What you should know about IPAB: The ACA tool that could cut provider rates next year

By Heather Drost, senior editor

The Medicare Board of Trustees last month released their annual report on the solvency of the program's trust fund. The grim news drew the most headlines: The trustees now say the program's trust fund will be depleted in 2028, as opposed to last year's 2030 projection.

But the report also offered a sliver of good news. The trustees noted that projected growth per capita in Medicare spending did not exceed its target, which—had it happened—would have triggered a controversial Affordable Care Act (ACA) provision: the Independent Payment Advisory Board (IPAB).

Still, the reprieve may be short-lived. The report projected that IPAB will be triggered next year.

About IPAB

The ACA established IPAB as a 15-member panel of health care experts tasked with restraining Medicare's cost growth. In theory, IPAB recommends cost-cutting measures that take effect automatically unless Congress enacts an alternative that saves an equal amount of money.

But that theory has yet to be tested. Although the ACA requires the president, as well as the Republican and Democratic leaders in both chambers, to each recommend three members to the board, to date no panel members have been nominated—let alone confirmed by the Senate.   

Further, IPAB has been widely opposed by both health care industry groups and Republican lawmakers who say it gives Congress' legislative authority to the executive branch. While the provision has survived repeated repeal attempts and a legal challenge, $10 million in funding for the provision was cut in a 2014 omnibus spending bill.

So far, the controversy over IPAB has had no real consequence, as the Medicare growth rate—which is calculated using Medicare per capita data from the current year, the two previous years, and projections for the next two years—has yet to exceed the target amount. In this year's report, for instance, the Medicare amount of 2.21 percent fell below the 2.33 percent target.

But current projections for 2017, show the Medicare amount will exceed the target by .2 percent.

Speaking at a Brookings Institute event, Medicare Chief Actuary Paul Spitalnic said, "[B]ased on the current Medicare trustees report projections it will be expected ... that there would be a determination for the IPAB in 2017 ... That means that I would have to issue that the Medicare growth rates exceeds the targets and that savings will need to be generated to effectively account for this .2 percent of difference."

How IPAB could be implemented

In a world where Congress has nominated and confirmed all 15 panel members, IPAB would be convened once the determination is made.

According to the Kaiser Family Foundation, IPAB would be required to submit draft recommendations to achieve the needed savings in Medicare to MedPAC and the HHS secretary by Sept. 1, 2017. A final proposal would then be due to Congress and the President by January 15, 2018.

Congress then would have one year to consider the proposal, during which time they could pass legislation that generates the same level of savings, Spitalnic said at the Brookings event. Otherwise, he said the IPAB savings proposal would be implemented in 2019.

Report: IPAB likely will be trigged in 2017; Medicare trust fund will remain solvent until 2028

If no IPAB panelists have been nominated or confirmed when the determination is made, Spitalnic said the HHS Secretary would then be tasked with coming up with a cost-savings proposal and submitting it to Congress.

Potential areas to achieve cost savings

The ACA restricts the types of cuts IPAB or the HHS secretary could implement to achieve the needed cost-savings.

In an interview, Joseph Antos, the Wilson H. Taylor scholar in health care and retirement policy at the American Enterprise Institute, said the ACA language discourages cuts under IPAB that would affect beneficiaries' basic health benefits. That restriction, coupled with the tight timeline IPAB or the HHS secretary would have to draft the proposal, leaves little room for major policy changes, Antos said. 

However, Eric Cragun, a senior director in Advisory Board's Health Policy division, told the Daily Briefing that if IPAB is triggered, "one likely outcome is a cut to provider Medicare payment rates." That, he noted, "would continue a recent trend of rate cuts in efforts to cut federal spending," such as in the ACA, the the Medicare Access and CHIP Reauthorization Act (MACRA), and recent budget deals.

"For providers," Cragun said, "the key to thriving amid the rate cuts is to continue to drive efficiencies in care delivery. Regardless of who wins the election this fall, whether IPAB is triggered, or which payments are cut, providers will benefit from making care more efficient." He noted that providers can reap rewards for efficiency under CMS initiatives such as the Comprehensive Care for Joint Replacement Model and MACRA's Merit-Based Incentive Payment System.

Projections for next year

While Spitalnic believes "there is a fair likelihood that the IPAB determination will be made next year," other experts are skeptical.

Sherry Glied, dean of New York University's Robert F. Wagner Graduate School of Public Service, said that she would take the projections "with a substantial grain of salt." She said, "We have to do forecasts and because they are real numbers we put a lot of confidence in them," but "there is a lot of uncertainty."

500+ groups—mostly provider associations—call for the end of IPAB

For instance, she noted that as the overall population ages, the Medicare demographics are getting younger, but the Medicare growth rates are not demographic adjusted.

Glied also noted that the .2 percent is a small cut, and it could push CMS, which annually comes up with mandatory savings proposals, "to put more on the table." She said, "I suspect they will find the .2 percent so this does not happen."

Antos also noted that there a lot of "assumptions" that go into the calculations, which could ultimately affect whether the Medicare growth rate exceeds the target. He said, "It is entirely possible [IPAB] could be triggered next year, but it is also entirely possible that with very slight changes in assumptions that it wouldn't happen either."

However, whether or not the provision is triggered next year, Antos said he expects "IPAB will stay in place."

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