Independent Payment Advisory Board can (one day) affect hospitals

There’s a perception “out there” that the Independent Payment Advisory Board (IPAB) can’t affect how Medicare pays hospitals. For example, in today’s Wall Street Journal, Janat Adamy writes,

The health-care law created an Independent Payment Advisory Board that can recommend Medicare spending cuts to Congress, except for cuts directly to hospital payments.

That’s true initially, but not eventually. In NEJM last May, Tim Jost explained,

The effects of the IPAB’s proposals, however, may not be to “ration health care,” raise costs to beneficiaries, restrict benefits, or modify eligibility criteria. Proposals may not, before 2020, target the rates of particular providers —primarily hospitals and hospices — that are already singled out by the ACA for extraordinary cuts. The board is not prohibited from cutting payments for physicians, but its powers may be limited if a permanent fix for the sustainable growth rate —< the formula that determines increases or decreases in Medicare’s physician payments — is passed. (Emphasis mine.)

I know 2020 seems like a long time from now, and it is. But much of the law doesn’t kick in for many years, and there is a reason for that. The exchanges don’t start until 2014. The Cadillac tax commences in 2018. And then, finally, in 2020 the IPAB can affect hospitals. Why?

The answer is simple: politics. The ACA would not have passed without the cooperation of key interest groups (unions, hospitals, insurers, etc.). There’s only one way to gain that cooperation and it’s to put and/or reduce the pain. So, a deal was cut. Reductions in payments to hospitals are already in the law, and further cuts recommended by the IPAB are prohibited for a decade. Without this delay of further IPAB-recommended cuts there’d be no law, no reforms to the insurance markets, no subsidies for coverage of lower-income families, no Cadillac tax, and no IPAB.

Sure, one could imagine a tougher law with deeper and sooner cuts to spending. But that law would not have passed last March, and I doubt that any such law could pass today.

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