Misinformation About IPAB

June 9, 2011
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David Brooks’ op-ed in the New York Times earlier this week attacking health care reform’s Independent Payment Advisory Board has set off a mini-firestorm in the liberal blogosphere. Brooks claimed IPAB would impose centralized planning over health care decision-making, while the alternative Republican plan — vouchers — would let consumers decide how much insurance and how much health care they should buy.

David Brooks’ op-ed in the New York Times earlier this week attacking health care reform’s Independent Payment Advisory Board has set off a mini-firestorm in the liberal blogosphere. Brooks claimed IPAB would impose centralized planning over health care decision-making, while the alternative Republican plan — vouchers — would let consumers decide how much insurance and how much health care they should buy. Brooks went on to say the fight over IPAB will be a defining battle between the two ideologies contending for power in the U.S. — decentralized free-market choice and centralized planning.

Whew. That’s an awful lot of baggage to pile onto a board that the Congressional Budget Office says will pare all of $15.5 billion from overall Medicare spending between 2015 and 2019. For those keeping score, that compares to $400 to $500 billion in other Medicare cost reductions in the reform law.

Some very strong and insightful responses to Brooks came from the New Republic’s Jon Chait and Jonathan Cohn and the Washington Post’s Ezra Klein, who touched on most of the key points that help explain why more centralized health care systems have lower costs, allow for more rational decision-making in health, and deliver better results. Today Paul Krugman joined the fray, highlighting an unsigned blog post from the Economist, which I hadn’t seen yet. That’s why I’m writing. That British-based magazine inaccurately describes IPAB, which will be far less influential than either its opponents or proponents claim.

In attacking Brooks, the Economist writes:

Patients aren’t going to experience a loss of freedom or satisfaction because an expert reviewer at the Independant Payment Advisory Board makes the call as to whether a procedure is medically beneficial, rather than the corresponding bureaucrat at their insurance provider or at the for-profit clinic they’re attending.

If wishes were fishes. The law Congress actually passed, as opposed to the one that pro-IPAB pundits think passed, gives this 15-member body far less power than similar bodies in Europe. It cannot, by law, ration care. It cannot, by law, tinker with benefits or limit access to specific technologies if they are deemed not cost-effective. Even the use of comparative effectiveness research is constrained in the reform law.

The sole power IPAB is granted in the legislation is to pursue reduced costs through changes in payment policy. It can replace fee-for-service with bundled payments or pay-for-performance schemes. It can reward accountable care organizations with penalties for lousy care and incentives for higher quality care. Moreover, whatever IPAB recommends must be passed by Congress, which also has the option of substituting its own cost-cutting measures.

The fact is the IPAB will have much less power than comparable boards in Europe. In fact, it doesn’t even have as much power as comparable boards at insurance companies, which are unelected and operate without transparency. They actually get to make medical coverage decisions based on their cost-effectiveness. Of course, even an insurance company can’t avoid a government mandate like the recently enacted “you must cover mammography screening,” which is a terrible waste of money for certain age groups.

That’s why Brooks’ endorsement of Rep. Paul Ryan’s claim that IPAB is 15 unelected bureaucrats rationing care is a flat-out lie. If IPAB reduces payments to physicians and hospitals through, say, a bundled payment scheme to ACOs, those hospitals and doctors will be the ones rationing care. The big change in their lives is that they will get less money to accomplish their job — delivering high quality care. Given the estimated 30 percent waste in the health care system, I’m betting that they’ll be able to figure out how to do it once they’re put on a money diet. In other words, the reform law and by extension IPAB put “rationing” power where it belongs — in the hands of the people who are directly responsible for delivering medical care.

The Republican voucher scheme, on the other hand, will require individual seniors to make those choices. They will do that either by buying scaled back insurance  policies (the limited vouchers offered by Medicare will lead to most seniors purchasing far less comprehensive plans than the current benefit). Or those seniors will deny themselves needed care because they can’t afford the ever-rising co-pays and deductibles, which is how market-based solutions always ration care.

Medicare is destined to spend less in the future than current projections. So take your pick as to which rationing scheme you prefer. You can either have insurance companies and an individual senior’s personal wealth determine what gets rationed. Or you can have your doctors and other providers make those decisions.

I prefer the latter. At least the Economist got that right. As the European experience shows, centralized systems with capped budgets almost everywhere lead to better outcomes, lower costs and universal coverage.

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