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Peter Orszag vs. Howard Dean on the IPAB

What annoyed me most about the Howard Dean op-ed in the Wall Street Journal yesterday was that naive readers would finish it erroneously believing:

  • That our current system of Medicare payments involves less command-and-control than IPAB would.
  • That IPAB introduces rate setting to Medicare.
  • That IPAB's purpose is to "ration" care by deliberately lowering below costs payments for procedures deemed by IPAB to fail benefit-cost tests.
  • That IPAB is somehow blocking the move to wellness-based health care--ACOs, etc.

Peter Orszag is the Sanitation Department:

Critics Are Wrong About the Medicare Payment Board: Opposition to the Independent Payment Advisory Board -- created as part of the Affordable Care Act -- continues to mount. And opponents continue to mischaracterize the whole point of the board. What they seem not to understand is that the board is needed mostly so that that Medicare can continue to encourage slower growth in costs….

Systems for paying hospitals and doctors are changing. We’re moving away from the old fee-for-service plan and toward paying for value in health care--and we’re making the shift more rapidly than expected. Redesigning the payment system is a fundamentally different approach to containing costs. The old way was to simply slash the amounts that Medicare pays for services. And here is where the criticism of the Independent Payment Advisory Board becomes somewhat Orwellian.

The point of having such a board--and here I can perhaps speak with some authority, as I was present at the creation--is to create a process for tweaking our evolving payment system… more facile and dynamic than turning to Congress for legislation…. As Medicare experiments with accountable care organizations, bundled payments and other new strategies, the agency will inevitably need to make adjustments…. As even preliminary answers come in, the Independent Payment Advisory Board is supposed to make the adjustments, allowing Medicare to move as smoothly and quickly as possible toward an improved system for rewarding value in health care. Congress could never act so nimbly.

With that in mind, consider the recent attack on the Independent Payment Advisory Board in the Wall Street Journal by Howard Dean…. His critique begins by claiming that the board “is essentially a health-care rationing body,” even though the legislation specifically states that the board is not allowed to make any recommendations that would ration care. He goes on to argue that the board would use a bureaucratic rate-setting process to bluntly lower payments. Which is exactly what Congress does today. The board, in contrast, is mostly meant to navigate--outside the political realm--the two-steps-forward and one-step-back process of testing new payment structures.

Dean correctly notes that the board is not expected to save money over the medium term. This is not, as he implies, because it would engage in ham-fisted rate-setting. It is because the board is not meant to act until Medicare costs grow more rapidly than certain thresholds…. Dean argues that “If Medicare is to have a secure future, we have to move away from fee-for-service medicine, which is all about incentives to spend more, and has no incentives in the system to keep patients healthy.” Bravo! But what he fails to grasp is that the core rationale for the board is exactly to accomplish this shift….

The slowdown in health-care costs is a promising sign that efforts to move away from fee-for-service are working. But it’s still early in the game, and the next steps, taken in response to lessons learned, will need to be careful ones. That’s why the Independent Payment Advisory Board was created, and why it should not be eliminated.