March 16, 2015

One especially alarming artifact of the Patient Protection and Affordable Care Act (ACA) is the Independent Payment Advisory Board (IPAB).  The IPAB is a 15-member panel charged with making proposals to “reduce cost growth” and “improve quality of care for Medicare beneficiaries.”  It is required to recommend cost-saving initiatives in any year in which per capita spending exceeds a threshold determined by the government. In addition, the Commission is authorized to make recommendations to “constrain the rate of growth in the private sector.”

Right now, the IPAB is also a phantom.  Although the ACA called for the Commission to be in place and to make its first set of recommendations by January 2014, no members have ever been appointed and no nominations are even in the works.

Nevertheless, opposition to the IPAB is as strong today as when the draft that became the ACA first appeared.  Senator John Cornyn (R-TX) reintroduced the Protecting Seniors' Access to Medicare Act of 2015 (S. 141), which would repeal the IPAB, in January.  Two weeks ago, Representatives Phil Roe, M.D.  (R-TN) and Linda Sanchez (D-CA) reintroduced companion legislation (H.R. 1190).  ASA, which led a coalition seeking repeal in 2013, urges support for the bipartisan legislation and has published the following talking points in support of their position:

• The non-elected and largely unaccountable Independent Payment Advisory Board (IPAB) will have sweeping powers to mandate across the board payment or other cuts on top of SGR and sequestration cuts.
• IPAB not only severely limits Congressional authority, it eliminates the transparency of hearings, debate and any meaningful opportunity for stakeholder input.
• IPAB cuts will disproportionately fall on physicians, and could disproportionately impact anesthesiologists, who already experience a “33% problem.”

These are all very valid points, which the AMA, MGMA and other medical associations also advocate.  

The SGR has served thus far as a brake on the rate of growth rather than as the basis for massive cuts, since Congress has intervened to prevent the formula from going into effect year after year; and we hope that Congress will do so again shortly, since absent legislation, the SGR is about to drive a 21.2 percent reduction in Medicare payments on April 1, 2015. 

The IPAB members would be nominated by the President and confirmed by the Senate rather than popularly elected—but the IPAB was designed precisely to shield Congress from the annual hunt for ways to restrain spending on healthcare without facing medical and hospital association lobbying.  The unaccountability was intended.

The impact on physicians would be disproportionate, since hospitals would be exempt from the IPAB cuts through 2019.  And since the “33% problem”—Medicare payments for anesthesia services amount to approximately one-third of commercial rates, in contrast to the 70-80 percent of commercial payments represented by Medicare payments for other services—persists, anesthesiologists would be at a particular disadvantage.

If the IPAB were to function as prescribed in the ACA, it would recommend ways to achieve spending rate reductions set at 0.5 percent in 2015, 1.0 percent in 2016, 1.25 percent in 2017 and 1.5 percent in 2018 and beyond—if Congress failed to pass legislation producing the required savings by August 15 of each year and if spending exceeded a targeted amount.  For 2015-2018, the targeted rate of spending growth was to be based on the projected five?year average percentage increase in the Consumer Price Index for all urban consumers (CPIU) and the Consumer Price Index for all urban consumers for medical care (CPI?M).  Beginning in 2019, the spending threshold that would trigger the IPAB’s cost-cutting recommendations would be set at the nominal gross domestic product (GDP) per capita + 1.0 percent.

As we know, however, there is no IPAB in place, and one major reason is that Medicare spending growth has slowed considerably over the last several years, without any action on the part of federal legislators or regulators, staying under IPAB’s thresholds.  As the Commonwealth Fund chart below shows, per-beneficiary Medicare spending is not currently projected to exceed the IPAB thresholds until 2022.

There is thus no immediate threat from the phantom IPAB.  The fact that Medicare costs are currently rising too slowly to trigger IPAB recommendations is no guarantee that costs will not rise faster in the future, however—fast enough, perhaps, to motivate the President to nominate and the Congress to confirm Commission members (none of whom could, by law, be a practicing physician).  That is why ASA, MGMA and other organizations are continuing to seek the IPAB’s repeal, and why we encourage you to support those efforts.

With best wishes,

Tony Mira
President and CEO