Points of view

Living in a Post-IPAB World


The second anniversary of President Obama’s Affordable Care Act (ACA) just passed. And two years after its enactment, the debate over health care reform is every bit as contentious. The recently released forecast from the Congressional Budget Office (CBO) offers fodder to both sides.

On one hand, the law may cost $50 billion less over the next ten years than projected in January — but the national budget deficit is now projected to be $93 billion higher. Medicare and Medicaid expenditures are projected to more than double over the next decade, despite 4 million fewer Americans getting health insurance.

For anyone in favor of improving our healthcare system, these numbers make clear just how desperately our county’s entitlement programs need real reform. 

Unfortunately, the president’s chosen cost-cutting strategy for Medicare — the establishment of the Independent Payment Advisory Board (IPAB), an all-powerful panel of budget enforcers — is one of the most harmful aspects of ACA. Lawmakers must cast this flawed approach to reform aside and focus instead on innovative initiatives that address the program’s real cost-drivers while protecting seniors’ access to care.

IPAB is a board of 15 presidential appointees. Unelected and unaccountable, these bureaucrats are tasked with drawing up budget cuts if Medicare expenditures exceed preset targets. 

Those targets will almost certainly be surpassed. Medicare spending is expected to be $575.7 billion this year, jumping to over $1 trillion by 2022, as the country ages. Over the next 75 years, the program is projected to accumulate a $38 trillion budget shortfall.

Much of this enormous price tag goes towards financing Medicare Parts A and B. And yet, IPAB has no authority over either. In fact, the board can’t make any substantive structural changes. Neither the fee-for-service structure nor enrollee premiums and fees can be altered.

The board’s only viable option is to further ratchet down reimbursement rates for Medicare providers, especially doctors, who are already losing money on Medicare patients. Indeed, the financial burden of too-low payments under Medicare has driven 17 percent of doctors and 31 percent of primary care physicians across the country out of the Medicare program altogether, according to a study from the American Medical Association.  

If rates fall any lower, seniors will have an increasingly difficult time securing doctor appointments. Visits will be cut short to squeeze in patients and care compromised. 

IPAB is even more insidious because it deflects policymakers’ attention from innovative reform efforts with real cost-saving potential.

Last June, the Department of Health and Human Services (HHS) launched two such initiatives. 

The first would make $42 million available to improve coordination of care for Medicare enrollees. Consider that just about half of Medicare beneficiaries suffering from congestive heart failure are readmitted to a hospital within six months of discharge. Each readmission costs an average of $7,000. The health and monetary benefits of improved coordination to make such readmissions unnecessary would be huge. Evidence shows that well designed transitional care between providers can dramatically reduce costs and improve health care outcomes. 

Limiting preventable Medicare hospital readmissions could save nearly $245 billion over the current ten-year budget window, according to MedPAC. Even a 40 percent reduction could save $100 billion over that same period.

The second HHS initiative combats chronic illness. This has enormous cost-cutting potential, as 75 percent of health care expenditures go towards the treatment of chronic diseases. Diabetes, heart disease and strokes alone cost $1 trillion annually.

Patient coaching and health education could both improve enrollee health and reduce the costs of treating such illnesses. A clinical trial of the Diabetes Prevention Program found that enrolling overweight adults aged 60-64 in a community-based weight loss program could save Medicare between $1.8 and $2.3 billion over ten years.

Both HHS initiatives hold the promise of saving money and lives. The same cannot be said for IPAB. Instead of generating savings by improving the health of beneficiaries, IPAB devalues these efforts, squeezing doctors and providers to the detriment of seniors.

It’s time to support a Medicare cost-saving strategy that encourages long-term strategic thinking. Congress must repeal IPAB and stand up for real Medicare reform.

Peter Pitts is President of the Center for Medicine in the Public Interest and a former FDA Associate Commissioner.