THE INDEPENDENT PAYMENT ADVISORY BOARD (IPAB) June 2011

1. THE INDEPENDENT PAYMENT ADVISORY BOARD (IPAB) June 2011

2. The new law The health care reform law created a new body called the Independent Payment Advisory Board (IPAB) responsible for reducing growth in Medicare spending, once spending triggers are hit. This amounts to the first ever cap on Medicare spending.

3. Ipab membership 15 members appointed by the President and confirmed by the Senate for 6-year terms. Members include: physicians, health care experts, third party payers and economists. The heads of HHS, CMS and HRSA serve as ex-officio, non-voting members. Simple majority of the Board present is all that is needed to pass a recommendation to Congress. A 10-member consumer advisory council advises the Board and holds at least two public meetings per year. A majority of the Board must be those NOT directly involved in providing or managing the delivery of items or services under Medicare. The President selects the Board’s Chair.

4. IPAB: HOW IT WILL WORK If Medicare costs are increasingfaster than inflation, IPAB must recommend program changes to Congress by January 15 of each year (beginning in 2014) that reduce Medicare spending. The proposals cannot ration health care, increase revenues or beneficiary premiums, increase Medicare beneficiary cost-sharing or otherwise restrict benefits or eligibility criteria. Targeted cuts are based on total Medicare spending but exempt over 50 percent of providers for many years, including hospitals, hospice and some physicians. If IPAB does not submit a proposal by January 15, the HHS Secretary is required to submit a proposal to the President by January 25. The President must then submit it to Congress within two days.  

5. IPAB Proposals • IPAB submits its proposals to Congress each January, beginning in 2014. • The IPAB proposals automatically become law the following January, beginning in 2015 unless: • Congress passes and the President signs into law - by August 15 - its own proposals that will save Medicare the same amount; or • The Senate votes with a 3/5 majority to reject the proposals. • The changes IPAB makes to Medicare cannot be overruled by the Administration or a court of law. “I believe this commission is the largest yielding of sovereignty from the Congress since the creation of the Federal Reserve… It has an enormous amount of potential power.” - Peter Orszag, Former OMB Director

6. Timing: key dates on the horizon 2011: IPAB Membership nominations expected to begin Late 2012: Expected confirmation of IPAB members; first IPAB money appropriated by Congress 2013: Chief Actuary determines if Medicare spending has triggered the IPAB process Jan. 15, 2014: IPAB’s first set of recommendations due (if triggers met) 2015: IPAB’s decisions will be implemented by HHS Secretary

7. Concerns about IPAB • Mandatory • The IPAB is charged with making recommendations every year (starting in 2014) in which the CMS Actuary determines that the Medicare spending growth triggers have been reached. • Unaccountable Board, No Recourse on Decisions • No checks and balances or judicial review • Politicized process - politically appointed board members; hospitals already secured exemption from cuts through 2019. • Impact on Patient Care • Virtually impossible to control Medicare spending without impacting patient access to doctors and treatment options. • IPAB will likely cut payments to doctors covered under Medicare, causing many to leave the program and not accept Medicare payments. • Seniors Foot the Bill • Seniors will be squeezed further as IPAB will be required to identify and make further spending cuts to Medicare every year, on top of the $400 billion that was cut from Medicare as part of health care reform.

8. IPAB: NOT THE RIGHT SOLUTION • Whatever your feelings are about the new health care reform law, there is one part that everyone should be concerned about: IPAB – the Independent Payment Advisory Board. • IPAB is a new entity that will be responsible for reducing Medicare spending. • IPAB will have the power to make cost-cutting decisions about Medicare with little oversight and no means for individuals or doctors to challenge its decisions. • In its efforts to control Medicare spending, IPAB will end up limiting patients’ access to medical care. • Something needs to be done to control Medicare spending, but IPAB goes too far.

9. SPEAKING OUT AGAINST IPAB “As it now stands, the Independent Payment Advisory Board would put in place another arbitrary system, in the mold of the Medicare physician payment formula and could leave physicians subject to two sets of cuts…The AMA will work to stop the IPAB from causing this type of double-jeopardy situation for physicians and compromising access to care for seniors and baby boomers.” “IPAB also worries consumer organizations such as the seniors lobby AARP, which fears that Medicare savings targets could have an ‘unintended impact on beneficiaries’ access to or quality of care,’ according to spokesman David Allen.” January 26, 2011 –The Politico – “Health Industry and Lawmakers Move Against Medicare Spending Board” “America’s hospitals support the repeal of IPAB because its existence permanently removes Congress from the decision-making process and threatens the long-time, open and important dialogue between hospitals and their elected officials about the need of local hospitals and how to provide the highest quality care to their patients and communities…we are deeply concerned that removing elected officials from the decision-making process could result in deeper cuts to the Medicare program in the future.” October 26, 2010 – AHA Letter to Sen. John Cornyn

10. Speaking out against IPAB • Alliance of Specialty Medicine • American Health Care Association • American Hospital Association • American Medical Association • Association of American Medical Colleges • Easter Seals Disability Services • Leadership Council of Aging Organizations • National Committee to Preserve Social Security and Medicare • National Grange of the Order of Patrons of Husbandry • PhRMA • Volunteers of America

11. Summary • With the sound intent of cutting Medicare costs, IPAB goes too far. • IPAB’s mandatory, no-recourse judgments by members - who are accountable to no one - put critical medical decisions in the hands of bureaucrats. • IPAB will unintentionally scare doctors away from Medicare, limiting access to treatments and medications. • Let’s reduce Medicare spending by cutting fraud, waste and high administrative costs before we start cutting payments for the health care products and services patients need. • Providers, patient advocates, seniors and others are speaking out against IPAB.