It is a sad commentary on Congress that the most promising cost control in the Affordable Care Act is the one that takes much of the responsibility for controlling costs away from Congress and hands it off to an independent board of experts. That board -- officially known as the Independent Payment Advisory Board -- has made it through to the final bill, and in substantially stronger form than I, for one, expected. The House had always been more skeptical of the idea, but then the Senate bill became everybody's bill and the energy on changing it shifted to the big-ticket items such as affordability and surviving reconciliation. The result was that a strong version of IPAB slipped through almost unnoticed.
The IPAB is a 15-person, full-time board composed of health-care experts and stakeholders. Members need to be confirmed by the Senate and will serve six-year terms, with one possible reappointment. But the important thing isn't who serves. It's how they vote. Or, as the case may be, don't vote.
If Congress approves the board's recommendations and the president signs them, they go into effect. If Congress does not vote on the board's recommendations, they still go into effect. If Congress votes against the board's recommendations but the president vetoes and Congress can't find the two-thirds necessary to overturn the veto, the recommendations go into effect. It's only if Congress votes them down and the president agrees that the recommendations die. “I believe this commission is the largest yielding of sovereignty from the Congress since the creation of the Federal Reserve,” says Peter Orszag, who's been one of the idea's most enthusiastic supporters.
The board will propose packages of reforms that bring Medicare in line with certain spending targets. Those reforms won't increase cost sharing or taxes and they won't change eligibility or benefits. Instead, they're reforms of what Medicare pays for and how it pays for it. By 2018, the target growth rate is the average five-year increase in GDP plus one percentage point. So if GDP has been growing at 3 percent, the target is 4 percent. If Medicare's growth is faster than that, then the board is charged with saving the lesser of 1) the difference between the target growth rate and the real growth rate, or 2) 1.5 percentage points off the projected growth rate.
There are some weaknesses in the board. If Congress can find 60 votes, it can amend the board's recommendations without finding offsetting savings elsewhere. The board can't seriously change payment rates until 2018. And if Medicare is growing more slowly than the rest of the health-insurance market, then Congress can protect it from the board every other year (so it would have to save more money in, say, 2020, but not in 2021).
Nevertheless, this is the most powerful cost-cutting agency we've seen. For all those folks saying Congress can't stick to cuts, this is the closest thing to a solution that anyone's come up with. It gives Congress a way to let someone else take on the hard decisions that it doesn't have the expertise or political will to make. If Congress so chooses, it could let the IPAB do its work without ever bringing the recommendations up for a vote: They'd still go into effect, and no one would be on the record in either direction.
As a commentary on Congress, is all this a bit sad, and even weird? Yes. But it may also be necessary. And it will be interesting to see how it interacts with the private market: You could see the reforms that get seeded into Medicare being adopted by everyone else (which is common even now). And if Medicare does bring its costs far down while private insurance finds itself unable to make meaningful changes, pressure could increase for some sort of Medicare buy-in program along the lines of what Alan Grayson is proposing.The bottom line is that IPAB creates a continuous system for controlling costs in Medicare and trying out new reforms and experiments. For all those disappointed by Congress's fecklessness when it came to cost controls in the Affordable Care Act, know that Congress actually agrees with you, and is trying to do something about it. Or at least let someone else do something about it.