IPAB Is Coming! IPAB Is Coming!

One if by land, two if by sea, and three if by Congress.  No, that is not how the saying goes, but it may be more apt these days than in the days of the founders.  This is the year that many of the provisions of the Affordable Care Act (ACA) (P.L. 111-148 and P.L. 111-152) start going into effect.  One of those provisions is the beginning of the work of the Independent Payment Advisory Board (IPAB).  Established by section 3403 of the Patient Protection and Affordable Care Act (PPACA) (P. L. 111-148) and codified at section 1899A of the Social Security Act,  IPAB was designed to reduce the per capita rate of growth in Medicare spending.  If certain conditions are met, the members of IPAB will meet and develop recommendations so that Medicare spending is reduced by a certain percentage in future years.  There are limitations on what IPAB can recommend to reduce spending. The process established by PPACA gave Congress the ability to prevent the proposed reductions in spending made by the IPAB.  If Congress does nothing, the cuts automatically go into effect. The process starts this year, with the first recommendations for reductions in spending,  if any are made, effective for the 2015 payment year.

Report of the Actuary

On April 30, 2013, the CMS  Actuary is required by Soc. Sec. Act sec. 1899A(c)(6)(A)  to submit a report  determining whether the projected Medicare per capita growth rate for 2015 will exceed the Medicare target growth rate for 2015.  The projected Medicare per capita growth rate is a five-year average of growth in Medicare spending calculated as the sum of per capita spending under Parts A, B and D taking into account any changes to payment or delivery systems published in final rules but not yet implemented.  In addition, this calculation is to consider the update to the physician fee schedule to be zero if the actual update is a negative number.  The Medicare target growth rate is calculated as a five-year average percentage increase in: (1) the average projected increase in the Consumer Price Index for All Urban Consumers and the medical care expenditure category of that index  for 2015, 2016, 2017 or (2) the nominal gross domestic product per capita plus 1.0 percentage point for 2018 and beyond.

IPAB Recommendations

If the CMS Actuary reports on April 30th of this year that the Medicare per capita growth rate for 2015 is greater than the Medicare target growth rate for 2015, then the IPAB will have to make recommendations to achieve a 0.5 percent reduction in Medicare spending in 2015 or a target savings percentage established by the CMS Actuary  that is less than 0.5 percent.

IPAB  will then have until January 15, 2014 to develop recommendations to achieve a net reduction in Medicare spending equal to that savings target for 2015.  PPACA prohibits the recommendations from including proposals to ration health care, raising revenues or premiums, increasing beneficiary cost-sharing, restricting benefits, or modifying eligibility criteria. In addition, the recommendations are not to reduce payment rates for items or services from providers and suppliers who will be receiving a reduction in payments due to a productivity adjustment in 2015.  PPACA establishes that the net reduction in Medicare spending shall not be greater than 0.5 percent for payment year 2015; 1.0 percent for payment year 2016; 1.25 percent for payment year 2017; and for 2018 and following years not greater than 1.5 percent. The IPAB recommendations will have to be delivered to the Medicare Payment Advisory Commission (MedPAC) by September 1, 2013 for their review and comments.


The HHS Secretary is to implement the first set of recommendations from IPAB beginning on August 15, 2014, for payment year 2015.  Congress can stop or modify the implementation of IPAB’s recommendation by adopting a proposal  that supersedes IPAB’s recommendations. If  IPAB fails to make a recommendation as required, the HHS Secretary is required to make recommendations that achieve the spending reduction requirements.  The Secretary will have until January 25, 2014 to make recommendations for 2015 if IPAB fails to do so.


So who are these people who will be deciding what cuts to make to Medicare spending in 2015 and beyond? As of yet, no one knows.  IPAB is to consist of 15 members that are appointed by the president and confirmed by the Senate.  As of January, 1 2013, no members were appointed by the president to IPAB.  In addition, there is no requirement that members be appointed by any specific date.  Members of IPAB are to include physicians and other health care professionals who represent various health care professions and regions of the country.  Medical professionals, however, are not to constitute a majority of IPAB.

So this is the year it begins, 2013.  A whole new organization for health care professionals to attempt to influence if the CMS Actuary determines that Medicare spending is going to increase.  In addition, heath care professionals will get an opportunity to lobby congress, as well, if the recommendations of IPAB are not to their liking.  Three lamps are lit, so let the process begin.