Washington Editor

Medicare needs fixing. That much everyone agreed on at a House subcommittee hearing on the Independent Payment Advisory Board (IPAB) created by the Affordable Care Act as a way to contain "excessive cost growth" in Medicare.

But the agreement ended at IPAB itself, which is viewed by many as a price-setting bureaucracy akin to the UK's National Institute for Health and Clinical Excellence. Prescribed as a cure-all to cut health care costs on a yearly basis, the 15-member board is set to begin business in 2014 by taking the hard choices out of the hands of Congress.

Under the health care reform act, IPAB is required to act when Medicare spending levels hit a specified target. Legislation proposed by the board to cut spending would automatically be implemented unless Congress passes an alternative within a set time.

But the congressional alternative would have to achieve the same dollar savings as the IPAB recommendation, which would not be subject to judicial review.

During Wednesday's hearing before the House Energy & Commerce Subcommittee on Health, IPAB opponents raised several red flags about the soon-to-be-formed board.

"This mandate does not take into consideration public health demands, such as a pandemic for example, that may necessitate greater, not reduced, Medicare spending," Mary Grealey testified on behalf of the Healthcare Leadership Council.

"It does not take into consideration new innovations in health care that can make Medicare more cost-effective without the need for draconian provider cuts," she continued. "New medicines that have the potential to help millions of Americans deal with chronic and painful illnesses can have high up-front costs and, thus, be prime targets for IPAB cuts, even though the dissemination of those innovative cures to patients can reduce health care costs in the long run."

IPAB is designed to keep costs in rein on an annual basis, but meaningful reforms take more than a year to develop, implement and achieve tangible results, Grealey said. She urged Congress to give reforms that are already in motion time to work before turning to an approach as "extreme" as IPAB.

For the time being, the board, which is to be appointed by the president with Senate confirmation, is prevented from rationing care, raising premiums, increasing cost sharing, restricting benefits or altering eligibility requirements, Avik Roy, an analyst with Monness, Crespi, Hardt & Co., pointed out in written testimony.

Because of those restrictions, the board's cost-cutting focus, at least until 2020, would be on Medicare Parts C and D, which covers prescription drug prices.

Thus, "the aspects of Medicare that most involve individual choice and prudent cost-sharing are the ones that appear to be the most likely to wither under IPAB, as it is currently structured," Roy said.

According to the Medicare trustees' annual report, Part D is working as its spending is 41 percent lower than their initial 10-year estimate. (See BioWorld Today, June 20, 2011.)

Sen. John Cornyn (R-Texas) attributed the savings in the prescription drug plan to the injection of competition and choice into the system. Cornyn plans to introduce a bill in the Senate to repeal IPAB as a companion bill to the Medicare Decisions Accountability Act, H.R. 452, which was introduced in the House in February by Rep. Phil Roe (R-Tenn.).

The House bill has 161 sponsors from both sides of the aisle and has been endorsed by the American Medical Association and a coalition of more than 270 health care-related organizations.

Other concerns raised at Wednesday's hearing had to do with the impact to access and the nature of IPAB itself. Several lawmakers cited Medicare's chief actuary Richard Foster's dire forecast that, under the Affordable Care Act, physicians will be paid half of what their services cost by the end of this decade. He projected payment would drop to 33 percent of costs in the decades ahead. The result is likely to be fewer physicians accepting Medicare patients.

Rep. Frank Pallone (D-N.J.), the ranking member of the subcommittee, spoke against IPAB, saying it is about "a growing imperialistic presidency." He compared it to the Defense Base Closure and Realignment Commission that removed Congress from the decisions about military base closures.

The idea that Congress is not capable of making the right choices is not true, Pallone said.

During her testimony, Health and Human Services Secretary Kathleen Sebelius said President Barrack Obama is considering appointments to the board, even though IPAB would not be effective for two years after his current term.

Sebelius acknowledged that the Congressional Budget Office is correct in saying IPAB isn't necessary now, but she called the board an essential "backstop" and "failsafe" to ensure the survival of Medicare.

"We don't know about the future," she added.

Other people defending the board also acknowledged the progress Medicare is making. The Affordable Care Act rewards good behavior and penalizes bad behavior to reform the system, Judy Feder, a senior fellow at the Center for American Progress, testified. IPAB ensures those reforms are met.

Feder, who responded when asked that she has discussed serving on IPAB with the administration, said Congress would be misguided to appeal the board. Rather, its authority should be expanded to all payers since Medicare can go only so far to ensure efficiency in health care.

The president called for strengthening IPAB in his 2012 budget plan. (See BioWorld Today, April 18, 2011.)

His overall strategy for health care cost containment is dependent on $500 billion in savings in the Medicare and Medicaid programs by 2023 and an additional $1 trillion in the following decade. "But if we're wrong, and Medicare costs rise faster than we expect, then this approach will give the independent commission the authority to make additional savings by further improving Medicare," Obama said in discussing his plan.

Biopharma continues to have "significant concerns about the overly broad powers of the unelected IPAB, which could enact sweeping Medicare changes without congressional oversight and which would not be subject to judicial or administrative review," John Castellani, president and CEO of the Pharmaceutical Research and Manufacturers of America, said earlier this year in response to the president's plan.

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