IPAB is no Fed, will fail

What Congress gives, it can take away. Particularly if a different Congress is doing the take-away. That’s why the Independent Payment Advisory Board (IPAB) is doomed to failure, assuming that it can get off the ground. Laws can be changed. In the case of the inaptly-named sustainable growth rate (SGR), they are changed several times a year—a testament to the practical realities of price controls and formula-driven decision-making. The IPAB was created by an act of the last Congress and is supposed to meet an arbitrary spending target that is not feasible without structural changes in Medicare and the health care delivery system. The IPAB has one tool—price controls—to hit the same kind of fiscal target that the SGR has. If the board requires politically unacceptable payment cuts, a future Congress will neutralize IPAB just as it has neutralized the SGR. Congress could pass its own version of the IPAB cut if it plays by the Affordable Care Act’s (ACA) rules. Congress could also change IPAB’s charter or even abolish it. But that probably will not be necessary as IPAB is unlikely to become the policy authority that some hope it will be. Senate confirmation of 15 experts to dictate Medicare policy is a near-impossibility. Any group that size is designed to debate issues, not decide them. It took the Federal Reserve two decades before it had the tools (with the Federal Open Market Committee) to directly affect our money supply. The IPAB won’t have that much time.

Joseph Antos is the Wilson H. Taylor Scholar in Health Care and Retirement Policy at the American Enterprise Institute.

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