IPAB is Medicare’s New Hammer for Spending Accountability

Now that the latest annual “doc fix” is in, Congress has granted physicians another reprieve from potentially crippling cuts to their Medicare reimbursements under the sustainable growth rate (SGR) payment formula. The SGR calls for Medicare payments to be reduced if health spending is higher than gross domestic product (GDP) for the given year.

Beginning this year, there’s a new player in town, one with the authority to achieve what Congress has consistently failed to do—cut Medicare provider spending to keep it below a cap, and do so with unprecedented autonomy.

Say hello to the Independent Payment Advisory Board (IPAB), a creation of the Affordable Care Act (ACA) that will propose ways to reduce “overpayment” to Medicare providers if target spending levels are exceeded.

What distinguishes the IPAB from the Medicare Payment Advisory Commission (MedPAC), an independent Congressional agency established by the Balanced Budget Act of 1997, is that its proposals will automatically become law unless Congress enacts its own proposals reducing Medicare provider spending by at least as much as the IPAB’s, or unless the Senate musters a three-fifths majority vote to override IPAB’s proposals entirely. Further, any changes recommended by the IPAB cannot be overruled by the executive branch or a court of law.

MedPAC never wielded such authority; in fact, many of its cost control recommendations were ignored.

The IPAB comes to life this year with a $15 million appropriation from the ACA (see “The IPAB Timetable”). The board, a 15-member, multi-stakeholder group, is expected to include physicians, nurses, medical experts, economists, consumer advocates, and others appointed by the President and subject to Senate confirmation.

Incendiary Reactions

Dubbed by its most vociferous and largely Republican critics as “dangerously powerful,” “the real death panel” or “bureaucrats deciding whether you get care,” the IPAB also has some Democrats decrying its power grab. In a Jan. 5 statement, U.S. Rep. Pete Stark (D-Calif.) called the IPAB “an unprecedented abrogation of Congressional authority to an unelected, unaccountable body of so-called experts.”

Even U.S. Rep. Allyson Schwartz (D-Pa.), who helped draft the ACA, has come out against the IPAB, joining a handful of Democrats and more than 200 Republicans in signing a bill (H.R. 452) to repeal the ACA’s IPAB provision. The Senate has a similar bill (S. 668).

Although the IPAB is legally barred from making formal recommendations to ration care, increase beneficiary premiums or cost-sharing, and from restricting benefits or eligibility criteria, critics worry that its authority to control prices could hurt patients by driving Medicare payments so low that physicians stop offering certain services.

Enforcement Power

The IPAB will have unprecedented power to enforce Medicare’s provider spending benchmarks. Beginning in 2014, if Medicare’s projected spending growth rate per beneficiary rises above an inflation threshold of GDP per capita plus 1 percent, the IPAB will be triggered and will propose ways to trim provider payments.