Controlling Health Care Costs and the Independent Payment Advisory Board (IPAB)

As seen in Sierra Sacramento Valley Medicine Vol. 64 / No. 3 - May/June 2013  

Getting Serious about Cost Containment

Understanding the ACA’s Independent Payment Advisory Board (IPAB) 

By Adam Dougherty, MPH, MS III

THE PATIENT PROTECTION AND Affordable Care Act (ACA) brings unprecedented changes to the American health care system. Through the individual mandate, health insurance exchanges, and the expansion of Medicaid, the nation may finally shed its dubious title as the sole Western nation without universal coverage. 

A lesser-known piece of the law has the potential to tackle an even greater challenge: the unsustainable growth in health care spending. National health care costs are now an all too familiar problem. In 2009, the U.S. topped $2.5 trillion in health care expenditures, or 17.6 percent of GDP. This equates to $8,086 per person, more than twice the average of the highest spending countries.^1,2 The unyielding growth in federal health program costs, most notably Medicare and Medicaid, remains the single greatest threat to our nation’s fiscal health and long-term deficits. 

Extended life expectancy and an aging baby boomer population means spending will continue to accelerate, and the CBO projects that direct federal health costs will total 9.7 percent of GDP by 2030 and 13.7 percent by 2050, with national health expenditures nearing 50 percent  of GDP by 2080.³

The ACA begins to take important steps to combat these trends and improve the value of the health care dollar through accountable care organizations, comparative effectiveness research, and value-based purchasing. Arguably the most significant effort to contain costs, though, can be found in Section 3403 of the ACA and is known as the Independent Payment Advisory Board (IPAB).⁴

Consisting of a 15-member panel of presidential appointees, IPAB’s task is to produce recommendations to hold down Medicare spending, if the program’s per capita growth exceeds established limits. Beginning in 2015, IPAB will make recommendations with the spending target tied to the Consumer Price Index (CPI), better known as inflation. After 2020, the target will be tied to GDP plus one percent, a historically less-restricting trend. Most importantly, the IPAB recommendations offered to Congress are binding, for legislators must either approve the proposals or find equally effective alternatives to offset the costs.

As the federal government has an increasing stake in future health care spending through Medicare, Medicaid and the ACA’s low-income subsidies, an effort to address the underlying costs is imperative for public programs, payers, and employers. IPAB is in a unique position to fast-track successful cost-saving models, mobilize the leverage of the nation’s largest purchaser, and truly effect health system change.  Yet the IPAB itself is on life support, as both the House and Senate rescind $10 million of the $15 million allocated by the ACA in their proposed FY2013 budgets.

The highly politicized nature of reigning in Medicare costs and the failure of Congress to take action in the last several decades justifies new approaches to real cost containment. Nevertheless, the inability to adopt serious cost control measures has created skepticism and has cast IPAB as a controversial body comprised of unelected bureaucrats who are accountable to few. These concerns are probably overblown, since Congress has the ability to override IPAB recommendations by enacting comparable cost controls. Efforts to repeal IPAB are commonplace in the House, where it is referred to as a “rationing board” and “the real death panel,” yet little is being done to address long term costs containment.⁵

This picture offers further justification for IPAB’s necessity. The mere presence of the board requires recognition of the need for a Congressional plan to control Medicare costs, something vehemently avoided in the current age of political polarization and special interest influence. Additionally, concerns about restricting access to care are addressed in the ACA itself, as IPAB is unable to make any recommendations that would alter plan benefits or eligibility levels, and has explicit language against the notion of “rationing” care.⁶

Organizations such as the American Hospital Association (AHA) and the American Medical Association (AMA) fear that IPAB will simply cut provider reimbursements in order to meet spending targets, and are also pushing for its repeal. Their concerns are valid, but too generalized, as IPAB would be able to propose smarter changes than blunt across-the-board payment reductions as seen in the Sequester. Including strategies similar to those offered by organizations like the Medicare Payment Advisory Committee (MedPAC) into IPAB recommendations is a more realistic scenario.

At present, Congress routinely ignores MedPAC recommendations. Examples of MedPAC strategies include targeted reductions to areas of overpayment and high-cost procedures, coupled with a greater investment in primary care. Moreover, IPAB would be able to look at bold new strategies to ensure the future stability of Medicare. For example, given the increasing use of pharmaceutical therapies, recommendations could include Medicare Part D amendments like additional drug manufacturer rebates, negotiated rates, or even a Medicare-operated plan to compete with private drug plans.⁷

IPAB will indeed have broad-reaching implications, as Medicare arguably sets the bar for health coverage, price, quality measurement, and workforce training and distribution. Not only is IPAB commissioned to make recommendations for Medicare, but is also instructed to produce non-binding advisory recommendations for non-federal programs, national health expenditure, and health policy issues that affect both public and private health care systems.⁸ Such recommendations could have lasting effects on the health care system, particularly in the federally subsidized state-based health insurance exchanges.

Future challenges will include how best to parallel IPAB’s work with the efforts of the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS). Maximizing collaboration and information flow through public-private partnerships will be vital, as well. Concurrent investigations through ACA-established bodies like the Patient-Centered Outcomes Research Institute (PCORI) and Center for Medicare and Medicaid Innovation (CMMI) will glean novel models of evidence-based health care delivery and financing that IPAB could accelerate.

Pending its survival in the political arena, IPAB will not only be an effective backstop to impose Congressional discipline, but more importantly will be a vehicle to efficiently translate this research into practice.

1 Squires D.A., The U.S. Health System in Perspective: A Comparison of Twelve Industrialized Nations, The Commonwealth Fund, July 2011.

2 California Health Care Foundation, Health Care Costs 101: US Health Care Spending, 2011 Edition.

3 The Long Term Outlook on Health Care Spending, CBO, November 2007.

4 Public Law 111-148, Section 3403: Independent Payment Advisory Board.

5 HR 452, The “Medicare Decisions Accountability Act of 2011,” House Energy and Commerce Health Subcommittee, Feb. 29, 2012.

6 Aaron H, The Independent Payment Advisory Board — Congress's “Good Deed,” N England Journal of Medicine, June 2011.

7,8  Ebeler J, Neuman T, Cubanski J. The Independent Payment Advisory Board: a new approach to controlling Medicare spending. Kaiser Family Foundation Program on Medicare Policy, April 2011.

Improving Mental Health Access for the Desperate with Laura's Law

As seen in Sierra Sacramento Valley Medicine Vol. 64 / No. 2 - March/April 2013

Laura’s Law – Time to
Bring it to Your County? 

By Adam Dougherty, MPH, MS III

MENTAL ILLNESS HAS TOUCHED most of us
in some way − be it a personal struggle, a loved
one’s troubles, a news story of mass murder, or
simply witnessing a disturbed soul on the street
corner. Fortunately, there is growing recognition
of the importance of mental health services as a
mainstay of comprehensive medical care.

But what if an individual is too ill and

disorganized to even seek out care? Tragically,
people with the greatest need are the same ones
with the most trouble navigating the system.
If these people are lucky enough to find some
mental health services, it is usually limited to
acute short-term hospitalization or care within
the criminal justice system after a crime has
been committed.

Our patients with mental illness are forever

in a revolving door between the emergency
department, county mental health clinics,
and jail psychiatric services. With no ability to
provide sufficient follow up, doctors are forced
to discharge these patients back to the streets
until they fall into the cycle again.

This was the case in 2001 when Scott Thorpe,

an untreated schizophrenic, made headlines for
gunning down 19-year-old Laura Wilcox and
two other employees in a Nevada City clinic.
Following the tragedy, the California Legislature
passed Laura’s Law. It expands services to
severely ill, often-untreated individuals. The law
allows counties to require Assisted Outpatient
Treatment (AOT) for needy people who have a
history of violence and repeated hospitalization
and have failed voluntary treatment.

More specifically, AOT is court-ordered

therapy that is designed to intervene before an
individual further deteriorates into the vicious
cycle. Unlike high-cost acute hospitalization,
AOT includes a menu of options tailored to an
individual’s unique needs and circumstances.
It focuses on outpatient services such as
psychotherapy, medication management, crisis
intervention, in-home nursing and social
services.

Counties have the prerogative to decide

whether to implement the law or not; and
unfortunately for most of California’s severely
mentally ill, only one county − Nevada County
− has done so. Local government has been
hesitant to implement the law, given a sense that
it limits people’s autonomy. However, many of
us would argue for a greater good to promote
public safety and a moral responsibility to help
those who truly can’t help themselves.

AOT shouldn’t be construed as “forced

treatment,” but rather it is an opportunity to
bring relief to a vulnerable, high-risk and costly
group, providing services to those who have
been unable to benefit from the medical system
other than re-hospitalization or incarceration.
For every Scott Thorpe, there are hundreds more
who don’t make headlines, but continue to suffer
in the community − many with malnutrition,
medical illness and treatable mental health
conditions that severely limit their ability to
become a functioning member of society.

Governor Jerry Brown recently signed

legislation extending Laura’s Law to 2017, and
it is time for Sacramento and surrounding
counties to take a closer look at the benefits of
implementation. Not only would it save lives,
but AOT also makes fiscal sense. In a recent
study of the law’s implementation, the Nevada
County Behavioral Health Department found 

that AOT significantly reduced hospitalization
and incarcerations rates, resulting in savings of
$1.81 for every $1.00 invested in the program.
For these efforts, Nevada County was bestowed
the 2011 National Association of Counties
Achievement Award.

Laura’s Law would be a promising patch to

help mend our fragmented local mental health
system, reduce disparities for the neediest among
us, provide rehabilitation and prevent tragedy.
Sacramento and its neighboring counties could
lead the way by enabling funding streams
available through the Medi-Cal program, the
Prop. 63 Mental Health Services Act, and the
recently unveiled bipartisan federal legislation,
The Excellence in Mental Health Act, introduced
by our very own Congresswoman Doris Matsui.

Local law enforcement, county health

services and their affiliates, and patient
advocates also all have a part to play in making
this program a reality. 

Adam Dougherty is a third year medical student
at the UC Davis School of Medicine and sits on the
Sacramento County Public Health Advisory Board
(PHAB).

The Future of Medicine

A couple years old, but a great TED overview of what's on the horizon in the next few decades from Dr. Daniel Kraft, Executive Director of FutureMed.

Some of the concepts:

P4 Medicine
-Predictive
-Preventive
-Personalized
-Participatory

Stage Zero Medicine
-Curing disease before even getting sick.

Quantified Wellness/Quantified Self
-Biometric monitoring of health

Yay future!

Special Session to Implement Health Reform Underway in California

Last week, Governor Brown announced a Special Legislative Session so that California can continue to lead the way in implementing the Affordable Care Act. Under this special session, bills signed into law can be deemed effective withing 91 days, as opposed to the traditional process where they would have to wait until next January to become effective. With enrollment into our new insurance exchange Covered California beginning in October, and the individual mandate and Medi-Cal expansion going live on Jan. 1 2014, this session will maximize preparation state-wide.

The session began this week, with focus on how best to carry out the Medi-Cal expansion to those making up to roughly $14,000 a year. Below is the text of the Governor's Proclamation proclamation outlining the major priorities, and a news spot on the session featuring UC Davis pediatrician Assemblyman Richard Pan:

A PROCLAMATION
BY THE GOVERNOR OF THE STATE OF CALIFORNIA

WHEREAS, an extraordinary circumstance has arisen and now exists requiring that the Legislature of the State of California be convened in extraordinary session;

NOW, THEREFORE, I, EDMUND G. BROWN JR., Governor of the State of California, in accordance with Section 3(b) of Article IV of the Constitution of the State of California, hereby convene the Legislature of the State of California to meet in extraordinary session in Sacramento, California, on the 28th day of January, 2013, at a time to be determined, for the following purpose:

To consider and act upon legislation necessary to implement the federal Patient Protection and Affordable Care Act (Public Law 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Public Law 111-152), in the following areas: ‪

a. California’s private health coverage market, and rules and regulations governing the individual and small group markets related to guaranteed issue of coverage, pre-existing condition exclusions, rating restrictions, and any other requirements necessary to conform state law to federal rules.

‪b. California’s Medi-Cal program and changes that are necessary to implement federal law, including requirements for eligibility, enrollment, and retention.

‪c. Options that allow low-cost health coverage to be provided to individuals who have income up to 200 percent of the federal poverty level within the California Health Benefit Exchange, to the extent allowed by federal law or regulations.

IN WITNESS WHEREOF, I have hereunto set my hand and caused the Great Seal of the State of California to be affixed this 24th day of January 2013.


____________________________________
EDMUND G. BROWN JR.
Governor of California

 

Medical Imaging ♥ NASA

Here is a gem for the Mars mission naysayers from a clinical perspective. Though we can argue whether the US Preventive Service Task Force (USPSTF) recommendation for routine mammography screenings starting at age 50 is economically justified, translational science seems like a pretty good idea:

Improving School Lunches and Curbing Obesity: The Healthy, Hunger-Free Kids Act

As American obesity continues to reach epidemic proportions, there is increasing focus on starting at the source: the kids!

I have previously commented on the complexity of forces at play here. Also worth investigating is The Healthy, Hunger Free Kids Act, which received rare bipartisan support, was signed by President Obama in Dec. 2010, and is being rolled out this academic year across the country. Below is another great graphic from Peter Kim, et al, followed by additional info on the law's implementation:




So what does the Act actually do?

Improves Nutrition and Focuses on Reducing Childhood Obesity 

• Gives USDA the authority to set nutritional standards for all foods regularly sold in schools during the school day, including vending machines, the “a la carte” lunch lines, and school stores. 
• Provides additional funding to schools that meet updated nutritional standards for federally-subsidized lunches. This is an historic investment, the first real reimbursement rate increase in over 30 years. 
• Helps communities establish local farm to school networks, create school gardens, and ensures that more local foods are used in the school setting. 
• Builds on USDA work to improve nutritional quality of commodity foods that schools receive from USDA and use in their breakfast and lunch programs. 
• Expands access to drinking water in schools, particularly during meal times.
• Sets basic standards for school wellness policies including goals for nutrition promotion and education and physical activity, while still permitting local flexibility to tailor the policies to their particular needs. 
• Promotes nutrition and wellness in child care settings through the federally-subsidized Child and Adult Care Food Program. 
• Expands support for breastfeeding through the WIC program.

Increases Access 

• Increases the number of eligible children enrolled in school meal programs by approximately 115,000 students by using Medicaid data to directly certify children who meet income requirements. 
• Helps certify an average additional 4,500 students per year to receive school meals by setting benchmarks for states to improve the certification process. 
• Allows more universal meal access for eligible students in high poverty communities by eliminating paper applications and using census data to determine school-wide income eligibility. 
• Expands USDA authority to support meals served to at-risk children in afterschool programs.

Increases Program Monitoring and Integrity 

• Requires school districts to be audited every three years to improve compliance with nutritional standards. 
• Requires schools to make information more readily available to parents about the nutritional quality of meals. 
• Includes provisions to ensure the safety of school foods like improving recall procedures and extending hazard analysis and food safety requirements for school meals throughout the campus. 
• Provides training and technical assistance for school food service providers.

For more information and implementation timelines, visit the USDA Healthy, Hunger-Free Kids Act homepage and the USDA blog.

Health Reform, The Election, and Beyond

As seen in Sierra Sacramento Valley Medicine Vol. 63 / No. 5 - Sept/Oct 2012

Health Reform in 2012 –
Crunch Time, Part Two
By Adam Dougherty, MPH, MS III

This is the second piece in a two-part series on a
decisive year in health care policy.

IN THE WAKE OF THE RECENT Supreme Court
ruling of the Affordable Care Act (ACA) and in
anticipation of the November elections, the
drama of 2012 has only just begun. The future
of our new American health care system remains
an uncertain one, but the potential paths
forward have indeed grown clearer.

Supreme Court Debrief
As the dust begins to settle after the Supreme
Court’s ruling, it is worth recapping what
actually happened and what it means. Starting
in 2014, every qualifying American citizen will
be obligated to have health insurance coverage.
While my correct prediction wasn’t entirely
accurate as far as which justices would vote in
favor,1 I'll point out that I was in the extreme
minority among peers and colleagues in even
coming close! That being said, I will admit I did
not sleep much the night before the ruling, and I
may have PTSD from the moment of sheer
terror when CNN initially botched the call.

In the ruling's supporting opinion, Chief
Justice John Roberts explains that the mandate
does not fall under the jurisdiction of the
Commerce Clause. Rather, he interprets it as
legal through the taxation authority granted to
Congress. In its simplest interpretation, yes, the
mandate is a tax. More accurately, though, it is a
monetary penalty on those individuals who
choose not to purchase health insurance.

Contrary to some doomsday shock jocks,
this is not “the biggest tax increase on the
middle-class in our history,” as the vast majority
of rational Americans would opt for some form
of health insurance anyway. More so, there will
be exemptions from the mandate for individuals
with religious objections or for those who can't
afford insurance even with the exchange
subsidies (e.g. up to three months coverage for
those between jobs).

For the handful of individuals who take
freedom to the extreme by voluntarily foregoing
health coverage, they will see an annual penalty
on their tax returns that will theoretically
subsidize the health care that they eventually
might need. It is also worth noting that the law
explicitly prohibits the IRS from “aggressive
efforts to collect the penalty” (i.e. threatening
jail-time), and will most likely occur through
withholding of tax returns.

The Medicaid aspect of the Supreme Court
ruling was also significant, as the court felt that
obligatory expansion of eligibility to 133 percent
of the federal poverty level ($15,000 for an
individual, $30,000 for a family of four in 2012)
was beyond Congress' authority. This provision
has huge financial implications for states,
counties, businesses, health providers, and
patients as it is almost wholly federally funded.

Despite the Feds picking up the bill, several
conservative governors have jumped on the
opportunity to refuse this piece of Obamacare.
Unfortunately, these are the states which have
some of the highest uninsured rates and would
precisely be the ones to benefit most once
enacted in 2014. While many of the quick
responses from the likes of Rick Perry and
Bobby Jindal might merely be political
pandering, the chorus of local opposition will
undoubtedly rise from county hospitals, health
insurers, state medical societies, and patient
advocacy groups.

Similar knee-jerk reactions took place in the
1960s with the original creation of the Medicaid
program, which all states eventually ended up
implementing despite it being completely
voluntary. I predict that most states will fall into
line to tap into the 2014 revenue stream.

To those who worry that this “investment”
in Medicaid expansion will bury us in debt, the
nonpartisan Congressional Budget Office (CBO)
says otherwise. They now estimate that the ACA
will cost $84 billion less over 11 years than what
was originally forecasted. By expanding the pool
of insured persons and reducing expensive
rescue care, they estimate an overall reduction in
the national deficit by $109 billion over this
time frame.2 Of note, California is expected to
fully implement the expansion, bringing
coverage to over three million previously
uninsured Californians.

The ACA has now survived all three
branches of government, and the Supreme
Court seal of approval will allow the state-based
health insurance exchanges to move full speed
ahead. Many state legislatures will still opt out of
creating their own exchanges, but the law allows
for a national exchange to fill these gaps. In the
meantime, the law continues to quietly roll out
new consumer benefits, with the most recent
being the Medical Loss Ratio standard for health
insurers.

Under this standard, health plans are
required to spend at least 80 cents of every
dollar on actual health care services instead of
on marketing, profits, and overhead. And if they
don't? Then their customers get a rebate check
for the amount they underspend on actual care –
which was the case this year for 12.8 million
Americans to the tune of $1.1 billion averaging
$151 dollars for each family.3

Skimming off fewer health care dollars for
profit or executive compensation probably
appeals to most health care consumers. Of note,
Medicare, despite all its critics, has significantly
lower overhead costs than private insurances.4

November and Beyond
Looking to the November elections, it is not
unrealistic to call 2012 a referendum on health
reform. Public opinion of the law is still largely
divided, half in favor and half opposed.5 In a
one-term presidency scenario (and an
accompanying Republican sweep of the House
and Senate), we would see extensive reversals of
the last two years. While the “Repeal on Day
One” slogan is effective at the podium, laws
cannot be overturned in one swift Executive
Order.

Given the near impossibility of obtaining 60
seats in the Senate (the filibuster-proof level
needed to pass anything anymore), Republicans
would use the Reconciliation Process to
overturn/augment many budget-related items,
including the mandate penalties, Medicaid
expansion funds, and terminating the insurance
exchange subsidies and the Public Health and
Prevention Fund.

If the President prevails (in either a split
legislature or Republican legislature), the vast
majority of ACA provisions would remain, no
matter how many presidential vetoes are
exercised. Hence, 30 million individuals would
still gain insurance coverage, and the Medicaid
program would be fundamentally preserved.
In either scenario, a continued focus on the
deficit will remain, as the post-election lame
duck session requires dealing with the failed
Super Committee and its looming $1.2 trillion
in “sequestration” cuts, which would spell
substantial reductions to Medicare, Medicaid,
and other health programs. Regardless of the
election outcome, harder questions remain with
the biggest drivers of the long-term deficit
including the projected spending in Medicare
and the flawed SGR formula.

Medicare eligibility age extension, assetbased
cost sharing, expanded value-based
purchasing, and the Independent Payment
Advisory Board (IPAB) are a few of the more
controversial but necessary strategies being
considered. Bold steps may be taken in the
ensuing 113th and 114th Congresses to address
long-term health spending as the nation
recovers from the Great Recession, and the
medical profession will continue to have a
central role to play in shaping these decisions.

Now more than ever, it is essential for
current and future physicians to be engaged in
the conversations and deliberations that will
shape our evolving American health care. How
health reform translates from words on paper to
what happens in our exam rooms is a process
still unfolding.

1 Dougherty, A., “Health Reform in 2012 – Crunch Time,
Pt. 1”, SSV Medicine, May/June 2012.
2 Estimates for the Insurance Coverage Provisions of the
Affordable Care Act Updated for the Recent Supreme
Court Decision, Congressional Budget Office, July 24,
2012.
3 Health Care Law saves consumers over $1 billion, US
Department of Health and Human Services, June 21,
2012.
4 Steffie Woolhandler, Terry Campbell, and David U.
Himmelstein, “Costs of Health Care Administration in
the United States and Canada,” The New England
Journal of Medicine, August 21, 2003, 768–75.
5 Kaiser Health Tracking Poll: Early Reaction to
Supreme Court Decision on the ACA, Kaiser Family
Foundation, June 2012.