Focus on Health System Reform: Independent Payment Advisory Board

Beginning in 2014, the federal government will be able to sidestep Congress and impose its own cost-containment policies for the Medicare program through the creation of the Independent Payment Advisory Board (IPAB).  The IPAB will consist of 15 members, appointed by the President with the consent of the Senate.  The IPAB must include physicians and other health care providers in its membership as well as representatives for consumers and the elderly.  Individuals who are directly involved in providing or managing the delivery of Medicare items and services may not constitute a majority of IPAB’s membership.  Also, IPAB members may not be engaged in any other business or be employed elsewhere, which could limit the pool of potential candidates.

By April 30thof each year (beginning in 2013), if the Centers for Medicare & Medicaid Services (CMS) determines that per capita spending outpaces the average of the Consumer Price Index (CPI) for all urban consumers and for all urban consumers’ medical care, the IPAB will be charged with making recommendations to Congress on ways to cut Medicare expenses which could include cuts to the physician fee schedule. Beginning in 2019, the target criteria will change to be based on the nominal gross domestic product per capita, plus one percent. Spending rate reductions are currently:

  • .5% in 2015
  • 1% in 2016
  • 1.25% in 2017
  • 1.5% in 2018 and beyond

The IPAB must submit its spending reduction recommendations to Congress by January 15thof each year.  If Congress fails to take action to approve the IPABs recommendations or pass its own legislation to reduce costs within 6 months, CMS must enact the measures the IPAB has proposed, doing so no later than August 15th of the same year.

 There is no guarantee that IPAB recommendations will succeed in reducing growth by the required amount and there could be a significant bubble effect as cuts in one area are balanced by increased growth elsewhere.  IPAB’s ability to constrain spending may also be limited by factors beyond its control, including:

  • Hospitals and hospices are “off limits” for IPAB recommendations (except changes to Medicare Advantage) until 2020.
  • Clinical labs are exempt for one year.
  • Changes that might raise premiums or revenues, increase beneficiary cost-sharing, restrict benefits, modify eligibility criteria, or ration healthcare are excluded.
  • The growth rate reduction percentages that will be invoked are less than the expected rate by which Medicare growth will exceed CPI targets, which could lead to the implementation of short term fixes.
  • Congress may, at any time, make changes to Medicare that increase spending.

The Congressional Budget Office (CBO), assuming that targets will be met, estimates Medicare spending to be reduced by $15.5 billion over five years. However, the CMS Chief Actuary has already commented that the target growth rates may be unachievable.

The creation of the Independent Payment Advisory Board is one of the more controversial provisions in the Patient Protection and Affordable Care Act and stands to impact the Medicare physician fee schedule more than any other portion of the act.

 
 

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