Sarah Palin, Howard Dean, and Liberal Bloggers All Making Mistakes In Discussing the Medicare Independent Payment Advisory Board

Ever since Howard Dean had an op-ed in the Wall Street Journal calling for elimination of the Medicare Independent Payment Advisory Board, conservative sites have been using this to claim, as Investors Business Daily has, that Sarah Palin was right about death panels. The problem with their argument is that Howard Dean got some of the facts wrong, and Palin’s argument remains a stretch. However, liberal bloggers also continued to make mistakes in discussing the IPAB in rebuttals to Dean. While Dean was wrong in calling for its abolition, there were problems in the originator Senate version of the Affordable Care Act which should be fixed.

Howard Dean is wrong in claiming that the IPAB will not cut costs. There is no question that a board with the power to change how Medicare operates is capable of cutting costs. Dean is misleading in writing, “The nonpartisan Congressional Budget Office has indicated that the IPAB, in its current form, won’t save a single dime before 2021.” The reason for this is not that it cannot cut costs, but that the cost cutting regulations do not become effective until Medicare costs raise above a certain point, which the CBO does not project will happen until 2022. While the IPAB’s rulings only directly affect Medicare, it is common for private plans to mirror changes in Medicare, but paying at a higher rate.

The idea behind the IPAB is to have medical experts make proposals for cost cutting in Medicare to take this out of the political process. On paper the board is not allowed to ration care, but by itself this argument in its defense is bogus. Howard Dean does have a point here. Rationing is not well defined in the legislation. Any changes in how Medicare reimburses physicians, either in terms of dollar amounts or, as is most likely to occur, the nature of the payment system, will lead to reduced spending in some areas and could be considered rationing. The important point here is that it is not necessarily the IPAB which might ration care. If you consider this to be rationing, the same could be said about any Congressional changes in Medicare reimbursement. The question then becomes whether it is better for Congress or for a panel of experts to decide where spending cuts should occur.

From this perspective, the IPAB is a good idea and should not be abolished. However, there are two structural problems which should be revised.

The first is trying to legislate Medicare cuts in the future. With an aging population and unknown new technology, we cannot predict today how much we should spend on Medicare after 2021. There obviously needs to be some limit on costs, but this is a decision which should be made by Congress at the time. We already have seen the problems with attempts to legislate automatic decreases in Medicare payment with the Sustainable Growth Rate. Using this flawed plan, we run into the situation where the automatic formula would reduce Medicare payments to a level where physicians simply would not be able to afford to treat Medicare patients. Now pretty much every year, and sometimes more often, Congress has to intervene and overrule the cuts called for with the Sustainable Growth Rate. The current legislation creates similar problems.

The second problem is that the IPAB has insufficient accountability. It makes sense to have decisions made outside of the current legislative process, analogous to an independent panel making recommendations for military base closings. Many liberal bloggers defending the IPAB have used this analogy, but many incorrect believe that, like the military base recommendations, the decisions of the IPAB will be subject to an up or down vote by Congress. The portions of the Affordable Care Act which create the IPAB make it virtually impossible that Congress will be able to override their rulings. On the other hand, I have read speculation that Congress might be able to pass supplemental spending bills to replace things cut by the IPAB, comparable to how they currently override the cuts which would come from the Sustainable Growth Rate. However, this would not solve the problem should the IPAB make structural changes in Medicare which lead to physicians not being willing to accept Medicare patients.

The IPAB as was passed in the Senate version of health care reform legislation should be maintained but reformed so that an up or down vote by Congress is required to accept their recommendations, and so that cuts are not automatically required. While many Democrats now feel compelled to defend this aspect of the law as passed (largely in response to the ridiculous hyperbole coming from the right in opposition), we must keep in mind that the Senate version was passed only because of the Democrats losing a super majority in the Senate, preventing the normal process of the Senate passing a final bill following reconciliation with the superior House bill. Changes should be made, but not repeal of this or the entire bill as Republicans are calling for. Unfortunately, the Republican refusal to engage in the normal legislative process will probably make fixing the problems in the Affordable Care Act unlikely to occur in Congress.