Earlier this month, the House sent the American Health Care Act (AHCA) to the Senate, which is now crafting its own bill to repeal and replace key elements of the Affordable Care Act (ACA) through budget reconciliation. A provision of the ACA that was once in the crosshairs of Republican lawmakers has appeared to receive little attention in recent years. That might be about to change.
The Boards of Trustees for Medicare will likely soon release a report, which is expected to project rising Medicare costs. Medicare spending levels that exceed the target threshold will trigger the Independent Payment Advisory Board (IPAB) to spring into action and figure out where to cut. Here’s the rub: In the seven years since IPAB was outlined in the ACA, no one has ever served on the 15-person panel, nor has anyone even been nominated. But even if IPAB never comes to exist, Republican policymakers might still need to consider Medicare cuts. And determining where to cut will fall squarely on the shoulders of US Department of Health and Human Services (HHS) Secretary Tom Price.
The IPAB policy is this: An independent board would recommend cost-saving changes to Medicare. Congress would have to take action to consider those changes, or come up with its own plan to bring Medicare spending back in line with the target rate. Even though IPAB was never formed, provisions in the law call for action anyway.
IPAB was once a major focus area of health care stakeholders, and was referred to as “death panels” by opponents. Over the past several years, however, IPAB has been on the back burner. When crafting AHCA, House Republicans opted not to address IPAB, which falls outside of the budget reconciliation rules. Both Republican and Democratic lawmakers have proposed bills to repeal it. It could be considered in a separate vehicle by Congress later this year.
Last year, the Boards of Trustees for Medicare predicted 2017 would be the first year that spending in Medicare would exceed the target rate set in law, triggering proposals to cut spending in the program. The Trustees missed their April 30 deadline to determine if Medicare cuts were needed.
What is the process?
The law lays out a six-step process. If 2017 becomes the year that Medicare spending trends trigger action, the process begins with the Trustees report, which was due at the end of April. IPAB (if it existed) would then have the summer to work on and finalize proposals to reduce spending and bring it in line with the target established by the US Centers for Medicare and Medicaid Services (CMS) chief actuary (OACT). The final proposal would need to be submitted to the Medicare Payment Advisory Commission and to HHS by September 1. However, with no IPAB ready to take on this charge, the requirements default to HHS, which needs to turn around the proposals by January 25, 2018.
Congress would need to address these proposals in 2018, as the ACA requires HHS to begin automatically implementing the proposals by August 15, 2018. Congress could pass superseding legislation that saves the same amount of money, or it could vote to waive IPAB requirements (which would require a supermajority in the Senate).
What can be cut?
The law stipulates that IPAB (or HHS acting in its place) cannot offer recommendations that would ration care, raise revenues or Part A or Part B premiums, increase cost sharing, or change benefits or reduce the number of people eligible for coverage. During the initial phase of this policy (until 2019), the law limits where the savings proposals can come from.
What is the trigger?
What sets all of this in motion is a formula that compares projected growth in Medicare per capita spending to the rates of inflation for 2015 through 2019. After 2019, the comparison is to the gross domestic product plus one percentage point. The specific rate of inflation is the average of the projected percentage increase in the consumer price index for all Urban Consumers (CPI-U) and the medical care expenditure category of the CPI-U. In general, measures of inflation capture price increases and not changes in the use or intensity of services.
Keep a look out for the 2017 Medicare Trustees report, which did not meet its April deadline. If the trigger does get pulled, we could be in for an ever more complicated health policy journey in the near future.