Medicare Payment Board Needs Fixing


Those who opposed the healthcare bill are currently debating whether “repeal and replace” should be the clarion call in the coming election. Regardless of how this debate turns out, those in favor of doing better should focus their immediate attention to identifying and fixing the most harmful parts of the legislation. The new Independent Payment Advisory Board (IPAB) should be a top target.

The bill that passed restructures the existing federal agency responsible for bringing down Medicare costs — the Medicare Payment Advisory Commission (MPAC) — and turns it into the IPAB.

MPAC was a group of medical experts appointed by Congress that provided non-binding recommendations on ways to cut expenses and increase revenues in the Medicare program.

The changes embodied in the IPAB are meant to make the agency more independent and to skirt the political hurdles that have stalled cost-control efforts in the past. Board members will now be appointed by the President. And the IPAB’s policy recommendation will automatically be instituted unless Congress overrides them.

The goal of reigning in Medicare expenses is a worthy one. As is, the program’s costs are spiraling out of control: Medicare is projected to accumulate a $38 trillion budget shortfall over the next 75 years.

But this version of the IPAB will likely prove ineffectual. For one, it doesn’t have any authority over the biggest cost-drivers in Medicare

Medicare Part A, for instance, is so expensive its reserves will be empty by 2017, according to the Medicare Trustees. Part A covers in-patient hospitals stays. By 2035, the program’s revenues will only finance about half of promised benefits.

Medicare Part B, which covers out-patient services, has similar cost problems. Administrators just raised Part B premiums on nearly a quarter of beneficiaries because expenses have gotten so high. And an analysis from the Congressional Research Service found that without substantial hikes in Part B premiums, the program’s finances are “at risk of exhaustion.”

Yet the IPAB has no power over Part A or Part B. They’re both left to keep hemorrhaging money, soaking up taxpayer dollars and compromising the economy. Lawmakers need to push to expand the agency’s purview so it can address the real causes of Medicare’s ballooning costs.

There’s also a risk that IPAB will be insensitive to the needs of Medicare patients. After all, board members are unelected appointees with an incredible amount of power. The IPAB is liable to enact cost-cutting measures that might sound good in the board room, but actually lead to worse health outcomes for Medicare patients and strap them with unbearable costs.

Indeed, the IPAB can make drastic changes to Medicare plans, including raising premiums, cutting benefits, and restricting eligibility requirements. Technically, Congress can cancel any such changes by passing a joint resolution within a month of their proposal. But Congress is so fractured that it’s very unlikely there will be the political will for such a move.

There need to be more substantive checks against the IPAB decisions. And seniors need to be guaranteed representation during the policymaking process.

If left unaltered, Medicare could literally bankrupt this country. This IPAB is a step in the right direction, but it needs improvement. By pushing for some simple, commonsense modifications to the IPAB, those in favor of doing better could substantially bring down healthcare costs and improve coverage for millions without compromising their principles.

Peter J. Pitts is President of the Center for Medicine in the Public Interest and a former FDA Associate Commissioner.