And Obama insisted, over lobbyist & Congressional opposition, it be there. Wall St Journal:
Last year, Congress rejected a bill that would have required an up-or-down vote on recommendations to reduce the budget deficit from a commission composed primarily of members of Congress. This year, Congress acquiesced to President Barack Obama's insistence that it create a presidentially appointed Independent Payment Advisory Board (IPAB) to craft ways to slow Medicare spending that will take effect automatically unless Congress votes to reject them.
Did something big just happen that will nudge Washington toward fiscal sanity? Or is this a smoke screen, one that allows backers of the health bill to argue today that it was fully paid-for and gut the provision tomorrow?
We won't know for a decade. "We'll get earlier feedback on the Apple iPad's performance than the IPAB," quips Peter Orszag, the White House budget director.
There is a chance—a chance—this will grow into a mechanism that overcomes congressional inability to say "no" to Americans who collectively demand more in benefits than they're willing to pay in taxes. It is hardly democratic. It substitutes technocrats' judgment for decisions by elected representatives. But, as Maya McGuiness, head of the Committee for a Responsible Federal Budget, puts it: "Outsourcing some of the harder policy decisions is the best chance we have."
The law instructs the 14-member board to devise money-saving changes to Medicare when per-capita spending is projected to climb faster than one percentage point above the overall economy's growth rate. Congress can block the changes, but that requires a majority vote or, if the president vetoes, two-thirds. There are lots of strings: The law says the board can't ration care, increase revenue or restrict eligibility for benefits (though it can change the amount and way Medicare pays for care.) Hospitals get a pass for the first several years.
The Congressional Budget Office estimates that the board will save around $15.5 billion over 10 years, on top other changes to Medicare specified in the law—more if run by the right people and if Congress lets it take the heat, less if run by the wrong people or if Congress resists.
But it is a big change: A Medicare panel Congress created in the 1997 Balanced Budget Act can only make suggestions; this one has more teeth. "If I had gone to the Aspen Institute or the Brookings [Institution] board, and said you're going to get an entitlement commission with authority to control health-care costs, they'd be breaking out the champagne and high-fiving themselves," says Rahm Emanuel, the president's chief of staff. "That's what's been done at the president's insistence over the opposition of providers and defenders of congressional prerogatives."
When House Ways and Means Chairman Charles Rangel (D., N.Y.) told Mr. Obama that House Democrats were uneasy about surrendering their power over the purse, White House aides say the president responded: "There'll be no health bill if I don't have the ability to control costs."
Mr. Orszag injudiciously told the Washington Post's Ezra Klein that the provision represents "the largest yielding of sovereignty from the Congress since the creation of the Federal Reserve." (Don't tell the Supreme Court.) If the board realizes its potential to push Medicare toward paying for better quality care, as opposed to paying for more care, "it could well turn out to be perhaps the most important component of the new legislation," he says. (Mr. Orszag sometimes sounds like a man growing weary of the high-pressure budget director's job who would love to chair the new board.)
Yelps from doctors and drug companies suggest the IPAB may bite.
The American Medical Association complains that "un-elected officials" are getting "broad discretionary authority to make radical changes in the structure of ... Medicare." The Pharmaceutical Research and Manufacturers of America objects to the "non-elected" board's "overly broad powers." Already, several members of Congress are vowing to weaken the board before it gets going.
Deficit fighters are divided. "I like it," says Ms. McGuiness. "Of course you can always change the rules, but it's helpful for the politicians to say: 'I didn't want to do it but the Medicare board made me." Douglas Holtz-Eakin, the former CBO chief who advised John McCain's presidential campaign, is skeptical. "In the end I expect the Congress to legislatively overrule it when it becomes inconvenient," he says.
Changing budget rules and creating commissions, even a board with clout, doesn't guarantee that health-cost growth will actually be slowed or the deficit reduced. That takes political will. If Congress feels like it was bludgeoned into accepting IPAB as part of the health-overhaul imperative, it'll wiggle out of its board's recommendations when the shouting starts, changing or suspending the law if necessary.
But a few years from now, Congress may be forced by political or financial-market pressure to tackle the deficit and restrain health-care spending. If so, the IPAB may prove valuable, providing sound policies for changing the way health care is delivered as well as political cover.