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April 27, 2011

Fact vs. Fear-mongering About the Independent Payment Advisory Board

Maggie Mahar

A headline in last week’s New York Times suggested that, at last, conservatives and liberals have found an issue that they can agree on: “Obama Panel to Curb Medicare Finds Foes in Both Parties,” the story announced, referring to the Independent Payment Advisory Board (IPAB) created by the Accountable Care Act (ACA) to monitor and curb Medicare inflation. The article quotes both Democrats and Republicans warning that the panel is, in fact a “rationing board” made up of “unaccountable bureaucrats” who threaten to “endanger patient care.” While spotlighting the board’s opponents, the Times quotes only one Democrat who supports the bill: Senator John D. Rockefeller IV, (D, W.VA), the chief architect of IPAB. One is left with the impression that legislators have found a righteous bipartisan cause, and that the IPAB is likely to be repealed.

Then, there are the facts:  Exactly four Democrats have signed on to Rep. Phil Roe's (R-Tenn.) IPAB repeal bill:  Reps. Shelley Berkley (D-Nev.), Michael Capuano (D-Mass.) Larry Kissell (D-N.C.) and Rep. Allyson Schwartz (D-Pa)  Meanwhile, in his recent speech on the deficit, President Obama made it clear that that he has no intention of eliminating the board; to the contrary, he hopes to strengthen IPAB.. Any legislation that attempts to kill or seriously weaken the Independent Payment Advisory Board faces a certain veto. In other words, reports that IPAB is about to be repealed are greatly exaggerated—as are suggestions that IPAB poses a threat to Medicare beneficiaries.

For one, the Affordable Care Act specifically prohibits IPAB from making recommendations that “cut benefits.” Secondly, as Joe Baker, president of the New York-based Medicare Rights Center told Fox News last week: “IPAB is a backstop. It's something that will be used if these other initiatives” in the ACA—“quality initiatives and better drug cost controls don't work” to rein in spiraling costs. “There’s some good consumer protections built into the IPAB," Baker added.

White House Deputy Chief of Staff Nancy-Ann DeParle explains: “IPAB’s recommendations. . .would only take effect if Medicare costs grow too fast. We’re already implementing a series of reforms that will improve the quality of care and reduce costs.”

For example, under the ACA, Medicare is phasing out $132 billion in overpayments to Medicare Advantage insurers over a period of ten years; spurring hospitals and nursing homes to become more efficient by trimming annual increases in Medicare reimbursements by 1%, or $196 billion, cutting payments to hospitals with the highest rates of medical errors and infections by another 1%, and refusing to pay for preventable readmissions. As a result, the Kaiser Family Foundation points out:  “CBO projects that Medicare spending will be within IPAB targets through 2021.”

How the Mainstream Media Confuses the Public

Nevertheless, because the Times is so influential, the article declaring that IPAB faces “Foes in Both Parties” has spawned similar stories both in the blogosphere and in newspapers nationwide. Just a few days ago, a Washington Post editorial warned of a “bipartisan” move “to hobble the plan.”  As proof, the Washington Post editorial linked to the Times piece, as did a number of blog posts. 

The Times piece has drawn attention, in part because, even though it is positioned as a news story, it takes a strong editorial stand. The point of view is established in the third paragraph: “Opponents fear that the panel . . .  would usurp Congressional spending power over one of the government’s most important and expensive social programs. In general, federal courts could not review actions to carry out the board’s recommendations.”

“Usurp”—“to seize and hold (a position, office, power, etc.) by force or without legal right”—this is a pretty strong verb. In the same breath, we are told, the courts will have no jurisdiction over the panel’s decisions. At this point, a reader may well think: “No wonder Democrats and Republicans have joined forces on this issue—clearly IPAB must be stopped.”

What bothers me most about articles like this one is that, invariably, they are packed with false statements that are bound to mislead the public. Most readers don’t know much about the Independent Payment Advisory Board, why it was created, the rules that govern its operation, and what drives the opposition. Below, I try to fill that gap by offering a primer on the IPAB.  But first let’s clear away some of the most common misconceptions that pop up in the Times story.

       Fear-Mongering vs. Fact about IPAB

Fear-Mongering: “Mr.:  Obama’s proposal would allow the board to “impose more price controls and more limitations on providers, which will end up cutting services to seniors.” (Rep. Paul D, Ryan Republican of Wisconsin.

Fact: The Accountable Care Act specifically prohibits IPAB from recommendations that would: 1) ration health care; 2) raise revenues or increase Medicare beneficiary premiums or cost sharing; or 3) otherwise restrict benefits or modify eligibility criteria. In other words, IPAB cannot “cut services.” 

Fear-mongering: The president’s proposal “punts difficult decisions on health spending to an unelected, unaccountable board of bureaucrats.” (Senator John Cornyn, (R. Tex). . .Congress should not “delegate Medicare decision-making to 15 people appointed by the president.” (Rep. Paul D. Ryan, R. Wis.)

Fact:  The board will not be made up of “friends of Barack.” As the Kaiser Family Foundation (KFF) explains in a report issued earlier this month: The members of the board are to be “appointed by the President and confirmed by the Senate. . . The President is required to consult with Congressional leadership in making 12 of the 15 appointments. He is to consult, concerning three appointments each, with the Majority Leader and Minority Leader of the Senate, and the Speaker and Minority Leader of the House.

“The statute sets out an array of qualifications for Board members: expertise in health care, economics, research and technology assessment, experience with employers and third-party payers, and consumers,” KFF adds. In other words, these are health care experts, not bean-counting “bureaucrats.”

Despite charges that it is “unaccountable,” IPAB’s recommendations will be open to public comment:  “A Consumer Advisory Council, composed of 10 members appointed by the Comptroller General, one from each of the 10 HHS regions, will advise IPAB on the impact of payment policies on consumers. The Council is required to meet at least twice a year, and its meetings must be open to the public.” (By contrast, as I have explained in the past, the RVS update committee, or “RUC,” that currently sets Medicare fees for physicians, flies under the radar, meeting behind closed doors and keeping no minutes. The RUC is truly “unaccountable”, and typically, more than 90% of the RUC's recommendations are accepted and enacted by CMS).

Finally, the Medicare Payment Advisory Commission (MedPAC), a non-partisan group that has won widespread respect in Washington, also will be looking over IPAB’s shoulder: “IPAB must submit its draft recommendations to MedPAC,” and “MedPAC will comment on those recommendations.”

Fear-Mongering: “In its effort to limit the growth of Medicare spending, the board is likely to set inadequate payment rates for health care providers, which could endanger patient care.”  (Rep. Pete Stark, D-CA) The Times seems to agree. The piece ends by belatedly acknowledging that IPAB cannot cut benefits or hike co-pays and deductibles, but then adds: “This increases the likelihood that the board will try to save money by trimming Medicare payments to health care providers.”

Fact: The law prohibits IPAB from making recommendations affecting certain providers, including hospitals anytime before 2020. Hospitals are exempted, along with nursing homes, and hospices  because, as Washington & Lee health law expert Timothy Jost explains, “they already are  singled out by the ACA for extraordinary cuts.”  (As  noted above, annual increases in Medicare reimbursements to these institutions will be cut by 1% a year for 10 years, part of an effort to motivate these institutions to cut their costs by doing a better job of avoiding errors and coordinating care. MedPAC research shows that when hospitals are under some financial pressure, they can and do cut waste.)

In the report released earlier this month, KFF suggests that these exemptions leave “Medicare Advantage (MA), the Part D prescription drug program and Skilled Nursing Facility services as the likely focus of IPAB’s attention.”  We know that under the ACA, Medicare will be cutting back payments to MA insurers who are not providing good value, and as Naomi recently observed on Health Beat,  President Obama seems to be putting the idea of letting Medicare negotiate for lower drugs prices “back on the table. ” In a speech at George Washington University earlier this month, he declared that he plans  “to cut government spending on prescription drugs by $200 billion over ten years.”  Naomi added: “Perhaps the new Independent Payment Advisory Board will get involved in providing the bulk of these recommendations.” 

As for skilled nursing facilities, MedPAC’s March 2011 report to Congress pointed out that “In 2009, the average Medicare [profit] margin for freestanding Skilled Nursing Facilities  was 18.1 percent.  . . we examined relatively efficient SNFs and found that it is possible to have costs well below average, above-average quality, and more than adequate Medicare margins.’  In other words, there is money to be saved without undermining patient care.

Fear-Mongering: “The impact of the board’s decisions could be magnified, the Times suggests “because private insurers often use Medicare rates as a guide or a benchmark in paying doctors . . .”

Fact: IPAB could recommend trimming physicians’ fees for certain tests and treatments. But under the ACA, the Secretary of Health and Human Services already has the authority to reduce Medicare reimbursements for “over-valued services” and lift fees for “under-valued services.” Thus, the KFF report is probably right in suggesting that IPAB will focus most of its attention on drug-makers, Advantage insurers and SNFs.

Fear-Mongering:  “Relying on arbitrary spending targets is not a good way to make health policy, especially when decisions may be left to the unelected and unaccountable.” (A. Barry Rand, chief executive of AARP).

Fact: These spending targets are far from arbitrary. IPAB will not be plucking numbers out of the air. As I explain below, the targets are tightly tied to the economy’s growth, with an eye to making sure that Medicare spending is not outstripping the rest of the economy in a way that will endanger the future of the program.

IPAB Was Invented to Rescue Medicare from the Lobbyists

What the Times and most of the media reporting on the backlash against IPAB fail to mention is that Congress created this independent board of medical experts for two TK reasons: 1) Legislators are rightly alarmed by runaway Medicare inflation that could bring an end to Medicare as we know it, and  2) as Washington & Le’s Timothy Jost puts it: “Congress is too driven by special-interest politics and too limited in expertise and vision to control costs.”

Begin with the Medicare spiral. Between 1985 and 2009 Medicare reimbursements climbed by almost 9% a year. (Per capita Medicare outlays spiraled by an average of 7% during those years, while the population eligible for Medicare increased—up 2% a year—accounting for the 9% growth in total annual spending.)

As the Kaiser Family Foundation chart below reveals, even though Medicare’s administrative costs are lower than costs in the private sector (where health care dollars are funneled through private insurers, tacking their administrative costs onto the total bill), over the long run, average annual growth in Medicare spending per beneficiary has been only 1 percent lower than per capita growth in private health spending for comparable benefits. (Since 2002 Medicare has been somewhat more successful in keeping costs down, mainly by putting a lid on some providers’ fees. But as KFF points out, thanks to the relentless hikes in the prices we pay for drugs, devices and the cutting-edge equipment used in high tech tests and treatments, combined with “increases in the volume and complexity of services”  that providers prescribe, reimbursements  continue to levitate.


Some argue that Medicare ‘s outlays must soar because the population is aging, but KFF explains: “the contribution of increased enrollment and an aging population to growing Medicare spending, is modest relative to the effects of rising health care costs.” CBO projects that rising enrollment as the population ages would “increase Medicare spending from 4 percent of GDP in 2020 to 5 percent of GDP by 2035; however, when all factors affecting Medicare and rising health care costs also are included, Medicare spending is projected to rise to 7 percent of GDP that year. “All factors” includes the reality that each year, we pay more for virtually every product and procedure. Meanwhile, health care providers “do more.” As Boston surgeon Dr. Atul Gawnade has pointed out in the New Yorker, the number of surgeries done in the U.S. has spiraled during the past decade. Yet, he observes, there is no data indicating that our health has improved as a result.

The bottom line is this: Medicare’s outlays have been growing far faster than either GDP or the average workers’ wages. This means that we have no choice: we must break the curve of Medicare inflation, or give up Medicare altogether.  The only question is who should make the decisions: the health care industry lobbyists who profit from profligate spending, or a panel of  medical experts appointed by the President, and confirmed by the Senate, who are prohibited from taking fees from anyone, and are charged with curbing spending without cutting benefits?

In Part 2 of this post, I will explain the formula that the IPAB will be using to break the curve, and why we cannot bring down Medicare costs simply by raising deductibles and co-pays. I’ll describe how Congress can, if it wishes, turn down IPAB’s recommendations by finding other ways to cut Medicare spending by an equal amount—without paring benefits, or raising deductibles and co-pays—and why Congress is not likely to pursue that option, in part because many legislators would prefer to let IPAB take the heat for decisions that will cut someone’s revenue stream.

Moreover, some legislators agree with observers who, for years, have been concerned that politicians lack the expertise to deal with “the difficult and exceptionally detailed technical issues,” that must be dealt with when trying to squeeze the waste out of Medicare spending. As Sen. Jay Rockefeller puts it: “Medicare payment policy should be determined by experts using evidence, not by the undue influence of special interests.” 

In that context, I’ll discuss how this lack of medical expertise leaves Congress all the more vulnerable to being swayed by health industry lobbyists who profit from profligate Medicare spending. Here, I’ll explore the conflicts of interest among Democrats who want to repeal IPAB. And I’ll describe how, in the past, those lobbyists have succeeded in blocking reforms that research showed could in fact, rein in costs, while simultaneously leading to better patient outcomes. .  .  Finally, I’ll compare the IPAB to the alternative—Rep. Ryan’s proposal. 


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