Will ObamaCare lead to Death Panels?

Before you write off this blog post as the ranting of a madman, understand that when confronted with a controversial issue, I carefully consider all the evidence before opining.  The question is actually addressing the role that the Independent Payment Advisory Board (IPAB) will play in implementing the goals of the Affordable Care Act (ObamaCare, the term that the President himself has embraced). 

To begin with we have to understand exactly the powers of the IPAB.  I’ve written about it on several occasions.  This 15-member appointed board will be formed in 2013.  We have been assured by the President that IPAB will not ration medical care.  If we are to believe this statement (by the way the legislation itself reads that way), we have to understand what is meant by rationing.  There are actually three different ways to ration medical care.  One way is to ration explicitly.   For example, establish a rule that says anyone over 70 years of age is not eligible for hip replacement surgery.  That is what most of us think when we consider the meaning of the term.  A second way to ration is to set spending targets for medical care spending.  For example, we could mandate a target growth rate for medical care spending.  Or a third way to ration is to establish a fee schedule that must be followed when providing medical care to seniors. 

So the question is “Will ObamaCare (through the IPAB) ration care in any of these three ways”?  The answer is “Yes.”  The legislation clearly gives the board the authority to set provider fees with the intention of targeting a growth rate in overall medical care spending.  ObamaCare provides IPAB with the legislative authority to ration care.  Setting the fee for hip replacement surgery so low that no surgeon will provide the procedure will accomplish the same result as an outright ban on procedure.  The difference between the two approaches is that the board can say that it doesn’t ration care, that physicians are the bad guys for not providing the care. 

Will IPAB lead to death panels?  Sarah Palin was excoriated by the media when she voiced her concern to the American public during the reform debate.  We were told that the term “death panel” does not appear in the legislation.  True.  But Sarah Palin was considering the mandatory end-of-life counseling in the original legislation, which by the way, did not make it into the final bill.  She did not specifically mention the IPAB, which was called the “Independent Medicare Advisory Board” in the original bill.  The new name better reflects the new powers, not just over Medicare but over all payers. 

That still is not enough evidence to cause alarm, except of course among skeptics like me.  My concern (not voiced publicly until now), is based on what ObamaCare supporters have been writing about the future of medical care delivery.  The first article was in the British medical journal Lancet in 2009 (Principles for evaluating scarce medical interventions) coauthored by Ezekiel Emanuel, an Obama health policy adviser and considered a candidate for one of the positions on IPAB.  The most controversial aspect of the approach described in this article is the notion of the “complete lives system,” which prioritizes younger people who have not lived complete lives to be first in line for scarce medical resources.  Not enough evidence yet to be too alarmed. 

Next, I came across an article written by M. Gregg Bloche, another health care adviser to President Obama.  “Beyond the ‘R Word’? Medicine’s New Frugality” (New England Journal of Medicine, May 24, 2012) addresses the powers of the IPAB “to nudge providers toward more frugal practice by changing Medicare payment policies – and clinician’s incentives.”  There is still no direct mention of a power to ration because “the R word threatens long-term cost containment.”  Supporters are still dancing around the issue, but not embracing it. 

By summer’s end the popular press gets involved.  Eduardo Porter in the August 21, 2012, New York Times wants to ration health care, but do it more fairly.  In his article Porter targets his angst more directly on “older adults in their last year of life.”  Medicare spends six times as much on seniors who die during the year than those who survive.  He then goes on to say that we should follow the lead of the UK in their explicit use of their board, the National Institute for Health and Clinical Excellence (NICE), to set a value on the worth of each year of a person’s life.  Porter adds “rationing is inevitable in a world with finite resources.”  Should I be alarmed yet? 

Two weeks later, on September 6, Ezekiel Emanuel and colleagues published “A Systemic Approach to Containing Health Care Spending” in the New England Journal of Medicine.  This time his suggestion is to set payment rates for medical care to limit spending growth to global targets.  In other words, all payers and providers would be bound by the same government-determined fee schedule in order to keep overall medical care spending at specified levels; i.e., caps on spending growth set at the average growth in wages.  It’s beginning to look a lot like rationing to me. 

Finally, on September 16, Steven Rattner (counselor to the Secretary of the Treasury in the Obama administration) takes us “Beyond ObamaCare” in his New York Times article, providing literally the last nail in the proverbial coffin when he begins his article with “WE need death panels.”  His suggested target is end-of-life care.  “The big money in Medicare is found in reducing the cost of treating people in the last year of life, which consumes a quarter of the program’s budget.”  Well, at least somebody else connected the dots for me. 

The President may be denying that his health care plan contains the elements of full-blown European-style rationing, but his surrogates are spreading the word in various media outlets, or as Smokey Robinson wrote in his 1966 MoTown hit:

So get ready, so get ready – cause here I come. 

(Get ready cause here I come).

I’m on my way.

Get ready cause here I come.

The Temptations were talking about a love that’s true.  I’m afraid that in our case, we’re talking about something quite different.

The Obama Medicare Reform Plan

I recently had lunch with several of my colleagues and the topic of the Ryan-Wyden plan came up in the conversation.  The question was asked “Is it fair to judge the Ryan plan against traditional Medicare? Shouldn’t we be comparing it with the Obama plan?  Fair question.  But what is the Obama plan for Medicare?  It’s more than simply cutting $716 billion from Medicare and redirecting it to cover Medicaid expansion and the exchange subsidies.  The President’s plan creates the Independent Payment Advisory Board whose 15 members are tasked with reducing the growth in Medicare spending.

Appointed by the President and confirmed by the Senate, IPAB has the power to cut Medicare payments to providers and the private insurers that participate in the Medicare Advantage and prescription drug programs.  Hospitals and hospice payments are exempted from IPAB oversight until 2020.  The board can also change the payment structure from fee-for-service to capitation or some hybrid form to achieve its targets.

Over the period 2013 through 2018 per capita Medicare spending is targeted to grow at a maximum rate equal to the average of the Consumer Price Index (CPI) and the Medical CPI.  Annually the board is responsible to develop a plan to keep Medicare spending below the target.  Not a problem, you say?  Over the past decade the CPI has grown at an annual rate of 2.66% and the Medical CPI 4.53%.  At the same time per capita Medicare spending grew 6.51% annually.  If these results continue into the future, the IPAB would have to cut Medicare spending 2.91%.  But with hospitals and hospices exempt (37% of Medicare spending), spending on physicians’ services and other nonexempt categories would have to be cut 4.62%.

About the only power IPAB has to fulfill its mission is cutting payments to providers.  It may not propose any real reforms to the program (such as a premium support mechanism like the Ryan-Wyden plan).  It also cannot ration care, restrict benefits, modify eligibility rules, or make changes in cost sharing.

Ewe Reinhardt, Princeton economist, says its the “only hope to restrain Medicare spending.”  Peter Orszag, former director of the Congressional Budget Office under Obama, says its the “most important aspect of the Affordable Care Act.”  Regardless of those claims, Paul Ryan calls it a “rationing board” and Jeremy Lazarus, president elect of the American Medical Association says it “would have too little accountability and the power to make indiscriminant cuts that adversely affect access to health care for patients.”

Does the rationing claim stand up to careful scrutiny?  Despite the language of the Act, rationing is inevitable.  The board can set prices for specific services so low that no provider will offer them, or at least fewer will offer them.  Many physicians already refuse to see new Medicare patients and as payment rates fall below those of Medicaid, more will follow.  While hospitals escape the wrath of IPAB until 2020, they too will find it more difficult to remain solvent because of low payment rates.

If economics teaches us anything, it teaches us that price controls create shortages.  And if we refuse to ration via prices, we’ll have to find another mechanism to ration.

Note to self: Another reason to delay retirement.  Keep your job so you can keep your private health insurance.  Delay Medicare’s control over your access to medical care as long as possible.