The New Health Dialogue

Wikimedia Commons

On Wednesday, President Obama delivered an address at The George Washington University outlining his new proposal for deficit reduction. The president’s speech was a response to the announcement of Congressman Paul Ryan’s budget proposal, “The Path to Prosperity,” and proposed a different vision of entitlement reform and deficit reduction. As outlined on this blog last Friday, Ryan’s plan includes significant changes to Medicare and Medicaid that would shift costs to beneficiaries in many parts of the country, without addressing the underlying drivers of these rising costs. While President Obama acknowledged that the current growth in costs for these programs is unsustainable, he rejected Ryan’s proposal as untenable, and in opposition to American values.

“To meet our fiscal challenge, we will need to make reforms,” he said. “We will all need to make sacrifices. But we do not have to sacrifice the America we believe in. And as long as I'm President, we won't.”

Although most of the discussion of health care in the president’s speech focused on broad statements of principle, there was one point that will be of particular interested to people on both sides of the health reform debate.

"And we will slow the growth of Medicare costs,” Obama said, “by strengthening an independent commission of doctors, nurses, medical experts and consumers who will look at all the evidence and recommend the best ways to reduce unnecessary spending while protecting access to the services seniors need.”

The independent commission that President Obama is referring to is the Independent Payment Advisory Board (IPAB), a multi-stakeholder commission made up of 15 members appointed by the president to six-year terms are subject to Senate confirmation. The IPAB was created by the Affordable Care Act and is charged with the responsibility to develop “specific detailed proposals to reduce per capita Medicare spending in years when spending is expected to exceed target levels, beginning with 2015.” 

Critically, the proposals of the IPAB are binding, unless Congress is able to come up with a equally effective alternative. IPAB is independent of Congress and the electoral process, which will give it the ability to make difficult, politically unpopular decisions. This independence is vital to IPAB's mission, since Congress is unlikely to take on the task of effectively cutting Medicare spending. While IPAB has some latitude with its actions, it is not allowed to use rationing, cost shifting to beneficiaries, changes in eligibility criteria, or benefit restriction to achieve these savings. As a result, cost reductions will come in the form of reduced reimbursement rates and other changes in payment that haven’t yet been tried.

IPAB was a particularly controversial part of the health reform legislation. Critics in Congress, especially from the Republican caucus, feared the delegation of these important policy decisions to bureaucrats not directly accountable to the American people. IPAB has also been strongly opposed by lobbying groups from the medical industry, including the American Medical Association and the American Hospital Association. Some specialty societies are also joining the anti-IPAB chorus.

How IPAB will coexist with the present Medical Payment Advisory Commission (MedPAC) is somewhat unclear. MedPAC serves a similar purpose as that of IPAB, with the exception that MedPAC's role is limited to advising Congress on Medicare payments. With no binding authority to implement changes, however, MedPAC has largely been ineffective at enacting changes to Medicare reimbursement policies.

As a result, Washington insiders have expressed skepticism over the potential for reform based on apolitical analysis offered by both IPAB and MedPAC. As National Council on Quality Assurance President Margaret O'Kane put it bluntly, "We have MedPAC. Congress doesn't listen to MedPAC”—which is precisely why IPAB was created with the power to impose new payment methods, with or without Congressional approval. Nevertheless, the fight over President Obama's efforts to bend the Medicare/Medicaid cost curve may thus continue well after the present round of budget negotiations, as CMS attempts to operationalize legislation that calls for real adjustments to reimbursement and expenditures. 

Despite the uncertainty surrounding the future of recommendations stemming from MedPAC and IPAB, the organizations’ missions offer a concrete blueprint for controlling the growth of health care costs that cannot be ignored.