Last time, I started the examination of the Independent Payment Advisory Board in the Patient Protection and Affordable Care Act by discussing what it is and who its members will be. Now let's look at its actual duties.
The process will start each year (beginning in 2013) by April 30, when the chief actuary of the Centers for Medicare & Medicaid Services must determine whether the projected Medicare per capita growth rate for the year after the next will exceed a target growth rate. If it will, then the IPAB is charged with developing a proposal with recommendations for achieving cost savings. Before 2018, the target growth rate is the average of the projected percentage increase in consumer inflation and consumer medical inflation. After 2017, the target growth rate will equal the projected growth rate in per capita nominal gross domestic product plus one percent (nominal GDP does not separate the effect of inflation.)
If the projected Medicare growth rate will exceed the target, the chief actuary must calculate a savings target. This will equal a stated percentage of projected total Medicare spending -- the lesser of the percentage in excess of the target, or 0.5 percent in 2015;1.0 percent in 2016; 1.25 percent in 2017; and 1.5 percent in years thereafter.
Starting in 2014, the IPAB by January 15 may submit an advisory report to Congress on Medicare issues. In addition, in those years for which the actuary has set a savings target, the IPAB must develop and submit a proposal containing recommendations to reduce the Medicare per capita growth rate to meet the savings target. Their proposals are subject to the following restrictions:
- They cannot recommend health care rationing, increased revenues or Medicare beneficiary premiums, increased Medicare benefciary cost-sharing (including deductibles, coinsurance, and co-payments), or otherwise restrict benefits or modify eligibility criteria.
- Before 2019, they cannot recommend new reductions in payments to service providers and suppliers.
- They may recommend reduced payments under Medicare Parts C and D, such as direct subsidies to Medicare Advantage and prescription drug plans that are related to administrative expenses and profit.
- They may make recommendations only with regard to the Medicare program.
- Their recommendations may be designed to help reduce the growth rate in per capita health care spending while maintaining or enhancing beneficiary access to quality care.
When developing its proposals, the IPAB must, "to the extent feasible":
- Give priority to recommendations that extend Medicare solvency
- Include recommendations that improve the health care delivery system and health outcomes, and protect and improve Medicare beneficiaries' access to necessary and evidence-based items and services, including in rural and frontier areas
- Target Medicare spending reductions to sources of excess cost growth
- Consider how changes in payments to providers will affect beneficiaries
- Consider the unique needs of those eligible for both Medicare and Medicaid
- Consider the findings in an annual report on system-wide health care costs, patient access to care, utilization, and quality-of-care.
The proposals cannot result in an increase in total Medicare spending beyond what would have occurred with no action over a 10-year period.
What happens to this proposal after it leaves the IPAB? That will be the subject of part 3. Stay tuned.
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