Medicare Payment Reform: Still Acrimonious As Hell

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This is the week of Independent Payment Advisory Board hearings in Washington--I watched one yesterday, and am listening to one today in front of a different committee.  (You can follow my live-tweeting of both events here).


It is timely, therefore, that my husband has a column out today on the odd and possibly unconstitutional structure of the IPAB, which is supposed to control costs in Medicare by recommending binding payment cuts.  When opponents of ObamaCare argue that it spend all the savings from Medicare cuts on new entitlements, proponents tend to argue that IPAB will save us; in the feistier debates, words like "death panel" tend to get thrown around.  So the hearings have touched some very twitchy nerves.

As usual, there's a high noise-to-signal ratio in these hearings: Republicans spend a lot of time asking what happens when the IPAB sets the reimbursement rate on kidney dialysis to $1 a session, while the Democrats seem to have decided that they shouldn't have to sit through this hearing, so they're holding a hearing on a topic they'd much rather cover: the Ryan Medicare premium support plan.  At this morning's hearing, Kathleen Sebelius, the HHS secretary, attempted to dodge any questions she didn't like by repeating her criticisms of the Ryan plan.  (This strategy did not work well, especially since at the end of the session, she inexplicably admitted that she wasn't so familiar with the premium support model, and how it might differ from vouchers, which made her sound at best unprepared, and at worst, unqualified to be HHS secretary.  Luckily for her, there were only 200 people watching.)

Nonetheless, there have been some interesting discussions of the IPAB mechanism.  Which is that if cost growth exceeds target, IPAB recommends payment cuts to bring growth in line.  Congress must then either come up with an alternative package of cuts, or come up with a supermajority to override.  IPAB can only recommend payment cuts; they can't, say, increase premiums or cost sharing, or note that back surgery is mostly worthless and should be taken off the reimbursement schedule entirely.

The Democrats have made much of the potential for Congressional override--Sebelius has repeatedly reiterated that IPAB cuts only take effect if Congress fails to act.  But Scott Gottlieb of AEI made a really interesting argument: Congress isn't going to have much more latitude than IPAB, because their substitute package has to score as same-year cuts.  The sorts of "delivery system reforms" that Democrats have been touting as the permanent solution to health care cost growth take time to implement; you don't get big first-year savings. Which means that IPAB can't use them to hold cost growth in line under the law, and neither can Congress.  The alternatives are some sort of crude rationing (set the reimbursement for back surgery to $1) or the kind of across-the-board cuts that have led to shrinking access for Medicaid patients.

There's also the outstanding question of whether Congress can bind its own hands this way, an issue that has gotten short shrift.  As my husband chronicles in a new column, the mechanics are complicated, and quite possibly, unconstitutional.  

But according to Cohen, IPAB's mandate is so broad, and the checks on it so few, that it tests the limit of even the most deferential standard. "It's like the perfect storm of bad elements," she says. Among the problems? "Overly broad delegating authority language, no judicial review, no administrative review, no rule-making. There's no meaningful congressional oversight and it's not repealable except for under the most draconian and limited circumstance."

That's the other catch: ObamaCare doesn't just create IPAB. It also sets in place a series of barriers designed to make it extremely difficult to repeal. So if Congress wants to get rid of IPAB, it will have to jump through a complex set of hoops first.

That means acting swiftly and with great unity. The health care overhaul contains a provision labeled Joint Resolution Requirements to Dissolve the Board that lays out exactly the steps that Congress must follow if it wants to take down IPAB. The provision lays out in great detail what a joint resolution to dissolve IPAB would have to look like, and then sets out a further requirement that it must be introduced between January 1 and February 1, 2017--meaning Congress would have to act in just a few working days. 

Following the introduction of the legislation, Congress would have to pass the joint resolution with a supermajority of sworn members by August 15 of the same year. "If you don't do that," Cohen says, "Congress has no option, at all, to repeal the board." 

Meanwhile, even if the board were successfully dissolved, IPAB would keep issuing its recommendations, which would still have the force of law, until 2020.

The protections erected around IPAB make it all but impossible to repeal. "We kind of joke about that," says Cohen, "the idea that the whole bill comes down but the only thing that stays is IPAB, like the roach after the nuclear blast."

This is more than an academic discussion.  There's been a lot of journalistic coverage of the lawsuits against the individual mandates, but another legal challenge has mostly flown beneath the radar: Arizona's Goldwater Institute is attempting to get IPAB thrown out.  


There's one thing that the hearings made crystal clear: there's still a phenomenal amount of anger and passion over this issue.  It's hard to put my finger on exactly why, but these hearings felt considerably more acrimonious than most of the ones I've watched--and I include banker grillings.  The conviction that once ObamaCare was passed, the American public would get on board and "national health care: yes or no?" would be a dead issue as we all started fiddling with the technocratic levers . . . well, "laughably naive" seems, um, a rather laughably naive way to describe this notion.  We're going to be fighting about this for a long, long time.
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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