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IPAB is Medicare’s New Hammer for Spending Accountability

by Christopher Guadagnino, PhD •

President Obama has since proposed a lower threshold of GDP per capita plus 0.5 percent, meaning that the IPAB would be triggered earlier and likely would have deeper cuts to make. According to a December 2011 article in Health Affairs, Obama has also proposed equipping IPAB with the authority to recommend “value-based” approaches to Medicare’s benefit design, such as tiered pricing that adjusts beneficiaries’ cost-sharing levels based on the proven effectiveness of certain services.

It is unclear how the spending growth benchmark will be affected by the $123 billion in Medicare payment cuts to hospitals and other providers over nine years, triggered when the so-called “supercommittee” failed to reach a budget-cutting consensus last fall.

In an op-ed published on June 23 on Politico.com, U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius described the IPAB as a “backstop to ensure that rising costs don’t accelerate out of control, threatening Medicare’s stability.” She maintains that the board is necessary to ensure Medicare spending stays within budget while health care providers continue to prove the effectiveness of reimbursement reform projects the ACA is funding.

The IPAB Timetable

  • 2012: IPAB member confirmation expected. Congress will appropriate first IPAB money.
  • 2013: Chief actuary to determine if Medicare spending growth reaches level that triggers the IPAB process.
  • 2014: First set of IPAB proposals due, if triggered.
  • 2015: HHS secretary will implement the IPAB’s proposals, unless Congress enacts its own proposal package achieving equal savings or the Senate rejects the IPAB’s proposals with a three-fifths majority vote.

Impact on Physicians

“The IPAB is a structural intervention to put pressure on Congress, the executive and CMS [Centers for Medicare and Medicaid Services] to guarantee the ACA’s investment in cost containment, and it gives physicians the incentive to act on its principles,” said Judith Feder, PhD, professor of public policy at Georgetown University, former dean of the Georgetown Public Policy Institute and a fellow at the Urban Institute.

Dr. Feder was a co-signer of a letter sent by 100 health policy experts and economists, including Congressional Budget Office founding director Alice Rivlin, now with the Brookings Institute, to congressional leaders last May urging them to abandon attempts to repeal the IPAB provision. Dr. Feder said the IPAB will marshal “the expertise of professionals who can weigh evidence on how payment incentives affect care delivery and suggest sensible improvements, while forcing debate on difficult choices that Congress has thus far failed to address.”