Controversial Board Set to Cut Medicare Payments

Published June 1, 2011

In an April speech to the nation on budgetary issues, President Obama proposed strengthening one of the more controversial boards created under his health care law as a deficit reduction measure.

The Independent Payment Advisory Board (IPAB), consisting of fifteen unelected officials, will be tasked with reining in Medicare’s costs beginning in 2014. IPAB is slated to make recommendations to keep Medicare spending in line with budget guidelines—and unless Congress passes legislation making equal reductions in spending, or three-fifths of the Senate votes to override IPAB, the board’s recommendations will automatically take effect.

Pressing for Repeal

Ethicist Wesley J. Smith, a senior fellow at the Discovery Institute’s Center on Human Exceptionalism, says IPAB could become the cornerstone of state rationing.

“The passage of ObamaCare put the structure in place to create a bureaucratic state. Right now the board only has the power to cap Medicare and lower rates to providers, but who’s to say what the board’s power will be in the future? This is a different kind of bureaucracy because it will have power to override Congress and the president. It’s an astonishing abdication of power by an elected, accountable body to an unelected, unaccountable body,” says Smith.

Smith notes IPAB was denounced by opponents of Obama’s law as a “death panel” approach when it was introduced, based in part on the experience of its predecessor in the United Kingdom, NICE. The board has sparked bipartisan opposition, with several Democrats who supported Obama’s health care law, such as Rep. Pete Stark (D-CA), calling IPAB a “dangerous provision” that “sets [Medicare] up for unsustainable cuts.” After Obama’s April speech, Rep. Allyson Schwartz (D-PA), vice-chair of the New Democrat Coalition, wrote to her colleagues calling on them to support repealing IPAB entirely.

Bureaucrats to Be Blamed Later

“When people start to complain about the board’s decisions, Congress will say: It’s not me, it’s them, and they will point to the IPAB. What this does is eliminate ‘political impudence’ by the people,” says Smith.

Smith notes that IPAB was born in part out of Obama’s public position that cutting back on health care costs is impossible within normal political structures. The president told The New York Times in 2009, referring to the possibility of denying his grandmother a costly hip replacement, “It is very difficult to imagine the country making those decisions just through the normal political channels.”

“Pretty soon you will have the most difficult decisions in the country being made, not by elected officials accountable to the people, but by boards of experts,” Smith says.

Top-Down ‘Hasn’t Worked’

James Capretta, a fellow at the Ethics and Public Policy Center and former associate director of the White House Office of Management and Budget (OMB), describes IPAB as “government-driven managed care” which is likely to fail.

“I’m sure that somewhere there are examples of government clinics out there where the IPAB model has worked, but in the context of the U.S. Medicare system, it hasn’t worked,” Capretta says.

Past experience with prior boards, even those with more limited purview, shows that care-restricting recommendation power is likely to be overruled by Congress. When the Agency for Healthcare Research and Quality (AHRQ) suggested surgery to relieve back pain was unnecessary, Congress promptly stripped its guidelines of any enforcement authority—one reason, Capretta says, that the White House attempted to insulate IPAB from legislative review.

“Why should we allow a small body of unelected, unaccountable ‘experts’ to have this much power over us? This really is the process of the bureaucratization of our society,” says Smith.

Burden on Rural Doctors

IPAB is limited in the recommendations it can make. For example, it cannot call for increased revenues, and hospitals are exempt from cuts until 2019. This is one reason the burden of IPAB’s cuts could fall particularly hard on rural areas, says Lisa Tharp, legislative director for farmer community network Ohio State Grange.

“Physicians are already facing significant shortages over the next decade and may end up bearing the brunt of cuts in the form of reimbursement reductions for the services they provide,” Tharp said.

Tharp says the Grange supports Ohio House Resolution 452, the Medicare Decisions Accountability Act, a bipartisan bill which calls for repeal of IPAB. If IPAD moves forward, doctors won’t be sure what they’ll get paid, and therefore can’t promise to continue certain services, Tharp says.

“We know several doctors that have decided to drop out of Medicare, and we’re already seeing it in rural areas,” she said. “Just the idea that these people are not elected and [are instead] appointed by the president and charged with the task of limiting payments for Medicare and deciding which procedures can be performed should send up a red flag. This is a scary thing, because what else will the IPAB cut?”

Clumsy Centralization vs. Consumer Power

Capretta says the IPAB will operate at a clumsy macro level rather than on a patient-by-patient basis.

“The decisions they make will apply across the board,” Capretta explains. “IPAB will have the authority to limit payments to providers, and to do this they will use price controls to reduce costs. Historically this has only reduced the number of suppliers by driving them from the market, thus reducing supply.”

The alternative to top-down cuts is a consumer-driven market for health care, with the government focusing on oversight and consumer protection, Capretta says.

“There’s plenty of evidence indicating that empowering consumers through a decentralized approach would work far better than central planning at weeding out unnecessary costs while still improving the quality of patient care,” says Capretta.

Kenneth Artz ([email protected]) writes from Dallas, Texas. Benjamin Domenech ([email protected]) is managing editor of Health Care News.