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Critics Are Wrong About the Medicare Payment Board

Author: Peter R. Orszag, Adjunct Senior Fellow
July 31, 2013
Bloomberg.com

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For Medicare, this has been a summer of good and bad news. On one hand, the program's costs continue to rise remarkably slowly. So far this fiscal year, they have gone up by only 2.7 percent in nominal terms, the Congressional Budget Office reports.

On the other hand, opposition to the Independent Payment Advisory Board -- created as part of the Affordable Care Act -- continues to mount. And opponents continue to mischaracterize the whole point of the board.

What they seem not to understand is that the board is needed mostly so that that Medicare can continue to encourage slower growth in costs.

One reason costs have been rising so slowly is that systems for paying hospitals and doctors are changing. We're moving away from the old fee-for-service plan and toward paying for value in health care -- and we're making the shift more rapidly than expected.

Redesigning the payment system is a fundamentally different approach to containing costs. The old way was to simply slash the amounts that Medicare pays for services. And here is where the criticism of the Independent Payment Advisory Board becomes somewhat Orwellian.

The point of having such a board -- and here I can perhaps speak with some authority, as I was present at the creation -- is to create a process for tweaking our evolving payment system in response to incoming data and experience, a process that is more facile and dynamic than turning to Congress for legislation.

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