IPAB Provides Important Backstop Against Health Cost Growth

October 12, 2013 at 11:47 am

Some Republican senators suggest that upcoming budget legislation include changes to the Independent Payment Advisory Board (IPAB) — a presidentially appointed commission created by health reform that will help to slow the growth of Medicare costs.  But repealing or weakening IPAB would be bad for Medicare’s beneficiaries, as we have written.

IPAB provides an important backstop to the other cost control measures in the Affordable Care Act (ACA).  The ACA trims payments to health care providers under Medicare’s current payment mechanisms.  It also begins to restructure the health care payment and delivery system to stop paying providers for more visits or procedures and begin rewarding effective, high-value health care.  Only if these first two approaches do not hold the growth of Medicare spending to specified targets will the IPAB process be triggered.

The Congressional Budget Office (CBO) projects that the ACA’s reductions in Medicare payment rates will produce most or all of the savings needed to meet the law’s spending targets and that IPAB recommendations will not be needed during the next decade.  However, CBO expects that the IPAB mechanism will generate savings in some later years.

Critics charge that IPAB will ration health care, but that’s false.  The ACA specifically prohibits the board from rationing health care, raising Medicare’s premiums or cost sharing, cutting benefits, or restricting eligibility.  It must focus exclusively on proposals that achieve savings in the payment and delivery of health care services.

If Congress repeals IPAB, the alternatives could prove far worse for Medicare beneficiaries.  Congress would more likely consider shifting significant costs to beneficiaries, such as by sharply increasing premiums and raising the eligibility age.

Most important, repealing IPAB would fuel efforts to replace Medicare’s guarantee of health coverage with premium support — a fixed payment, or voucher, that beneficiaries would use to help them buy private health insurance or traditional Medicare.  This arrangement would achieve budgetary savings by limiting the amount of the voucher.  As a result, most beneficiaries, particularly those who are older and sicker and remain in traditional Medicare, would face higher premiums and more total out-of-pocket spending.

Premium support would also substantially reduce enrollment in traditional Medicare, dilute its market power, and deny Medicare much of its ability to serve as a leader in controlling health care costs.

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More About Paul N. Van de Water

Paul N. Van de Water

Paul N. Van de Water is a Senior Fellow at the Center on Budget and Policy Priorities, where he specializes in Medicare, Social Security, and health coverage issues.

Full bio | Blog Archive | Research archive at CBPP.org

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