By Henry J. Aaron, Ph.D.
Among the most important attributes of legislative statesmanship is self-abnegation — the willingness of legislators to abstain from meddling in matters they are poorly equipped to manage. The law creating the Federal Reserve embodied that virtue. Congress recognized the abiding temptation to use monetary policy for political ends and realized that it would, at times, prove irresistible. To save themselves from themselves, wise legislators created an organization whose funding and operations were largely beyond the reach of normal legislative controls. Short of repealing the law, Congress denied itself the power to do more than kibbitz about monetary policy.
In establishing the Independent Payment Advisory Board (IPAB) in section 3403 of the Affordable Care Act (ACA), Congress may once again have shown such statesmanship. For several reasons, however, it is too early to be sure. The board must surmount major challenges — first to survive and then to function effectively. Harold Pollack has neatly summarized the problem, the solution, and the problem with that solution: “Every Democratic and Republican policy expert knows that we must reduce congressional micromanagement of Medicare policy. Unfortunately, every Democratic and Republican legislator knows that mechanisms such as IPAB that might do so would thereby constrain their own individual prerogatives.”1
Medicare’s founding legislation stated that “Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine.”2 Duly warned, Medicare administrators have largely forborne from using coverage policy or financial incentives to discourage ineffective or needlessly costly methods of care. Members of the legislative branch have not, however, displayed similar restraint. They have pressured those same administrators on coverage policies and passed laws to impose them.
In the view of many observers, both executive inactivity and legislative intrusiveness have been unfortunate — the former because the leverage that the country’s largest single buyer of health care could wield to effect reforms has gone largely unused, the latter because few members of Congress are well enough informed to make such decisions wisely, and some are in thrall to campaign contributors and producers and suppliers of medical services.
Enter section 3403 of the ACA. This lengthy and complicated provision establishes the IPAB, consisting of 15 full-time members appointed for staggered 6-year terms, plus 3 ex officio members from the administration.3 The IPAB is charged with reporting to Congress, beginning in 2013, on ways of holding Medicare spending within legislated limits, starting with spending in the “implementation year” of 2015. For implementation years 2015 through 2019, the limits are equal to the average of actual or projected growth of the general Consumer Price Index and health care prices over 5 years centered on that implementation year — that is, over 2013 through 2017, for implementation year 2015. For implementation years starting with 2020, the target will be the growth rate of the per capita gross domestic product (GDP) plus 1 percentage point, again averaged over 5 years. If per capita Medicare spending as projected by the chief actuary of the Centers for Medicare and Medicaid Services exceeds the limit for a given year, the IPAB is required to present the President with recommendations for reducing annual per capita spending — by 0.5% in 2015 (or less, if a smaller cut suffices to meet the limit) and by increasing amounts in succeeding years, up to 1.5% in 2018 and beyond.
The legislation requires the President to transmit the IPAB’s recommendations to Congress promptly. It specifies a tight timetable during which Congress must consider the board’s proposals and strict rules under which the House and Senate must vote on them or come up with alternatives that achieve similar savings. If no legislative action is taken, the IPAB’s recommendations take effect, and the secretary of health and human services is directed to implement them. The IPAB may also propose changes in health care financing outside of Medicare, but these recommendations are not required to be implemented and are not covered by the rules governing presidential transmission or Congressional voting. Strengthening the IPAB by authorizing it to propose changes in payments by all payers under similar “fast-track” legislative procedures would increase the chances that it can fulfill its advocates’ hopes.
For several reasons, it remains unclear whether the IPAB will succeed.4 The first challenge is political: Can the agency survive and, if so, in what form? Senior administration officials touted the IPAB as one of the most important provisions in the ACA. President Barack Obama, in his plan for deficit reduction, proposed even stricter targets for spending reduction than those contained in the ACA and stronger, but unspecified, powers for the IPAB. The President’s budget commission also proposed strengthening the board’s powers. Still, Congressional calls for repealing or weakening the IPAB are legion.5 The board, critics allege, would impose price controls or supplant Congressional legislative prerogatives. Many physicians’ groups seek at least to put physician fees off limits.
Second, although the IPAB’s targets for slowing spending growth are specific and the procedures for consideration of its recommendations are detailed, the actual changes that it may recommend are circumscribed and the resources at its disposal for preparing those recommendations are modest. The IPAB may make no recommendations that would result in “rationing” health care (a term that the law does not define); raising revenues, premiums, or cost sharing; limiting benefits or changing eligibility standards; or reducing payments to acute care or long-term care hospitals or to hospices before 2020 or payments to clinical laboratories before 2016. Any legislative “fix” for the sustainable-growth-rate (SGR) formula used to calculate Medicare’s physician payments would probably put physicians’ fees off limits, as well. As Ebeler et al. point out, these limits mean that through 2020, savings would have to be found in private Medicare Advantage plans, Medicare’s Part D prescription-drug program, or spending on skilled-nursing facilities, home-based health care, dialysis, durable medical equipment, ambulance services, and services of ambulatory surgical centers.3
Third, whether the IPAB will have sufficient resources to carry out its responsibilities is unclear. The board’s chair will have to run the now-infamous Senate confirmation gantlet and, once in office, will face formidable political and administrative challenges. All appointed IPAB members must commit to serving 6-year terms at modest pay and may not simultaneously have outside employment — conditions that will make it difficult to recruit senior professionals. Staffing will also be hampered by a tight agency budget and restrictive salary limits.
Despite these impediments, the survival and strengthening of the IPAB is of critical importance. Critics allege that the ACA doesn’t do enough to control the growth of health care spending. That criticism is unjustified. In enacting the ACA, Congress created a broad and potentially powerful portfolio of cost-control instruments, containing virtually every method that analysts have advanced for slowing growth of spending in a rational fashion — accountable care organizations, comparative-effectiveness analysis, bundled payments, value-based insurance design, limits on the exclusion of employer-financed premiums from personal income tax, and health insurance exchanges to promote competition among insurance plans.
Over time, we will learn which of these instruments work best and how to implement them. Once we have done so, the IPAB can mobilize the power of the country’s largest health care buyer to effect health system change. Were Congress to succumb to calls to weaken or kill the IPAB now — to paraphrase Talleyrand’s famous comment on the execution of the Duc d’Enghein by Napoleon — it would be worse than a crime; it would be a blunder.