IPAB–Serving American People Not Private Healthcare Businesses

Medicare spending is, and always has been controlled by private healthcare businesses whose primary goals center on the maximization of income and profits. Whenever healthcare reform efforts call for Medicare cost-savings, lobbyists for private healthcare businesses take out their wallets, make substantial “donations” to our elected officials and voila, the potential savings never see the light of day. Medicare spending is out-of-control as a result. To reduce Medicare spending (i.e., increase its solvency) and minimize influence-peddling distortions, the Independent Payment Advisory Board (IPAB) was created under Obamacare (PPACA). This body was tasked  ”to reduce the per capita rate of growth in Medicare spending”.

Under the law, any IPAB proposals for reducing Medicare spending CANNOT “include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums, increase Medicare beneficiary cost sharing (including deductibles, coinsurance, and co-payments), or otherwise restrict benefits or modify eligibility criteria.”  In other words, the cost savings must come from the private healthcare businesses and NOT from Medicare beneficiaries. With the IPAB, Medicare will remain solvent longer.

IPAB keeps Medicare solvent longerThe legislation creating the IPAB includes many features that make sure the recommended Medicare cost-savings get applied. Unlike the Medicare Payment Advisory Commission (MedPAC) before it, the IPAC has the authority to make changes to the Medicare program on it own.  With their pockets stuffed with influence-peddling contributions, congressmen in the past made sure that hundreds of billions of dollars in MedPAC-recommended Medicare cost- savings never saw the light of day. The existence of the IPAB thus reduces congressional influence on the cost-saving details of Medicare.

To make sure that the IPAB doesn’t have too much power or fails to act, the legislation creating it included checks and balances.  Congress has the power to overrule the IPAB’s recommendations with a supermajority vote or it can choose to create equally effective alternatives (without impacting Medicare beneficiaries’ pocketbooks, eligibility, or benefits, of course).  If Congress fails to pass its own legislation by Aug. 15 each year, the IPAB’s recommendations automatically take effect. The Secretary of the Department of Health and Human Services (HHS) reviews the IPAB’s recommendations and is required by law to implement them. If the IPAB does not submit a proposal, then the HHS Secretary is required to submit a proposal to obtain the necessary Medicare cost-savings.  So that any one group or individual cannot “sit” on IPAB’s recommendations, the legislation includes defined time limits for action.

The need for Medicare cost-savings is defined by the Actuary’s Office of the Centers for Medicare & Medicaid Services (CMS).  If Medicare’s per‐capita spending growth rate in the following two years is projected to exceed a targeted rate, then the IPAB is called into action.  For the 2013 through 2016 “determination” years, the target growth rates were not exceeded, so no IPAB cost-saving recommendations were needed. In fact, an IPAB board does not even exist today. However, for 2017, CMS’s Chief Actuary predicts that Medicare spending growth will exceed the target rate and the IPAB must therefore be formed so that it can make a draft proposal for cost-savings by September 1, 2017. The full timetable for cost-savings to take effect is given by Kaiser Family Foundation.  From the American healthcare consumers’ and taxpayers’ viewpoints, this process sounds pretty good.

The fifteen appointed members of the IPAB will include “individuals with national recognition for their expertise in health finance and economics, actuarial science, health facility management, health plans and integrated delivery systems, reimbursement of health facilities, allopathic and osteopathic physicians, and other providers of health services, and other related fields, who provide a mix of different professionals, broad geographic representation, and a balance between urban and rural representatives”.  Individuals who financially profit from the healthcare industry cannot make up more than 50% of the board’s membership and individuals representing consumers and the elderly must also be included.  In other words, the board is made up of people who know a lot about Medicare and don’t have a financial conflict of interest in decision-making. This mix of individuals sounds a lot better than our current setup where our politicians do the bidding of private healthcare businesses intent on maximizing income and profits.

The legislation creating the IPAB is not without healthcare businesses influence. The cost-savings measures will not affect them until sometime in the future (they hope never if the Republicans successfully repeal Obamacare). For example, the IPAB cannot affect Medicare reimbursements until 2019 for all inpatient hospitals, outpatient hospitals, long-term care hospitals, inpatient rehabilitation facilities, and psychiatric hospitals even if these businesses are highly profitable, low quality, and cost-inefficient.

Who Doesn’t like the IPAB?

If the actions of IPAB keep Medicare solvent for longer times, then why are some groups against it?  Money, of course!  Every healthcare business (or their lobbying groups) and politicians that stand to lose money are against the IPAB. These groups include:

Congressional Republicans

If Obamacare (PPACA) created it, you can be sure that the Republicans want to get rid of it. The IPAB is clearly seen as a hindrance to Republican plans to fully privatize Medicare. In order to make Medicare privatization appealing, congressional Republicans need to increase Medicare costs and make it more insolvent not decrease costs as the IPAB would do!

In addition, individual Republican congressmen who receive major health industry contributions for favorable legislative action would lose out when the IPAB takes charge of Medicare cost-savings recommendations.

Health Insurers Selling Medicare Advantage Plans

Before Obamacare (PPACA), some Medicare Advantage plans received as much as 82% more per enrollee (in 2010) compared to what was paid for traditional Medicare enrollees.  Even today some still get as much as 15% more (in 2016). See the Medicare Advantage Program: Status Report (March, 2016) for more details. The IPAB would recommend that federal payments to Medicare Advantage plans per enrollee be no higher than the payments made for similar enrollees under the traditional Medicare program . Without the extra money, health insurers’ would have to use their own money to market their plans and reduce their costs.

Congressional Democrats

There are also individual congressional Democrats that receive major health industry contributions for favorable legislative action and they would receive fewer contributions when the IPAB takes charge of Medicare cost-savings.

Pharmaceutical Companies

By law, Medicare is the only government healthcare program that cannot negotiate with pharmaceutical companies for lower prices for its 56 million members. This is one of those pieces of legislation that can be traced to congressmen who took the financial interests of cash-dispensing healthcare businesses over those of the American people. The IPAB will surely recommend that Medicare be allowed to negotiate so that enrollees can benefit from lower drug prices.


Because of the way that doctors are paid, specialists stand to see their reimbursements cut if the IPAB does its job. Unlike specialists, primary care physicians stand to gain higher reimbursements under IPAB actions. HHS Secretary Tom Price, an orthopedic surgeon and politician, is particularly vocal against the “evils” of the IPAB.

Tom Price on IPAB

The American Medical Association
The AMA, a doctors’ lobbying group,  warns that decreasing some doctors’ reimbursements will “adversely affect access to health care services for Medicare patients”. This is the AMA’s usual threat that doctors will stop seeing Medicare patients if their reimbursement rates are cut. When Medicare cuts reimbursements, the employer-sponsored insurers usually follow.  In addition, because the elderly use healthcare services more than the young (especially from specialists like cardiologists), this threat is hollow.

The importance of IPAB for All Americans

The vast majority of Americans has never heard of the Independent Payment Advisory Board (IPAB) or understand its importance. The IPAB was formed to extend Medicare solvency and reduce spending growth without impacting beneficiary eligibility, cost, and benefits. This means that cost-savings must come from those businesses that make money from health spending rather than from the pocketbooks of Medicare beneficiaries. Repealing Obamacare (PPACA) means that the promised IPAB Medicare cost-savings will never see the light of day thus impacting all present and future Medicare beneficiaries. With the creation of the IPAB, the American people finally have a better chance of seeing major Medicare cost-savings.

We need to fully appreciate what is at stake for all Americans given the current efforts in Congress. The Republicans’ amended American Health Care Act is in the Senate for approval after being passed in the House of Representatives on May 4, 2017. If passed, the IPAB and all other affordability and quality measures in Obamacare (PPACA) will be swept away.

The Republicans are in a hurry to repeal Obamacare, not because of some election promise made to the American people, but because it contains many cost-saving measures that improve Medicare solvency and therefore thwarts the Republican agenda. This agenda calls for turning the government’s Medicare obligations over to private healthcare businesses (e.g., insurance companies selling Medicare Advantage plans). These businesses are salivating over the prospect and show their gratitude by filling congressional pockets with “contributions”.

Even if the American Health Care Act does not pass soon, I am sure efforts will be made to stop the cost-saving mission of the IPAB anyway.  I will be watching.

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