Now that the latest annual “doc fix” is in, Congress has granted physicians another reprieve from potentially crippling cuts to their Medicare reimbursements under the sustainable growth rate (SGR) payment formula. The SGR calls for Medicare payments to be reduced if health spending is higher than gross domestic product (GDP) for the given year.
Beginning this year, there’s a new player in town, one with the authority to achieve what Congress has consistently failed to do—cut Medicare provider spending to keep it below a cap, and do so with unprecedented autonomy.
Say hello to the Independent Payment Advisory Board (IPAB), a creation of the Affordable Care Act (ACA) that will propose ways to reduce “overpayment” to Medicare providers if target spending levels are exceeded.
What distinguishes the IPAB from the Medicare Payment Advisory Commission (MedPAC), an independent Congressional agency established by the Balanced Budget Act of 1997, is that its proposals will automatically become law unless Congress enacts its own proposals reducing Medicare provider spending by at least as much as the IPAB’s, or unless the Senate musters a three-fifths majority vote to override IPAB’s proposals entirely. Further, any changes recommended by the IPAB cannot be overruled by the executive branch or a court of law.
MedPAC never wielded such authority; in fact, many of its cost control recommendations were ignored.
The IPAB comes to life this year with a $15 million appropriation from the ACA (see “The IPAB Timetable”). The board, a 15-member, multi-stakeholder group, is expected to include physicians, nurses, medical experts, economists, consumer advocates, and others appointed by the President and subject to Senate confirmation.
Incendiary Reactions
Dubbed by its most vociferous and largely Republican critics as “dangerously powerful,” “the real death panel” or “bureaucrats deciding whether you get care,” the IPAB also has some Democrats decrying its power grab. In a Jan. 5 statement, U.S. Rep. Pete Stark (D-Calif.) called the IPAB “an unprecedented abrogation of Congressional authority to an unelected, unaccountable body of so-called experts.”
Even U.S. Rep. Allyson Schwartz (D-Pa.), who helped draft the ACA, has come out against the IPAB, joining a handful of Democrats and more than 200 Republicans in signing a bill (H.R. 452) to repeal the ACA’s IPAB provision. The Senate has a similar bill (S. 668).
Although the IPAB is legally barred from making formal recommendations to ration care, increase beneficiary premiums or cost-sharing, and from restricting benefits or eligibility criteria, critics worry that its authority to control prices could hurt patients by driving Medicare payments so low that physicians stop offering certain services.
Enforcement Power
The IPAB will have unprecedented power to enforce Medicare’s provider spending benchmarks. Beginning in 2014, if Medicare’s projected spending growth rate per beneficiary rises above an inflation threshold of GDP per capita plus 1 percent, the IPAB will be triggered and will propose ways to trim provider payments.
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.
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.”
Because of the changes the ACA has already made to provider reimbursement and Medicare Advantage plan funding, Dr. Feder said Medicare’s average annual growth rate for the next decade is projected to be a full percentage point below per capita growth in GDP. On top of that, she said, “the ACA’s other payment reform experiments have the potential to improve quality and cut spending growth even further by reducing payment for overpriced or undesirable care, like unnecessary hospital readmissions, and rewarding efficiently provided, coordinated care.”
By Dr. Feder’s analysis, the IPAB would likely not be triggered for a decade, but it stands ready as a backup, if needed. Indeed, she said she favors extending the IPAB’s authority beyond Medicare, allowing a system-wide spending target that creates an all-payer incentive to ensure that providers really change their behavior to boost quality and efficiency.
If the IPAB does come into play, Dr. Feder said, surgeons have more to worry about than primary care physicians, because the board’s cost reduction proposals would likely focus on services for which she says overpayment is the most acute, such as imaging and high-cost specialty procedures.
Otolaryngologists Respond
Opponents of the IPAB, including the American Academy of Otolaryngology–Head and Neck Surgery (AAO-HNS), the American College of Surgeons, the American Medical Association and several other medical specialty and state medical societies, argue that the board inappropriately strips Congress of its authority over Medicare payment policy and insulates policymaking from important medical practice realities and their impact on patient care.
Under the current law, fewer than half of IPAB members can be health care providers, and none are permitted to be practicing physicians or otherwise employed. “How are we going to pick 15 people whose judgments are better than anyone else’s?” asked David Nielsen, MD, AAO-HNS Executive Vice President and CEO. “The IPAB would be staffed by academicians and economists, just like the kind who came up with the SGR. It’s doubtful that an appropriate perspective of practicing physicians and patients can be obtained,” he added.
Dr. Nielsen said the IPAB would behave like the SGR, only worse. Just as the SGR unfairly burdens physicians with outdated assumptions about medical spending and unrealistic spending targets, he said, the IPAB has the same cost constraint principles in place. “But, unlike the SGR, we don’t have the transparency of hearings and debate about how the IPAB’s mandated cuts might overlook important cost-of-practice realities, put small-group practices out of business and jeopardize patient access to surgical care,” he said. And, unless the SGR is repealed, Dr. Nielsen said, “We’re stuck with the worst of both worlds, a double whammy of mandated cuts placed on the shoulders of physicians.” He noted that certain health care entities, including hospitals, are protected from the IPAB’s scrutiny until 2018.
—David Nielsen, MD
Movement to Repeal the IPAB
One of the AAO-HNS’ chief legislative priorities is to repeal the IPAB through passage of H.R. 452, the Medicare Decisions Accountability Act of 2011, which has well over 200 bipartisan cosponsors. Two companion bills in the Senate, S. 2118 and S. 668, both introduced by Sen. John Cornyn on different dates, are provocatively named the “Health Care Bureaucrats Elimination Act: A bill to remove unelected, unaccountable bureaucrats from seniors’ personal health decisions by repealing the Independent Payment Advisory Board.”
On Feb. 29, the Health Subcommittee of the House Energy and Commerce Committee held a meeting to consider H.R. 452 and voted 17 to 5 to favorably report the bill out of committee. The top-ranking Democrat on the subcommittee and one other Democrat voted for the measure, along with all 15 Republicans present.
Another supporter of H.R. 452, the American College of Surgeons, has long opposed the IPAB. David Hoyt, MD, FACS, ACS Executive Director, recently sent a letter supporting the repeal of the IPAB to the subcommittee’s chairman, warning that “leaving payment policy decisions in the hands of an unelected, unaccountable governmental body with minimal congressional oversight will negatively impact the availability of quality, efficient health care to Medicare beneficiaries and all Americans.”
The Real Cost Drivers
Besides urging repeal of the IPAB, the AAO-HNS also urges Congress to revisit the ACA to ensure that implementation efforts focus on reform provisions that genuinely improve quality and access to health care. According to Dr. Nielsen, the current economic situation is unsustainable and poses a looming crisis unless the rising cost of health care is addressed. Reform should drill down to the major locus of cost savings, which is not physician reimbursement, per se, he said.
“We have to accept responsibility to reduce costs on our own, and we know that reimbursement can no longer be entirely based on fee for service. But high quality, highly specialized tertiary care can only be sustained if it is reimbursed adequately,” Dr. Nielsen said.
If the whole purpose of mechanisms like the IPAB is to reduce the overall cost of health care, the most dramatic opportunities will not come from penalizing physicians who offer the most sophisticated, life-saving procedures, he said.
Instead, the focus should be on drivers of the highest disease and cost burdens, things such as end-of-life care, COPD and other chronic diseases, end-stage renal disease and preventable hospital readmissions, Dr. Nielsen said. “Successfully influencing these factors is where you dramatically shift costs,” he added.