About that $3.1 billion
The Independent Payment Advisory Board contained in the Affordable Care Act has come under fire since it was first floated as an idea. The purpose of the IPAB is to find ways to control the cost of Medicare when certain expense targets are exceeded. The Board is limited in what it can do to affect this control, but that doesn’t seem to matter to critics. It is perceived as government control over health care and an initiative that is counter to allowing the markets to dictate costs through competition.
First the IPAB was the dreaded “death panel,” now it will exercise too much bureaucratic control over the health care system and finally there is H.R. 452, the Medicare Decisions Accountability Act of 2011, a bill to repeal the Board entirely. The repeal believe it or not has (or had) some bi-partisan support until Republicans tied other changes to the legislation. Now there is another snafu because the Congressional Budget Office reported that repealing the IPAB would increase direct spending. Here is what the CBO said on March 7.
SUMMARY
H.R. 452 would repeal the provisions of the Affordable Care Act (ACA) that established the Independent Payment Advisory Board (IPAB) and created a process by which that Board (or the Secretary of the Department of Health and Human Services) would be required under certain circumstances to modify the Medicare program to achieve certain specified savings.
CBO estimates that enacting H.R. 452 would not have any budgetary impact in 2012 but would increase direct spending by $3.1 billion over the 2013-2022 period. That estimate is extremely uncertain because it is not clear whether the mechanism for spending reductions under the IPAB authority will be triggered under current law over the next 10 years. However, it is possible that such authority would be triggered in one or more of those years; thus, repealing the IPAB provision of the ACA could result in higher spending for the Medicare program than would occur under current law. CBO’s estimate represents the expected value of a broad range of possible effects of repealing the provision over that period.
An opinion piece in the Wall Street Journal, March 9, 2012 is less than friendly to the IPAB and less accurate than one would hope. However, most disturbing about ongoing criticism are both the lack of viable alternatives and a lack of understanding about how the system works. These factors coupled with a misplaced faith in market forces and competition is getting us nowhere fast both with Medicare and the health care system in general.
…IPAB really does embody ObamaCare’s innermost values and beliefs—to wit, that health decisions are too important to leave to the people receiving the care (patients), the people providing the care (doctors and hospitals), the people paying for the care (taxpayers), or even the people who got the government involved in the first place (politicians).
Instead, supposedly independent experts will run a battery of small experiments, figure out which ones “work” and then impose them through Medicare’s price controls on all U.S. medicine. When health spending in a given year exceeds a budget benchmark, as it always does and will, the 15 White House-appointed wise men will work their miracles…
Those “experiments” will be changes in the way we pay for health care, perhaps similar to what is already being tried in the form of Accountable Care Organizations, bundled payments, hospital readmission programs, medical homes, etc. Will they all work, probably not, but what’s new. If they don’t work, I can tell you one thing, it will be in large part because neither patients not providers want them to work.
The WSJ also says this:
“It’s also among the reasons Paul Ryan’s Medicare reform is so much better than Mr. Obama’s. Beneficiaries would receive a “premium support” payment to buy insurance, and insurers and providers would compete for business on value for money. What “works” is what millions of consumers decide.”
“Premium” and “support” are two words that also mean “defined contribution”, a tact now being taken by more and more employers which is merely a form of cost shifting. Simply put, the beneficiary gets a fixed amount of money to spend on health care or the purchase of insurance. They are then free to buy what they want with the fixed amount of money while any additional expenses come from their pocket. In the case of Medicare the theory is that with this payment beneficiaries will be free to buy traditional Medicare or any of a number of other private plans that will “compete” for the fixed pool of money. But how does all this competition save money? Medicare is already the lowest payer except for Medicaid. Do we expect private plans to exert stronger oversight over claims and services provided, like tighter medical necessity controls, tighter networks, etc? Sounds like another form of the dreaded rationing, either that or more interference between patient and their doctor. Isn’t that what we have been accusing insurers of doing and what we don’t like?
We have well-intentioned dreamers out there who sincerely believe that empowered patients will seek efficiency forcing prices down and that somehow private insurers have a magic bullet that allows them to control costs. If all that is true and if we are truly concerned about health care costs why hasn’t competition already worked? Insurers compete for business among employers, there are many different insurers in a given area, patients are free to change coverage and in large employers to choose among several health plans. In many cases spouses can choose between two different employer plans. In other words, there is a lot of choice out there already. Is cost a motivator? Employees of employers large and small are paying thousands of dollars a year in premiums and that’s only a small portion of the cost, but you would think that paying $4,000 to $6,000 in premiums would provide motivation to shop around.
In addition to the fact that health care purchases are like no other purchases, there is one factor none of the current proposals consider. Pricing is left to the health care providers. Medicare and Medicaid set prices which are 20% or so below market, each private carrier then negotiates an acceptable fee with providers and providers who do not accept an in-network fee charge the patient whatever they want and the patient has no recourse. It’s the pricing stupid!
The only alternative, and the IPAB’s true end game, is harsher and more arbitrary price controls and eventually limits on the care patients are allowed to receive. The New England Journalists (of Medicine) deny this reality because ObamaCare has a clause that prohibits “rationing,” even as the law leaves that term undefined. But reducing treatment options will be inevitable as government costs explode.
Yes, WSJ, that is the end game.
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