Bending the Health Cost Curve: The Promise and Peril of The Independent Payment Advisory Board

Underlying today's and the future's health-care reform debate is a consensus that America's health-care financing system is in a slow-moving but deep crisis: care appears substandard in comparison with other advanced industrial countries, and relative costs are exploding beyond all reasonable measures. The Obama Administration's Patient Protection and Affordable Care Act (ACA) attempts to grapple with both of these problems. One of ACA's key instrumentalities is the Independent Payment Advisory Board-the IPAB, designed to discover and authorize ways to reduce the rate of growth of Medicare and other categories of health spending. The IPAB is a peril. Expert boards to perform regulatory tasks in the interest of efficiency and social goals always run a high risk of being captured by the industry they are supposed to regulate. Even should it succeed at its task of reducing the rate of growth of Medicare spending, who is to say that the reductions will not come at a heavy cost in reduced quantity and effectiveness of medical care? But the IPAB also has promise. The need for a better process than our current specialist-driven one to assign value to the medical services provided by Medicare is great. The bellwether status of Medicare payment systems means that commercial insurance consumers and payors would also benefit mightily from bringing more coherent, technocratic, and cost-effectiveness oriented logic to this process. And the current system of relative Medicare reimbursement rates is, in the judgment of many, currently well out of whack. We quail when we consider the magnitude of the tasks the IPAB faces--even its initial task. Nevertheless, we remain optimistic that this administrative agency will manage to bend the long-run healthcare cost curve and moderate future price increases.