INDEPENDENT PAYMENT ADVISORY BOARD

08Jun10

One of the most far-reaching innovations in the PPACA is the creation of an Independent Payment Advisory Board (IPAB), which will allow changes in Medicare reimbursement rules to be fast-tracked starting in 2015.  The purpose of the IPAB is to reduce the per capita rate of growth in Medicare spending.

Determination by CMS Chief Actuary; IPAB proposal

Starting no later than April 30, 2013, the IPAB’s annual review process will begin with a determination by the Chief Actuary for the Centers for Medicare and Medicaid Services (CMS) of the projected per capita growth rate under Medicare from one year (the “Determination Year”) to the next one (the “Implementation Year’).  If the projection for the Implementation Year exceeds the target growth rate for that year, the IPAB will be required to develop and submit during the first year following the Determination Year (i.e., the “Proposal Year”)[1] a proposal containing recommendations to reduce the Medicare per capita growth rate so that there will be a net reduction in total Medicare program spending that is at least equal to the savings target for the relevant year (which is calculated by the Chief Actuary), “while maintaining or enhancing beneficiary access to quality care.”

The IPAB’s proposal may not include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums, increase Medicare beneficiary cost-sharing (including deductibles, coinsurance, and copayments), or otherwise restrict benefits or modify eligibility criteria. Recommendations must relate exclusively to the Medicare program.

No IPAB proposal submitted prior to December 31, 2018 may include any recommendation (applicable to items and services furnished prior to December 31, 2019) that would require providers[2] and suppliers[3] which receive reductions in their market basket updates under Section 3401 of the PPACA to receive a reduction to their inflationary payment updates in excess of that year’s productivity adjustment.

In addition to the IPAB’s recommendations to reduce Medicare’s per capita growth rate, the proposal must contain:

  • an explanation of each recommendation contained in the proposal and the reasons for including it;
  • an actuarial opinion by the CMS Chief Actuary certifying that the proposal meets the statutory requirements for cost reductions and that the its recommendations, if implemented, will not increase Medicare program spending;
  • a legislative proposal that implements the recommendations; and
  • other information determined appropriate by the Board.

The IPAB is also directed to include, “as appropriate,” recommendations in the proposal to reduce Medicare payments under parts C (Medicare Advantage) and D (outpatient prescription drugs), such as —

  • reductions in direct subsidy payments to Medicare Advantage and prescription drug plans related to administrative expenses (including profits) for basic coverage;
  • denying high bids or removing high bids for prescription drug coverage from the calculation of the national average monthly bid amount;
  • reductions in payments to Medicare Advantage plans that are related to administrative expenses (including profits); and
  • reductions in payments to Medicare Advantage plans that are related to performance bonuses for such plans.

In preparing its proposal, the IPAB is required to submit a draft proposal by September 1 of the Determination Year to MedPac and to the Secretary of HHS for their review.  The Secretary must submit a report to Congress on the results of such review by March 1 of the submission year (which is the same as the Proposal Year). The Board is also required to engage in regular consultations with the Medicaid and CHIP Payment and Access Commission.

Starting in 2014, the IPAB must submit a proposal to Congress and to the President annually on January 15, unless –

  • It is a Proposal Year for which the Chief Actuary has made a determination that the projected Medicare per capita growth rate for the Implementation Year does not exceed the Medicare per capita target growth rate for such year; or
  • It is a Proposal Year for which the Chief Actuary makes a determination in the Determination Year that the projected percentage increase (if any) for the medical care expenditure category of the Consumer Price Index for All Urban Consumers (United States city average) for the implementation year is less than the projected percentage increase (if any) in the Consumer Price Index for All Urban Consumers (all items; United States city average) for such Implementation Year.

The IPAB may not submit a proposal prior to January 15, 2014.

Congressional consideration

The PPACA requires that the IPAB’s proposal and the legislative recommendations be given expedited consideration by Congress.

The statute sets strict deadlines for committee consideration of the proposed legislation, and places limits on Senate rules that could be used to delay its consideration.

Neither house is allowed to consider any bill, amendment, resolution, or conference report that would –

  • not meet the statutory requirements for cost reductions or the statutory requirement that the changes, if implemented, would not increase Medicare program spending;
  • repeal or otherwise change the recommendations of the IPAB if that change would change the cost reductions or increase Medicare program spending;
  • change the portion of the PPACA that imposes these prohibitions.

Congress does not have to enact the legislation proposed by the IPAB into law for the IPAB’s proposals to be implemented.  There are only two ways that Congress can stop the IPAB’s recommendations from going into effect:

  • It can enact, prior to August 15 of the Proposal Year, legislation that includes the following provision: “This Act supersedes the recommendations of the Board contained in the proposal submitted, in the year which includes the date of enactment of this Act, to Congress under section 1899A of the Social Security Act.; or
  • For Implementation Year 2020 and subsequent Implementation Years, it could both enact the provision described immediately above and also, no later than August 15, 2017, pass a joint resolution (introduced no later than February 1, 2017) to discontinue the Board.

If Congress fails to block implementation of the IPAB’s recommendations in a particular Proposal Year, the Secretary is required to implement those recommendations on August 15 of that year, and the Secretary may use interim final rulemaking to adopt the changes.

There is a limited additional exception to this implementation requirement.  The Secretary may not implement the recommendations contained in a proposal submitted by the Board or the President to Congress pursuant to this section of the law if in a Proposal Year (beginning with Proposal Year 2019) if –

  • the Board was required to submit a proposal to Congress in the year preceding the Proposal Year; and
  • the CMS Chief Actuary makes a determination in the Determination Year that the per capita rate of growth in national health expenditures for the Implementation Year exceeds the projected Medicare per capita growth rate for the Implementation Year.

This limited exception may not be applied in two consecutive years.

Effective dates of reimbursement changes

Assuming an IPAB proposal becomes effective on August 15, the actual reimbursement changes would take effect as follows:

  • If the change involves payment for an item or service in which payment rates change on a fiscal year basis (or a cost reporting period basis that relates to a fiscal year), on a calendar year basis (or a cost reporting period basis that relates to a calendar year), or on a rate year basis (or a cost reporting period basis that relates to a rate year), the new payment rate will apply to items and services furnished on the first day of the first fiscal year, calendar year, or rate year (as the case may be) that begins after such August 15.
  • If the change relates to payments to plans under parts C (Medicare Advantage) and D (outpatient prescription drugs), such recommendation shall apply to plan years beginning on the first day of the first calendar year that begins after such August 15.
  • If the change doesn’t fall into either of these two categories, its effective date will be addressed  in the regular regulatory process timeframe and “shall apply as soon as practicable.”

Composition of the IPAB

The IPAB will consist of 15 members appointed by the President with the advice and consent of the Senate, plus the HHS Secretary, the Administrator of the Center for Medicare & Medicaid Services, and the Administrator of the Health Resources and Services Administration, who will serve as ex officio as nonvoting members.  For the appointed members, serving on the Board will be a full-time job (or at least they are not allowed to “engage in any other business, vocation or employment.”)

The appointed members “shall include individuals with national recognition for their expertise in health finance and economics, actuarial science, health facility management, health plans and integrated delivery systems, reimbursement of health facilities, allopathic and osteopathic physicians, and other providers of health services, and other related fields, who provide a mix of different professionals, broad geographic representation, and a balance between urban and rural representatives.”  They will include, but not be limited to “physicians and other health professionals, experts in the area of pharmaco-economics or prescription drug benefit programs, employers, third-party payers, individuals skilled in the conduct and interpretation of biomedical, health services, and health economics research and expertise in outcomes and effectiveness research and technology assessment. There must also be representatives of consumers and the elderly.  At least half of the appointed IPAB members must have no direct involvement in the provision or management of the delivery of items and services under Medicare.

Members will be appointed for not more than two six-year terms.


[1] For a chart clarifying how this process works in terms of actual calendar years, click here.

[2] Medicare  defines the term “provider of services” to mean a hospital, critical access hospital, skilled nursing facility, comprehensive outpatient rehabilitation facility, home health agency or hospice program.

[3] The term “supplier” is defined by the Medicare statute to mean (unless the context otherwise requires) a physician or other practitioner, a facility, or other entity (other than a provider of services) that furnishes items or services under Medicare.



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