Vote to Repeal IPAB Shows Why It's Necessary

Update: CBO has estimated that the IPAB repeal bill (HR 452) would increase spending and deficits by $3 billion from 2013-2022.

On Wednesday, the Energy and Commerce Health Subcommittee voted by a wide margin to repeal the Independent Payment Advisory Board (IPAB), the 15-member panel tasked by the Affordable Care Act with making recommendations starting in 2014 to hold down Medicare spending when it grows faster than GDP per capita plus 1 percent. H.R. 452 was approved by the panel by a 17-5 vote with some bipartisan support. 

The biggest knock against IPAB from lawmakers is that it usurps Congressional authority over Medicare and puts decisions involving the program in the hands of an unaccountable panel instead of with elected representatives. However, a closer examination of how IPAB would function suggests that these concerns are overblown. For example, Congress has the ability to override IPAB recommendations with a majority vote if they are replacing them with equal savings or with a three-fifths vote if they are simply preventing them from going into effect. If Congress does not act at all, the recommendations go into effect automatically. Furthermore, IPAB has a rather limited mandate -- it cannot make changes to benefits, cost-sharing, or eligibility.

The most disconcerting thing about this vote, and about broader efforts in general to dismantle or repeal IPAB, is that while the IPAB repeal bill has bipartisan support, there is no bipartisan Congressional plan for controlling Medicare costs. Medicare spending will be the single largest contributor to rising debt in the future, and the reason IPAB was viewed as necessary in the first place is because Congress has been unable to take steps to rein in Medicare costs. CBO's estimate of repealing of the Affordable Care Act last year estimated IPAB's effect on spending through 2021 would be $14 billion, although the magnitude of the cuts could grow substantially over the long-term depending on Medicare cost growth.

IPAB is intended to be action-forcing because the politics of Medicare have been toxic and there has been no agreement on a plan that goes beyond provider and physician payment reductions. Ironically, the vote to repeal IPAB without any passable plan to replace it shows the need for it in the first place.

IPAB may also be necessary because of the board's ability to make smarter changes than blunt reductions in physician and provider payments. We know that scheduled reductions to Medicare payments to physicians are unlikely to take place given that "doc fixes" have routinely passed, but the status of provider payment reductions from the health care reform legislation -- specifically, the productivity adjustments that lower payments by about 1.1 percent annually -- is more uncertain. If those reductions prove to be too blunt a tool over the long-term, IPAB could be utilized to make smarter reductions in payments -- areas where, say, the Medicare Payment Advisory Commission believes that reimbursements are too high -- as we have argued in the past. Additionally, to address the concern of leaning too heavily on providers, IPAB's mandate could be broadened to make other changes to Medicare.

Controlling the growth of health care spending will be one of the most important tasks in putting our long-term debt on a sustainable path. There are plans out there, such as Ryan-Wyden or Lieberman-Coburn (or our ideas), which could control costs or at least take a big step in the right direction. IPAB has to remain in place, at least as a backstop, until we know that lawmakers have accomplished that goal.