We will be performing site maintenance on our learning platform at learn.aaos.org on Sunday, February 5th from 12 AM to 5 AM EST. We apologize for the inconvenience.


Published 7/1/2010
John H. Flint, MD; Alok D. Sharan, MD; Ryan M. Nunley, MD


Hint: It’s not a new Apple® product

With the swipe of a pen, President Barack Obama signed into law the Patient Protection and Affordable Care Act on March 23, 2010. The bill not only instituted some much-needed healthcare reforms, it also created the IPAB, or Independent Payment Advisory Board.

Much work went into creating the massive healthcare reform bill. But exponentially more work will go into deciding exactly how to implement its provisions. Accordingly, the IPAB and its implementation are topics of hot debate—not only in Congress but also among physicians, hospitals, and other healthcare providers.

IPAB was created as a response to the uncontrolled escalating costs of Medicare expenditures. Although Congress ultimately has the responsibility of addressing the cost issues, it has been unsuccessful, largely due to political pressure from a variety of lobbying groups.

For example, the Sustainable Growth Rate (SGR) formula, enacted in 1996, was intended to control spending for physician services under Medicare Part B. Since 2002, however, spending as measured by the SGR formula has consistently exceeded targets. Rather than implement the payment reductions required under the formula—or adjust the formula to more accurately reflect physician costs, Congress has annually passed short-term, stop-gap measures.

Until very recently, in fact, Congress has proved itself unable to make any dramatic changes to the healthcare system that would result in cost savings for fear of repercussions from their constituents. The IPAB is envisioned as a way to take important issues regarding controlling healthcare costs out of the political system and place them in the hands of a few specially selected individuals.

Composition and charges
The IPAB will have 15 members, who will serve as full-time employees appointed by the president for 6-year terms. Board members are expected to be nationally recognized experts in the field of health finance, economics, actuarial science, health facility, or health plan management. The IPAB is charged to represent providers, patients, and payors.

The board’s challenge is to reduce the per capita Medicare spending in years that spending is projected to exceed spending targets. IPAB will need to recommend spending reductions in “any year in which the increase in Medicare’s per capita spending rate exceeds the average of the growth in the Consumer Price Index (CPI) and that of the medical care CPI.” The board will make these new proposals starting in 2014, and the first recommendations will be implemented in 2015. The Department of Health and Human Services is legally bound to implement the IPAB’s recommendations unless Congress develops its own cost-reduction measures, which must be equally effective.

Ultimately, the recommendations made by the IPAB are on a fast track to becoming law. Congress must evaluate the recommendations under an expedited procedure.

The IPAB does have some limits in the methods it can use to control costs. For example, it is restricted from rationing health care, raising costs to beneficiaries, restricting benefits, or modifying eligibility criteria. It may not cut payments to hospitals and hospices before 2020. It can, however, cut reimbursement rates for physicians if Congress does not implement a permanent fix to the SGR by 2014.

The IPAB is also charged with annual reporting of healthcare costs, access, quality, and utilization. Interestingly, it is also charged with recommending means of slowing private health care expenditures growth to Congress, although the recommendations are not binding.

The orthopaedic response
The American Association of Orthopaedic Surgeons (AAOS) actively lobbied against inclusion of the IPAB into healthcare reform legislation. During the Capitol Hill visits at the 2010 National Orthopaedic Leadership Conference, AAOS members lobbied their representatives and senators for its repeal.

A central concern for the AAOS is that the establishment of the IPAB delegates power originally vested in Congress to unelected officials who cannot be held responsible for their actions by citizens. In essence, the power that Congress holds is derived from the power of the electorate. Through this new legislation, Congress has given away the power to control Medicare spending to individuals who are not elected and who do not answer to the American people.

No doubt, part of the appeal of the IPAB to Congress is that board members can make painful and politically unpopular decisions without fear of political fallout or concerns about being re-elected. But such an abdication of power does not bode well for addressing similarly tough issues in the future.

Challenges and opportunities
Will IPAB work? The challenges to successful implementation are legion. First, IPAB has been given a limited $15 million annual budget to develop and collect the data necessary to make the pertinent recommendations. It also faces the challenge of decreasing Medicare spending by $28 billion over the next 9 years.

In addition, the president must be able to find individuals willing to give up their current careers and salaries to serve as board members for a modest government salary. If the IPAB recommends reducing physician reimbursement rates to decrease Medicare expenditures, it may create a sizeable gap between private and Medicare rates and drive physicians out of Medicare, exacerbating the access problem.

Although the IPAB will face many challenges on multiple fronts while negotiating a political minefield, it has the potential for some positive outcomes. For example, if the power is used appropriately and is supported by adequate, accurate data, IPAB could make some important, effective, yet highly unpopular decisions that would never make it through Congress.

If the IPAB’s recommendations are unfounded or untenable, the American people can make their will known and force Congress to override the IPAB and make its own recommendations, assuming they meet the necessary budget constraints.

A significant opportunity exists in the area of data collection and reporting. With its limited budget, the IPAB may need to turn to outside organizations for data on healthcare costs, access to care, quality, and utilization. The orthopaedic community is a leader in collecting data on the quality of the care provided and the measurable outcomes of orthopaedic treatments, such as total hip and knee arthroplasties. The American Joint Replacement Registry may become an important source of data on the value of these orthopaedic procedures.

Moreover, the Access to America’s Orthopaedic Services Act (AAOS Act, HR1021/S1548) would require various agencies to provide reports to Congress analyzing the extent to which musculoskeletal research is being funded, collect data on the number of new investigators entering the research field, and identify existing trauma care initiatives to enhance cooperation across federal agencies. Thus, if IPAB is unable to generate all the data necessary to make its annual recommendations, it may solicit data from sources that could provide them readily.

This is the window of opportunity for orthopaedics. As stated by S. Terry Canale, MD, in his May 2010 editorial in AAOS Now, “Now is not the time to throw in the towel.” Dr. Canale recognized that “We (orthopaedics) need to be involved in the implementation process…we may be able to help shape whatever ultimately gets implemented if we are diligent.”

IPAB is a current reality. It may be derailed before full implementation in 2014; it may not be able to achieve its goals even if it does come to fruition. But if the orthopaedic community is ready, we may be able to shape its implementation and provide data that not only benefit our patients but also support our recommendations.

The Washington Health Policy Fellows include John H. Flint, MD; Alok D. Sharan, MD; Ryan M. Nunley, MD; Manish Sethi, MD; Adrian Thomas, MD; Taruna Madhav, MD; A. Alex Jahangir, MD; Aaron Covey, MD; James Genuario, MD, MS; Sharat K. Kusuma, MD; Samir Mehta, MD; and Anil Ranawat, MD.

Editor’s note: This is the third in a series of articles on redefining health care in America prepared by the AAOS Washington Health Policy Fellows. The series takes a close look at various aspects of the healthcare reform legislation signed by President Obama earlier this year.

Did you know?

  • IPAB members are expected to be nationally recognized experts in the field of health finance, economics, actuarial science, health facility, or health plan management.
  • The current salary for IPAB members for full-time employment would be $165,300.
  • The IPAB provision was not in the House version; in fact, the House opposed its inclusion in the final bill.
  • IPAB board members will be appointed by the President of the United States for 6-year terms.
  • IPAB will not make recommendations until 2014; implementation will start in 2015.
  • IPAB is prohibited from making cuts to hospital reimbursements for Medicare until 2020.