Obamacare’s Death Panel: Deferred, but Not Dismissed

Soon after Associate Justice Antonin Scalia passed away on February 13, Senate Republicans felt the need to declare that they would not even entertain the thought of holding confirmation hearings for any candidate President Obama might nominate to the Supreme Court in the last eleven months of his second term.

Given the high drama and politics surrounding presidential appointments that require Senate confirmation, it might be a good time to ask why another 15-member “court,” which President Obama himself established in 2010, and which was supposed to deliver its first decision in January 2014, has not yet seen its first member nominated!

This “court” is the almost forgotten “death panel,” officially named the Independent Payment Advisory Board (IPAB). Based on a target rate of Medicare spending per capita, the IPAB was supposed to start cutting Medicare payments to providers in 2015.

Through 2017, the target rate is the average of the change in the Consumer Price Index and the medical-care component of the CPI. For 2018 and subsequent years, the target rate is the rate of change in nominal Gross Domestic Product per capita plus one percent. The IPAB would cut spending by the lesser of the excess or a percentage increasing from 0.1 percent in 2015 to 1.5 percent in 2017 and subsequent years.

When the Affordable Care Act was signed in 2010, IPAB struck terror into the hearts and minds of medical providers and Medicare beneficiaries. For the entire quarter century through 2009, medical inflation increased at a faster rate than CPI except 1997 (David Newman & Christopher M. Davis, The Independent Payment Advisory Board, Congressional Research Service, November 30, 2010). Medicare spending per enrollee increased 6.7 percent annually, on average. CPI increased by 2.9 percent, its medical-care component by 5.1 percent, and GDP per capital by 4.1 percent.

Surely, the IPAB would start wreaking havoc on Medicare payments in 2015, providers and patients feared. Fortunately, Medicare spending growth dropped significantly after Obamacare was signed. (There were a number of reasons, including the drug benefit, which cost less than expected.) So, the cuts have never had to be made.

Further, the “death panel” immediately became politically toxic, so President Obama saw no upside in nominating candidates, whom the Senate would hesitate to confirm. Problem solved? Not at all. If there is anything worse than 15 political appointees deciding whether the red pill is better than the blue pill (as President Obama put it in a 2009 press conference), it is one political appointee making the decision.

And that is what happens if the board is not appointed: Its powers fall to the U.S. Secretary of Health & Human Services. In a constitutionally suspect provision of the legislation, Congress has little ability to overcome her arbitrary cuts, should Medicare spending jump again.

There is a better way: Limiting taxpayers’ liability for Medicare to a share of growth in CPI or GDP is reasonable. Instead of giving complete power over seniors’ access to medical care to one politician, it would be an easy reform to use the same (or similar) formula to allocate a defined contribution to each Medicare enrollee’s benefit, which they can use to pay for medical services of their choice.

The IPAB is a sleeping dragon. Congress should kill it before it wakes up.

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For the pivotal alternative to Obamacare, please see Independent Institute’s book, A Better Choice: Healthcare Solutions for America, by John C. Goodman.