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Obama's Medicare Plan: Rationing by Bureaucrats

The president's big plan for Medicare involves unelected bureaucrats making life or death decisions.

3:45 PM, Apr 14, 2011 • By MARK HEMINGWAY
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Just prior to the President's big budget speech, the White House released a fact sheet touting the fact that they were looking to strengthen the Independent Payment Advisory Board (IPAB) in the health care -- which is the primary mechanism in the Patient Protection and Affordable Care Act for reducing Medicare spending.

Then Obama launched into a breathtakingly demogogic attack on Ryan's plan in the speech. "Put simply, it ends Medicare as we know it," he said.

Ryan is already out swinging defending his Medicare proposal, but it's curious that the President attacked Ryan's plan without explaining the specifics of his own plan, while still describing it in vague terms:

Now, we believe the reforms we’ve proposed to strengthen Medicare and Medicaid will enable us to keep these commitments to our citizens while saving us $500 billion by 2023, and an additional one trillion dollars in the decade after that.  And if we’re wrong, and Medicare costs rise faster than we expect, this approach will give the independent commission the authority to make additional savings by further improving Medicare.

The lack of specifics here is probably because the White House knows that the more the public finds out about IPAB, the more unpopular the President's plan to reduce Medicare spending is likely to become.

Here's how IPAB works. It's a panel comprised of 15 presidential appointees who are tasked with reducing Medicare spending. The panel is is given certain spending targets that kick in in 2014. At first those targets are on a sliding scale, but by 2018 the spending targets are set at the rate of GDP growth with an additional half of a percentage point tacked on. (Originally, it was GDP plus a full percentage point, but according to the "framework" released prior to the President's speech the spending target has been reduced.)

Any recommendations IPAB makes about Medicare spending automatically become law. Congress can only override IPAB with a three-fifths majority vote, which is a very high legislative hurdle, or they can pass their own Medicare plan that meets the same spending target. There's no administrative process for doctors or citizens to challenge the board's decisions. There's a school of thought that says IPAB is even more blatantly unconstitutional than the individual mandate, as its power sounds legislative in nature -- its declarations would have the force of law -- and therefore cannot legitimately be delegated to an executive entity.

Which brings us to IPAB's supposed restrictions. In order to assuage fears that the board would run amok, supposedly the board was given a narrow mandate to restrict what it could do and prevent it from going on a rationing tear. IPAB can't adjust premium prices or Medicare's cost sharing mechanisms, such as co-payments, deductibles etc. 

It can, however, adjust reimbursement rates to doctors. But Medicare reimbursement rates are already well-below market rates and consequently doctors are treating fewer and fewer Medicare patients as they lose money on them. (Doctor access is already a huge problem for Medicaid for this same reason.)

Now the question is, how does Obama strengthen a panel that is already nearly unaccountable to Congress and is nominally not supposed to ration?

Yesterday, the president called for $480 billion in cuts to Medicare in his budget window. In the second decade of his plan, the president calls for $1.48 trillion in Medicare cuts.

Now the debate over IPAB has been muddied somewhat because they were an inspiration for Sarah Palin's "death panels" rhetoric that the lords of conventional wisdom so disproved of. However, it's pretty hard to argue that under IPAB unelected bureaucrats won't be making very important decisions that affect who gets what expensive medical treatments, which could ultimately be life and death decisions.

It's almost impossible to conceive of a way the president's going to cut $2 trillion from Medicare using IPAB without the board indulging freely in heavy-handed rationing. It would not be surprising if this was the direction that the White House is taking, given the administration recently took the unprecedented step of retroactively revoking FDA approval for Avastin, an expensive but clinically-proven late stage breast cancer drug.

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