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July 18, 2011

If you received any practice management or health policy newsletters at all, you almost certainly saw or heard the acronym “IPAB” last week.  Two committees in the House of Representatives held widely publicized hearings on legislation to repeal the Independent Payment Advisory Commission or “IPAB,” a radical cornerstone of the Affordable Care Act (ACA).

Numerous Members of Congress, including at least seven Democrats, have signed the repeal legislation, the “Medicare Decisions Accountability Act of 2011” (H.R. 452).  No Democratic Senator has come out in support of the Senate counterpart, the aggressively-named “Health Care Bureaucrats Elimination Act” (S. 668).   The medical lobby has expressed loud and clear opposition.  The AMA has adopted policy calling for full repeal of IPAB and supports H.R. 452 and S. 668.  So does ASA, which, along with some 250 other organizations representing patients and employers as well as most medical specialties, sent a letter on June 24th warning of the consequences for patient access to care if the IPAB was not blocked.

The IPAB is an independent board to be composed of 15 full-time members appointed by the President and confirmed by the Senate. The appointees will serve for staggered six-year terms. The Secretary of HHS, the Administrators of CMS and of the Health Resources and Services Administration are ex officio members.  The IPAB’s charge is to recommend ways to reduce spending if the per capita growth in Medicare expenditures exceeds defined target growth rates. This instrument is thus another version of the “expenditure targets” that we first saw when the Physician Fee Schedule was implemented in 1992.

How IPAB Will Limit the Growth in Spending

Beginning in 2013, the CMS Office of the Actuary will project whether Medicare’s per-capita spending growth rate in the following two years will exceed a predetermined target. Initially, the targeted rate of spending growth will be based on the projected five-year average percentage increase in the Consumer Price Index for all urban consumers and the Consumer Price Index for all urban consumers for medical care.

From 2018 on, the target will be set at the nominal gross domestic product per capita, plus 1.0 percent. Remember the SGR?  The current Sustainable Growth Rate also penalizes physicians for overshooting a spending target based on GDP.  If the Actuary projects that Medicare spending will exceed the targets, the IPAB will propose recommendations to Congress and the President to reduce the growth rate.   As of now, the growth in Medicare spending is expected to lag the growth in GDP by a full percentage point.  That sort of projection is notoriously unreliable.

The IPAB’s first set of recommendations would be proposed on January 15, 2014 and implemented on January 1, 2015. The recommendations will be executed  unless Congress votes to reject the proposal (with 60 votes in the Senate) or passes an alternative proposal that achieves similar savings. If Congress fails to pass fast-track legislation by August 15 of each year to achieve the required savings through other payment policy changes, the IPAB’s recommendations will automatically take effect. It is, of course, much easier to do nothing than to do something.  The IPAB’s recommendations are designed to be more effective than the SGR. 

The IPAB is responsible for sending Congress, additionally, annual detailed reports on health care costs, utilization, access and quality.  It must also submit recommendations regarding ways of slowing growth in private sector health care spending.

Rationale for the IPAB

As we know, health care spending continues to outpace the growth of the U.S. economy.  Despite methodologies for limiting the escalation in Medicare outlays such as DRGs and the SGR, the Medicare program is not considered sustainable.  The cost of Medicare is projected to increase from 3.6 percent of the GDP in 2010 to 5.9 percent in 2035 if the SGR survives and to seven percent if it does not.

The fact that Congress has overridden the SGR and postponed cuts in payments to physicians in eleven of the past twelve years, while adding coverage based on political pressure rather than on medical effectiveness, shows that the legislative branch is the wrong entity for the task of reining in healthcare costs.   In the words of Henry Aaron, “few members of Congress are well enough informed to make [health policy] decisions wisely, and some are in thrall to campaign contributors and producers and suppliers of medical services.” (Aaron H.  The Independent Payment Advisory Board – Congress’s “Good Deed.”  N Engl J Med 364:25, 2377-2370 (June 23, 2011)). 

The point of IPAB, then, is to protect the healthcare system or at least the Medicare system from Congress by creating an independent body of experts to make the tough decisions.  While a lawsuit brought by the libertarian Goldwater Institute in federal district court in Arizona contends that the IPAB provisions of the Affordable Care Act violate the constitutional Separation of Powers doctrine, Dr. Aaron points out that there is solid precedent for such Congressional “self-abnegation” in the law creating the Federal Reserve Board.

The Many Problems With the IPAB

The Arizona Separation of Powers litigation is a very long shot – Congress retains the ability to legislate the whole IPAB out of existence, after all – but there are so many other problems with the IPAB that it is likely to undergo some significant change.  Among the problems are those identified by the AMA in its July 14 “Health System Reform Insight:”

  • The IPAB may not consider changes in benefit structure, beneficiary eligibility, beneficiary cost-sharing or revenue increases, leaving no discernable option for controlling costs or ensuring program solvency other than cutting provider payments.
  • For several years, the law provides exemptions from cuts for hospitals and other providers, translating into potentially steeper cuts for physicians.
  • IPAB members will be appointed by the president to full-time positions, leaving no possibility for representation by practicing physicians.
  • Important health care payment policy decisions will be placed in the hands of a panel that has far too little accountability, leaving elected members of Congress with little input or control over important policy decisions affecting health care for millions of patients.
  • The formula for calculating allowed expenditure growth is rigid, with no flexibility for errors in actuarial projections or the impact that pandemics or technological changes may have on demands for care.

The letter from the coalition that includes ASA expressed the following concerns:

  • The law specifically prohibits judicial or administrative review of the implementation of any IPAB recommendations.
  • Low Medicare reimbursement rates have already led 17 percent of all physicians, including 31 percent of primary care doctors, to restrict the number of Medicare patients in their practices.  [Ed. – anesthesiologists and other hospital-based physicians typically must provide services to all hospital patients and cannot deny care to Medicare patients.  The fact that anesthesia payment rates are so much lower, relatively, than those for other services that are no longer as readily available to older patients, should bolster the case for hospital stipends.]
  • IPAB cannot focus on healthcare delivery reforms as long as it is required to achieve “scoreable” savings in a one-year time frame. The only option for producing those quick savings will be to cut payments to providers.

Others have raised questions as to whether the IPAB would have the resources to do the job right.  “Staffing the board with 15 leading experts who are willing to give up research, teaching and practice for 6 years for a relatively modest salary will be a challenge,” according to Timothy Jost (Jost T.  The Independent Payment Advisory Board. N Engl J Med 363;2, 103-105 (July 8, 2010). 

Several observers have commented that constraining physician spending alone cannot bend the cost curve.  To do so, they argue, would require changes in how providers are paid and perhaps even in patient incentives.  The statute, however, prohibits any recommendations that would result in “rationing” health care; raising revenues, premiums or cost-sharing; limiting benefits or changing eligibility standards, or reducing payments to other providers before 2020 (2016 for clinical laboratories).

All in all, the IPAB is a revolutionary and worrisome concept as it stands.  We encourage you to support your specialty societies' efforts to influence its shape and direction, and we will watch carefully how it develops.


Tony Mira
President and CEO