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The Independent Payment Advisory Board, or IPAB, is a fifteen-member United States Government agency created in 2010 by sections 3403 and 10320 of the Patient Protection and Affordable Care Act which has the explicit task of achieving specified savings in Medicare without affecting coverage or quality. Under previous and current law, changes to Medicare payment rates and program rules are recommended by MedPAC but require an act of Congress to take effect. The new system grants IPAB the authority to make changes to the Medicare program with the Congress being given the power to overrule the agency's decisions through supermajority vote.
Beginning in 2013, the Chief Actuary of the Centers for Medicare and Medicaid Services will determine in particular years the projected per capita growth rate for Medicare for a multi-year period ending in the second year thereafter (the "implementation year"). If the projection exceeds a target growth rate, IPAB must develop a proposal to reduce Medicare spending in the implementation year by a specified amount. If it is required to develop a proposal, the Board must submit that proposal in January of the year before the implementation year; thus, the first proposal could be submitted in January 2014 to take effect in 2015. If the Board fails to submit a proposal that the Chief Actuary certifies will achieve the savings target, the Secretary of Health and Human Services must submit a proposal that will achieve that amount of savings. The Secretary must then implement the proposal unless Congress enacts resolutions made to override the Board's (or the Secretary's) decisions under a fast-track procedure that the law sets forth.
IPAB was created as a strengthened version of the Medicare Payment Advisory Commission (MedPAC), a body with no regulatory power that solely advises Congress, but cannot enact regulations in and of itself. Since 1997, MedPAC had recommended cuts totaling "hundreds of billions of dollars" to Medicare that were ignored by Congress. Also, Congress has pressured Medicare administrators to cover "ineffective or needlessly costly methods of care", while Medicare's founding legislation says "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". Henry J. Aaron, a health care expert at the Brookings Institution, says that many observers see that some in Congress are "in thrall to campaign contributors and producers and suppliers of medical services" and most are not well enough informed to wisely use Medicare's buying power to reform health care. The idea behind the IPAB was to take power away from Congress (and special interests) in order to give it to those knowledgeable in health care policy.
On June 25, 2009, Senator Jay Rockefeller introduced the Medicare Payment Advisory Commission Reform Act of 2009, which would have changed MedPAC into an executive branch agency. On July 17, 2009, the Obama administration submitted to Congress a similar proposal called the Independent Medicare Advisory Council Act, which would have created an independent five-member executive council to make recommendations to the president. From June 17 to September 14, 2009, three Democratic and three Republican Senate Finance Committee members met for a series of thirty one meetings to discuss the development of a health care reform bill. During this period, Senators Max Baucus (D-Montana), Chuck Grassley (R-Iowa), Kent Conrad (D-North Dakota), Olympia Snowe (R-Maine), Jeff Bingaman (D-New Mexico), and Mike Enzi (R-Wyoming), met for more than sixty hours, and their discussions established the principles upon which the health care reform legislation that later passed was based. The Finance Committee included a provision establishing an independent Medicare advisory board in its health reform legislation, which passed the Senate on December 24, 2009.
IPAB is tasked with developing specific proposals to bring the net growth in Medicare spending back to target levels if the Medicare Actuary determines that net spending is forecast to exceed target levels, beginning in 2015.
With regard to IPAB's recommendations, the law says "The proposal shall not include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums under section 1818, 1818A, or 1839, increase Medicare beneficiary cost sharing (including deductibles, coinsurance, and co-payments), or otherwise restrict benefits or modify eligibility criteria." The Department of Health and Human Services (HHS) must implement these proposals unless Congress adopts equally effective alternatives. The board is also required to submit to Congress annual reports on health care costs, access, quality, and utilization. IPAB must submit to Congress recommendations on how to slow the growth in total private health care expenditures.
Every year on September 1, IPAB must submit a draft proposal to the Secretary of Health and Human Services. On January 15 of the next year IPAB must submit a proposal to Congress. If IPAB fails to meet this deadline, the HHS must create its own proposal. Congress must consider this proposal under special rules. Congress cannot consider any amendment to the proposal that does not achieve similar cost reductions unless both houses of Congress, including a three-fifths super majority in the Senate, vote to waive this requirement. If Congress fails to adopt a substitute provision by August 15, HHS must implement the proposal as originally submitted to Congress.
A 2009 Kaiser Health News article predicted primary care doctors would likely see benefits from an "independent Medicare commission because the panel would be more likely to increase their fees and lower specialists' rates". While payment cuts to hospitals and hospices are off-limits until 2020, and clinical laboratories are off limits until 2016, physician fees may be cut unless a doc fix to Medicare's sustainable growth rate formula makes those cuts off limits. Other "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". According to the New England Journal of Medicine, holding off creation of accountable care organizations (ACOs) is likely to be a bad long term strategy for physicians.
Critics of IPAB have charged that the board's cost-cutting mandate will inevitably bring about a reduction in care, despite the anti-rationing language in the bill. Congressman Phil Roe from Tennessee, a medical doctor, warned that IPAB will ration care through payment policy. American Medical News charged that the bill gives IPAB "unprecedented, dangerous authority to cut Medicare pay rates and strangle access to care." IPAB has frequently been denounced by its critics as a death panel.
IPAB is composed of fifteen members appointed by the President, subject to Senate confirmation. The Secretary of Health and Human Services, the Administrator of the Center for Medicare and Medicaid Services, and the Administrator of the Health Resources and Services Administration serve ex officio as nonvoting members. In making the appointments, the President consults with the Majority Leader of the Senate concerning the appointment of three members; the Speaker of the House of Representatives concerning the appointment of three members, the Minority Leader of the Senate concerning the appointment of three members, and the Minority Leader of the House of Representatives concerning the appointment of three members.
The first members appointed to the Board will be divided into three staggered classes in order to ensure that their terms do not expire simultaneously. Five will be appointed for a term of one year, five will be appointed for a term of three years, and five will be appointed for a term of six years. All subsequent appointments will be made for six years. A member may not serve more than two full consecutive terms. Individuals who are directly involved in providing or managing the delivery of Medicare items and services may not constitute a majority of IPAB’s membership.
The President of the United States must establish a system for public disclosure by IPAB members of any financial and other potential conflicts of interest. As it currently stands, no IPAB member may be engaged in any other business, vocation or employment.
Fifteen million dollars have been appropriated for IPAB in 2012. Future funding for the agency will be based on this figure but adjusted for inflation.
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Health economist Uwe Reinhardt thinks that given the "dubious style of campaign financing of which we all are victims now", an independent Medicare commission is the U.S.'s only hope to restrain Medicare spending. Reinhardt criticized former chairman of the House Ways and Means Subcommittee on Health William Thomas' 1995 comment as emblematic of the spurious reasoning found in Congress. Of a payment system that resembled bundled payment, Thomas said, "I'm not wild about a payment system that involves telling a bunch of innovative entrepreneurs that they can’t be in the business anymore". Reinhardt criticized this, saying Thomas "seemed uninterested in what made more clinical and economic sense. His was purely an industrial policy, not a health policy. And his reasoning explains why, year in year out, Congress has rejected economically sensible proposals to attain greater efficiency in the Medicare program." Reinhardt compares the IPAB to a similar board in Germany, which he says is efficient, effective and civilized.
Peter Orszag, who directed the CBO and OMB in the Obama administration, said the IPAB may be the most important aspect of the Affordable Care Act. He said the board was "created to help address our long-term fiscal imbalance while boosting quality in health care". "It's a very promising structure," said Orszag, but he cautioned that "whether it realizes its potential depends on how it's implemented."
Douglas Holtz-Eakin, a former CBO director and an economist who is currently president of a conservative political organization, thinks that despite "requirements that would force Congress to adopt the recommendations or find comparable savings", "cuts will be politically infeasible, as Congress is likely to continue regularly to override scheduled reductions". In the words of Susan Dentzer, editor of Health Affairs, Holtz-Eakin thinks no IPAB "will ever succeed in saving lawmakers from their own self-preserving instincts to pander".
Sen. John Cornyn, a Republican from Texas, introduced a bill in the Senate to prevent the creation of the IPAB. The Washington Post reported that Congressman and retired physician Phil Roe (R-TN) twice sponsored House bills to eliminate the IPAB, which was partially why he was regarded as a "kindred soul" by the medical industry. Roe was described as a "magnet during the last election for more than $90,000 in contributions from medical professionals from across the country" Roe charged that IPAB would deny care. However, the legislation governing IPAB bars "any recommendation to ration health care."
Tom Daschle, the former Senate Democratic leader who was Obama's first choice for health secretary, argues that IPAB should be expanded to cover all forms of health insurance in order to prevent doctors from shifting costs onto patients with private medical insurance. After voting for the 2010 health care reform, Pete Stark (D-Calif.), said that the IPAB "sets [Medicare] up for unsustainable cuts" that will endanger the health of patients, and that he would "work tirelessly to mitigate the damage" the panel would cause.
The Pharmaceutical Research and Manufacturers of America has said that elimination of the payment board is its top priority in the 2011 Congress. The American Hospital Association and the American Medical Association (AMA) have spoken out against the board. The AMA wants to change the IPAB requirement that members have no outside employment so working physicians can be considered. The AMA also opposes any independent commission which could cut physician payment rates.
Dr. J. Fred Ralston Jr., president of the American College of Physicians (ACP), expressed support for the idea behind the IPAB, saying "making complex Medicare payment and budgetary decisions is very difficult within a political process with substantial lobbying pressures", but the group would like to see significant changes. The ACP supports creating a position for a primary care physician on IPAB, additional protections that ensure cost reductions do not lead to lower quality of care, authority for Congress to reject proposals made by IPAB via a simple majority vote, and equal treatment of all healthcare providers.
Dr. Elaine C. Jones, government relations committee cochair of the American Academy of Neurology stated, "We are also very concerned about the power of the IPAB to cut payments to physicians. The sole function of the IPAB is to cut spending with little guarantee of maintaining quality, access, and scientifically proven care. There may be no physician representation on the board either. These elements are concerning and unacceptable."
Ron Pollack, the founding executive director of the health care advocacy group Families USA, advised Democrats against being divided and conquered by supporting repeal of specific portions of the health care reform, such as IPAB.
Two major nursing home associations, the American Health Care Association and the American Association of Homes and Services for the Aging, along with seventy two other healthcare groups, urged Congress to reject IPAB. They argued that the board would have too much control over Medicare and would affect the ability of healthcare providers to lobby for changes in how they are reimbursed. The groups also argued that IPAB would only be accountable to the president.
The American Academy of Orthopedic Surgeons has made IPAB a focus of their advocacy work. Hospital exemptions from 2015 to 2020 as well as the lack of practicing physicians on the board itself are major concerns. Recent lobbying efforts in April 2011 have focused on making these modifications if not fully eliminating this board.
Medical specialty groups have spearheaded efforts to repeal IPAB. Specifically, the American Society of Anesthesiologists and American Association of Neurological Surgeons co-lead a coalition of 26 medical specialties and patient organizations representing more than 350,000 physicians and their patients dedicated to repealing IPAB. The coalition recently endorsed efforts in the 113th Congress to repeal IPAB.
Howard Dean, a consultant for Washington, D.C.-based lobbying firm McKenna, Long and Aldridge and former Democratic Governor of Vermont, believes the IPAB will fail to control costs and should be abolished. He opposes the premise of the board, writing in the Wall Street Journal that it is "a health-care rationing body" and that "rate setting—the essential mechanism of the IPAB—has a 40-year track record of failure."
In an editorial opposing Sen. Cornyn's bill to repeal IPAB the Washington Post wrote, "The political system failed when it came to controlling health-care costs. The 15-member panel that Mr. Cornyn et al. deride as 'beltway bureaucrats' would be a group of experts in the field, nominated by the president, chosen in part by congressional leaders of the opposing party and subject to Senate confirmation. Congress isn't bound by its proposals if lawmakers can come up with what they think is a better approach. Getting costs under control is going to require difficult choices – including, in the case of Medicare, difficult political choices. This unwise bill is not a good sign about Washington's willingness to make them."
The Congressional Budget Office (CBO) estimated[when?] that IPAB will achieve Medicare spending reductions of twenty eight billion through 2019—amounting to 0.4% of the projected Medicare spending of ~$7 trillion for the period.
In March 2011, the CBO estimated the Medicare baseline level of spending would not exceed targets throughout the years of 2015 to 2021; thus, the IPAB was not expected to affect any Medicare spending.
The 2010 presidential commission, the National Commission on Fiscal Responsibility and Reform, issued a report on reducing the federal deficit and voted to strengthen the IPAB 11 to 7. It wished to bring forward the time by which health care providers would be affected by IPAB decisions. The recommendations "would hit hospitals the hardest, which gained an exemption from the group’s decisions for several years".
As part of legal challenges from conservative organizations and state attorneys general in about twenty states to the Affordable Care Act, Arizona's conservative Goldwater Institute, along with three Republican congressman from Arizona, filed a suit challenging the constitutionality of the IPAB. The Hill reported that "while the suit illustrates conservative frustration with the federal government, the courts rarely strike down advisory boards created by Congress".