The Acronym That Ate Health Care

Published May 16, 2011

National Review

The 2012 election, and the existence of a free health-care market in this country, could well depend on a little-known agency called IPAB. Remember that acro­nym. It stands for the Independent Payment Advisory Board, a vastly powerful but too often overlooked component of the president’s health-care-reform law. IPAB has not yet come into existence, but when Obamacare goes into full effect, it will be an unelected and unaccountable bureaucratic entity with nearly limitless power over federal Medicare spending. IPAB will have the power to effectively ration health care through price controls—which may not even be the scariest thing about it. That distinction arguably falls to its unprecedented overriding of congressional sovereignty, in flagrant violation of the constitutional separation of powers.

President Obama won’t admit to any of this, of course, but his nationally televised April 13 speech in response to Paul Ryan’s deficit-reduction plan did push IPAB out of the shadows and into public view. Obama made clear in that speech that IPAB’s authority over Medicare pricing would be a central component of his deficit-reduction plan, and he used the occasion to call for a substantial expansion of IPAB’s already unprecedented powers.

For the GOP, that spells political opportunity. Obama can’t begin to match Ryan’s deficit-reduction program without massive, IPAB-imposed health-care controls that would amount to rationing. That means the best Republican defense against the inevitable avalanche of Democratic attacks on the Ryan plan is a good offense against IPAB.

The IPAB controversy raises anew longstanding concerns about President Obama’s political convictions and methods: his radicalism, ideological stealth, and long-term intentions. An emerging bipartisan movement to abolish IPAB highlights the fact that many moderate Democrats have been uncomfortable with this board from the start. IPAB’s central role in Obama’s plans suggests that, despite his denials, the president has never truly surrendered his aim of driving America toward a socialized, British-style single-payer model, in which our entire health-care system would be government-run.

While almost nothing about IPAB has been subject to public debate, almost everything about it should be controversial. Paul Ryan calls IPAB a “rationing board,” to which the White House replies that IPAB is specifically prohibited by law from rationing care. IPAB is indeed legally barred from formal rationing, but with its authority to control prices, it will be able to drive Medicare payments so low that doctors will simply stop offering key services to patients. In theory, Medicare would still pay for a whole range of tests and treatments, but in practice, patients solely dependent on Medicare would be barred from a great many of them. That is de facto rationing.

Of course, as with the Ryan plan, Medicare patients would still have the option of paying for non-reimbursed care out of pocket—that is, until IPAB helps usher us into a fully socialized single-payer health-care future (of which more below).

So is IPAB a “death panel”? Not exactly, at least in the sense of explicitly deciding who shall live and who shall die. Yet IPAB’s price-setting power gives it control over medical decisions now made by doctors with their patients. And, yes, that means rationing by unaccountable bureaucrats. The one-size-fits-all consequences of IPAB’s declarations will be final for many an unfortunate patient. In that sense, IPAB will indeed be a death panel.

No plan, least of all Obama’s, can offer a bottomless health-care purse to every American. The advantage of the Ryan plan, however, is its reliance on patient choice. Having been taxed throughout their working lives to support a system that offers no choice, Medicare-dependent patients lose control of funds they might otherwise have used to purchase private health insurance. Ryan’s plan returns some of that money to Americans via a tax-supported health-care voucher. This allows consumers to choose the private insurance plan that most closely matches their priorities—devoting more or less resources to end-of-life care, for example.

Yet the constitutional problems surrounding IPAB are at least as disturbing as the lack of choice. IPAB’s defenders euphemistically refer to its unprecedented powers as “fast-tracking,” as if clever efficiency experts were simply speeding IPAB’s decisions through the usual legislative process. In reality, IPAB upends, short-circuits, and refashions the fundamentals of American government in ways that make a mockery of the Constitution.

Peter Orszag, former director of Obama’s Office of Management and Budget—and an enthusiastic IPAB supporter—once called IPAB “the largest yielding of sovereignty from the Congress since the creation of the Federal Reserve.” Arizona’s Goldwater Institute, which has filed a lawsuit against Obamacare that focuses on IPAB, argues that IPAB’s largely unchecked power over the nation’s health-care system will actually exceed the Federal Reserve’s control of the banking system, as well as the Environmental Protection Agency’s reach.

The basic principle is that IPAB’s recommendations will have the force of law unless they are countered by Congress. And Obamacare makes them exceedingly difficult to counter. Congress can modify IPAB’s decisions through its ordinary procedures only if Congress’s total Medicare expenditures do not exceed IPAB’s recommended levels. It takes a three-fifths supermajority of the Senate to waive these restrictions. In addition, IPAB’s recommendations must be moved through Congress according to a specific timetable. This “fast-tracking” supersedes even the Senate’s standing rule requiring 60 votes to invoke cloture in case of a filibuster.

And it may not end there. Under the current version of the law, Congress retains the option of passing separate legislation authorizing additional Medicare expenditures. As part of his response to Ryan, however, President Obama called for IPAB to be granted the power of “automatic sequester.” While the White House has done little to fill out the details of this audacious proposal, it apparently means that IPAB would be able to prevent Congress from appropriating any additional money for Medicare outside of IPAB-initiated legislation. Oh, and by the way, the Obamacare legislation exempts IPAB’s recommendations from either administrative or judicial review.

As the Goldwater Institute’s anti-IPAB suit puts it: “Congress has no constitutional power to delegate nearly unlimited legislative power to any federal executive branch agency, much less to entrench health care legislation against review, debate, revision or repeal…. Such federal overreaching must be rejected if the principles of limited government and the separation of powers established by the United States Constitution mean anything.”

A Congressional Research Service report acknowledged the unprecedented nature of Obamacare’s attempt to restrict the power of future Congresses: “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, 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.”

You don’t need to be a professor of constitutional law to see that there is something profoundly wrong here. As Orszag notes, IPAB essentially captures a substantial portion of the sovereignty granted to Congress by the Constitution and transfers it to a semi-independent entity within the executive branch, freed from judicial review to boot. Obamacare is an offense against the Constitution, and while the courts may or may not eventually acknowledge that, it is up to the electorate to step in now to set things right. Its attack on individual liberty and democratic accountability, as embodied in America’s system of constitutional self-rule, tells you all you need to know about Obamacare and the man it’s named for.

Radical? That’s not too strong a word for the systemic transformation we’re dealing with here.

Socialist? Rep. John Fleming (R., La.), a co-sponsor of the House legislation to repeal IPAB, calls the panel a Soviet-style “central planning committee.” He’s right. Even in the absence of a single-payer system, IPAB’s centrally planned and democratically unaccountable price-setting authority pulls us far down the road to socialism. Socialism inhibits liberty, and IPAB’s panoply of restrictions on democratic self-rule are the logical corollary of command-and-control central planning.

Conservatives must take this lesson to heart and make the constitutional issues every bit as central to their assault on IPAB as the question of rationing itself. Claremont Institute scholar Charles Kesler has forcefully argued that Obamacare will be repealed and Obama himself defeated only when the public recognizes that the very “future of self-government in America” is at stake in this debate. If IPAB stands, the door is open to further ceding of congressional authority to boards and panels and commissions. If an extraconstitutional health-care rationing board is required to rescue us from a debt crisis driven by rising health-care costs, why not unaccountable energy-rationing or carbon-rationing boards to rescue us from an oil-price spike or the supposed crisis of global warming?

Some observers say that IPAB will have little effect on Medicare spending (contrary to its advocates’ claims of huge savings), while the Ryan plan would lead to draconian cuts. That is too simple. It’s true that according to current Congressional Budget Office (CBO) projections, IPAB’s legislated cost-cutting targets will likely fail to bite over the next ten years. Curiously, a week after Obama’s reply to Ryan, White House deputy chief of staff Nancy-Ann DeParle actually touted this fact, virtually boasting that IPAB would do nothing to save money for a decade. By then, however, DeParle’s claims were out of date, since her boss had just promised harsher cost-cutting targets for IPAB. While the CBO hasn’t yet scored Obama’s new targets, White House spokesman Nick Papas acknowledged, under questioning from Fox News, that Obama’s new IPAB proposal would indeed have some fiscal impact before the decade is out.

What is going on here? Quite simply, Obama knows that his health-care plans are his political Achilles heel, so he’s doing his best to disguise and downplay the inevitable impact of IPAB. To a degree, Ryan’s bold plan has served to smoke Obama out, forcing the president to at least hint at his expansive vision for IPAB’s future. Perhaps from Obama’s perspective, however, it is he who has successfully tricked Ryan into laying out a detailed program of politically unpopular cuts. If Obama can disguise the true long-term impact of IPAB’s price controls on Medicare, he wins.

Obama’s approach is to promise eventual savings from IPAB, while never actually spelling out what they are or who will suffer the cuts. That’s why IPAB isn’t even slated to come into existence until after the 2012 election. From Obama’s perspective, better to be criticized for not saving enough money than to acknowledge how deeply IPAB’s decisions will someday bite.

Obama doesn’t have to demand a strengthening of IPAB’s fiscal targets and powers; it may occur naturally. If he effectively defeats the Ryan plan by securing reelection, Obamacare will become the only game in town. At that point, the burgeoning fiscal crisis will force even some Republican budget hawks to demand expanded targets and powers for IPAB.

In fact it’s already happening. The bipartisan Simpson-Bowles deficit commission, appointed by Obama, essentially had no choice but to work within the framework of Obamacare. Accordingly, Simpson-Bowles pushed for IPAB to be granted a much wider range of powers, including the extension of its authority beyond Medicare to all of Obamacare. Once IPAB’s rules govern America’s health-care system as a whole, we will be most of the way down the road to a British-style single-payer system. Obama hasn’t gone that far himself yet, but he’s already using the political cover provided by Simpson-Bowles to call for expanded IPAB authority.

The literature on IPAB is filled with plans and suggestions for expanding its cost-cutting (i.e. rationing) powers. Washington Post blogger Ezra Klein, for example, wants the stricture on formal rationing to be removed and has called for IPAB to have “at least” an advisory role in Obamacare as a whole. A report by the Kaiser Family Foundation, beloved of liberal policy wonks, implicitly lays out a political route to a single-payer system: The report essentially agrees with conservative critics that IPAB’s price-setting will freeze Medicare recipients out of a great deal of care, but suggests that the solution is to place equal regulatory pressure on private payment rates.

So once Ryan’s plan is effectively taken off the table, and burgeoning deficits bring stricter IPAB cost-cutting targets, a massive and politically powerful generation of retired baby boomers will be told that the only solution to their rationing problems is to bring even private health-care services under IPAB’s purview. Once this politically unaccountable panel has control of the entire health-care system, seniors on Medicare will gain at least somewhat greater access—but at the cost of British-style rationing for all, not to mention the end of cutting-edge medical innovation in the country.

This is what Obama has been planning all along, of course. In 2007, he made it clear that if he were designing a system from scratch, he’d opt for single-payer. When he proposed health-care reform as president, however, Obama vehemently denied that his plan was a Trojan horse for a single-payer system. But the denial is implausible. Indeed, the Tea Party was inspired, in part, by a video clip in which Obama clearly implied a long-term goal of leveraging his plan into a single-payer system.

At this point, it is unnecessary for Obama to openly advocate such a system. All he needs to do is keep Obamacare in place, effectively eliminate Republican alternatives by winning reelection, and then quietly manage the powerful fiscal forces that will push the system in his preferred direction.

Should Ryan’s free-market plan be repudiated, we will face a future in which socialized medicine is the only alternative to fiscal meltdown. Quite possibly, however, it will prove no alternative at all, and we will end up with the worst of all worlds: heavy-handed rationing alongside a still-expanding deficit. Health-care expert Avik Roy recently noted that since the board that is IPAB’s British counterpart was established in 1999, health-care expenditures have actually grown at a higher rate in Britain than in the United States. This suggests that Paul Ryan’s strategy of relying on free-market competition to lower health-care spending is the better way to go. That free-market strategy has already had some success in the case of Medicare’s prescription-drug plan.

Obama’s plans depend on keeping IPAB as far under the radar as possible until after he has secured reelection in 2012. Ryan has exposed the president’s strategy a bit, but unless Republicans seize on Obama’s still-muffled hints of his intentions to strengthen IPAB’s targets and powers, Ryan will be thrown permanently on the defensive. That means victory for Obama, socialized health care for America, and sorrow for those who still believe in the founders’ vision of a free people under constitutional government.

Mr. Kurtz is a senior fellow at the Ethics and Public Policy Center and the author of Radical-in-Chief (Threshold, 2010).

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