While the ACA wrote many such initiatives into law at the outset, its main mechanism for continuing to experiment with and give new force to new payment rules and incentives going forward is the Independent Payment Advisory Board (IPAB), a panel of healthcare experts appointed by the president and confirmed by the Senate, empowered to find ways to keep federal Medicare outlays below a yearly growth cap of GDP + 1% (Obama's 2013 budget proposes tightening the cap to GDP +.5%). In years when costs are projected to exceed the cap, IPAB is charged with developing a package of proposals to hold costs below it, to be presented to Congress. In its turn,
Congress must consider this proposal under special rules. Congress cannot consider any amendment to the proposal that does not achieve similar cost reductions unless both houses of Congress, including a three-fifths super majority in the Senate, vote to waive this requirement. If Congress fails to adopt a substitute provision by August 15, HHS must implement the proposal as originally submitted to Congress (Wikipedia).IPAB is structured like the existing Medpac, which was created by the Balanced Budget Act of 1997. Medpac, however, makes recommendations to Congress that have no force of law. Giving such a board teeth was an idea originally proposed in early 2009 by Senator Jay Rockefeller, and Obama glommed onto it early as his favored means of controlling healthcare costs.
When Washington Post editorial page editor Fred Hiatt asked Obama in July 2009 what he regarded as the best means of reducing healthcare costs, Obama first explained why he did not want to end the employer tax deduction for employee healthcare benefits -- though he did favor (and eventually, successfully fought for) capping it at the high end of current employer expenditures. Ending the cap outright or cutting it too radically, Obama feared, would simply drive employers to pass more healthcare costs to their employees, rather than making care more efficient. He explained his preference for what became IPAB as follows:
At this point, I am confident that both the House and the Senate bills will contain what we've been calling MedPAC on steroids, the idea that you continually present new ideas to change incentives, change the delivery system, understanding that because this is such a complex system we're not always going to get it exactly right the first time, and that there have to be a series of modifications over the course of a series of years, and we have to take that out of politics and make sure that an independent board of medical experts and health economists are providing packages that are continually improving the system. So I think there's general consensus that that is one of two very powerful levers to bend the cost curve [the other being the high-end cap on the employer exemption].Obama's emphasis was (and remains) on incremental change, empowering a depoliticized panel to build on what works and try new ideas on a pilot basis. Republican reaction to IPAB illustrates the political science principle that presidential advocacy for any given policy polarizes political response, ensuring the opposing party's fervent opposition. Once focused on the public option as the prime bogey of Democratic legislation (see, e.g., the ever-opportunistic proto-candidate Romney), the GOP shifted its fire to IPAB as Obama effectively damned the public option with faint support while throwing his weight behind IPAB. Sarah Palin was in the forefront of demonizing IPAB, shifting her inflammatory "death panel" charge, originally focused on end-of-life counseling, to tar the Board. In a Sept. 8, 2009 Wall Street Journal op-ed (published the day before Obama's speech to Congress pushing for a healthcare reform law), Palin wrote:
Now look at one way Mr. Obama wants to eliminate inefficiency and waste: He's asked Congress to create an Independent Medicare Advisory Council—an unelected, largely unaccountable group of experts charged with containing Medicare costs. In an interview with the New York Times in April, the president suggested that such a group, working outside of "normal political channels," should guide decisions regarding that "huge driver of cost . . . the chronically ill and those toward the end of their lives . . . ."She dared, all right. And the demonization continues to this day. Paul Ryan's 2013 budget, contrasting the magic of market competition to "bureaucrat control," smears IPAB as a mechanism for rationing care:
Given such statements, is it any wonder that many of the sick and elderly are concerned that the Democrats' proposals will ultimately lead to rationing of their health care by—dare I say it—death panels? Establishment voices dismissed that phrase, but it rang true for many Americans. Working through "normal political channels," they made themselves heard, and as a result Congress will likely reject a wrong-headed proposal to authorize end-of-life counseling in this cost-cutting context. But the fact remains that the Democrats' proposals would still empower unelected bureaucrats to make decisions affecting life or death health-care matters. Such government overreaching is what we've come to expect from this administration.
IPAB's unelected and unaccountable bureaucrats have the power to determine what "rationing health care" means, allowing them to cut Medicare in ways that harm seniors' access to providers and lead to the denial of critical care.
This charge is misleading on all counts, right down to the quotation marks that imply that "rationing health care" is IPAB's mandate. In fact, as I noted recently, the ACA stipulates that IPAB proposals "shall not include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums under section 1818, 1818A, or 1839, increase Medicare beneficiary cost sharing (including deductibles, coinsurance, and co-payments), or otherwise restrict benefits or modify eligibility criteria" (ACA consolidated bill Sec. 3403\1899A SSA page 409). Moreover, while the "bureaucrats" are themselves unelected, they are appointed by the (elected) president and confirmed by the Senate (good luck with that, Obama...). And of course, Congress has the power to reject their recommendations. Moreover, IPAB is modeled on Medpac, the initiative of a Republican Congress.
The Medicare reform plan in Ryan's 2013 budget (released in March 2012) masks, more cleverly than his 2011 plan, his chief mechanism for cutting government Medicare spending: shifting costs to seniors. It uses a more moderate spending growth cap than the earlier plan: GDP + 0.5%, the same as the ACA. It provides ostensible protections against premium increase for lower income seniors, stipulating that Medicaid will pay their out-of-pocket expenses "if costs rise faster than the established limit," i.e., if non-poor participants have to pay more for a "Medicare" plan than their government grant provides. This protection, however, is implicitly undercut by the Ryan budget's gutting of Medicaid funding. Ryan 2013 seems to guarantee other seniors full funding for a "benchmark" plan that is the "actuarial equivalent" of fee-for-service Medicare -- though it also stipulates that means-tested seniors (those who currently pay more for Medicare Parts B and D) will pay more if the cost of offered plans exceeds the spending growth cap. It remains unclear, as far as I can tell, what happens to the premiums of seniors who are neither high-income nor low-income if an increase in the price of the benchmark plan in the exchange exceeds the yearly cap.[Update: Kevin Drum also poses this question.] It appears, thought, that while competition is the touted mechanism for cost control, cost-shifting to some or most seniors for cost growth beyond the cap is the "backstop" -- and likely the true -- mechanism.
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