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Independent Payment Advisory Board or IPAB

March 21, 2012

The Independent Payment Advisory Board, or IPAB, is a fifteen-member United States Government agency created in 2010 by sections 3403 and 10320 of the Patient Protection and Affordable Care Act which has the explicit task of achieving specified savings in Medicare without affecting coverage or quality. Under previous and current law, changes to Medicare payment rates and program rules are recommended by MedPAC but require an act of Congress to take effect. The new system grants IPAB the authority to make changes to the Medicare program with the Congress being given the power to overrule the agency's decisions.

Beginning in 2013, the Chief Actuary of the Centers for Medicare and Medicaid Services will determine in particular years the projected per capita growth rate for Medicare for a multi-year period ending in the second year thereafter (the "implementation year"). If the projection exceeds a target growth rate, IPAB must develop a proposal to reduce Medicare spending in the implementation year by a specified amount. If it is required to develop a proposal, the Board must submit that proposal in January of the year before the implementation year; thus, the first proposal could be submitted in January 2014 to take effect in 2015. If the Board fails to submit a proposal that the Chief Actuary certifies will achieve the savings target, the Secretary of Health and Human Services must submit a proposal that will achieve that amount of savings. The Secretary must then implement the proposal unless Congress enacts resolutions made to override the Board's (or the Secretary's) decisions under a fast-track procedure that the law sets forth.

IPAB was created as a strengthened version of the Medicare Payment Advisory Commission (MedPAC), a body with no regulatory power that solely advises Congress, but can not enact regulations in and of itself. Since 1997, MedPAC had recommended cuts totaling "hundreds of billions of dollars" to Medicare that were ignored by Congress. Also, Congress has pressured Medicare administrators to cover "ineffective or needlessly costly methods of care", while Medicare's founding legislation says "Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine". Henry J. Aaron, a health care expert at the Brookings Institution, says that many observers see that some in Congress are "in thrall to campaign contributors and producers and suppliers of medical services" and most are not well enough informed to wisely use Medicare's buying power to reform health care. The idea behind the IPAB was to take power away from Congress (and special interests) in order to give it to those knowledgeable in health care policy.

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