Will the Independent Payment Advisory Board Have Any Real Power?

By Rosenblatt, Robert | Aging Today, July/August 2011 | Go to article overview

Will the Independent Payment Advisory Board Have Any Real Power?


Rosenblatt, Robert, Aging Today


When Medicare runs into financial trouble, who do you trust to decide that a surgeon will get less money for a delicate operation, or that an expensive new cancer drug won't be covered? How about a new board of 15 experts- the Independent Payment Advisory Board (IPAB)- whose mission is to set a target for Medicare spending to slow its growth and save hundreds of billions of dollars in the coming decades.

The IPAB, which begins its work in 2014, represents a potential huge shift of power away from Congress, and members of both parties are furious about it.

Bipartisan Anger, Tenuous Targets

It's a strange day when Rep. Pete Stark (D-Calif), one of the most liberal members of Congress, finds common ground with Rep. Paul Ryan (R-Wis.), whose blueprint for converting Medicare into a voucher system makes him the darling of conservatives.

The IPAB is "a mindless rate-cutting machine that sets the program up for unsustainable cuts," according to Stark. The board "will endanger the health of America's seniors and people with disabilities."

Ryan denounced the IPAB as "a rationing board," and said it would "impose more price controls and more limitations on providers, which will end up cutting services to seniors."

The board would swing into power if the government's Medicare experts say a spending target can't be reached. Between 2014 and 2018, the target would be the average of the general cost of living, and expected medical inflation.

Suppose the cost of living is going to go up 2% per year for five years, and medical inflation will be 4% per year. The target for Medicare would be to keep spending growth to an average of 3% per year.

After 2018, the target would be the average cost of living, plus 1%. If general inflation is 3%, then the target becomes 4%. If the actuaries and experts say the target won't be reached, then the payment board must figure out ways to trim spending.

The problem with these optimistic targets is that medical costs have always far outpaced the general rate of inflation, and nobody in the public or private sector has been able to slow them.

"Health spending in the United States averaged $8,086 per person in 2009, totaling $2.5 trillion, or 17.6% of our nation's economy, up from 7.2% of GDP in 1970 and 12.5% of GDP in 1990," according to the Kaiser Family Foundation.

Targets Tough to Enforce

How would the board slow this growth if no one else has been able to? The board is "specifically prohibited by law from recommending any policies that ration care, raise taxes, increase premiums or costsharing, restrict benefits or modify who is eligible for Medicare," according to the Obama Administration website.

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