A controversial feature of the Patient Protection and Affordable Care Act is the new Independent Payment Advisory Board (IPAB). This appointed panel will be tasked with cutting Medicare spending, but some of its features appear to be problematic. I have written a new report on the structural flaws of the board and how it will ultimately ration care for Medicare patients. Here are my big picture conclusions.
First, given its mission, IPAB’s mandate is too narrow. The board is prohibited from recommending changes that would reduce payments to certain providers before 2020, especially hospitals. Because of directives and restrictions written into the law, reductions achieved by IPAB between 2013 and 2020 are likely to be limited primarily to Medicare Advantage (23 percent of total Medicare expenditures), to the Part D prescription drug program (11 percent), and to skilled nursing facility services (5 percent). That means that reductions will have to come from segments that together represent less than half of overall Medicare spending.
Second, the IPAB is effectively unaccountable. In practice, the law makes it almost impossible for Congress to reject or modify IPAB’s decisions, even if those decisions override existing laws and protections that Congress passed. As a result, it is not in fact an advisory body, despite its name. The system is set up so that IPAB, rather than Congress and the Department of Health and Human Services (HHS) acting under Congress’ authority, makes policy choices about Medicare.
Finally, IPAB’s time horizon is too short. IPAB’s cuts have to be achieved in one-year periods. That effectively rules out long-run quality improvements or preventive programs. Instead, IPAB will be forced to focus on reducing reimbursements to providers due to their short-term nature.
The upshot is clear.
While IPAB appears to be barred from recommending rationing healthcare, raising revenue or premiums, increasing cost sharing, or restricting benefits and eligibility, its mission will inevitably endanger access to existing care and innovation in new therapies. Although rationing is an unpopular and ungracious term, IPAB may bring Medicare dangerously close to a rationed system.
It will become more difficult to make appointments with providers of all sorts, thereby restricting care.On top of which, a provider will not offer a poorly reimbursed, but effective, treatment unless there does not appear to be a therapeutic alternative. “Rationing” will occur in complex and often subtle ways, and patients may never know that they could have received a more effective treatment.
The ACA is an enormous reform, of which IPAB is only one part. However, its structural defects make it a potentially damaging policy toward the future of healthcare in the United States. Inevitably, IPAB will be driven to implement reimbursement cuts, and consistent with the history of price controls, the result will be reduced access to care and diminished investment in medical innovation.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Read the complete study here.
