After debate, Medicare advisory board in the news (again)

In last night's presidential debate, both candidates traded arguments about an advisory group called the Independent Payment Advisory Board, which will be created to make recommendations about reducing the growth of Medicare spending.

The board, which would be seated in 2013, is one of a number of provisions in the Affordable Care Act designed to extend the solvency of Medicare from 2016 to 2024.

There has been much confusion about the board, and now that confusion has fresh legs. In light of that, we are reprinting our 2011 email explaining the purpose, role and potential impact of the board:

Medicare advisory board getting 'death panel' treatment

Remember "death panels" from the debates over health care reform? That's how opponents of national health care reform labeled a provision that would have compensated doctors for counseling their Medicare patients about end-of life decisions such as advanced directives and living wills. This reasonable and common-sense provision was removed from the Affordable Care Act because of the furor created by politically motivated misrepresentation.

Now we have the Independent Payment Advisory Board (IPAB), and the "death panel" rhetoric has started up again.

Rep. Phil Gingrey of Georgia, a physician and chair of the Republican House Doctors Caucus, has gone on record saying: "Under this IPAB ... that the Democrats put in Obamacare, where a bunch of bureaucrats decide whether you get care, such as continuing on dialysis or cancer chemotherapy, I guarantee you when you withdraw that, the patient is going to die. ... It's rationing." (1)

In fact, the board, created under the Affordable Care Act, will be charged with limiting the growth of Medicare spending. The board, which would begin its work in 2014, would have latitude in making recommendations on cost savings but is expressly prohibited from taking any action that would "ration care."

In order to understand the role the board might play, it is necessary to explain how Medicare spending growth is managed now. Currently, Congress has total policy responsibility for Medicare. The Medicare Payment Advisory Commission can make recommendations to Congress, but Congress has no obligation to follow them. The commission has no independent authority and is not required to meet defined budgetary targets.

Under this system, Medicare spending grew at an average annual rate of 6.8% from 2001 to 2010, or 3.7 percentage points faster than per capita GDP. (2) In short, the current system doesn't seem to be working all that well.

The primary reason for the IPAB is to give authority for spending recommendations to an independent board of experts, rather than members of Congress. It is hoped that this would reduce the influence of politics, lobbyists and various stakeholders.

Here's how the IPAB would work:

• The independent board would be composed of 15 experts (including doctors and patient advocates) nominated by the president and confirmed by the Senate.
• The board would recommend policy changes to Congress that would reduce Medicare spending by specified amounts. Among other responsibilities, the law requires the board to recommend changes in payments to Medicare providers based upon different forms of care. Although payment structures could have an influence over physicians, board recommendations would not infringe upon how they practice medicine. The first recommendations would be due in 2014 and would be targeted for implementation in 2015.
• In order to address issues of transparency, the board is required to produce an annual public report on systemwide health care costs, access to care, utilization of services and quality of care, including comparisons by region, types of services and types of providers for both Medicare and private payers. (3)
• The board is specifically prohibited from making any recommendations that would: 1) ration care, 2) raise taxes, 3) increase premiums or cost-sharing and 4) restrict benefits or modify Medicare eligibility.
• Congress can accept or reject any board recommendations. If Congress rejects recommendations, and Medicare spending exceeds specific targets, Congress must enact policies that achieve equivalent savings. Otherwise the recommendations of the board will be implemented by the Department of Health and Human Services.

As currently designed, there are potential advantages and disadvantages with the IPAB.

The Congressional Budget Office estimates the IPAB will achieve $15.5 billion in Medicare savings by 2019, when the board's recommendations are scheduled to be implemented. The federal government's chief actuary estimates that the IPAB, in conjunction with strict limits on the growth in Medicare per capita spending, would achieve $24 billion in the same time frame. (4)

Opponents of the IPAB are concerned that if Medicare expenditures exceed a target rate of growth, those savings would have to be realized in part through reductions in provider and supplier payments. If provider cuts are too significant, they say, it could impact access to care. For this and other reasons, the Pharmaceutical Research and Manufacturers Association (PhRMA), the American Hospital Association (AHA) and American Medical Association (AMA) all support a repeal of the IPAB.

However, these concerns may be minimized by modifying the IPAB rather than repealing it. Some of the modifications could include the ability to revise spending targets, modifying the five-year window used to calculate targets, allowing savings to accrue over time as opposed to a single implementation year and clarifying the IPAB's authority regarding provider cuts.

Nevertheless, two bills, sponsored by Rep. Phil Roe, R-Tenn., and Sen. John Cornyn, R-Texas, have been introduced to repeal the IPAB. The repeal effort includes the support of some House Democrats. As if to highlight the influence of politics and lobbyists, several of the Republican and Democratic supporters of the repeal effort have received hundreds of thousands of dollars in contributions from health care professionals. (5) As of February 2011, after the passage of the Affordable Care Act, more than $42.7 million has flowed to both Republican and

Democratic lawmakers from health care and health insurance interests. (6)
Both supporters and opponents of the IPAB agree that Medicare cost growth is a critical driver of federal budget increases and must be addressed. Yet opponents seem to be willing to repeal the tool that would do the most to rein in costs. As an alternative, House Republicans would end Medicare as an entitlement program and replace it with a premium support, or voucher, system after 2020.

The Affordable Care Act is expected to achieve $400 billion in Medicare savings by 2019. Even with those cost savings, Medicare is expected to increase from 3.6 percent of GDP in 2010 to 5.9 percent by 2035. (7) While there may be problems with the current version of the IPAB, they can be corrected. If our goal is to reduce Medicare costs without massive programmatic changes, a repeal would be both unwise and disingenuous.

– Bob Semro

End notes
1) Peter Roff, Obamacare's Advisory Board Could Be a Real Killer, U.S. News and World Report, June 28, 2011.
2) Judy Feder and Nicole Cafarella, What's Driving up the Cost of Medicare? Per Capita Costs Will Fall but the Number of Retiring Baby Boomers Will Not, Center for American Progress, June 2011.
3) Kaiser Family Foundation, Explaining Health Reform: Medicare and the New Independent Payment Advisory Board, May 2010.
4) Ibid.
5) R. Jeffrey Smith, Health-related money continues to flow to members of Congress, The Washington Post, Feb. 6, 2011.
6) Ibid.
7) Ebeler, Jack (et. al), The Independent Payment Advisory Board: A New Approach to Controlling Medicare Spending, Kaiser Family Foundation, April 2011.