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Reform creates board with unprecedented authority, uncertain membership

Funding to establish the Independent Payment Advisory Board (IPAB), mandated as part of health system reform, won’t be available until this October, but that’s not stopping dermatologists from being concerned about the impact that the panel may have on the specialty.

Dermatologists are appropriately anxious about the IPAB, noted Jack S. Resneck Jr., MD, chair of the American Academy of Dermatology Association’s Council on Government Affairs, Health Policy and Practice, and associate professor of dermatology and health policy at the University of California, San Francisco School of Medicine. The anxiety largely stems from the unprecedented authority that the IPAB is given and the uncertainty regarding who will be part of the 15-member board.

Created as part of the Patient Protection and Affordable Care Act, the IPAB is charged with making recommendations to reduce growth in Medicare spending while enhancing quality of care. Specifically, the IPAB is to develop proposals that will improve the health care delivery system and health outcomes, protect and improve Medicare beneficiaries’ access to necessary and evidence-based items and services, and target reductions in Medicare program spending to sources of excess cost growth.

“The Independent Payment Advisory Board is one of the key parts of health reform that will set our system on a path to sustainability in the long run,” said Jessica Santillo, a spokesperson for the Department of Health and Human Services (HHS). The Congressional Budget Office has estimated that the IPAB will save $15.5 billion between now and 2019, she added.[pagebreak]

How it will work

If the Centers for Medicare and Medicaid Services’ (CMS) actuary determines that Medicare expenditures will exceed a target rate of growth, the IPAB will be required to develop proposals to reduce costs. The health reform law initially sets the target growth rate as the average of the consumer price index and the index’s medical component. Starting in 2018, the law permanently sets the target growth rate as the gross domestic product plus 1 percentage point. The IPAB proposals must be designed to achieve savings targets that are the lesser of either the excess growth rate (i.e., projected growth minus target growth) or a defined percentage of program spending (i.e., 0.5 percent in 2015, 1.0 percent in 2016, 1.25 percent in 2017, and 1.5 percent in 2018 and beyond).

The IPAB will begin submitting its recommendations to Congress on Jan. 15, 2014. Moving forward, the board will submit recommendations at least once every two years. By July 1, 2014, the IPAB will produce a public report containing standardized information on system-wide health care costs, patient access to care, utilization, and quality of care. This report will allow for comparison by region, types of services, types of providers, and both private and public payers. The panel will produce such a report annually thereafter.

The IPAB recommendations should focus on efforts to extend Medicare solvency, according to the health reform law. Its proposals must include the rationale behind the proposed target savings, including an actuarial opinion supporting the rationale. Additionally, the recommendations should contain legislative language to implement them.

When developing proposals, IPAB members are required to consult with the Medicare Payment Advisory Commission (MedPAC) and the HHS secretary. In addition, a 10-member advisory committee to the IPAB will be appointed by the Comptroller General. The committee, which will meet at least biannually, will be composed of one member for each of the 10 HHS geographic regions.

Unprecedented authority

While the IPAB will advise Congress on Medicare matters in 2014, it’s the following year that the panel will be authorized to make binding Medicare policy recommendations and non-binding private payer policy recommendations.

Congress can either introduce the IPAB’s proposals as new legislation or modify them. If the modification does not achieve cost savings equal to those expected by the board’s recommendations, Congress needs a three-fifths majority vote to pass it. If Congress either fails to approve IPAB’s recommendations or find alternative equivalent reductions, the panel’s proposals will automatically take effect. If Congress rejects the IPAB’s recommendations, the president can veto that congressional action. If the veto isn’t overturned, the board’s recommendations go into effect.

The authority the health reform law affords the IPAB is of concern because it is similar to that of the Federal Reserve, which is outside the oversight of Congress, said Michael J. Ramlet, coordinator of the American Action Forum’s Operation Healthcare Choice. (The AAF is a non-profit think tank; former Minnesota Sen. Norm Coleman, a Republican, serves as its CEO.)

It is the fast-track legislative approval process that is most disconcerting to physicians. “Congress’s ability to exercise its authority is basically being given up to the IPAB,” Dr. Resneck said. That, in turn, subverts physicians’ prospects of having a fair hearing about the board’s proposals.

Even though the IPAB is prohibited from rationing care, raising revenues and Medicare premiums, increasing beneficiary cost-sharing, and otherwise changing benefits or modifying eligibility criteria, it could cut payment rates for physicians providing services to beneficiaries. While dermatology services may not rank among the most expensive for CMS, Dr. Resneck said, some are being utilized at a rate that will make them a likely target for IPAB, which is unlikely to consider epidemics or other justifications for the increases.[pagebreak]

Proposals target physicians

Physicians will remain the primary target for potential reductions until 2020 when the exemption from IPAB recommendations negotiated by hospitals and hospices during the reform debate expires, Dr. Resneck noted. As the health care system looks to models in which physicians and large organizations are collaborating to provide more integrated care and reduce costs, such as accountable care organizations, targeting physicians the way the IPAB does seems counterproductive, Dr. Resneck said.

Moreover, the IPAB’s authority to make binding Medicare policy recommendations adds to the expenditure constraint physicians are already facing under the flawed Sustainable Growth Rate formula, he pointed out. “Essentially we are now layering two problematic expenditure targets on top of each other,” said Dr. Resneck. “Imposing automatic across-the-board payment reductions will not enable us to rationally evaluate health care expenditures and cut spending in the appropriate areas,” he suggested. “Instead it will probably just impact access for particular patients, such as Medicare patients.”

Ramlet of the AAF concurs. Without knowing what the IPAB is going to tackle or how it is going to tackle it, he said, the panel’s primary method to control costs appears to be making payment reductions, which doesn’t get at the core issues of why health care costs are rising.

IPAB membership

The other question that remains is who is going to be making these recommendations.

According to the health reform law, the president is responsible for appointing the board’s members, subject to approval by the Senate. The president is to nominate 12 of the 15 members, including the chair, after consulting with majority and minority leaders in both the Senate and House. The Senate majority and minority leaders, the Speaker of the House, and the House Minority Leader may nominate one member each. The HHS secretary, the CMS administrator, and the administrator of the Health Resources and Services Administration are considered ex-officio members. The chair is authorized to appoint an executive director and staff for the IPAB. Members will have six-year terms, limited to two consecutive terms.

The IPAB will include nationally recognized experts in health finance and economics, actuarial science, health facility management, health plans and integrated delivery systems, and reimbursement of health facilities. Members should represent a mix of professionals who span a broad geography with a balance between urban and rural representation. Physicians, health care practitioners, consumer representatives, and representatives of the elderly population will be included among the membership.

The long list of individuals who must be on the IPAB doesn’t leave room for many physicians, Dr. Resneck said. He suspects that only two or three physicians will make it on the panel.

With the law being challenged by House Republicans, there is speculation that Senate Republicans could block nominations to the panel. They could also nominate Republicans to the IPAB who do not support its premise, preventing the board from functioning. The president could use recess appointments to name the board’s members, a move he made to appoint Donald Berwick, MD, MPP, CMS administrator last year. Dr. Berwick’s appointment, however, was considered somewhat controversial because it side-stepped the need for Senate approval.

Who will serve on the IPAB and how they will interact with Congress will ultimately determine the impact the panel will have on the practice of dermatology in years to come.


Timeline for targets

IPAB’s real impact will begin to be felt in 2015, when its savings recommendations will be required to cut Medicare spending by a certain amount each year. The process will actually begin in 2013 and operate on a three-year cycle. How will it work?

Target growth rate: Initially, the target growth rate is the average of the consumer price index and the index’s medical component. Starting in 2018, the law permanently sets the target growth rate as the gross domestic product plus 1 percentage point.

Savings requirement: Lesser of two options: 1) the difference between projected growth and the target growth rate, or 2) a defined percentage, starting at 0.5 percent in 2015, rising to 1.0 percent in 2016 and 1.25 percent in 2017, and set at 1.5 percent in 2018 and beyond.

Three-year cycle:

  • Year 1: Determination Year

    Beginning in 2013, the IPAB determines that estimated expenditures over a five-year period ending with year 3 (Implementation Year) will exceed the target growth rate.

  • Year 2: Proposal Year

    Beginning in 2014, the IPAB issues proposals to reduce expenditures to achieve target savings.

  • Year 3: Implementation Year

    Beginning in 2015, the IPAB’s recommendations go into effect unless Congress passes a law that will result in greater savings.



 

Related Resources

Timeline for targets