July 12 2011
This summer, most of the public's political attention is focused on the tug-of-war over the debt ceiling and government budget. Yet another important drama is also unfolding in Washington.
This week, Congressional leaders will hold a hearing on the IPAB: the Independent Payment Advisory Board, which could be a first step to the board's repeal This board, created by the Affordable Care Act ("ObamaCare"), is one of the lesser-understood provisions in the 2000-page law, but it is a critical aspect, exemplifying how ObamaCare would control Medicare costs. If the public learns more about IPAB, the movement to fully repeal ObamaCare will gain important momentum.
Lawmakers created the IPAB in the Affordable Care Act to help solve Medicare's significant financial problems. The average couple will pay $140,000 into Medicare during their working years, but will get nearly three times that amount back in health care services through Medicare. This pattern has led the program to a $79.4 trillion "unfunded liability" or budget hole, and that figure grows each year.
Bad budgeting is not the only problem that Medicare faces today. Medicare and Medicaid - the two giant government health insurance programs - demonstrate clearly the difference between access to health insurance and access to health care. While millions of people have access to the insurance offered by these programs, they are often declined by doctor's offices because of the too-low reimbursement rates offered to medical providers.
Here's the IPAB approach to fixing these problems: Fifteen bureaucrats will take control of Medicare cost containment in 2014. Three nonvoting members of the Board are already determined: the Secretary of Health and Human Services, the Administrator of CMS, and the Administrator of the Health Resources and Services Administration. The other 12 appointees will be selected by the President and confirmed by the Senate.
Each year, the CMS director will submit to IPAB the per-capita growth rate in Medicare and the target per-capita growth rate. Undoubtedly, as health care costs continue on their upward spiral (fueled by government regulations), the growth rate will be higher than the target rate. The mission of IPAB will be to make the two rates match, by drafting a proposal for changes to the Medicare program. This proposal will become law unless Congress, by supermajority in both houses, votes to stop the proposal and comes up with its own plan to match IPAB's savings.
To cut costs, the IPAB will scrutinize drugs and treatments - not just based on their effectiveness - but based on their cost. While the letter of the law prohibits the IPAB from "rationing" care, this approach can have no other result but de facto rationing. Americans should ask if this is really an appropriate role for the government to take. Health care is a complex and personal issue, and a government board can only use statistical averages and dollar signs to decide which treatments are acceptable.
We've already seen this dynamic at work in England, for example, where Dr. Donald Berwick (currently in the U.S. working as CMS director) created a no-apologies rationing board called the National Institute for Clinical Excellence (NICE). Thousands of British patients have been denied drugs that are available in the U.S. and in Europe, because NICE rejected the drugs on grounds of cost-effectiveness. Heartbreaking examples abound.
Just last year, England changed their public policy relating to NICE and revoked the body's decision-making power over new drugs. To avoid the pain that comes with health care rationing, the U.S. needs to reform Medicare using a different approach. In fact - the opposite approach would be best.
What is the opposite of rationing? A free-market system, built from the ground up that allows individuals to make their own decisions with their health care resources and gives patients the access to health care that they really need.
For example, through a "premium-support" model, the government would continue to help seniors seek health insurance coverage by paying them directly and then encouraging them to seek health insurance in the private market. Policymakers could also promote more cost-sharing among beneficiaries. While Medicare beneficiaries wouldn't have to pay for the entire cost of any treatment, they'd always have at least a little "skin-in-the-game." Medicare patients would then have an incentive to maintain good health and seek treatment of only when it's truly needed.
Proposals like these would empower individuals by putting them in the driver's seat of health care. They would be far superior than our current path, toward IPAB-control, that will take choices away from patients and ultimately ration care. At this week's hearings on Capitol Hill, our leaders should seriously consider the consequences of this government rationing board and take action to repeal this odious provision of ObamaCare as a first step to full repeal.