Why Medicare Needs a Safety Net

Cuts needed? Use experts.

Photographer: Christopher Furlong/Getty Images

It's a little awkward to defend something that doesn't yet exist. But the Independent Payment Advisory Board is in danger of being killed before it's born, thanks to a vote in the House Tuesday, and that would be a mistake -- an extremely costly one both for Medicare, the program it's meant to support, and for the entire federal budget. 

The payment board is meant to apply a brake on rising Medicare spending. If costs grow beyond a certain level, the IPAB is to come up with cuts to bring them down. (After 2017, the cap is 1 percentage point more than the increase in gross domestic product.) Congress could override those cuts, but only with a three-fifths vote

So controversial has this board been since its conception in 2010 as a provision of Obamacare that the president has yet to nominate a single one of its 15 members. Until now, the board hasn't been needed, because other forces -- including the cuts that other aspects of the Affordable Care Act imposed on Medicare, and, to a lesser degree, the recession -- have slowed the growth of health-care costs. 

But those costs are accelerating again, and without the IPAB, they could put pressure on the rest of the budget. During all but four of the 25 years before Obamacare was passed, Medicare spending growth was higher than the IPAB's cap. Part of that was driven by improvements in medical technology -- the ever-multiplying drugs, devices and procedures that expand the benefits of health care. 

Another reason for runaway spending, however, was lawmakers' reluctance to say no to the health-care industry. For example, after Congress created a law in 1997 to impose an increasingly tight cap on doctor payments, lawmakers went on to pass 17 overrides to keep it from taking effect. (That law was finally scrapped this year.) Doctors, hospitals and other health-care providers are worried, for good reason, that the IPAB will be impervious to the kind of political pressure that keeps Congress from trimming budgets.

Yet the board already faces some built-in limits. It can never cut benefits or push people off the program. Until 2020, it can't even reduce the amounts hospitals are paid. Then, if costs accelerate at historic speeds, the IPAB could cut payments for any of the sectors that get Medicare money -- not just hospitals and doctors, but insurers, drugmakers and others. 

House Republicans voted Tuesday to eliminate the IPAB not because they think Medicare has no need for a cost-braking mechanism, but because they think it assigns congressional authority to unelected bureaucrats. Yet Congress already possesses the power to keep the IPAB from acting. It has only to pass laws that limit Medicare spending growth. Congress could, for example, allow Medicare to negotiate lower drug prices, or push the agency to bring down Medicare Advantage payments.

The repeal legislation may have enough support to pass the Senate, too, if not enough to overcome a veto. But lawmakers' energy would be better spent finding new ways to constrain health-care spending growth. Rather than try to kill the IPAB, Congress should keep it from needing to act.  

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.