State of the Industry 2011: Medicare Advisory Board

High-ranking Senate Republicans introduced a bill late in the summer to proactively abolish Medicare's Independent Payment Advisory Board (IPAB) before it even gets off the ground. The board will begin work in 2014, but it's already mired in political wrangling.

"IPAB is the salt in the soup," says Dan Mendelson, CEO of advisory firm Avalere Health. "You've got MedPAC, you have Congress, and three or four important elements in monitoring and controlling Medicare spending, but there is no budget for Medicare."

However, the industry will have to wait and see whom Congress and the president will appoint to the 15-member IPAB group before getting a feel for how it will approach policies-particularly policies that call for provider payment reductions. IPAB can't change eligibility rules or benefits, and up until 2020, it also won't be able to make changes to hospital payments.

"The major flaw in how Congress has set up IPAB is the exemption of hospitals from the recommendations," Mendelson says. "It's impossible to imagine controlling Medicare spending but not being able to touch 40% of that spending. They have to be able to focus on the full range of healthcare costs, and hospitals are a linchpin in reform."

IPAB will enact cuts if Medicare spending exceeds a prescribed formula.