Medicolegal Issues

IPAB is Medicare's New Hammer for Spending Accountability


Now that the latest annual “doc fix” is in, physicians have been granted another reprieve from potentially crippling cuts to their Medicare reimbursement under the flawed sustainable growth rate (SGR) payment formula.

Beginning this year, there’s a new player in town that will have the authority to achieve what Congress has consistently failed to do—cut Medicare provider spending to keep it below a cap—and it can do so with unprecedented autonomy.

Say hello to the Independent Payment Advisory Board (IPAB), a creature of the Affordable Care Act (ACA) that will propose ways to reduce “overpayment” to Medicare providers if target-spending levels are exceeded.

What distinguishes the IPAB from the Medicare Payment Advisory Commission (MedPAC) is that its proposals will automatically become law, unless Congress enacts its own proposals that reduce Medicare provider spending by at least as much as IPAB’s, or the Senate musters a three-fifths majority vote to override IPAB’s proposals entirely. Further, the IPAB’s changes to Medicare cannot be overruled by the executive branch or a court of law.

MedPAC never wielded such authority; in fact, many of its cost-control recommendations were ignored.

The IPAB is a structural intervention to put pressure on Congress, the Executive, and CMS to guarantee the ACA’s investment in cost-containment.

—Judith Feder, PhD, professor of public policy, Georgetown University, Washington, D.C., former dean, Georgetown Public Policy Institute, fellow, the Urban Institute

The IPAB comes to life this year, with a $15 million appropriation from the ACA, and begins ramping up its operations (see “The IPAB Timetable,” p. 26). The board will be comprised of a 15-member, multi-stakeholder group—expected to include physicians, nurses, medical experts, economists, consumer advocates, and others—appointed by the President and subject to Senate confirmation.

Incendiary Reactions

Dubbed by its most vociferous and largely Republican critics as “dangerously powerful,” “the real death panel,” and “bureaucrats deciding whether you get care,” the IPAB even has some Democrats decrying its power grab. Rep. Pete Stark (D-Calif.) called the IPAB “an unprecedented abrogation of Congressional authority to an unelected, unaccountable body of so-called experts.”1

Even Allyson Schwartz (D-Pa.), who helped draft the ACA, has come out against the IPAB, joining a handful of Democrats and more than 200 Republicans in signing on to a bill (H.R. 452) to repeal the ACA’s IPAB provision. The Senate has a similar bill (S. 668).

Although the IPAB legally is barred from formally making recommendations to ration care, increase beneficiary premiums or cost sharing, and from restricting benefits or eligibility criteria, critics worry that its authority to control prices could hurt patients by driving Medicare payments so low that physicians cease to offer certain services to them.

Enforcement Power

IPAB will have unprecedented power to enforce Medicare’s provider spending benchmarks. Beginning in 2014, if Medicare’s projected spending growth rate per beneficiary rises above an inflation threshold of Gross Domestic Product per capita plus 1%, the IPAB would be triggered and would propose ways to trim provider payments. President Obama has since proposed a lower threshold of GDP per capita plus 0.5%, meaning that the IPAB would be triggered earlier and likely would have deeper cuts to make.

It is unclear how the spending growth benchmark will be affected by the $123 billion in Medicare payment cuts to hospitals and other providers over nine years, which were triggered when the so-called “super committee” failed to reach a budget-cutting consensus last fall.

U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius describes the IPAB as a “backstop to ensure that rising costs don’t accelerate out of control, threatening Medicare’s stability,” and she maintains that the board is a necessary fallback mechanism to enforce Medicare spending within budget while healthcare providers continue to prove the effectiveness of various value-based delivery and reimbursement reform projects the ACA is funding.2

Impact on Physicians

“The IPAB is a structural intervention to put pressure on Congress, the Executive, and CMS [Centers for Medicare & Medicaid Services] to guarantee the ACA’s investment in cost-containment, and it gives physicians the incentive to act on its principles,” says Judith Feder, PhD, professor of public policy at Georgetown University, former dean of the Georgetown Public Policy Institute, and a fellow at the Urban Institute.

Dr. Feder was a co-signer of a letter sent by 100 health policy experts and economists—including Congressional Budget Office founding director Alice Rivlin, now with the Brookings Institute—to congressional leaders last May urging them to abandon attempts to repeal the IPAB provision. Dr. Feder maintains that the IPAB will marshal “the expertise of professionals who can weigh evidence on how payment incentives affect care delivery and suggest sensible improvements, while forcing debate on difficult choices that Congress has thus far failed to address.”

Because of the changes the ACA has already made to provider reimbursement and Medicare Advantage plan funding, Feder says that Medicare’s average annual growth rate for the next decade is projected to be a full percentage point below per capita growth in GDP. On top of that, she says, “the ACA’s other payment reform experiments have the potential to improve quality and cut spending growth even further by reducing payment for overpriced or undesirable care–like unnecessary hospital readmissions–and rewarding efficiently provided, coordinated care.” By Feder’s analysis, the IPAB would not likely be triggered for a decade, but stands ready as a backup, if needed. Indeed, she favors extending IPAB’s authority beyond Medicare, to allow a system-wide spending target that creates an all-payer incentive to assure that providers really change their behavior to boost quality and efficiency.

Impact on Hospitalists

If the IPAB does come into play, Feder believes that hospitalists have less to worry about than other physician specialists, because the Board’s cost-reduction proposals would likely focus on services where overpayment is the most acute – like imaging and high-cost specialty procedures. “If hospitalists are promoting efficient, coordinated care, their position can only be enhanced by IPAB’s recommendations, to the extent that they can demonstrate value for the healthcare dollar spent,” she says.

Necessary quality and cost reforms that patients deserve, and physicians want to deliver, have been stymied for too long by a crippled Congress, and by powerful special interest agendas, says SHM Public Policy Committee member Bradley Flansbaum DO, MPH, FACP, SFHM, director of the HM program at Lenox Hill Hospital in New York City, and clinical assistant professor of medicine at NYU School of Medicine. Reform requires some real enforcement authority to put value-based quality above the fray, he adds.

“CMS just does not have the teeth to do that right now; they are in the cross-hairs, and an IPAB-like body is needed to insulate Congress from the politically-risky choices, bring evidence and expertise to the decisions, bust through the politics, and get the job done,” Dr. Flansbaum says.

Dr. Flansbaum illustrates the problem by pointing to recent clinical studies that show percutaneous vertebroplasty, which injects bone cement into the spine to treat fractures, to be no better than a placebo in relieving pain. Medicare and private health insurers have been covering vertebroplasty for many years, despite the absence of rigorous study of its effectiveness. The same likely holds true for scores of other expensive treatments and surgical procedures. “Who, exactly, is going to put the kibosh on this?” Dr. Flansbaum asks. “The free market, which includes surgeons, hospitals, and device companies, each with their agendas, or regulators?”

Dr. Flansbaum believes that, in order to effectively bring down costs, the IPAB should not be restricted to supply-side proposals (i.e. provider reimbursement), but also should be allowed to propose demand-side changes to Medicare’s benefit plans, such as tiered network pricing with higher premiums to cover the latest and most expensive technologies.

SHM supports the need for an independent entity to check the growth in Medicare spending, but it does not support the IPAB as it is currently established under the ACA because certain groups (including hospitals) are protected from its scrutiny during its first several years—a limitation that SHM says puts the board’s legitimacy into question and seriously weakens its potential cost-saving effectiveness. SHM supports replacing the IPAB with an independent board that (1) subjects all Medicare providers and suppliers to the same scrutiny without special interest carve-outs, (2) balances cost-saving with QI considerations, (3) protects delivery of quality services, and (4) ensures board membership that represents all potentially affected groups, including physicians. (Read the entire statement in the “Where We Stand” section of SHM’s Advocacy microsite at

By removing the IPAB’s present handcuffs—opening its scope to all providers, as well as to demand-side changes in Medicare’s benefit structure—an IPAB-like entity with the proper staff and expertise can rationally think-out the choices that Congress will never make, according to Dr. Flansbaum.

“For the sake of our economy and our future generations, healthcare costs have to come down, even if that means some short-term pain,” he says. “Hospitals may take a hit. Some physician income might take a hit. Otherwise, there won’t be any hospitals or salaries to be hit.”

Christopher Guadagnino is a freelance writer in Philadelphia.

The IPAB timetable

  • 2012: IPAB member confirmation expected. Congress appropriates first IPAB money.
  • 2013: Chief actuary determines if Medicare spending growth reaches level that triggers the IPAB process.
  • Jan. 15, 2014: First set of IPAB proposals due, if triggered.
  • 2015: HHS Secretary will implement IPAB’s proposals, unless Congress enacts its own proposal package achieving equal savings, or the Senate rejects IPAB’s proposals with a 3/5 majority vote.


  1. Statement of Congressman Pete Stark Supporting Health Care Reform, March 21, 2010. Available at: Accessed Jan. 5, 2012.
  2. Kathleen Sebelius, “IPAB Will Protect Medicare.” Politico, June 23, 2011. Available at: Accessed Jan. 5, 2012.

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