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Why We Should Keep IPAB

June 16, 2011

By Josh Barro

Today, the Editors have called for repeal of the Independent Payment Advisory Board. I believe such a repeal would be a mistake. Medicare costs are expected to continue to explode over the next several decades, swallowing an ever larger share of federal revenues. We must control those costs. If not through IPAB, then how?

The Editors contend that the alternative to IPAB is Paul Ryan’s proposal to convert Medicare into a premium-support program. But IPAB and RyanCare are not substitutes. Ryan’s proposal does not even begin shifting seniors off of traditional Medicare until 2021, and people who turn 65 before that year will be allowed to stay on traditional Medicare until they die. Therefore, premium support produces no savings within the next decade and fairly limited savings in the following one. That’s not going to cut it alone; we also need to achieve near-term savings within the traditional Medicare program.

Recognizing that need, Paul Ryan’s budget proposal assumes $389 billion in Medicare savings, relative to President’s budget, before 2021. Unfortunately, Ryan has not identified the mechanism that these savings will come from. But the only ways to save money in traditional Medicare are to pay less for things or to pay for fewer things; which is to say, you can only hit that target if you have IPAB or something that looks an awful lot like IPAB.

The Editors are right to note that IPAB, despite all the Democrats’ denials, is a rationing measure. But rationing should not be a dirty word. The alternative to rationing is uncontrolled expenditure. Ryan himself described the situation correctly: “Rationing happens today! The question is who will do it?” If you moved to a premium-support model, the answer would be “consumers and private insurers.” But since single-payer Medicare is going to be around for decades to come (if not forever) some of that rationing will have to be done by the government.

Edit to add: Avik Roy notes, correctly, that IPAB is currently restricted in the kinds of cost-saving measures it can recommend, and asks if I favor strengthening the board. The answer is yes, and that I particularly support proposals to allow IPAB to recommend higher cost-sharing for treatments that are deemed to be less effective.

Original Source: http://www.nationalreview.com/agenda/269818/why-we-should-keep-ipab-josh-barro

 

 
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