny elderly patients access to Medicare services. The inflammatory charge played a major role in helping Republicans win back control of the House of Representatives in the 2010 midterm election.

The concept behind IPAB is relatively simple. Beginning in 2015, if per capita spending on Medicare beneficiaries grows faster than gross domestic product plus 1%, the panel must offer cost-control measures to bring down the growth rate. Congress can either substitute its own cuts or accept the IPAB recommendations, which automatically go into effect if Congress does its usual—that is, nothing.

From the bill's outset, cynical observers dismissed IPAB's ability to shape Medicare's cost curve. They pointed to the controls slapped on physician payments in the late 1990s, which Congress overrides every year with the so-called “doc fix.”

Still, IPAB bashing remains a popular sport for politicians and interest groups, including major healthcare providers. Earlier this year, the American Medical Association endorsed bipartisan House legislation that would repeal IPAB, citing its “power to make indiscriminate cuts.”

The American Hospital Association chimed in with a February endorsement of a Senate IPAB repeal bill “because its existence permanently removes Congress from the process of making decisions regarding Medicare payment.” This blast came despite reform architects having included an exemption for hospitals until 2020, a carve-out specifically designed to ensure the AHA's endorsement of the ACA.

More recently, IPAB has picked up some liberal enemies. Former Vermont Gov. Howard Dean, now a senior consultant to a major lobbying firm, blasted the panel as “essentially a healthcare rationing body” that would set rates so low for physicians and hospitals that “no doctor or hospital will perform them.” Responding at the end of July, former Office of Management and Budget Director Peter Orszag attacked Dean for fundamentally misrepresenting the board's authority.

“The legislation specifically states that the board is not allowed to make any recommendations that would ration care,” Orszag said. IPAB's recommendations, should they become necessary, will more rapidly move the Medicare payment system away from fee-for-service toward the accountable care and bundled-payment models now being tested with some success across the country.

Of course, given the current modest trajectory of healthcare spending, the controversy swirling around IPAB would appear to be nothing more than inside-the-Beltway positioning for the next election cycle. Healthcare hasn't grown fast enough to trigger an IPAB response for the past three years and by all indications will stay below the target again this year.

But the law remains on the books, and at some point the White House will have to make appointments. Will the IPAB be pressed into action once the insurance expansion kicks in?

The nation should once again look to Massachusetts. Last year, in an update to its pioneering healthcare reform law, the Bay State created an 11-member Health Policy Commission to set annual benchmarks for healthcare cost growth. It will ask providers to submit “performance improvement plans” if their costs grow more rapidly than the benchmark. Its first report is due in mid-2014.

The Massachusetts insurance expansion went off largely without a hitch and now more than 96% of residents have coverage—a model for the entire nation. If the Health Policy Commission doesn't have to act because cost growth remains tame, or high-cost providers accept its verdict on acceptable plans, the national reform law's defenders may have a powerful rejoinder as the midterm election approaches and the political talk once again turns to the death panels set up by IPAB.

Merrill Goozner is the editor of Modern Healthcare

Follow Merrill Goozner on Twitter: @MHgoozner