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Repealing IPAB Will Result in More Drastic Alternatives, Analysts Say

By Nellie Bristol, CQ HealthBeat Associate Editor

March 19, 2012 -- While some members of Congress say if the Independent Payment Advisory Board (IPAB) gets up and running there will be draconian provider and benefit cuts, several economic analysts said Monday that without the panel, the situation would be worse.

The board, which House Republicans plan to vote to repeal this week, would move Medicare toward more efficient modes of care and better value for the dollar, said Peter Orszag, vice chairman of global banking at Citigroup. Without mechanisms to streamline Medicare, “I think almost inevitably the result will be premium support because that is a falsely attractive approach that appears to save tons of money fast, even though mostly it’s just by shoving the dirty laundry under the bed than actually putting it through the washer,” he said.

Premium support, a Medicare restructuring suggested by several lawmakers, including House Budget Committee Chairman Paul D. Ryan, R-Wis, would replace the current program with set payments to help defray premium costs for insurance. An analysis by the Congressional Budget Office said that under Ryan’s plan, in 2030 Medicare enrollees would pay more than two-thirds of the cost of their Medicare-covered services rather than about a quarter of the costs if the program stays as it is. IPAB is statutorily prohibited from rationing care and must make recommendations to improve the efficiency of care delivery.

Orszag, former director of the White House Office of Management and Budget under Obama, commented during a press call hosted by the Center on Budget and Policy Priorities (CBPP). Other participants included CBPP Senior Fellow Paul Van de Water and Princeton University economics and public affairs Professor Uwe Reinhardt. The panelists said giving cost-reducing power to an independent board free of political influence is the best way to ensure that innovative programs are enacted even if they might shake up the status quo.

If Medicare were an insurance company and Congress its board of directors, said Reinhardt, “then you would have to say this insurance company is severely flawed because its system of governance is beset by incredible conflicts of interest. With Congress you really always have to worry whom do they represent, the people or particular interest groups that give them money.” IPAB members are prohibited from receiving gifts and so would be “far more dispassionate” Reinhardt said.

In addressing concerns that the panel would usurp the role of Congress in managing Medicare, Van de Water wrote in paper last week “to some extent, limiting congressional micromanagement of Medicare payment policy is desirable.” Echoing Reinhardt, he said, “Many times in the past, efforts to reform Medicare payments have been slowed or stopped by health-care interests that have successfully lobbied Congress to protect their income stream at Medicare’s expense.” He added: “IPAB can give Congress political cover for making necessary but controversial decisions such as [those] that are opposed by special interests that can finance high-powered lobbying campaigns and make substantial campaign contributions.”

IPAB was passed as part of the health care overhaul (PL 111-148, PL 111-152). It is a 15-member presidentially appointed panel that would develop cost containment strategies for Medicare that must be adopted if projected growth in cost-per-beneficiary exceeds a specified target. Congress could supersede the proposal if it developed a plan that saved the same amount of money.

Nellie Bristol can be reached at [email protected].

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