IPAB is Still Necessary

Last Congress, H.R. 452 was introduced in the House to repeal the Independent Payment Advisory Board (IPAB), a 15 member board of Senate-confirmed experts created by the Affordable Care Act with the purpose of containing Medicare costs. The IPAB makes recommendations -- which cannot affect Medicare benefits, cost-sharing, or eligibility -- if Medicare per-beneficiary cost growth exceeds a target level (GDP+1 percent after 2019), and those recommendations automatically go into effect unless a majority of Congress replaces them with a similar-sized package or a three-fifths majority overrides the recommendations without a replacement.

We said at the time that the bill was introduced that the attempt to repeal IPAB showed exactly why it was necessary: Congress had not shown a willingness to sufficiently tackle Medicare costs. It seems our point still stands since a bipartisan group of 70 House lawmakers reintroduced a new bill with the same purpose: to repeal IPAB. 

The CBO score of the old bill estimated repealing the board would increase the deficit by $3.1 billion from 2013-2022. Although CBO's current law Medicare projections grew more slowly than IPAB's target in every year through 2022, CBO used probabilities to project that IPAB would be used in three years. Below is an excerpt of a March 2012 CBO report highlighting the consequences of repealing IPAB on the budget:

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.

Although the ten-year cost may be small in this estimate, the importance of IPAB as a backstop cannot be understated. It is quite possible that Medicare cost growth could exceed CBO expectations, whether because of legislation (such as doc fixes or a sequester repeal) or higher-than-expected health care cost growth. Offsetting only the $3 billion cost would not be enough because of the possibility of substantial costs in both this decade and over the long term. A sufficient replacement could be another form of a cap on Medicare or overall health care spending growth, or a sizeable package of health savings policies. Otherwise, IPAB should remain in place; in fact, lawmakers could work to strengthen the board so it has more policies to work with when making its recommendations.

While health care cost growth has slowed recently, if history is any indication, that trend may be easily be reversed. There may be other cost-containment measures that could substitute for IPAB or changes than could strengthen the program, but without any alternatives, repealing IPAB is a bad idea.