02/14/2013 10:07 am ET Updated Apr 16, 2013

Unlikely Prescription for Medicare's Fiscal Woes

How's this for a bitter pill?

For Republicans looking for cures for Medicare spending growth, one of the best places to look is one of their least favorites: in the legislative pharmacopeia that is Obamacare.

There are many things opponents of President Obama's health reform law detest, and topping the list is the Independent Payment Advisory Board, or IPAB.

Before we get to the reasons why, it is good to remember that, as sketched into the law, the singular goal of the IPAB is -- guess what? -- to control Medicare spending growth.

Nothing actually happens under the provision unless (i.e., until) the $525 billion per year program exceeds growth targets, and the earliest any IPAB-directed actions could take effect is 2015. But if everything really is on the table as both sides work to avoid the next in a series of fiscal embarrassments, why not a major dose of economic medicine -- properly defined and administered -- that is already written into law and embraced by the president?

The biggest obstacle for Republicans is political or, more precisely, optical. Although IPAB's stated goal is to contain Medicare spending growth, the provision is the embodiment of everything Republicans do not like, not just about Obamacare, but about "Big Government" generally. IPAB is a Board! -- sufficient criticism for many -- of 15 "bureaucrats" who will operate beyond the reach of Congress or the public. They will make arbitrary decisions about what Medicare will or will not pay for. They will use payment to come between you and your doctor. They will take away your health care!

Maybe so. The IPAB as drafted today is a black box, not a blueprint, a plan to make plans to save money, later. And for critics, black boxes are whatever they want them to be: death panels in drag, roulette wheels for rationing care, medical-industrial phantasmagoria straight out of Kafka and Huxley. Even among health industry supporters of Obamacare -- patient advocacy groups, insurers, the major provider and drug lobbies -- the IPAB is worrisome because it is all cost-containment mission and few particulars. If done right, it could save not only billions of dollars but thousands of lives from needless and dangerous medical interventions; if done wrong, it could mean arbitrary intrusions into medical care and a death knell for whole spheres of medical innovation.

The need for clarity today about how the IPAB will work years from now is one more reason the White House and Congress can and should mobilize -- in the service of deficit reduction -- the biggest potential mechanism for Medicare cost containment already written into law. Federal budget negotiators need the vehicle; those rushing to implement Obamacare need to flesh out how the IPAB will work; and those investing -- or afraid to invest -- in medical innovations need to know what impact IPAB will have on the future of Medicare.

How best to proceed with accelerating this provision of Obamacare and apply it like economic medicine to the deficit disorder? The clearest guideposts for properly defining and administering IPAB have been described well -- by the provision's more informed critics.

First, do no harm. Do not use IPAB to apply ham-fisted controls to broad classes of medical interventions or new medical technologies, simply because they are expensive. This will be accomplished if IPAB is staffed by more physicians than accountants, and run in ways sensitive to clinical nuance. A frequent criticism of IPAB is that its 15 members will be "bureaucrats, not doctors" -- one among many demagogic fantasies conjured by Obamacare's opponents.

Reality check: The actual law does not say IPAB members cannot be doctors, merely that its majority cannot be, to avoid the self-dealing by physician specialties that has crippled Medicare payment reforms for decades. But it also does not stipulate that any member must be a doctor -- something fixable in one sentence in deficit reduction language acknowledging and expanding IPAB.

Second, work with what works. Every "payment advisory" issued by IPAB should be based not on technocratic theories or clinical wishful thinking, but on what works in real-world health care settings. Health insurers and provider organizations large and small, commercial and non-profit, all around the U.S. are working to find ways to prevent hospitalization, rationalize cancer care, improve heart surgery outcomes, reduce unnecessary tests, and manage chronic disease. IPAB should root out the best of these market-based innovations and promulgate them nationally through the power of payment.

Third, operate in broad daylight. A frequent criticism of the IPAB is its lack of accountability: its 15 members are appointed for fixed terms and its decisions are final. The goal was to avoid the predicament of Medicare's traditional payment advisory panel which -- despite glaring conflicts such as self-dealing by specialty physician groups over primary care physicians -- has made countless earnest proposals to reduce costs, only to have them beaten down by lawmakers, i.e., by lobbyists for affected industry segments. A deliberate lack of political permeability puts the IPAB beyond this political corruptibility -- the main reason it was created in the first place. Members cannot be bought by health industry groups whose payments they are advising on, nor manipulated by legislators who have been. Today, politicians have the final say on any and all changes to Medicare payment. The economic consequences are self-evident.

IPAB's uncharacteristic detail on this political independence was inspired by years of hard experience for Medicare administrators who tried to use payment means to improve quality and reduce cost. Unfortunately for patients and taxpayers, for every hospital that wins, another loses. And every losing hospital has a Congressman who, in the name of "political accountability," knows exactly whom to call at Medicare to kill the experiment. The same goes for the inevitable winners and losers among physician specialties, drug companies, and medical technology providers. IPAB may be beyond the reach of politics, but that also puts it beyond the reach of the highest bidder.

This is exactly how it works with many of the hundreds of mini-IPABs operating today across the health insurance industry, in secret. No drug reps, no boondoggles, no contact with industry.


That's right -- we already have IPAB, in miniature, all doing the exact same things; they're just not called that. One of health care's many dirty little secrets: there are dozens of Boards of "faceless bureaucrats" making decisions about our medical care right now, one for every health insurer of any significance. They operate in secret, they may or may not have any doctors involved, and they are accountable only to the insurer's executives and shareholders.

By contrast, IPAB can and should operate in full view -- it's work vetted, peer-reviewed and published, in much the same way the federal government regulates the approval of drugs and medical devices. It is not a pretty process, and it is certainly not perfect, but it works. This would also provide cover-fire for the better of those mini-IPABs -- while driving the bad ones into the obsolescence they deserve - bringing clarity and consistency to rationales for health coverage where today chaos and confusion reign.

A good place for IPAB to start is where everyone agrees: some medicine is not only not worth it, but actually bad for you. We spend somewhere between an estimated $192 and $325 billion per year on what different researchers call "overtreatment" or "unwarranted use" -- care that is not only unnecessary but potentially dangerous. This represents up to 13 percent of medical care spending today; if applied to Medicare, we just found some percentage of $66 billion per year for deficit reduction -- and an unknown but certain number of lives spared scalpels, radiation and chemistry that would have done more harm than good. In the end, IPAB can and should not be about cutting costs, but protecting patients from harm.

If there is an obstacle to transforming the IPAB from a murky Obamacare provision into a win-win deficit reduction device, it would be steeped not in policy but politics. Republicans have an obsessive desire to cut spending at what appears to be almost any cost -- but it may not outweigh their obsessive hatred of Obamacare.

Much of that hatred is ideological, but much is also steeped in legitimate concerns about how things like IPAB will work. Negotiations to prevent sequestration and deal with long-term Medicare spending would be the perfect time to address those concerns with clarifying legislative language, and apply the proceeds to the service of deficit reduction.

Good fiscal medicine all the way around? Of course. But it may be too bitter a pill for the opponents of Obamacare to swallow.