(This post was contributed to by Bruce Schmiechen and Mark McCutchan)
As we’ve explained previously, the vast majority of our nation’s projected long term deficit is due to rising healthcare costs. There are three primary responses offered to this problem:
* “Business as usual” – if we do nothing, health care will use up more and more of our nation’s resources thereby imperiling our long term fiscal solvency. In addition, as we try desperately try to reduce our health care costs, decisions about how to do so will be in the hands of health insurance companies, leading to more rationing and more denials of coverage by insurance companies looking to pad their bottom lines.
* The Republican Response – Rep. Ryan and others in today’s GOP offer a free-market faith-based approach that seeks to shift health care costs away from the government and onto individuals by abolishing Medicare and replacing it with inadequate vouchers. The theory is that if individuals feel more of the cost of health care, they will make cost cutting decisions. In reality, individuals do not have the information or bargaining power needed to reduce costs and, instead, the Republican plan will simply lead to more people going without critical health care or paying more for such care. In addition, given that Medicare and Medicaid are better at holding down costs than private sector insurance companies, the Republican plan will likely lead to higher overall health care costs even as government spending on health care goes down.
* The Progressive Response – The primary progressive responses to growing healthcare costs is to increase the role of government in providing health insurance, with the ultimate goal of a Medicare-for-all single payer insurance system. This approach would save money because a single health insurance payer can have lower administrative costs than multiple private insurance companies and reduces the administrative burden on medical practices of trying to deal with hundreds of insurance companies. That is why government programs such as Medicare have lower administrative costs than do private insurance companies and have a track record of more effectively controlling healthcare costs than does the private insurance market. Rep. Jim McDermott (D-WA) and Senator Bernie Sanders (I-Vt) recently introduced legislation, entitled the American Health Care Security Act of 2011, which would create such a Medicare-for-all system.
The progressive response is likely to be the most effective and fair, as it addresses two of the major causes of high health care costs in the U.S. – administrative overhead costs and lack of health insurance – and does so in a way that avoids putting the burden of cost cutting directly on patients. But given the rapid escalation of healthcare costs in the U.S., and the role that other factors play in those increases, even a Medicare-for-all system is not likely to do enough to bring healthcare costs down to a reasonable level.
The additional step that is needed is to bring the rising costs related to technological advances under control. As we described previously, approximately half of the increase in healthcare spending is due to technological advances that lead to the use of more expensive technology, more surgeries, and more pharmaceuticals. While some of this is highly beneficial, many of these advances provide little to no benefit over previous, cheaper treatment options. The biggest thing we can do to reduce future health care costs, therefore, is to bring increased spending related to technological advances under control by assessing the comparative effectiveness of these advances before we start widely instituting them.
In his recent budget speech, President Obama proposed strengthening the Affordable Care Act’s Independent Patient Advisory Board (“IPAB”), which is designed to constrain Medicare spending by the federal government, and is the most serious proposal to address the problem of increasing healthcare costs. Combined with the well over $1 billion that the Obama Administration has invested so far into comparative effectiveness research for medical procedures, technologies, and pharmaceuticals, the IPAB is designed to rationalize, rather than ration, health care spending and to help curb the cost increases related to technological advances that actually provide little to no added benefit over earlier cheaper options.
For starters, in trying to unravel the issues, let’s look at how the IPAB actually works. Here is the official White House formulation:
15 experts including doctors and patient advocates would be nominated by the President and confirmed by the Senate to serve on IPAB.
IPAB would recommend policies to Congress to help Medicare provide better care at lower costs. This could include ideas on coordinating care, getting rid of waste in the system, incentivizing best practices, and prioritizing primary care.
IPAB is specifically prohibited by law from recommending any policies that ration care, raise taxes, increase premiums or cost-sharing, restrict benefits or modify who is eligible for Medicare.
Congress then has the power to accept or reject these recommendations. If Congress rejects the recommendations, and Medicare spending exceeds specific targets, Congress must either enact policies that achieve equivalent savings or let the Secretary of Health and Human Services follow IPAB’s recommendations.
In essence, the IPAB is designed to make sure that the treatments that are being paid for are actually beneficial and by to find ways to prioritize the most cost-effective forms of treatment. It is important to keep in mind also that IPAB builds on other provisions in the Affordable Care Act aimed at comparative effectiveness, and would only take effect if those other provisions failed to achieve the goal of slowing the growth of Medicare spending. Experts estimate that the IPAB proposal alone could save more than $400 billion from Medicare spending over the next decade.
While the IPAB currently exists, President Obama’s proposal is to make it stronger by limiting Congress’ ability to overrule IPAB recommendations. While currently Congress has to approve IPAB’s recommendations, President Obama’s proposal is for Congress to only be able to vote to reject IPAB proposals, without amendments, and only if Congress replaces the proposal with equivalents savings. Unfortunately, though perhaps not surprisingly, the response in Congress has not been encouraging. “The Health Care Blog” described the reaction to President Obama’s proposal to strengthen the IPAB:
It didn’t take long for the fireworks to start. The New York Times reported… that politicians from both sides of the aisle are lining up not only to deep-six the president’s latest IPAB proposal, but to get rid of it entirely. Republicans like Paul Ryan of Wisconsin cried rationing. Democrats like Pete Stark of California said such decisions are better left in the hands of Congress.
So Congress, which has demonstrated an acute inability to control health care spending, is pushing back against the President. It’s not surprising that the GOP would reject anything the President proposed, since their agenda is essentially to kill Medicare and kill health insurance reform under the ACA. But the negative response includes some Congressional Democrats, who want to maintain their current prerogative to control Medicare spending.
The IPAB isn’t an easy answer to all of the complex issues involved in cost constraint moving forward. But it does:
* establishes a process to begin addressing the difficult questions.
* offers a framework for reducing healthcare costs that’s based in transparency and aggregation of the most complete data possible
* brings the process of budgeting, planning and proposing constraints on the least effective and most costly practices into the daylight
* places this critical decision-making – and inevitable debates – into the public sphere and out of the hands of folks invested in those aspects of our health care system that have brought least benefit to patients while maximizing industry profits.
The tangled political processes of Congress – any Congress controlled by any party – cannot be relied upon to effectively manage this essential and complex task. IPAB doesn’t strip Congress of any responsibilities or engagement. It’s not a dictatorial board and certainly not a “death panel.” But the principle and process mandating the Independent Patients Advisory Board doesn’t rest on the assumption that politicians can effect what they clearly cannot.
As noted on The Health Care Blog, “One of the reasons Medicare costs are out of control is that every effort to rein in spending in one Congress is usually overturned by subsequent Congresses.”
Deficit reduction is a real issue, but most of the issues marking the deficit debate in our current Congress aren’t serious or real. It’s a great idea to have a serious debate about how best to enact health insurance reform that broadens coverage, guarantees quality care and begins to control costs. It can be done, but – in the current parlance of our nation’s commentariat – it requires serious adults in the room and an admission of where out-of-control spending actually exists. Unhinged ideology, special interest agendas and turf wars seem to govern the rhetoric and actions of too many legislators. Serious and adult voters will have take our own measures in 2012 to address the inability of our current Congressional majority to even begin to get serious or act like adults. The President has made a significant step forward. But he’ll need a lot of help to make the IPAB actually work.
In order to help rationalize healthcare spending and avoid rationing of healthcare, take action by contacting your federal legislators and the President, and writing a letter to the editor of your local newspapers to:
* urge support of the Medicare-for-all proposal in the Sanders-McDermott American Health Care Security Act of 2011
* urge support of President Obama’s reasonable approach, through the Independent Patient Advisory Board to reign in the growth of Medicare spending without harming the benefits that our nation’s seniors should and do receive
* push back against Republican proposals to abolish Medicare and eliminate health care reform