The Facts

The Senate health reform bill would establish a 15-member Independent Payment Advisory Board (IPAB) with significant authority with respect to Medicare payment rates. Beginning in 2014, in any year in which the Medicare per capita growth rate exceeded a target growth rate, the IPAB would be required to recommend Medicare spending reductions. The recommendations would become law unless Congress passed an alternative proposal that achieved the same level of budgetary savings. Subject to some limitations—hospitals, for example, would be exempt until 2020—the IPAB could recommend spending reductions affecting Medicare providers and suppliers, as well as Medicare Advantage and Prescription Drug Plans. In years in which the IPAB would not be required to make recommendations, it would be required to submit an advisory report. Every two years, the IPAB would make recommendations on slowing the growth of private health expenditures.

The proposed IPAB has drawn significant criticism from advocacy groups, and a similar provision is not included in the House bill. However, the Senate’s IPAB proposal has strong support from President Obama and is expected to emerge in some form in any final comprehensive health reform package.

What’s at Stake

Medicare providers and suppliers could be subject to significant payment cuts if the proposed IPAB is enacted and overall Medicare spending continues to increase at its current rate. A group of providers and advocacy groups, including the American Hospital Association, joined in a January 11, 2010, letter opposing the IPAB, noting that it would not be accountable to anyone but the president (who appoints its members). Shifting payment authority from Congress to an independent commission would be a significant change, and is viewed as one of the most meaningful measures in health reform legislation with respect to bending the cost curve in health spending.

Steps to Consider

  • Understand the broad and significant powers granted to the IPAB. For example, achieving coverage of new procedures and technologies could be impeded significantly if the role of Congress is minimized.
  • Keep informed about the Medicare per capita growth rate and the IPAB’s authority to make recommendations for payment reductions.
  • Should the IPAB be enacted, work to identify individuals for nomination.