The Independent Payment Advisory Board
Jim Hahn
Specialist in Health Care Financing
Christopher M. Davis
Analyst on Congress and the Legislative Process
March 12, 2012
Congressional Research Service
7-5700
www.crs.gov
R41511
CRS Report for Congress
Pr
epared for Members and Committees of Congress
The Independent Payment Advisory Board
Summary
In response, in part, to overall growth in Medicare program expenditures and growth in
expenditures per Medicare beneficiary, the Patient Protection and Affordable Care Act (PPACA,
P.L. 111-148, as amended) created the Independent Payment Advisory Board (IPAB, or the
Board) and charged the Board with developing proposals to “reduce the per capita rate of growth
in Medicare spending.” The Secretary of Health and Human Services (the Secretary) is directed to
implement the Board’s proposals automatically unless Congress affirmatively acts to alter the
Board’s proposals or to discontinue the automatic implementation of such proposals.
The annual IPAB sequence of events begins each year, starting April 30, 2013, with the Chief
Actuary of the Centers for Medicare & Medicaid Services calculating a Medicare per capita
growth rate and a Medicare per capita target growth rate. If the Chief Actuary determines that the
Medicare per capita growth rate exceeds the Medicare per capita target growth rate, the Chief
Actuary would establish an applicable savings target—the amount by which the Board must
reduce future spending. This determination by the Chief Actuary also triggers a requirement that
the Board prepare a proposal to reduce the growth in the Medicare per capita growth rate by the
applicable savings target. The Board cannot ration care, raise premiums, increase cost sharing, or
otherwise restrict benefits or modify eligibility. In generating its proposals, the Board is directed
to consider, among other things, Medicare solvency, quality and access to care, the effects of
changes in payments to providers, and those dually eligible for Medicare and Medicaid. If the
Board fails to act, the Secretary is directed to prepare a proposal.
Board proposals must be submitted to the Secretary by September 1 of each year and to the
President and Congress by January 15 of the following year. Board proposals are “fast-tracked” in
Congress, and IPAB proposals go into force automatically unless Congress affirmatively acts to
amend or block them within a stated period of time and under circumstances specified in the act.
Section 3403(d) of the act establishes special “fast track” parliamentary procedures governing
House and Senate committee consideration, and Senate floor consideration, of legislation
implementing the Board or Secretary’s proposal. These procedures differ from the parliamentary
mechanisms the chambers usually use to consider most legislation and are designed to ensure that
Congress can act promptly on the implementing legislation should it choose to do so. PPACA also
established a second “fast track” parliamentary mechanism for consideration of legislation
discontinuing the automatic implementation process for the recommendations of the Board.
The Board’s charge is to develop proposals for the Secretary to implement that reduce the per
capita growth in Medicare expenditures, not to reduce Medicare expenditures. Therefore, while
the CBO projects that the cumulative impact of the Board’s recommendations from 2015 through
2019 will reduce total spending by $15.5 billion, during the same period, Medicare expenditures
will total $3.9 trillion with average spending per beneficiary forecast to increase from $13,374 to
$15,749. While the Board’s potential impact on total expenditures is likely to be relatively small
compared to overall Medicare expenditures, its impact on particular Medicare providers or
suppliers may be significant, particularly if the Board alters payment mechanisms.
The President’s FY2013 budget, as submitted to Congress on February 13, 2012, includes a
proposal to strengthen the IPAB. H.R. 452, the Medicare Decisions Accountability Act of 2011,
which would repeal the IPAB, was ordered to be reported out of the House Energy and
Commerce Committee on March 6, 2012 and out of the House Committee on Ways and Means on
March 8, 2012.
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Contents
Introduction...................................................................................................................................... 1
Background...................................................................................................................................... 1
Medical Inflation ....................................................................................................................... 1
Earlier Medicare Reform Proposals .......................................................................................... 3
Structure and Operations of IPAB ................................................................................................... 4
Membership............................................................................................................................... 5
Qualifications of Board Members ............................................................................................. 5
Term of Office ........................................................................................................................... 6
Conditions of Service ................................................................................................................ 6
Compensation............................................................................................................................ 6
The Board’s Structure, Staff, and Budget .................................................................................. 6
The Determination Process.............................................................................................................. 7
Key Calculations by the Chief Actuary ..................................................................................... 7
A Hypothetical Example............................................................................................................ 9
Activating the Trigger.............................................................................................................. 11
The IPAB Medicare Proposal Process ........................................................................................... 12
Proposal Schedule ................................................................................................................... 12
Scope of Proposals .................................................................................................................. 12
Additional Considerations ....................................................................................................... 13
Content of Proposals................................................................................................................ 14
Exceptions to Developing Proposals ....................................................................................... 15
Other Board-Related Activities...................................................................................................... 15
Advisory Reports..................................................................................................................... 15
Annual Public Reports............................................................................................................. 15
Biennial Reports to Slow Growth in National Health Expenditures ....................................... 16
Consumer Advisory Council ................................................................................................... 16
Government Accountability Office Study ............................................................................... 16
“Fast Track” Procedures for Congressional Consideration............................................................ 16
Procedures for Considering IPAB-Implementing Bill............................................................. 17
House and Senate Introduction of IPAB-Implementing Bill............................................. 17
House and Senate Committee Referral, Report, and Discharge........................................ 18
Congress Can Consider Only Legislation That Meets the Same Fiscal Targets as
Those Recommended by the IPAB ................................................................................ 18
Initial Senate Floor Consideration..................................................................................... 19
Initial House Floor Consideration ..................................................................................... 20
Automatic “Hookup” of House and Senate Bill................................................................ 20
Consideration of a Conference Report or Amendment Exchange..................................... 20
Consideration of Veto Message......................................................................................... 21
Procedures for Considering Joint Resolution Discontinuing the Independent Payment
Advisory Board Process ....................................................................................................... 21
Introduction, Referral, and Automatic Discharge.............................................................. 21
Senate Floor Consideration ............................................................................................... 22
House Floor Consideration................................................................................................ 22
Automatic “Hookup“ with Other Chamber....................................................................... 22
Additional Considerations ....................................................................................................... 23
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Legislation May Face a High Bar...................................................................................... 23
Either Chamber May Change the Parliamentary Procedure.............................................. 23
Questions Exist About the Enforceability of the Procedures ............................................ 23
Implementation of Board Medicare Proposals .............................................................................. 24
Discussion and Potential Impact of IPAB...................................................................................... 25
Qualifications and Recruitment of Board Members................................................................ 25
Funding.................................................................................................................................... 26
Savings Over Time .................................................................................................................. 26
Board Proposals....................................................................................................................... 27
Impacts Beyond Medicare....................................................................................................... 27
Activity Related to IPAB During the 112th Congress .................................................................... 27
Repeal Proposals ..................................................................................................................... 27
The National Commission on Fiscal Responsibility and Reform ........................................... 28
CBO March 2011 Baseline...................................................................................................... 28
The President’s April 13, 2011, Deficit Reduction Proposal................................................... 28
The President’s FY2013 Budget.............................................................................................. 29
Medicare Decisions Accountability Act of 2011 (H.R. 452)................................................... 29
Figures
Figure 1. Annual Change in CPIu, CPIm, and Per Enrollee Medicare Expenditures ........................ 2
Figure 2. Initial Five-Year Sequence ............................................................................................... 8
Tables
Table 1. Three-Year Sequence of Events ......................................................................................... 7
Table 2. Definition and Applicability of Key Terms Over Time.................................................... 10
Table 3. Example for Hypothetical Implementation Year.............................................................. 11
Table A-1. Effective Dates for Section 3403 Provisions of PPACA.............................................. 30
Table B-1. How Does IPAB Contrast to MedPAC......................................................................... 32
Table C-1. Providers of Services or Supplies Enumerated in Section 3401 .................................. 34
Appendixes
Appendix A. Key Dates for IPAB Implementation........................................................................ 30
Appendix B. A Comparison of IPAB and MedPAC ...................................................................... 32
Appendix C. Medicare Productivity Exemptions and Board Recommendations.......................... 33
Contacts
Author Contact Information........................................................................................................... 35
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Acknowledgments ......................................................................................................................... 35
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Introduction
The Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, as amended) created the
Independent Payment Advisory Board (IPAB, or the Board) to “reduce the per capita rate of
growth in Medicare spending.”1 The Board’s proposals will be implemented by the Secretary of
Health and Human Services (the Secretary) unless Congress acts either by formulating its own
proposal to achieve the same savings or by discontinuing the automatic implementation process
defined in the statute.
This report, which provides an overview of the Board, begins with a discussion of the rationale
behind the creation of an independent Medicare board and briefly reviews prior proposals for
similar boards and commissions. The report then describes the structure of the Board, the
calculations and determinations required to be made by the Office of the Chief Actuary (the Chief
Actuary) in the Centers for Medicare & Medicaid Services (CMS) that trigger a Board proposal,
and the content of and constraints on Board proposals—including the Medicare productivity
exemptions under Section 3401 of PPACA. In addition, the report reviews the expedited and
other parliamentary procedures that relate to congressional consideration of Board proposals and
other Board-related activities, and concludes with a description of how the Board’s proposals are
to be implemented and their possible impact. Appendix A details key dates for IPAB
implementation and various reports required by the law, and Appendix B compares the IPAB
with the Medicare Payment Advisory Commission (MedPAC). Appendix C summarizes the
Medicare productivity exemptions in Section 3401 of PPACA as they relate to Section 3403.
Background
Among some proponents of health care reform, a major impetus for reform, in addition to
improving quality and increasing access, has been the rising cost of the Medicare program.
Medical Inflation
For the past 25 years, annual medical inflation has exceeded annual overall inflation in every year
but one (see Figure 1).2 Specifically, over this time period, medical inflation has on average been
roughly 2.2 percentage points higher each year than overall inflation. Moreover, Medicare
spending during this same period has increased 8.5% per year, while total federal outlays during
this same period increased by only 5.3% per year.3 While some of the growth in Medicare
expenditures can be attributed to the increase in the number of Medicare beneficiaries, Medicare
1 Section 3403(b). For a discussion of the Board and other new entities created pursuant to PPACA, see CRS Report
R41315, New Entities Created Pursuant to the Patient Protection and Affordable Care Act, by Curtis W. Copeland.
2 As measured by the Bureau of Labor Statistics (BLS) U.S. city average all-items and U.S. city average medical care
indices, http://www.bls.gov/data/#prices. As the BLS notes in Measuring Price Change for Medical Care in the CPI,
http://www.bls.gov/cpi/cpifact4.htm, the CPI-medical care index only measures out-of-pocket consumer expenditures,
including any health insurance premium amounts deducted through payroll withholdings. While this measure is
commonly used to denote medical inflation, it measures changes in prices in only part of the health care system and
may not be a good indicator of overall medical inflation or the growth in spending for medical care.
3 Executive Office of the President, Budget of the United States Government: FY2009, Historical Tables, U.S.
Government Printing Office, Washington, DC, 2008, pp. 26-27, http://www.gpoaccess.gov/usbudget/fy09/pdf/hist.pdf.
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per enrollee expenditures rose 6.3% per year from 1985 through 2008—faster than overall
medical inflation.4 Had spending per Medicare beneficiary increased at just the rate of overall
inflation over the 1985 through 2008 period, per enrollee expenditures in 2008 would have been
slightly less than $4,600 as compared to actual 2008 Medicare Part A and Part B expenditures of
$9,448 per beneficiary.5
Figure 1. Annual Change in CPIu, CPIm, and Per Enrollee Medicare Expenditures
18
16
14
12
e
g 10
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1998
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CPI-m
CPI-u
Medicare per enrollee
Source: CRS analysis of data from U.S. Department of Labor, Bureau of Labor Statistics, http://data.bls.gov;
http://www.cms.gov/NationalHealthExpendData/downloads/tables.pdf, Table 13.
Notes: CPIu refers the Consumer Price Index for all items and services and CPIm refers to the Consumer Price
Index for medical inflation.
Again, the legislation’s stated goal of the Board is to reduce the per capita growth in Medicare
expenditures, not to reduce overall Medicare expenditures. The Board achieves this goal by
4 This estimate is based on the growth in Medicare Parts A and B only and does not include the additional costs
associated with Medicare Part D, coverage for prescription drugs, which was introduced in 2006. The Boards of
Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2010 Annual Report
of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust
Funds, Washington, DC, August 5, 2010, p. 228.
5 U.S. Department of Labor, Bureau of Labor Statistics, http://data.bls.gov/cgi-bin/cpicalc.pl. The Boards of Trustees,
Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2010 Annual Report of the
Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds,
Washington, DC, August 5, 2010, p. 228.
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developing proposals for the Secretary to implement that reduce the growth in Medicare
expenditures. Therefore, while the Congressional Budget Office (CBO) projects that the
cumulative impact of the Board’s recommendations from 2015 through 2019 will reduce total
spending by $15.5 billion, during the same period total Medicare expenditures are projected to be
$3.9 trillion with average spending per beneficiary increasing from $13,374 in 2015 to $15,749 in
2019.6 These savings represent a reduction of about $60.00 per year per Medicare beneficiary
over the 2015 through 2019 period.
Earlier Medicare Reform Proposals
Since these historic patterns of growth in overall health care spending, and Medicare in particular,
are viewed as not being sustainable,7 several proposals have been advanced over the years to
create an independent policy-making entity that would be charged with limiting the future growth
in Medicare expenditures;8 be insulated from special interests and lobbyists since these entities
would be appointed, rather than elected, and serve for extended terms; and such officials would
be able to make the so-called “hard decisions” to control rising costs. Moreover, it has been
assumed that these entities would possess the specialized expertise needed to make operational
decisions regarding payments and focus initiatives on beneficiary interests and the longer term
financial viability of the program.
For instance, in 2000 and 2001 Senators Breaux and Frist introduced reform proposals to increase
CMS’s budget, create separate agencies to administer parts of the program, and establish a
Medicare Board to manage competition among private plans and traditional Medicare (referred to
as “Breaux-Frist I,” S. 1895, and “Breaux-Frist II,” S. 358).
Interest in an independent health care entity reemerged during early discussions of what became
PPACA. Former Senator Tom Daschle proposed the Federal Health Board, modeled after the
Federal Reserve Board, with broad authority over both private and public health care programs,
including benefit and coverage recommendations, regulation of private insurance markets, and
improvements in quality of care.9
In June 2009, Senator Rockefeller introduced the Medicare Payment Advisory Commission
(MedPAC) Reform Act of 2009 (S. 1380 in the 111th Congress), which would have altered
MedPAC from its current 15-member advisory commission to an 11-member executive branch
agency with authority to make both payment and coverage decisions (see Appendix B for a side-
by-side comparison of MedPAC and IPAB). In order to achieve program savings, the
Commission was directed “to implement payment policies, methodologies, and rates and
coverage policies and methodologies ... estimated to reduce expenditures under this title by not
less than 1.5 percent annually.”
6 The Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2010
Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical
Insurance Trust Funds, Washington, DC, August 5, 2010, pp. 25, 33, and 228.
7 U.S. General Accounting Office, Health Care: Unsustainable Trends , GAO-04-793SP, May 2004, p. 3,
http://www.gao.gov/new.items/d04793sp.pdf.
8 http://industry.bnet.com/healthcare/1000740/should-medpac-be-given-authority-over-medicare-payments/.
9 Tom Daschle, Scott S. Greenberger, and Jeanne M. Lambrew, Critical: What Can We Do About the Health-care
Crisis (St. Martin’s Press, 2008).
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In July 2009, the President submitted a draft proposal to Congress titled the Independent
Medicare Advisory Council Act of 2009 (referred to as the IMAC proposal). This proposal would
have established a five-member council to advise the President on Medicare payment rates for
certain providers. While the council would have had authority to recommend broader policy
reforms, its authority outside of Medicare payment policy was limited.
Finally, during the recent health care reform deliberations, the Senate Finance Committee
included a provision (§3403) to establish an independent Medicare advisory board in the now
enacted PPACA. Section 10320, added by the manager’s amendment, broadened the scope of the
Board to make recommendations to slow the growth in non-federal programs and changed the
name of the entity to the Independent Payment Advisory Board, to reflect these additional
responsibilities.
The perceived merits to some of an independent board are the perceived shortcomings to others.
For instance, as Medicare expenditures represent a sizable proportion of federal outlays,
approximately 13% in FY2010, for some critics such a large proportion of expenditures should
not be beyond the scrutiny and review of elected officials or the public. Second, there is concern
that boards, such as IPAB, are singularly focused on reducing spending, that tradeoffs exist
between spending and quality, and that these tradeoffs are best dealt with by elected officials.
Finally, similar efforts to “automatically” control health care spending, such as the sustainable
growth rate formula, used to update Medicare physician payments, potentially demonstrate that
such supposedly automatic mechanisms do not effectively remove special interests or Congress
from the process.10 For proponents, removing short term political and public opinion, focusing on
spending, and using automatic mechanisms is required to reduce the growth in expenditures and
rationalize health care decision making.
Structure and Operations of IPAB
The explicit charge given by PPACA to the Board in Section 3403(b) is to “reduce the per capita
rate of growth in Medicare expenditures.” As described in more detail below, beginning in 2013,
and each subsequent year, the Chief Actuary needs to calculate the Medicare per capita growth
rate—the five-year average growth in Medicare program spending per enrollee and the Medicare
per capita target growth rate—the rate Medicare expenditures would grow without triggering
interventions under this section. If the Chief Actuary determines that projected five-year per
capita growth rate in Medicare expenditures two years hence exceeds the projected per capita
target growth rate, the Chief Actuary needs to establish an applicable savings target—the amount
by which the Board must reduce future spending. The Chief Actuary’s determination also triggers
a requirement that the Board prepare a proposal to reduce Medicare expenditures by an amount at
least equal to the applicable savings target.
While funding for the Board is authorized beginning in FY2012 and the Chief Actuary makes its
first determination in 2013, the statute does not provide a date by which the Board is to begin its
operations. Below, the Board’s membership, structure, and budget are described.
10 Phillip Roe, “A Board Congress should nail,” The Washington Times, July 23, 2010,
http://www.washingtontimes.com/news/2010/jul/23/a-board-congress-should-nail/.
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Membership
The Board will be composed of 15 members appointed by the President with the advice and
consent of the Senate.11 As such, the members are officers of the United States under the
appointments clause of the U.S. Constitution.12 The Secretary of Health and Human Services, the
Administrator of CMS, and the Administrator of the Health Resources and Services
Administration are ex-officio nonvoting members. In selecting individuals for nomination, the
President is to consult with the majority and minority leadership of the Senate and House of
Representatives—each respectively, regarding the appointment of three members. The
Chairperson is appointed by the President, with the advice and consent of the Senate, from among
the members of the Board.
Qualifications of Board Members
The appointed members of the Board are to provide varied professional and geographic
representation and possess recognized expertise in
• health finance and economics,
• actuarial science,
• health facility management,
• health plans and integrated delivery systems, and
• reimbursement of health facilities.
In addition, the board members are to be drawn from a wide range of backgrounds, including but
not limited to
• physicians (allopathic and osteopathic) and other health professionals, providers
of health services, and related fields;
• experts in the area of pharmaco-economics or prescription drug benefit programs;
• employers;
• third-party payers; and
• 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.
Members should also include representatives of consumers and the elderly. A majority of the
appointed members cannot be individuals directly involved in the provision or management of the
delivery of Medicare items and services.
11 See §3403(g)(1).
12 See Department of Justice Memorandum entitled “Officers Of The United States Within The Meaning Of The
Appointments Clause” for a discussion of why Board members can exercise the authority delegated to them under the
statute. http://www.justice.gov/olc/2007/appointmentsclausev10.pdf.
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Term of Office
With exceptions for initial Board members and those appointed to fill a vacancy with an
unexpired term, each appointed member may serve two consecutive six year terms.13 If appointed
to fill a vacancy, the member can serve two additional consecutive terms. Appointments to
initially fill the Board are staggered with terms of one, three, or six years.
Conditions of Service
Appointed members of the Board will be subject to financial and conflict of interest disclosures
and will be treated as officers in the executive branch for purposes of the Ethics in Government
Act of 1978.14 Moreover, there is a blanket prohibition against appointed members engaging in
any other business, vocation, or employment. In addition, former members of the Board will be
precluded for one year from lobbying before the Board, the Department of Health and Human
Services, or any of the relevant committees of jurisdiction of Congress.15 Finally, appointed
members of the Board may be removed by the President only for neglect of duty or malfeasance
in office.16
Compensation
Appointed members of the Board will be compensated at a rate equal to Level III of the
Executive Schedule ($165,300 for 2011), and the Chairperson will be compensated at a rate equal
to Level II ($179,700 for 2011).
The Board’s Structure, Staff, and Budget
The Chairperson will be the principal executive officer of the Board and supervise employees.
The Board will elect its own vice Chairperson to act in the absence or disability of the
Chairperson or in the event of a vacancy. In addition, the law provides that the Board can hire an
executive director and a staff—either detailed from other Federal agencies or direct hires—to
perform its duties.
The budget for the Board for FY2012 is $15 million, with annual adjustments based on increases
in the consumer price index (CPI)—only slightly more than the MedPAC budget. The Board will
be funded out of the Medicare trust funds—specifically, 60% of the Board’s funds will come from
the Federal Hospital Insurance Trust Fund and 40% from the Federal Supplementary Medical
Insurance Trust Fund.
13 See §3403(g)(2).
14 See §3403(g)(1)(C).
15 See §3403(g)(1)(D).
16 See §3403(g)(4).
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The Determination Process
This section describes the role of the Chief Actuary and the determination process by which the
Chief Actuary establishes whether the projected per capita Medicare expenditures will exceed
certain target levels. The Chief Actuary’s determination sets in motion a three-year sequence of
events (see Table 1). In addition, this section describes the key calculations that the Chief Actuary
will need to make beginning in 2013 and provides an illustrative example of these calculations.
The three-year sequence begins each year with the Chief Actuary making a determination, by
April 30, as to whether the projected per capita Medicare expenditures will exceed certain target
levels. The year in which the Chief Actuary makes its determination is referred to as the
determination year (DY). The next year is referred to as the proposal year (PY) and the following
year is the implementation year (IY).
Table 1. Three-Year Sequence of Events
Determination Year (DY)
By April 30
Chief Actuary of CMS makes projections and determination
By September 1
Draft proposal sent by IPAB to MedPAC for consultation
Draft proposal sent by IPAB to Secretary for review and comment
Proposal Year (PY)
By January 15
Proposal submitted by IPAB to Congress and the President
By January 25
Secretary submits own proposal to Congress and the President, with a copy to
MedPAC, if IPAB was required to submit a proposal but failed to do so
By March 1
Secretary submits report containing review and comments to Congress on IPAB
proposal (unless the Secretary submitted own proposal because IPAB failed to do
so)
By April 1
Deadline for specified Congressional Committees to consider the submitted
proposal and report out legislative language implementing the recommendations.
Congress has the authority to develop its own proposal provided it meets the same
fiscal requirements as established for the Board and meets this deadline.
Beginning August 15
Secretary implements the proposal subject to exceptions
On October 1
Recommendations relating to fiscal year payment rate changes take effect
Implementation Year (IY)
On January 1
Recommendations relating to Medicare Part C and D payments take effect
Recommendations relating to calendar year payment rate changes take effect
Source: CRS analysis of P.L. 111-148, as amended.
Key Calculations by the Chief Actuary
Beginning in 2013, the Chief Actuary is required to determine several key calculations, based on
an analysis of a five-year period. The DY is the midpoint of the five-year period, as shown in
Figure 2.
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Figure 2. Initial Five-Year Sequence
(Determination Year 2013)
The Chief Actuary is required to calculate
• the Medicare per capita growth rate (the “growth rate”), and
• the Medicare per capita target growth rate (the “target growth rate”).
The growth rate is defined as the projected five-year average (using the DY as the midpoint of the
five years) growth in Medicare program spending per enrollee. Medicare program spending
includes spending for Medicare Parts A, B, and D, net of premiums.17 For example, for the 2013
DY, the Chief Actuary will use the growth in spending for 2011-2015.
Using the same five-year period, the target growth rate will initially be calculated based on the
midpoint between the five-year average overall inflation (using the Consumer Price Index for all
items and services, the CPIu) and five-year average medical inflation (using the Consumer Price
Index for medical inflation, the CPIm). However, beginning with the 2018 DY, the target growth
rate will be tied to the growth of the economy, based on the five-year average increase in the
nominal Gross Domestic Product (GDP) plus one percentage point.
For DYs prior to 2018, the target growth rate is determined as follows:
• Calculate the percent increase in each year for both the CPIu and the CPIm.
• Add the CPIu and CPIm together for each year and take the simple average by
dividing by 2.
• Using the simple average for each year, calculate the average annualized rate of
growth for the entire five-year period.
• The average annualized rate of growth is a single number, which is the target
growth rate for the five-year period.
17 See §3403(l)(4).
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For DYs beginning in 2018, the target growth rate will be the projected five-year average
percentage increase in the nominal GDP per capita plus one percentage point. Using this formula
will constrain future increases in Medicare expenditures more closely to the rate of growth in the
economy. However because the formula adds one percentage point each year to the increase in
nominal GDP, Medicare expenditures could continue to grow more quickly than the economy.
If the Chief Actuary finds that the growth rate does not exceed the targeted growth rate, the
process for the year ends. If the Chief Actuary determines that the growth rate exceeds the target
growth rate for any DY, the Chief Actuary is required to establish an applicable savings target for
the IY. The applicable savings target is an amount equal to the product of the total projected
Medicare expenditures in the PY times the applicable percent. The applicable percent is defined
as the lesser of either the projected excess for the IY (the amount by which Medicare spending is
forecast to exceed the targeted growth in spending expressed as a percent of total Medicare
expenditures) or the percent as specified in the statute (0.5% in IY 2015; 1.0% in IY 2016; 1.25%
in IY 2017; and 1.5% in 2018 and any subsequent IY). In either event, the percent is converted to
a dollar amount by which Medicare program expenditures must be reduced.
For example, if the Chief Actuary determines in 2013 that the growth rate will exceed the target
growth rate by 0.75% for IY 2015, the Board would need to make recommendations that reduce
overall Medicare expenditures by 0.50% (the applicable percent for IY2015). Alternatively, if the
Chief Actuary determines in 2013 that the growth rate exceeds the target growth rate by the
projected excess, 0.35% for IY2015, the Board would need to make recommendations that reduce
overall Medicare expenditures by 0.35%. (See Table 2 for the annual applicable percent and
other changes in key terms over time.)
A Hypothetical Example
This section provides an example to illustrate the calculations the Chief Actuary needs to develop,
beginning April 2013 and each year thereafter, that form the basis of the Chief Actuary’s
determination (see Table 3). For this example, Year 1 is the first year of data included in the
calculation, Year 3 is the DY, Year 4 is the PY, and Year 5 is the IY. It is further assumed that the
applicable percent is 0.50% and that total projected Medicare expenditures in the PY are $600
billion.
First, in April of Year 3, the Chief Actuary must calculate the growth rate—the projected five-
year average growth in per capita Medicare spending (Column A) over the five-year period
ending with the IY.18 In addition, the Chief Actuary must calculate the target growth rate. For the
current DY, Year 3, this is the projected five-year average percentage increase in the average of
the projected increase in the CPIu and the CPIm, also beginning with Year 1 and ending with the
IY. Column B presents the annual percentage change in the CPIu, ending with Year 5, the IY, and
column C presents the annual percentage change in the CPIm ending in Year 5. Column D
provides the annual average percentage change in the CPIu and CPIm and the five-year annual
18 The average percentage increase over time is calculated using a geometric mean, which is the [nth root of the (value
at the end of the time period divided by the value at the beginning of the time period)] – 1. A geometric mean is
generally preferred to the arithmetic mean when measuring growth rates.
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growth in the average, ending in Year 5.19 As the Chief Actuary makes these calculations in the
DY for an IY two years hence, some of the data the Chief Actuary will rely on will be projections.
Table 2. Definition and Applicability of Key Terms Over Time
(DY = Determination Year; PY = Proposal Year; IY = Implementation Year)
DY 2013
DY 2014
DY 2015
DY 2016
DY 2017
DY 2018+
PY 2014
PY 2015
PY 2016
PY 2017
PY 2018
PY 2019+
Key Terms
IY 2015
IY 2016
IY 2017
IY 2018
IY 2019
IY 2020+
Medicare
The projected five-year average (the projected implementation year and four prior years) of the
Per Capita
growth in Medicare program spending per unduplicated enrol ee.
Growth
Rate
Medicare
The projected five-year average (the projected implementation year and four prior
The projected
Per Capita
years) percentage increase in the average of the projected percentage increase (if
five-year
Target
any) in the Consumer Price Index for Al Urban Consumers (al items, U.S. city
average
Growth
average) and the Consumer Price Index for Al Urban Consumers (medical care,
percentage
Rate
U.S. city average).
increase in
nominal GDP
per capita
ending in the
IY plus one
percentage
point, for
each of 5
years
Applicable
The lesser of
The lesser of
The lesser of
The lesser of
The lesser of
The lesser of
Percent (if
0.5 percent or 1.0 percent or 1.25 percent
1.5 percent
1.5 percent
1.5 percent
growth rate
the projected
the projected
or the
or the
or the
or the
exceeds
excess
excess
projected
projected
projected
projected
target
excess
excess
excess
excess
growth rate)
Applicable
The product of the total projected Medicare expenditures in the proposal year and the applicable
Savings
percent for that implementation year.
Target
Source: CRS analysis of P.L. 111-148, as amended.
19 For determination years after 2017, the target growth rate is the projected five-year average percentage increase,
ending with the implementation year, in the nominal gross domestic product per capita plus one percentage point.
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Table 3. Example for Hypothetical Implementation Year
(A)
Annual
Percentage
(C)
(D)
Growth in
(B)
Annual
Average
Per Capita
Annual
Percentage of CPIu
(E)
Medicare
Percentage
Change in
and
Projected
Year
Spending
Change in CPIu
CPIm
CPIm
Excessa
Year 1
1.00%
2.20%
3.5%
2.85%
Year 2
4.10%
3.40%
4.10%
3.75%
DY (Year 3)
9.10%
2.80%
4.60%
3.70%
PY (Year 4)
6.00%
1.60%
4.70%
3.15%
IY (Year 5)
4.90%
2.30%
4.00%
3.15%
Five-year Average Annualized Growth Rate
4.99%
3.32%
1.67%
Source: CRS analysis of P.L. 111-148, as amended.
a. The projected excess is the difference in five-year average in column (A) and column (D)
Continuing the example, since the average annualized five-year per capita growth rate of 4.99%
exceeds the five-year average annualized target growth rate of 3.32%, the Chief Actuary must
establish an applicable savings target for the IY. The applicable savings target is calculated by
multiplying the projected Medicare program spending in the PY by the lesser of
• the applicable percent for the IY (in this example, 0.5%), or
• the difference in columns A and D (column E).
Since 0.5% is less than 1.67%, 0.5% would be used. Therefore, the applicable savings target is
$600 billion multiplied by 0.005, or $3 billion.20
In summary, in this hypothetical example, the Chief Actuary’s calculations determined that the
growth rate exceeded the target growth rate. Given this determination, the Chief Actuary
calculated the applicable savings target, which required the Board to prepare a proposal that
reduces Medicare expenditures by the applicable savings target.
Activating the Trigger
The Chief Actuary applied this calculation to historic data to better understand the potential
impact on Medicare spending. The Chief Actuary reported that “actual Medicare cost growth per
beneficiary was below the target level in only four of the last 25 years, with three of those years
immediately following the Balanced Budget Act of 1997.”21 Thus, in most recent years past,
depending on the target growth rate and assuming no other changes, the Chief Actuary would
20 This $3 billion savings target compares to $10.02 billion ([4.99%-3.32%] multiplied by $600 billion)—the amount
projected spending exceeded targeted growth in spending. Again, in later years, different applicable percentage values
are used and in any year if the projected excess in spending is less than the applicable savings target, then the projected
excess for the implementation year (expressed as a percent) is the applicable percent.
21 Richard S. Foster, Chief Actuary, Centers for Medicare & Medicaid Services, “Estimated Financial Effects of the
“Patient Protection and Affordable Care Act”, as amended” press release, April 22, 2010, http://burgess.house.gov/
UploadedFiles/4-22-2010_-_OACT_Memorandum_on_Financial_Impact_of_PPACA_as_Enacted.pdf.
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have made a determination that triggered a Board proposal. The assumption of no other changes,
however, may not be realistic since it assumes that any Board’s recommendations implemented in
prior years had no lasting effect on costs in later years and at the same time ignores the impact of
other statutory and regulatory changes that potentially affected the Medicare program.
The IPAB Medicare Proposal Process
If the Chief Actuary makes a determination by April 30 of the DY that the growth rate for an IY is
forecast to exceed the target growth rate for that year, the Board is to develop a detailed proposal
to reduce the growth rate by the applicable savings target. This section details the proposal
process and key elements of Board proposals.
Proposal Schedule
By September 1 of each DY, the Board submits a draft of its proposal for review to the Secretary
and to MedPAC for consultation. The Board transmits its annual proposal to Congress and the
President on January 15 of each PY, beginning 2014. By March 1 of each PY, the Secretary
submits comments to Congress on Board proposals.
If the Board is required to develop a proposal but fails to transmit its proposal to Congress and the
President by January 15 of any PY, the Secretary is required to develop a proposal and transmit it
to Congress and the President, with a copy to MedPAC, by January 25 of the PY. The statute does
not define a specific role for MedPAC after it receives the proposal.
Scope of Proposals
PPACA directs the Board that its proposal
• relate only to the Medicare program;
• result in a net reduction in total Medicare program expenditures in the IY that are
at least equal to the applicable savings target established by the Chief Actuary;
• not include any recommendation to ration care, raise revenues or Medicare
beneficiary premiums, increase cost-sharing, restrict benefits, or alter eligibility;
• not reduce payments to providers or suppliers scheduled to receive a reduction in
payment as the result of productivity adjustments under Section 3401 (see
Appendix C);
• include, as appropriate, recommendations to reduce Medicare payments under
parts C and D, such as reductions in direct subsidy payments to Medicare
Advantage and prescription drug plans22 that are 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
22 Direct subsidy payments are payments made by CMS on behalf of insureds, for cost-sharing elements of the benefit
design with respect to low-income enrollees who are exempted by CMS from paying these elements themselves.
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average monthly bid amount23 and reductions in payments to Medicare
Advantage plans that are related to administrative expenses (including profits)
and performance bonuses for Medicare Advantage plans;24 and
• include recommendations with respect to administrative funding for the Secretary
to carry out the Board’s recommendations.
In addition, if the Chief Actuary has made a determination that the growth in per capita national
health expenditures is greater than the Medicare per capita growth rate (a determination to be first
made in 2018), then the Board’s proposals should be designed to help reduce the growth in
national health expenditures while maintaining or enhancing Medicare beneficiary access to
quality care.
In order to develop proposals, the Board is empowered to request and receive official data. In
addition, the Board has the power to hold hearings, including field hearings, and to take
testimony, and receive evidence as the Board considers advisable. Finally, Board proposals
require a majority vote of the appointed members.
Additional Considerations
In developing its proposal, the Board is also directed, to the extent feasible, to
• give priority to recommendations that extend Medicare solvency;25 and
• give recommendations that
• improve the health care delivery system and health outcomes, including by
promoting integrated care, care coordination, prevention, and wellness, and
quality and efficiency improvements;
• protect and improve Medicare beneficiaries’ access to necessary and
evidence-based items and services, including in rural and frontier areas;
• target reductions in Medicare program spending to sources of excess growth;
• consider the effects on Medicare beneficiaries of changes in payments to
providers of services and supplies;
23 The national average monthly bid amount is the average of the standardized bid amounts for each part D prescription
drug plan and it is used to calculate the base beneficiary premium. Denying or removing high bids would lower the
national average monthly bid amount.
24 Medicare Part C and D plans may have been emphasized as a result of concerns regarding the higher costs of
Medicare Advantage relative to Medicare fee-for-service, and unfavorable reports of some of their practices. “The
average Medicare payment to Medicare Advantage plans is 113% of the cost of similar benefits in the original fee-for-
service program.” The Henry J. Kaiser Family Foundation, Medicare at a Glance: Factsheet, Washington, DC,
November 2008, http://www.kff.org/medicare/upload/1066_11.pdf. Also see U.S. Congress, House Committee on
Energy and Commerce, Subcommittee on Health, Profits, Marketing, and Corporate Expenses in the Medicare
Advantage Market, committee print, prepared by Committee Majority Staff, 111th Cong., 2nd sess., December 2009.
However, the higher estimated spending under Part C relative to traditional Medicare may be reduced due to payment
rate changes in PPACA.
25 Medicare solvency generally refers to the Medicare Hospital Insurance (HI) Trust Fund since the Supplementary
Medical Insurance (SMI) Trust Fund is currently adequately financed by the automatic financing structure established
for Medicare Parts B and D. What is not clear from PPACA is to what extent the Board should favor Medicare Part A
solvency over other parts of the Medicare program.
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• consider the effects of recommendations on providers of services and
suppliers with actual or projected negative cost margins or payment updates;
• consider the unique needs of Medicare beneficiaries who are dual-eligible for
Medicare and Medicaid; and
• promote the delivery of efficient, high quality care to Medicare beneficiaries.
Content of Proposals
A proposal needs to include
• the Board’s recommendations,
• an explanation of each recommendation and the reasons for including such
recommendation,
• an actuarial opinion from the Chief Actuary certifying that the recommendations
contained in the proposal:
• will result in a net reduction in total Medicare program spending in the IY
that is at least equal to the applicable savings target,26 and
• are not expected to result, over the ten-year period beginning with the IY, in
any increase in the total amount of net Medicare program spending relative
to what it would have been absent the proposal.
The Chief Actuary’s certification in part restricts the Board from making recommendations that in
the short term reduce spending but in the longer term (10 years), increase spending.
Therefore, Board recommendations may focus on27
• reductions in payments to Part C and Part D plans, including, among other things,
direct subsidies to Part C and D plans and subsidies for non-Medicare benefits
offered by Medicare Advantage plans;
• changes to payment rates or methodologies for services furnished in the fee-for-
service sector by providers not otherwise addressed by changes such as
competitive bidding or reductions in excess of productivity adjustments (see
Appendix C); and
• changes that reduce costs by improving the health care delivery system and
health outcomes.
Finally, after 2018, if the Chief Actuary projects that the per capita rate of growth in national
health expenditures in the IY exceeds the projected Medicare per capita growth rate in the IY,
26 In calculating the reduction in Medicare spending, the Chief Actuary is directed to count any reduction in spending
achieved between October and December of a proposal year to the extent that such reductions were the result of the
Secretary implementing, beginning October 1 of the proposal year, Board recommendations to change the payment rate
for items or services.
27 See PPACA §3403(c)(2)(iv) and http://www.cbo.gov/ftpdocs/108xx/doc10868/12-19-
Reid_Letter_Managers_Correction_Noted.pdf, p. 11.
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then the Board’s proposals need to be designed to help reduce the per capita rate of growth in
national health expenditures while maintaining or enhancing beneficiary access to quality care.
Exceptions to Developing Proposals
There are several circumstances when the Board will not need to transmit a proposal to Congress
and the President. These are
• a year when the Chief Actuary determines that the growth rate does not exceed
the target growth rate, or
• a year when the Chief Actuary determines that the projected percentage increase
in the CPIm in the IY is less than the projected percentage increase in the CPIu.
Again, historically these circumstances have been rare. In addition, there are exceptions to
implementing proposals which are discussed below.
Other Board-Related Activities
While the Board’s principal function is to develop proposals that reduce per capita growth in
Medicare spending, this is not its sole activity. The Board is charged with developing advisory
reports related to Medicare, annual public information reports, and biennial reports containing
recommendations to slow the growth in national health expenditures. Each type of report is
detailed below, and a summary, with a timeline of the various Board reports, is presented in
Appendix A. In addition, the Government Accountability Office (GAO) is directed, as described
below, to undertake a review of the Board’s initial recommendations and report to Congress by
July 1, 2015.
Advisory Reports
Beginning January 15, 2014, the Board may develop and submit to Congress advisory reports on
matters related to the Medicare program, regardless of whether or not the Board submits a
proposal for such year. These advisory reports may include, for years prior to 2020,
recommendations regarding improvements to payment systems for providers of services and
suppliers who are not otherwise subject to the scope of the Board’s recommendations (providers
and suppliers scheduled to receive a reduction in their payment updates in excess of a reduction
due to productivity [see Appendix C]).
Annual Public Reports
The Board will also produce an annual public report, beginning by July 1, 2014, that includes
standardized system-wide information on health care costs, access to care, utilization, and quality
of care that allows for comparison by region, types of services, types of providers, and both
private payers and Medicare.28
28 Since some of these topics touch closely on subjects that MedPAC has dealt with in the past, and to avoid
unnecessary confusion between IPAB and MedPAC, refer to Appendix B, which highlights some of the differences
(continued...)
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Biennial Reports to Slow Growth in National Health Expenditures
Finally, in addition to Board proposals to control costs and the Board’s annual public report, the
Board will, beginning no later than January 15, 2015, and every two years thereafter, submit to
Congress and the President recommendations to slow the growth in national health expenditures
(excluding expenditures under this title and in other Federal health care programs) while
preserving or enhancing quality of care. These recommendations are different from
recommendations contained in any annual Board proposal and are not enacted by the Secretary
unless Congress acts because the Board’s official proposals can only include recommendations
related to Medicare.29 Rather, these recommendations can include matters that the Secretary or
other federal agencies can implement administratively, matters that may require legislation to be
enacted by Congress, matters that may require legislation to be enacted by state or local
governments, or matters that can be voluntarily implemented by the private sector.
Consumer Advisory Council
The Board will be advised by a Consumer Advisory Council composed of 10 consumer
representatives, appointed by the Comptroller General of the U.S. and from geographic regions
established by the Secretary. The Consumer Advisory Council will meet no less frequently than
twice a year, in Washington, DC, in public session. The law is silent on a date by which the
Comptroller General needs to appoint the members of the Consumer Advisory Council and with
respect to the term of service.30
Government Accountability Office Study
No later than July 1, 2015, GAO is to submit a report to Congress containing the results of a
study of changes to payment policies, methodologies, and rates and coverage policies and
methodologies under the Medicare program as a result of the recommendations contained in the
proposals made by the Board. The study is to include an analysis of the effects of Board
recommendations on access, affordability, other sectors of the health care system, and quality of
care. It may be the case that the impact of initial recommendations, if triggered in 2013, will not
be fully ascertainable by July 1, 2015, thus making it difficult for GAO to analyze changes.
“Fast Track” Procedures for Congressional
Consideration
The Secretary must implement the Board’s proposals unless Congress affirmatively acts to amend
or block them within a stated period of time and under circumstances specified in the act. As
noted above, PPACA requires the Board to submit its proposal to both Congress and the
(...continued)
between the two entities.
29 §3403(c)(2)(A)(vi).
30 In addition, the Board is to regularly consult with the Medicaid and CHIP Payment and Access Commission created
by the Children’s health Insurance Program Reauthorization Act of 2009.
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President. The proposal is to be accompanied by, among other things, implementing legislation.
The Secretary is required to automatically implement the proposals contained in the IPAB
legislation on August 15 of the year such a proposal is submitted, unless
• prior to that date, legislation is enacted that includes the statement, “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
• in 2017, a joint resolution discontinuing the automatic IPAB implementation
process has been enacted.31
To begin, Section 3403(d) of the act establishes special “fast track” parliamentary procedures
governing House and Senate committee consideration, and Senate floor consideration, of
legislation implementing the Board or Secretary’s proposal. These procedures differ from the
parliamentary mechanisms the chambers usually use to consider most legislation, and are
designed to ensure that Congress can act promptly on the implementing legislation should it
choose to do so. It accomplishes this goal by mandating the immediate introduction of the
legislation in Congress, and by establishing strict deadlines for committee and Senate floor
consideration, as well as by placing certain limits on the amending process. The procedures
established by the act permit Congress to amend the IPAB-implementing legislation, but only in a
manner that achieves at least the same level of targeted reductions in Medicare spending growth
as are contained in the IPAB plan. The act bars Congress from changing the IPAB fiscal targets in
any other legislation it considers as well, and establishes procedures whereby a super-majority
vote is required in the Senate to waive this requirement.
The act establishes a second set of “fast track” procedures governing the consideration of a joint
resolution discontinuing the automatic IPAB implementation process described above. Such
procedures are designed to promote timely consideration of such a joint resolution. This joint
resolution requires a super-majority vote of both chambers and either the signature of the
President or overriding his veto by a two-thirds vote in each house to enter into force.
Procedures for Considering IPAB-Implementing Bill
House and Senate Introduction of IPAB-Implementing Bill
On the day that the IPAB-implementing legislation is submitted to Congress by the President, it is
to be introduced “by request” in each chamber by the House and Senate majority leaders or by a
designee.32 If a house is not in session on the day the proposal is submitted, the measure is to be
introduced on the first day the chamber is in session thereafter. In the event that the House and
Senate majority leaders fail to introduce the legislation within five days after the date on which
the proposal is submitted to Congress (or after that chamber came into session after the proposal’s
submission), any Member may introduce the bill in his or her respective chamber.33
31 Such a joint resolution and the procedures for its consideration are described later in this report.
32 The term “by request” indicates that the measure is being introduced as a courtesy to the President, who can not
introduce legislation, and that the sponsor of the bill does not necessarily favor it.
33 Several existing expedited procedure statutes contain provisions for the mandatory introduction of legislation by
House and/or Senate leaders. CRS is unaware of any instance in which a House or Senate officer failed to introduce
(continued...)
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House and Senate Committee Referral, Report, and Discharge
When introduced in the House, an implementing bill is to be referred to House Committees on
Energy and Commerce and on Ways and Means. In the Senate, the measure is to be referred to the
Committee on Finance. Not later than April 1 in any year in which a proposal is submitted, the
three committees of referral may report the bill “with committee amendments related to the
Medicare program.” Rule XV of the Standing Rules of the Senate, which bars the Senate from
considering a committee amendment containing any “significant matter” not in the jurisdiction of
the committee recommending the amendment, does not apply to the IPAB legislation. The effect
of the exemption is that the Committee on Finance may report committee amendments to the
IPAB-implementing bill that include matter not in its jurisdiction “if that matter is relevant to a
proposal contained” in the IPAB plan.34
If a committee of referral has not reported the IPAB-implementing bill to its respective chamber
by April 1, the committee will be automatically discharged of further consideration of the
legislation.
Congress Can Consider Only Legislation That Meets the Same Fiscal Targets
as Those Recommended by the IPAB
The special parliamentary procedures established by the act attempt to bar the House or Senate
from considering any bill, resolution, amendment, or conference report pursuant to the special
fast track procedures contained in the act or by any other legislative mechanism, which would
repeal or change the recommendations of the IPAB if that change would fail to achieve the same
targeted reductions in Medicare spending growth achieved by the IPAB proposal. In other words,
the procedures propose to bar Congress from considering, in any legislation (not just the IPAB-
implementing bill), changes to the Board’s recommendations that fail to meet at least the same
fiscal targets as those forwarded by IPAB. Because the act establishes procedural rules related to
congressional consideration not just of the IPAB-implementing bill, but also governing the
consideration of other legislation as well, it differs from most expedited procedure statutes now in
force.
The act attempts to “entrench” this limitation on congressional action by stating that the provision
can only be waived in the Senate by an affirmative vote of three-fifths of Senators chosen and
sworn (60 votes if there is no more than one vacancy), the same threshold required to invoke
cloture on most measures and matters. An appeal of a ruling on a point of order under this
provision carries the same super-majority vote threshold to overturn the ruling of the Senate’s
presiding officer.35
(...continued)
legislation by request when directed to do so by such a statutory rule. For examples of such statutes, see U.S. Congress,
House, Constitution, Jefferson’s Manual, and Rules of the House of Representatives, H.Doc. 110-162, 110th Cong., 2nd
sess. (Washington: GPO, 2009), §1130.
34 Unlike germaneness, any requirement that amendments be “relevant” does not stem from Senate rules. It is a
limitation that is traditionally only imposed on the amendment process by unanimous consent. In cases in which such a
requirement has been imposed by unanimous consent, it has traditionally meant that the subject of an amendment must
relate to the subject of the text it proposes to amend, and does not contain any significant subject matter not addressed
by that underlying text.
35 While, as is described elsewhere in this report, the Chief Actuary of the Centers for Medicare and Medicaid Services
(continued...)
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Initial Senate Floor Consideration
The special parliamentary procedures established by the act create an environment for Senate
floor consideration of an IPAB-implementing bill which is similar to that which exists after the
Senate has chosen to invoke cloture on a bill.
Under most parliamentary circumstances, a motion to proceed to consider legislation in the
Senate is fully debatable.36 Under the special procedures established by the act, however, once an
IPAB-implementing bill is on the Senate Calendar of Business, a non-debatable motion to
proceed to its consideration is in order.37 If the Senate chooses to take up the implementing bill by
adopting this motion, consideration of the implementing legislation is limited to a total of 30
hours equally divided between the two party leaders, and a non-debatable motion to further limit
debate is in order. This is a departure from Senate practice under its Standing Rules, during which
debate on legislation is generally only limited by unanimous consent or by invoking cloture.38
Likewise, under the regular procedures of the Senate, debate on amendments is unlimited and
there is no general requirement that amendments be germane.39 Any amendments offered to the
implementing bill in the Senate under the special procedures established by the act, however,
must be germane, and debate on each amendment is limited to one hour, equally divided between
the bill manager and the offerer of the amendment. Debate on second-degree amendments,
debatable motions, and appeals is limited to 30 minutes each, similarly divided.40 The party
leaders may yield time they control under the overall 30-hour cap to Senators during the
consideration of any amendment, debatable motion, or appeal, should they choose to do so,
however debate on any may not exceed 1 hour.
Not only must amendments be germane, but, as is noted above, the procedure established by the
act bars the consideration of any amendment (including committee amendment), which would
cause the bill to result in a net reduction in the total Medicare program spending in the IY that is
less than the applicable savings target established for that year and contained in the IPAB
proposal. This limitation can only be waived by a vote of three-fifths of Senators chosen and
(...continued)
is to determine whether the IPAB proposal meets certain fiscal targets laid out by the act, it is not specified how such a
determination is to be made for other legislation Congress considers. How the Senate’s presiding officer, for example,
might rule on a point of order alleging that a given bill or amendment considered under regular parliamentary
mechanisms violates this provision, is unclear. This question would likely require additional clarification by the Senate,
no doubt made after close consultation with its Parliamentarian.
36 A motion to proceed to consider is non-debatable in the Senate under certain limited circumstances, including under
specific procedural statutes such as the Congressional Budget Act, when made during the Morning Hour, and when
dealing with Executive Business and conference reports.
37The act does not specify who can make the motion to proceed, and under the chamber’s Standing Rules, any Senator
may in theory lodge such a motion. By long-standing practice, however, Senators almost always defer to the majority
leader or his designee to make such scheduling motions.
38 For more information on cloture, see CRS Report 98-425, Invoking Cloture in the Senate, by Christopher M. Davis.
39 The germaneness of amendments is required when amendments are offered to general appropriations bills, under
some statutory rules (such as the Congressional Budget Act of 1974), to any legislation considered post-cloture, and
when Senators agree to such a requirement by unanimous consent. Although the time for debate on amendments is
unlimited in most circumstances, a non-debatable motion to table an amendment is in order in the Senate, and the effect
of adopting such a motion would be to kill the amendment.
40 If the bill manager favors the amendment, motion, or appeal, then the time in opposition will be controlled by the
Senate minority leader or his designee.
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sworn, and successfully appealing a point of order under this provision carries the same super-
majority vote requirement.
After 30 hours of consideration, the Senate proceeds to vote on any pending amendments and
then, once they are disposed of, on the measure itself, as amended, if amended. Prior to final
passage, a motion to table or to reconsider is in order, as would be a demand for a live quorum
call.
Initial House Floor Consideration
The act does not establish fast track parliamentary procedures governing initial floor
consideration of an IPAB-implementing bill in the U.S. House of Representatives. Should the
House choose to act on such legislation, it would presumably do so under its usual procedures,
most likely by adopting a special rule reported from the House Committee on Rules to establish
terms for considering the bill.
Automatic “Hookup” of House and Senate Bill
The act’s special parliamentary procedures include provisions that are intended to facilitate the
exchange of implementing legislation between the House and Senate.
First, the expedited procedures governing the Senate described above apply only to a bill received
from the House if the same bill has been introduced in the Senate. In addition, the expedited
procedures only apply in the Senate if the bill received from the House is related only to the
programs under the act and has satisfied the same fiscal targets as the IPAB-implementing bill.
Such limitations are intended to prevent the special fast track procedures from being used to
obtain expedited Senate consideration of unrelated legislation or legislative provisions.
The act also establishes “hookup” procedures to ensure that the chambers will act on the same
measure. If, before voting on its own implementing bill, a chamber receives an implementing bill
passed by the other chamber, that engrossed legislation will automatically be amended by the text
of the second chamber’s bill and become the measure the receiving chamber votes on for final
passage. If, after passing its own measure, a chamber receives an implementing bill passed by the
other chamber, the vote on the receiving chamber’s bill shall be considered to be the vote on the
measure received from the other house as amended by the receiving chamber’s implementing bill.
Consideration of a Conference Report or Amendment Exchange
The act also establishes special parliamentary procedures for the expedited consideration of
conference reports or amendments between the chambers intended to resolve bicameral
differences on an IPAB-implementing bill. In either case, consideration of the IPAB-
implementing bill at the stage of resolving differences is limited by the act to 10 hours of
consideration in each chamber, equally divided between Senate party leaders, and in the House,
between the Speaker of the House and its minority leader. Debate on any amendment under these
procedures is limited to one hour and on second-degree amendments, motions, and appeals, to 30
minutes each. Here also, the expedited procedures apply only if the legislation is related only to
the program under the act and satisfies the same fiscal targets required of the IPAB bill.
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Consideration of Veto Message
Should the President veto an IPAB-implementing bill, debate on the veto message in the Senate,
which would under normal circumstances be unlimited, is confined to one hour, equally divided.
There is no similar provision established for the House of Representatives, and it would
presumably consider such a veto message under its regular parliamentary mechanisms.41
Procedures for Considering Joint Resolution Discontinuing the
Independent Payment Advisory Board Process
Section 3403 of P.L. 111-148 establishes a second “fast track” parliamentary mechanism for
consideration of legislation discontinuing the automatic implementation process for the
recommendations of the Independent Payment Advisory Board described above.
Under the terms of the act, in order to qualify for consideration under “fast track” procedures, a
joint resolution discontinuing the process must meet several conditions:
• It must be introduced in 2017 by not later than February 1 of that year.
• It may not have a preamble.42
• It must have the title, “Joint resolution approving the discontinuation of the
process for consideration and automatic implementation of the annual proposal of
the Independent Medicare Advisory Board under section 1899A of the Social
Security Act.”
• It must have the sole text, “That Congress approves the discontinuation of the
process for consideration and automatic implementation of the annual proposal of
the Independent Medicare Advisory Board under section 1899A of the Social
Security Act.”
Introduction, Referral, and Automatic Discharge
Under the terms of the act, such a joint resolution may be introduced by any Member in either
chamber. When introduced, the joint resolution is referred to the Committees on Ways and Means
and on Energy and Commerce in the House, and to the Committee on Finance in the Senate.
In the Senate, if the Committee on Finance has not reported this joint resolution (or an identical
joint resolution) by the end of 20 days of continuous session after its introduction, the committee
may be discharged from its further consideration of the measure upon a petition signed by 30
Senators.43 The committee could also mark up and report the joint resolution, although it is not
required to do so, and if it does, it may not report amendments to it.
41 See CRS Report RS22654, Veto Override Procedure in the House and Senate, by Elizabeth Rybicki.
42 A preamble is a series of “whereas” clauses at the beginning of a measure describing the reasons for and intent of the
legislation.
43 Days of continuous session are calculated by counting every calendar day, including Saturdays and Sundays, and
pausing the count only at times when either chamber has adjourned for more than three days pursuant to a concurrent
adjournment resolution.
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Senate Floor Consideration
At any time after a qualifying joint resolution has been placed on the Senate’s Calendar of
Business, it is in order to make a non-debatable motion to proceed to its consideration. Such a
motion to proceed may be made even if one has been previously rejected. As with the IPAB-
implementing bill procedure described above, the act does not specify who may make this
motion.
Points of order against the joint resolution and its consideration, with the exception of points of
order established by the Congressional Budget Act of 1974 or any budget resolution enacted
pursuant to the Budget Act, are waived.44 If the Senate agrees to the motion to proceed,
consideration of the legislation is “locked in”; the joint resolution remains the unfinished business
of the Senate until it is disposed of.
Debate on a joint resolution discontinuing the automatic IPAB-implementing process and on all
debatable motions and appeals in connection with the measure is limited to 10 hours in the
Senate, with the time divided between the majority and minority leaders or their designees. A
non-debatable motion to further limit debate is available.
No amendment (including committee amendment), motion to postpone, motion to proceed to the
consideration of other business, or to recommit the joint resolution, may be made. At the
conclusion of consideration, and after a single live quorum call, if requested, the Senate votes on
the joint resolution. Passage of a joint resolution discontinuing the automatic IPAB process
requires a supermajority of three-fifths of Senators, duly chosen and sworn.
House Floor Consideration
The act does not establish special parliamentary procedures governing initial floor consideration
of a joint resolution discontinuing the IPAB-implementing process in the House of
Representatives. Should the House choose to act on such legislation, it would presumably do so
under its regular procedures, most likely by adopting a special rule reported from the House
Committee on Rules. Passage of the joint resolution in the House does, however, require a super-
majority of three-fifths of Members, duly chosen and sworn, the same as in the Senate.
Automatic “Hookup“ with Other Chamber
As with the special procedures established for considering IPAB-implementing bills described
above, the act also establishes “hookup” procedures to facilitate the consideration in one chamber
of a joint resolution passed by the other. If, before the passage by one house of a joint resolution
discontinuing the IPAB-implementation process, that house receives an identical joint resolution
from the other, that engrossed joint resolution will not be referred to committee, but will become
the one on which the receiving chamber takes its final vote. Such provisions are designed to
ensure that the House and Senate act on the same legislation.
44 It is unclear if this wide-ranging waiver would prevent points of order under the act itself from being raised against
the joint resolution, for example, if it did not have the required text or has been amended.
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Additional Considerations
Legislation May Face a High Bar
Both the implementing bill and the joint resolution described above are law-making forms of
legislation, which must be signed by the President or enacted over his veto to become effective.
Should either type of measure be vetoed by the President, overriding the veto would require a
super-majority vote of two-thirds in both chambers for the measure to become law. The arguable
and perhaps intended effect of the procedures in the act is to favor the continuation of the IPAB
and its recommendations even in the face of significant opposition in both chambers of
Congress.45 This is why some observers have argued that statutory disapproval mechanisms of the
type contained in the act shift the power balance to the executive branch and away from
Congress.46
Either Chamber May Change the Parliamentary Procedure
The “fast track” parliamentary procedures established by the act for the consideration of both
types of IPAB legislation are considered to be rules of the respective houses of Congress even
though they are codified in statute. As such, Congress has traditionally viewed them as subject to
change in the same manner and to the same extent that any House or Senate rule can be altered by
the Members of that chamber. In other words, Congress is not required to amend or repeal the
statute to change the procedures. The House or Senate can change the procedures by unanimous
consent, by suspension of the rules, or by special rule reported by the House Committee on Rules
and adopted by the House.
Questions Exist About the Enforceability of the Procedures
As is described above, the terms of the act attempt to “entrench” the procedures themselves
against change by requiring a super majority to amend them, as well as to discontinue the
automatic IPAB-implementation process. The act also purports to restrict the ability of future
Congresses to enact certain policy changes related to Medicare in other legislation, not just the
IPAB-implementing measure. How these entrenching provisions will be reconciled with the well-
established constitutional right of each chamber of Congress to make the rules of its own
proceeding,47 and how or if one Congress can broadly regulate the actions of a future Congress in
this way, will likely only be clarified in practice.
45 As of the date of this memo, the constitutionality of the Board is being challenged in Coons v. Geithner, a case filed
by the Goldwater Institute in federal district court in Arizona. See http://www.goldwaterinstitute.org/CoonsvGeithner6.
The three other current major challenges to PPACA, the Florida challenge (Florida v. HHS, No. 3:10-cv-91-RV/EMT
(N.D. Fla., 2010), the Virginia challenge (Virginia ex rel. Cuccinelli v. Sebelius, No. 3:10cv188 (E.D. Va., 2010)), and
the Thomas More Law Center challenge (Thomas More Law Ctr. v. Obama, (E.D. Mich, 2010)) did not raise
constitutional objections to IPAB. For a discussion of some of the constitutionality issues see CRS Report R40725,
Requiring Individuals to Obtain Health Insurance: A Constitutional Analysis, by Jennifer Staman et al.. In Baldwin v.
Sebelius, No. 10-1033, (S.D. Cal., 2010), dismissed by the trial court, but under appeal, also did not challenge IPAB.
There is always the possibility of future constitutional challenges to the Board once it is constituted and takes an action.
46 See, for example, Rep. Claude D. Pepper, remarks in the House, Congressional Record, vol. 134, July 7, 1988, p.
17071.
47 U.S. Constitution, Article I, Section 5.
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Questions about the enforcement of these provisions are highlighted when one imagines how the
consideration of IPAB legislation might play out in a future Congress. As has been noted, the
House of Representatives normally brings major legislation to the floor under the terms of a
special rule reported by its Committee on Rules. This is likely to be the method used by a future
House of Representatives to consider IPAB-implementing legislation or other bill dealing with
rates of Medicare spending.
Special rules establish unique terms for the consideration of legislation and routinely waive all
points of order against the measure in question and its consideration. As such, it is unclear if there
will be any parliamentary opportunity for a House Member to make a point of order against some
future IPAB-implementing bill, for example, that the legislation violates the act’s stricture on
changing targeted rates of Medicare spending. While one can certainly envision a Member
making a rhetorical argument to that effect, a special rule which waives all points of order against
such a bill and its consideration would effectively preclude enforcement of these terms of the act.
A “rider” discontinuing the automatic IPAB process entirely included in the conference report on
an appropriations bill would similarly be unreachable by points of order if the report were
considered under such a special rule or under the House’s suspension of the rules procedure.
Questions about the enforcement of the act’s provisions similarly exist in the Senate.
Traditionally, “fast track” procedures like those contained in the act have been, in practice, more
binding on the Senate than on the House, because the Senate views itself as a “continuing body”
having rules that are continually in force. Additionally, altering such statutory procedures have
arguably been more difficult in the Senate than in the House because to change its rules
(including statutory rules) the Senate must effectively get all its Members to agree to waive them
by unanimous consent or muster a super majority vote to suspend or amend them.
Unlike other statutory fast track procedures now in force, the act establishes wide-ranging
procedures which purport to regulate the consideration of not just one bill, but any legislation not
meeting certain stated policy goals. To what extent a future Senate will view itself as bound by
these broad terms, how the Senate’s presiding officer will intelligently rule on certain points of
order established by the act, among other questions, will likely require additional clarification by
the Senate.
Implementation of Board Medicare Proposals
In the absence of either one of the two general or one limited exceptions noted below, the
Secretary implements the Board’s proposals on August 15 of the PY. Essentially,
recommendations that relate to payment rate changes that take effect on a fiscal year basis take
effect on October 1 of the PY. Recommendations relating to payments to plans under Medicare
Parts C and D and recommendations relating to payment rate changes that take effect on a
calendar year basis take effect on January 1 of the IY.
There are two general exceptions to implementing a Board proposal:
1. If federal legislation was enacted by August 15 of the PY that superseded the
Board’s recommendations and
a. achieves at least the same net reduction in total Medicare program spending
as would have been achieved by the Board’s proposal, and
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b. does not increase the expected Medicare program spending over the ten-year
period, starting with the IY, relative to what it would have been absent the
legislation.
2. Beginning with IY 2020, and beyond, the Secretary would not implement a
Board proposal if a joint resolution was enacted prior to August 15, 2017, to
discontinue the Board.
In addition, beginning in PY 2019, if the Board submitted a proposal in the prior year and in the
current year the Chief Actuary determines that the projected per capita rate of growth in national
health expenditures for the IY exceeds the projected Medicare per capita growth rate for the IY,
then the Secretary is directed not to implement the recommendations submitted in the prior PY.
For example, if in 2020 the Board submitted a proposal and in April 2021 the Chief Actuary
determines that the projected per capita rate of growth in national health expenditures for 2023
exceeds the projected Medicare per capita growth rate for 2023, then the Secretary would not
implement the recommendations contained in the 2020 proposal. However, the Secretary cannot
use this exception in two successive years.
Discussion and Potential Impact of IPAB
Qualifications and Recruitment of Board Members
By statute, the Board is to be composed of members drawn from a wide range of professions and
backgrounds, in addition to geography, and a majority cannot be individuals directly involved in
the provision or management of the delivery of Medicare items and services. What is not clear is
whether this determination of a member’s status is made at the time of nomination or whether a
potential nominee’s status is a function of their prior experience. For instance, would a retired
executive from a Medicare Advantage plan be counted as being involved in the provision of
Medicare services even though he or she may now be retired? Similarly, since there is a blanket
prohibition on outside businesses, vocations, or employment, can a board member be
characterized as an employer or being involved in the provision or management of services when
he or she ceases employing anyone or ceases being involved in the provision of items or services?
One of the rationales for an independent board was to isolate health care payment decisions from
the influence of special interests. While the statute specifies the qualifications of Board members,
nationally recognized expertise, it also specifies that the Board should include, among others,
employers, third-party payers, and representatives of consumers and the elderly. In moving
beyond expertise, skills, and experience and naming specific groups that should be included on
the Board, the legislation designates some interests as worthy of being represented and others, by
omission, as not being worthy. These efforts, rather than isolating the Board from the influence of
special interests appears to welcome some interests directly into the process. In addition, Board
members, and the public more generally, may question whether certain Board members are on the
Board in a representative capacity even though they are prohibited from outside businesses or
employment.
While there is generally an adequate supply of individuals willing to serve on federal boards such
as IPAB, the commitment (full time), modest salaries (relative to physicians, the private sector,
and even some university appointments), and constraints on Board members (restrictions on
outside employment and term of service) may make recruiting highly qualified and respected
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individuals problematic.48 In addition, the prospect that Congress could pass a resolution to
discontinue the Board only adds to this potential problem. Finally, while it does not appear that
Board members reside locally, if this was a practical requirement for the operation of the Board,
this could be an additional impediment.
Funding
The funding level for the Board as set forth in the legislation, and the size of the staff that could
be supported by the funds, may constrain the Board’s ability to develop more comprehensive
recommendations to change payment mechanisms since such efforts are generally costly to
design and test prior to implementation. While the Board’s funding is slightly more than
MedPAC’s, the Board’s charge is much broader than MedPAC’s. In addition, since the Board is
not responsible for administering the program, it will operate outside the Secretary’s
demonstration authority so will not be able, on its own, to experiment with and test new payment
mechanisms. However, the Board may be able to effectively leverage its research capability and
expand its capacity to focus on larger programmatic changes by working with MedPAC, the
newly formed Center for Medicare and Medicaid Innovation, and CMS more generally. For
instance, the Center for Medicare and Medicaid Innovation and the Board could coordinate in the
design and testing of alternative payment models.
Savings Over Time
CBO estimates cost savings from IPAB, during the 2015-2019 period, at $15.5 billion.49 The
Chief Actuary attributes savings of $24 billion due to IPAB through 2019.50 The Chief Actuary
warns that achieving growth rate targets in IYs 2015-2019 may be a “difficult challenge” given
historic growth in per capita Medicare expenditures and the limitations on further reducing
payments to providers and suppliers scheduled to receive a reduction in their payment updates in
excess of a reduction due to productivity. In addition, the Chief Actuary points out that “after
2019, further Advisory Board recommendations for growth rate reductions would generally not
be required if other savings provisions were permitted to continue.”
Even if we assume that the Chief Actuary’s estimate of savings is reasonable and achievable, total
Medicare expenditures for the 2015 through 2019 period are forecast to be $3.9 trillion. The $24
billion in cumulative savings amounts to just slightly more that 0.6% of total program
expenditures. Put slightly differently, the projected savings from the Board’s recommendations
represent a reduction of $89.00 per year per Medicare beneficiary over the period 2015 through
2019.
48 Timothy Stolzfus Jost, “The Independent Payment Advisory Board,” The New England Journal of Medicine, vol.
363, no. 2 (July 8, 2010), pp. 103-105; http://www.cq.com/display.do?dockey=/cqonline/prod/data/docs/html/
weeklyreport/111/weeklyreport111-000003636595.html@allnews&metapub=CQ-WEEKLYREPORT&searchIndex=
0&seqNum=15&productId=5.
49 Letter from Douglas W. Elmendorf, Director, Congressional Budget Office, to Honorable Nancy Pelosi, Speaker,
House of Representatives, March 20, 2010, http://www.cbo.gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf.
50 Richard S. Foster, Chief Actuary, Centers for Medicare & Medicaid Services, “Estimated Financial Effects of the
“Patient Protection and Affordable Care Act”, as amended” press release, April 22, 2010, http://burgess.house.gov/
UploadedFiles/4-22-2010_-_OACT_Memorandum_on_Financial_Impact_of_PPACA_as_Enacted.pdf.
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Board Proposals
If the Board is to be fully successful it must balance both the short-term need to find savings with
longer-term program and payment design issues. Changes that reduce costs by improving the
health care delivery system and health outcomes often require several years before savings may
occur and the Board may have to find immediate savings, therefore, Board proposals may skew
toward changes in payments. To offset this potentiality, the Board may find it useful to work with
the Center for Medicare and Medicaid Innovation to design and test demonstrations that may aid
in longer term Board initiatives.
While the Board is charged with developing proposals that, in part, “target reductions in Medicare
program spending to sources of excess growth,” prior to 2019, the exemptions given to certain
providers and suppliers of services or items that were subject to reductions in excess of a
reduction due to productivity, means that other providers and suppliers will necessarily bear the
brunt of any proposals prior to 2018. As noted earlier, these exempt providers represented roughly
37% of all Medicare benefit payments in 2009. While the argument for the exemption from Board
proposals is that the exempt providers have already “taken a hit” by statutorily mandated changes
in how their price adjustments are calculated, the consequence is that Board proposals can only
target the remaining set of Medicare providers and suppliers. However, since total Medicare
program spending is a function of both price and utilization, it is possible that some of the excess
spending that potentially gives rise to the need for a Board proposal could be caused by increased
payments to exempt providers and suppliers.
Impacts Beyond Medicare
While the Board’s proposals can only relate to the Medicare program, the implications of its
recommendations may have a much broader impact. Many payers fashion their payments on
Medicare rates, such as “Medicare plus X%,” so recommendations to reduce Medicare payments
for certain procedures or suppliers are likely to have a ripple effect throughout the health care
system and could lead to a dampening of the average price paid for such services or supplies.
Activity Related to IPAB During the 112th Congress
Repeal Proposals
A number of bills have been introduced in the 112th Congress that would repeal PPACA
completely. These include, among others, H.R. 2 and S. 192. Other bills have been introduced to
amend the specific provisions of PPACA that relate to IPAB. For instance, H.R. 452, introduced
by Representative Roe of Tennessee on January 26, 2011, would repeal PPACA Sections 3403
and 10320 (the IPAB provisions), including any amendments, and would restore any provisions
of law amended by those sections. On March 29, 2011, Senator Cornyn introduced S. 668, the
Health Care Bureaucrats Elimination Act, which would also repeal Sections 3403 and 10320 of
PPACA.
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The National Commission on Fiscal Responsibility and Reform
The National Commission on Fiscal Responsibility and Reform, popularly referred to as the
Simpson-Bowles Deficit Commission, proposed two sets of recommendations (recommendations
3.5 and 3.6) regarding IPAB. Recommendation 3.5 proposed to “eliminate the provider carve-outs
that exempt certain providers from any short-term changes in their payments (see Appendix C).51
Recommendation 3.6 proposed to both establish “a global budget for total federal health care
costs and limit the growth in federal health care spending to GDP plus 1%.” The commission
suggested that “expanding and strengthening the Independent Payment Advisory Board (IPAB) to
allow it to make recommendations for cost-sharing and benefit design and to look beyond
Medicare.”
CBO March 2011 Baseline
On March 30, 2011, the CBO revised its estimate of the likely savings from IPAB. In testimony
before the House Energy and Commerce Committee’s Subcommittee on Health, CBO Director
Douglas Elmendorf testified that52
In its February 2011 estimate, CBO concluded that the rate of increase in spending would
probably exceed the target rate in some years, and that the IPAB, therefore, would have to
intervene to reduce the growth of Medicare spending. CBO estimated that those actions
would result in $14 billion in savings over the 2012–2021 period. In CBO’s March 2011
baseline, by contrast, the rate of growth in Medicare spending per beneficiary is projected to
remain below the levels at which the IPAB will be required to intervene to reduce Medicare
spending. As a result of that reduction in projected Medicare spending, CBO’s March
baseline does not include any savings from actions by the IPAB.
While, this estimate may well change in the future with future changes in CBO’s assumptions,
CBO currently forecasts that IPAB will not generate any savings through 2021.
The President’s April 13, 2011, Deficit Reduction Proposal
In President Obama’s April 13, 2011, remarks on fiscal responsibility, the President called for
strengthening an independent commission of doctors, nurses, medical experts and consumers
… to reduce unnecessary spending while protecting access to the services that seniors need.
[And if] Medicare costs rise faster than we expect, then this approach will give the
independent commission the authority to make additional savings by further improving
Medicare.53
51 The complete commission report can be found at http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/
documents/TheMomentofTruth12_1_2010.pdf.
52 Douglas W. Elmendorf, CBO’s Analysis of the Major Health Care Legislation Enacted in March 2010,
Congressional Budget Office, Washington, DC, March 3, 2011, http://www.cbo.gov/ftpdocs/121xx/doc12119/03-30-
HealthCareLegislation.pdf.
53 The President’s full remarks can be found at http://www.whitehouse.gov/the-press-office/2011/04/13/remarks-
president-fiscal-policy.
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The President’s proposal was further described in a fact sheet issued by the White House, which
detailed that IPAB should target per beneficiary Medicare cost growth to GDP per capita plus
0.5% beginning in 2018 rather than the current 1%.54
The President’s FY2013 Budget
The President’s FY2013 budget, as submitted to Congress on February 13, 2012, includes a
proposal to strengthen the IPAB. Beginning in the sixth year of implementation, 2020 (which ties
to the 2018 determination year), when the target growth rate is based on the growth in nominal
GDP per capita, the proposal would lower the target growth to the growth rate in nominal GDP
per capita plus 0.5 percentage point. The IPAB would also be given “additional tools like the
ability to consider value-based benefit design and policies that promote integrated and
coordinated care.” This modification would increase the likelihood that the IPAB would need to
submit a proposal to Congress.
Medicare Decisions Accountability Act of 2011 (H.R. 452)
H.R. 452, the Medicare Decisions Accountability Act of 2011, introduced on January 26, 2011,
would repeal the Independent Payment Advisory Board.55 On February 29, 2012, the House
Energy and Commerce Subcommittee on Health held a mark-up of the bill and forwarded it to the
full committee. The House Energy and Commerce Committee ordered the bill to be reported by
voice-vote on March 6, 2012. The House Committee on Ways and Means also ordered the bill to
be reported by voice vote on March 8, 2012.
54 http://www.whitehouse.gov/the-press-office/2011/04/13/fact-sheet-presidents-framework-shared-prosperity-and-
shared-fiscal-resp.
55 Section 2 of the bill reads as follows: “Effective as of the enactment of the Patient Protection and Affordable Care
Act (P.L. 111-148), sections 3403 and 10320 of such Act (including the amendments made by such sections) are
repealed, and any provision of law amended by such sections is hereby restored as if such sections had not been
enacted into law.”
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Appendix A. Key Dates for IPAB Implementation
Table A-1. Effective Dates for Section 3403 Provisions of PPACA
Start or
Effective Date
End Date, Frequency
Requirement
or Deadline
or Duration
CY2013
Chief Actuary of CMS submits determination of whether projected
4/30/2013
Al subsequent years.
Medicare per capita growth rate for the implementation year (two
years later) exceeds the projected Medicare per capita target growth
rate for the implementation year; determination submitted annually
thereafter.
By this date, IPAB submits draft copy of proposal to the Secretary for
9/1/2013
Al subsequent years
review and comment, and to MedPAC for consideration.
(subject to certain
conditions).
CY2014
Board is required to submit its first proposal to the President and
1/15/2014
Al subsequent years
Congress if the projected Medicare per capita growth rate for the
(subject to certain
implementation year exceeds the target growth rate for the
conditions).
implementation year. If the Medicare per capita growth rate does not
exceed the target growth rate, the Board is required to submit an
annual advisory report to Congress on matters related to the
Medicare program.
If Board fails to submit proposal to Congress and the President,
1/25/2014 Each
subsequent
year
Secretary submits contingent proposal.
(subject to certain
conditions).
Secretary submits report to Congress on results of review of Board’s
3/1/2014
Al subsequent years
proposal (unless Secretary submits a proposal in that year). MedPAC
(subject to certain
submits comments to Congress on Board's proposal or the
conditions).
Secretary's proposal.
Deadline for specified Congressional Committees to consider the
4/1/2014
Al subsequent years
Board's proposal and report out legislative language implementing the
(subject to certain
recommendations. Congress has the authority to develop its own
conditions).
proposal provided it meets the same fiscal requirements as
established for the Board.
Deadline for the Board to produce a public report containing
7/1/2014
Al subsequent years.
standardized information on system-wide health care costs, patient
access to care, utilization, and quality of care that allows for
comparison by region, types of services, types of providers, and both
private and public payers. Report is to be produced annual y
thereafter.
Start date for the Secretary to begin implementing the Board's
8/15/2014 Each
subsequent
year
proposal. Any recommendation that would change a provider's
(subject to certain
payment rate will apply to items and services furnished on the first
conditions).
day of the first fiscal year, calendar year, or rate year (which varies
depending on provider type) that begins after August 15.
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Start or
Effective Date
End Date, Frequency
Requirement
or Deadline
or Duration
CY2015
Deadline for the Board to submit to Congress and the President
1/15/2015
At least once every 2
advisory recommendations to slow the rate of growth in national
years thereafter.
health expenditures. These recommendations could not target
expenditures in federal health care programs. Recommendations are
required at a minimum once every two years.
Due date for GAO report on changes to payment policies,
7/1/2015 Periodically
in
methodologies, and rates resulting from the Board's
subsequent years.
recommendations.
CY2017
Deadline for Congress to introduce a joint resolution discontinuing
2/1/2017
the Board's activities.
Deadline for Congress to enact a joint resolution discontinuing the
8/15/2017
Board's activities.
CY2018
Board is only required to submit proposals to the President and
1/15/2018
Al subsequent years.
Congress for years in which the projected rate of growth in
Medicare spending exceeds the Gross Domestic Product (GDP) plus
1.0%.
CY2019
The first year the Board may begin submitting proposals that may
1/15/2019
Al subsequent years.
reduce payments to providers and suppliers scheduled to receive a
reduction in their payment updates in excess of a reduction due to
productivity. These proposals would take effect in 2020.
Source: CRS Report R41196, Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA): Summary
and Timeline, coordinated by Patricia A. Davis.
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Appendix B. A Comparison of IPAB and MedPAC
Table B-1. How Does IPAB Contrast to MedPAC
IPAB MedPAC
Located in
Executive Branch
Legislative Branch
Established under
Patient Protection and Affordable
Balanced Budget Act of 1997 (P.L.
Care Act (PPACA, P.L. 111-148, §
105-33, § 4022) – by merging
3403).
Prospective Payment Assessment
Commission (ProPAC) and the
Physician Payment Review
Commission (PPRC),
Principal Statutory Mandate
Make recommendations to be
Advise Congress on payments to
implemented by the Secretary of
private health plans participating in
Health and Human Services to reduce
Medicare and providers in Medicare’s
the per capita rate of growth in
traditional fee-for-service program;
Medicare spending; develop
analyze access to care, quality of care,
recommendations to slow the growth
and other issues affecting Medicare
in national health expenditures while
preserving or enhancing quality of
care
Authority
Board delegated significant policy
Advisory
making authority by Congress
Size
15 appointed and 3 ex officio
15 appointed members
members
Term
6-year term, staggered
3-year term, staggered
Appointed by
President in consultation with the
Comptroller General
majority leader of the Senate, the
Speaker of the House of
Representatives, the minority leader
of the Senate and the minority leader
of the House of Representatives
Conditions of Employment
Full time, subject to ethical
Part time, subject to ethical
disclosures, compensation is level II
disclosures, compensation is level IV
(Chairperson) and level III (members)
of the Executive Schedule (with
of the Executive Schedule, members
physician Commissioners receiving a
may not engage in other business,
comparability allowance)
vocation, or employment
Staff
Executive director and a staff to be
Executive director and a ful time staff
determined
of 40
Powers and Work Product
Power to hold hearings and obtain
Power to obtain official data
official data
Public meetings and two annual
Annual proposals, as required, annual
reports
and biennial reports
Budget
$15 million in FY2012 updated by the
$13 million in FY2011
rate of inflation annually
Source: CRS analysis.
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Appendix C. Medicare Productivity Exemptions and
Board Recommendations
PPACA Section 3401 altered certain market basket updates used to adjust Medicare base payment
amounts and incorporated productivity improvements into those market basket updates that
previously did not include them. Since some providers and suppliers of services will receive a
reduction in payments beyond their productivity adjustment in some years, Section 3403(c)(2)(iii)
prohibits, as described below, the Board from recommending in some years further reduction in
payment rates to those providers and suppliers.
All of the providers and suppliers subject to Section 3401 productivity adjustments are listed in
Table C-1. To be exempt under Section 3403(c)(2)(iii) from Board recommendations in any
given year a provider would have to be slated to receive a reduction under Section 3401 in its
inflationary payment update in excess of a reduction due to productivity in a year in which such
recommendations would take effect.56
Reduction in Excess of a Reduction Due to
Productivity Adjustment
An “update reduction in excess of a reduction due to productivity” means that for that category of
provider, after calculating any applicable percentage increase in payments due to changes in
costs, reduced by the productivity adjustment, payments are further reduced by an additional
applicable percentage specified in Section 3401. For example, in rate year 2012, payments to long
term care hospitals will be adjusted by changes in their costs, changes in productivity in the
broader economy, and then reduced by an additional 0.10 percentage point. Again, only those
providers that are subject to this additional reduction in payments will receive a time-limited
exemption from Board recommendations.57
Therefore, the relevant factor in determining whether providers have an exemption is whether the
provider had a reduction in excess of a reduction due to productivity in the year the
recommendation would take effect. If so, that provider is exempt from Board recommendations
that take effect in that year.
56 Some Medicare providers are paid according to fee schedules that are updated on an annual basis to reflect changes
in their costs. Under prior law these annual updates did not include an adjustment for changes in the productivity of
Medicare providers. Beginning in 2012, PPACA reduces the annual update to some providers by a productivity
adjustment equal to the 10-year moving average of changes in annual economy-wide private nonfarm multifactor
productivity. See CRS Report RL30526, Medicare Payment Policies, coordinated by Paulette C. Morgan for a general
discussion of Medicare payment policies.
57 See CRS Report R41196, Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA):
Summary and Timeline, coordinated by Patricia A. Davis, Appendix B, for a timeline of update reductions and
productivity adjustments, by provider.
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The Independent Payment Advisory Board
Table C-1. Providers of Services or Supplies Enumerated in Section 3401
(Applicable exemptions, if any, under Section 3403(c)(2)(iii))
Providers of Services
Inflationary Payment
or Supplies
Update Applicable
Perioda Exemption
Periodb
Inpatient Acute Hospitals
Productivity adjustment
Begins FY2012
Reduction in excess of a
FY2010-FY2019
Through 12/31/2019
reduction due to productivity
Skilled Nursing Facilities
Productivity adjustment
Begins FY2012
None
Long-term Care Hospitals Productivity adjustment
Begins RY2012
Reduction in excess of a
RY2010-RY2019
Through 12/31/2019
reduction due to productivity
Inpatient Rehabilitation
Productivity adjustment
Begins FY2012
Facilities
Reduction in excess of a
FY2010-FY2019
Through 12/31/2019
reduction due to productivity
Home Health Agencies
Productivity adjustment;
Begins CY2015;
None
Annual reduction of 1 percent
CY2011-CY2013
Psychiatric Hospitals
Productivity adjustment
Begins RY2012
Reduction in excess of a
RY2010-RY2019
Through 12/31/2019
reduction due to productivity
Hospice Care
Productivity adjustment
Begins FY2013
Reduction in excess of a
FY2013-FY2019
Through 12/31/2019
reduction due to productivity
Dialysis
Productivity adjustment
Begins CY2012
None
Outpatient Hospitals
Productivity adjustment
Begins CY2012
Through 12/31/2019
Reduction in excess of a
CY2010-CY2019
reduction due to productivity
Ambulance Services
Productivity adjustment
Begins CY2011
None
Ambulatory Surgical
Productivity adjustment
Begins CY2011
None
Center Services
Laboratory Services
Productivity adjustment
Begins CY2011
Through 12/31/2015
Reduction in excess of a
CY2011-CY2015
reduction due to productivity
Certain Durable Medical
Productivity adjustment
Begins CY2011
None
Equipment
Prosthetic Devices,
Productivity adjustment
Begins CY2011
None
Orthotics, and Prosthetics
Other Items
Productivity adjustment
Begins CY2011
None
Source: CRS analysis of P.L. 111-148, as amended.
a. FY = Fiscal Year; RY = Rate Year; CY = Calendar Year.
b. Since the first year the Chief Actuary in the Centers for Medicare & Medicaid Services can potential y make
a determination that projected Medicare expenditures exceed the projected target is 2013, the earliest that
any Board recommendations could be implemented would be August 15, 2014 for the fiscal year beginning
in October. Therefore, exemptions are only potential y significant for the period beginning October 1, 2014
through December 31, 2019.
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The Independent Payment Advisory Board
Providers Subject to Section 3401
Table C-1 also indicates which providers are subject to a productivity adjustment, a reduction in
excess of a reduction due to productivity, or some other adjustment; the applicable time period of
the adjustment; and whether the adjustment gives rise to an exemption period under Section 3403.
CRS analysis of CMS statistics indicates that in 2009 Medicare payments to exempt providers
represented approximately 37% of all Medicare benefit payments.58
Proposals generated by the Board in 2018 and submitted to the President and Congress in 2019
could include provisions, relating to any provider, that the Secretary would begin implementing
effective August 15, 2019 and later. By 2020, all exemptions will have lapsed and all providers of
services and supplies will potentially be subject to Board recommendations.
Author Contact Information
Jim Hahn
Christopher M. Davis
Specialist in Health Care Financing
Analyst on Congress and the Legislative Process
jhahn@crs.loc.gov, 7-4914
cmdavis@crs.loc.gov, 7-0656
Acknowledgments
The authors would like to thank David Newman, a former CRS Specialist in Health Care Financing, as well
as Patricia Davis, Hinda Chaikind, and Paulette Morgan for their assistance with this report.
58 U.S. Department of Health and Human Services, 2009 CMS Statistics, Centers for Medicare & Medicaid Services,
Baltimore, MD, August 2009.
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