With the Joint Select Committee on Deficit Reduction – a.k.a., the Super Committee – missing a major deadline this week, the prospects for a debt deal before the next election seem bleaker than ever.
Eventually, Congress will have to act. The long-term deficit situation is truly unsustainable and the sequestration trigger agreed upon in August will begin sharply cutting Defense Department programs and Medicare provider payments in January 2013 (assuming Congress and the President allow it to stay in effect).
But for those hoping that responsible decision-making on the country’s entitlement and tax programs will materialize after next year’s election, prepare to be disappointed. In particular, Medicare – the public health insurance program for the aged and disabled, and by far the largest contributor to our long-term fiscal mess – has been subject to congressional mismanagement now for years.
As Wes Joines pointed out in a post earlier this month, the Medicare physician payment system is broken and has been so for more than a decade. Private insurance carriers that participate in the Medicare Advantage program have been overpaid since 2003, when the Republican-controlled Congress set artificially high payment rates as part of the same bill that expanded subsidized prescription drugs at the government's expense. And members of both parties have proven themselves unable to withstand the temptation of using the Medicare program to steer benefits to special interests. Whether it’s boosting payments to rural hospitals, delaying competitive bidding for durable medical equipment, or shielding beneficiaries from scheduled benefit cuts, there are many recent examples of costly Congressional micromanaging on both sides of the aisle.
Underlying this mismanagement is a simple political calculus: members of Congress believe that they must avoid being linked to any policy that will hurt the country’s 47 million Medicare beneficiaries (not to mention the tens of millions more about to join the program) or risk defeat at the polls. Cutting benefits is one obvious no-no, but cutting provider payments is also politically dangerous, since doctors and hospitals may then stop treating Medicare patients or otherwise incite seniors’ anger.
So what can be done? One hope is that legislators themselves may be looking for a way out of this Medicare cost-control political vortex, especially given the hard decisions that most political elites know will have to be made as part of an eventual debt reduction deal.
One sign of this thinking is Congress’s recent decision to establish an Independent Payment Advisory Board (IPAB) as part of last year’s health reform legislation. The IPAB is designed to take Medicare payment policymaking out of the hands of Congress and put it into the hands of expert technocrats. Though the IPAB was not a major focus of the yearlong debate on health care legislation (Americans were otherwise obsessed with abortion, the public option, and death panels), it may prove to be one of the most consequential provisions included in the ACA. In the words of former budget director Peter Orszag, IPAB represents “the largest yielding of sovereignty from the Congress since the creation of the Federal Reserve.”
Here’s how it works: A 15-member board appointed by the president and confirmed by the Senate will propose sharp cuts to Medicare payments if cost growth in the program continues on its current trajectory. What makes this Board different from past Medicare commissions – or even the current Super Committee – is that the recommended cuts will go into effect unless Congress finds equal savings elsewhere in the program or supermajorities in Congress vote to waive the new rules (and even then only if the president signs the resulting bill). There is concern that future Congresses will not allow themselves to be constrained by these parliamentary hurdles and will try to prevent the cuts by simply not confirming IPAB appointees or passing a new law revoking some or all of IPAB’s powers. But the IPAB provision includes rules to check these congressional urges, so there is reason to believe that IPAB will have teeth.
Beyond the technical details, one’s optimism about the Board depends in large part on what one believes is ailing the US health care system. If high prices are the culprit (as many on the left believe), IPAB could prove effective at withstanding political pressure from doctors, hospitals, and other providers and keeping prices low. If over-utilization is the main cost driver (as many on the right believe), IPAB’s usefulness will be limited. This is partly by design: currently, the Board can only recommend changes to provider payment rates, not benefits.
But many outside experts – including some who sat on the US Fiscal Commission last year – recommend expanding IPAB’s powers. And the president has urged Congress to lower IPAB’s cost growth rate target, making it more likely that recommendations will be triggered. Some have even speculated that IPAB could be the vehicle by which a new all-payer rate setting scheme could be implemented.
It’s unlikely that Congress will go along with any of the above proposals any time soon. Indeed, many in Congress have called for IPAB’s repeal. And it’s true that further empowering a board of unelected technocrats is not an easy sell to the American people (especially since the biggest problems facing Medicare – and the federal budget as a whole – require moral, not mathematical, answers). But as the extent of our long-term structural deficit becomes more apparent – and the situation grows more urgent – members of Congress may be tempted to delegate more and more tough decisions to IPAB. Some might view this as an undemocratic and irresponsible abdication of authority – in other words, the coward’s way out. But as Edgar Allan Poe once wrote: “That man is not truly brave who is afraid either to seem or to be, when it suits him, a coward.”
 The Affordable Care Act also created the Center for Medicare and Medicaid Innovation (CMI), which has broad powers to experiment with new payment systems like accountable care organizations and bundling, and then apply the most successful models nationwide – all without further congressional action. This is a promising idea, but the Congressional Budget Office and others are skeptical of its cost-saving potential and so it will not figure as prominently as IPAB in debt reduction negotiations.
 Since the bill’s passage, some have used the “death panel” moniker to describe IPAB, but during the debate that phrase was used in reference to a provision that attempted to expand the use of living wills.