Welcome to another edition of “What’s the Deal?” the blog that makes its sequels as good as the original.
In this week’s blog, we return with the 2nd installment of our 4 part series on health care: ‘Ensuring the Uninsured are Insured.’ Part one can be found here. Since the two year anniversary of the passage of the Patient Protection and Affordable Care Act was this past Friday, I thought it fitting to write a piece on the legislation’s most recent controversial subject on Medicare: the Independent Payment Advisory Board, or IPAB. (Note: the debate over IPAB is not to be confused with the release of the iPad 3. It can get quite confusing.)
On Thursday, the House voted to repeal the IPAB, strictly on party lines, but with earlier democratic support. Though the repeal of IPAB is unlikely to pass the Senate or be signed by President Obama, it’s worth looking at why the provision for the board has sparked such opposition.
So, what’s the deal with this easily misunderstood acronym? What is this board, what does it have to do with healthcare, and why is it so heavily opposed by conservatives and lightly opposed by liberals?
The Independent Payment Advisory Board (IPAB) from the Affordable Care Act, is a board appointed by the President, that according to the legislation, is given the task of finding ways to reduce costs in Medicare spending; essentially a cost control group that will:
“develop and submit proposals to Congress and the President aimed at extending the life of the Medicare Trust Fund. The Board is expected to focus on ways to target waste in the system, and recommend ways to reduce costs, improve health outcomes for patients, and expand access to high-quality care.”
IPAB is really a backstop more than anything else, because its cost cutting proposals will only take effect if healthcare costs rise above projected levels of the Congressional Budget Office (CBO). Also, IPAB’s ideas will only be put into effect if Congress fails to create legislation to reduce medicare spending. So at least according to the law, the IPAB’s solutions will only be implemented as a last measure. Also, the law prohibits IPAB from rationing care, restricting benefits, or changing eligibility criteria.
The argument against IPAB isn’t really in the board’s task or mission to reduce costs, it is really about the makeup of the board, the ideology behind creating the board, and the overall ideology of the healthcare law itself: that the Federal Government is tasked with providing health care and keeping costs low instead of competition and the free market.
2 of the main antagonistic arguments are that IPAB will “usurp the role of Congress” and that “IPAB will actually ration, or reduce care”. It is interesting to note that it is explicitly written in the law to make sure the board doesn’t do either of those things. Both House republicans and some democrats have expressed worry that the IPAB will be an unaccountable group who could drastically cut health care services for seniors all in the name of savings. Some healthcare providers are worried about the cost cutting and waste/fraud eliminating that the Board is responsible for; that it will reduce care that is already too limited. A worry that having the Government controlling the price of healthcare will price out both the providers and the consumers.
Representatives are concerned that the President will use his Executive powers to appoint a board that doesn’t have to answer to Congress and that will use the “big government” reach to control Medicare costs when the “free market” should be setting the prices. Again this is more of a simple political ideological argument than anything else: over how much power the IPAB has and should be able to have.
The rebuttal to opposition is that the Board is a necessary piece of healthcare reform, because it allows healthcare to remain affordable to Medicare recipients. Specific measures in the law are in place to make sure the IPAB isn’t the only decision making body. Again, the law prohibits the board from implementing proposals that reduce care or restrict/change eligibility. The supporters of IPAB are arguing that the board is in line with the same idea of the entire healthcare law: that Government is needed to expand coverage to more people at an affordable rate, because the free market has priced out the people who need healthcare the most. IPAB is therefore needed to ensure that seniors will be able to afford the Medicare coverage they need.
So, this is the most recent example of lawmakers arguing over how much the Federal government should be involved in regulating an industry; another battle in the political and ideological struggle of American history: how much should the Federal Government be involved in the lives of its citizens?
Of course, the United States was formed as a response to an overarching government that imposed its will on its colonies to generate revenue. America’s original political fights came from over how much power the first U.S. government should have. The Federalist vs. Anti-federalist fight is essentially continuing into the present, especially since “libertarian” groups like the tea-partiers and others have become powerful popular movements in an election year.
So let’s take a look at a specific example from U.S. history, where the Federal Government expanded its power to regulate or influence an industry through a central board or committee.
Creation of the SEC
A good analogy to the American ideological struggle over healthcare is the creation of the Securities & Exchange Commission under the FDR administration. Here is an example of another Government “board” whose responsibility is to protect investors; similar to IPAB’s role of protecting Medicare recipients.
As is well known, the SEC was created in response to the Stock Market Crash of 1929, the catastrophic end to the 1920s: an era of huge securities investment with little information available, and little knowledge of the risks involved. After a Congressional commission on how to stabilize the markets and protect investors, the Securities Act of 1934 was passed which created the SEC. The SEC was created with guidelines to make sure the commission had no authority to approve a security, only the powers to ensure investor registration sheets were accurate (along with anti-fraud measures, etc).
Of course, in line with the theme of this blog, the legislation was not without its detractors and ideological opponents. A great deal of opposition came from businesses and issuers of stock themselves who thought that increased regulation would block growth during the depression and wouldn’t work to stabilize the markets.
Much of the opposition in congressional debate to the Securities Act focused on the legislation’s protection of “suckers” and “fools” who didn’t know enough to not be duped by worthless stock or investment. The argument was that like Government’s inability to prohibit alcohol, a Federal reach to protect investors would be futile (“you can’t protect fools from themselves”).
These representatives in 1934 might not have all thought that Federal protection of investors was the reincarnation of King George and the British tariff laws, but Federal overreach to counter the free market was absolutely a theme, even if on the surface opposition didn’t directly say this. A social Darwinist tinge to the opposition of the law (ie. let the gamblers and fools suffer for their “bad decision making” in investing) was geared to letting the free market, or the stock market keep or eliminate the winners and losers in investment and speculation. People that the Fed should not ultimately be helping stay in the speculation game, because they “caused” the financial collapse, not overzealous brokers and lax rules, etc.
For better or for worse, the securities exchange act was enacted and signed into law despite this opposition, but the content of the disagreement puts this fight into the same arena as today’s disagreements on IPAB.
This is at the very least an incomplete analysis and analogy, but the overall themes and some small details pervade over both the implementation of the SEC and the debate over IPAB:
- Both are Govt. created boards or commissions in larger pieces of legislation (IPAB – healthcare reform, and the SEC – the Securities Act) regulating a certain part of an industry.
- Protection is the goal behind each board: Protecting the American people from risky investments or unaffordable access to healthcare.
- Opposition for both has come in many forms, but mostly from business and the worry that a “meddling” Government will impede growth.
- Behind the opposition to each board is a political ideology (as old as the U.S. itself) that Government should have a limited role in determining the outcomes of the free market (and not a direct one).
So, we see one connection of a long-standing political debate resonating in the IPAB debate. Again, what’s important to keep in mind is context: the IPAB is part of a larger piece of legislation (the Affordable Care Act) which nearly, if not all, Republicans, oppose vehemently as a gross overstep of the powers of the Federal Government. Putting a chink in the armor of public opinion of the healthcare law is the goal here, a political scientist might say. As a historian, I might not see exactly that image, but merely a continuation of a political ideological fight in a different context.
Stay tuned for our 3rd portion of the 4 part blog series: “What’s the Deal With Ensuring the Uninsured are Insured?” where we’ll look at another piece of the legislation and see how a historical explanation can help unravel it.
Until next time,
Your Faithful Historian,
Eric G. Prileson
Sources & Further Reads:
Susan Phillips & J. Richard Zecher, The SEC and the Public Interest
Joel Seligman, the transformation of Wall Street: A history of Modern Corporate Finance
CAN REGULATION PROTECT “SUCKERS” AND “FOOLS” FROM
THEMSELVES? REFLECTIONS ON THE RHETORIC OF INVESTORS AND
INVESTOR PROTECTION UNDER THE FEDERAL SECURITIES LAWS
By John H. Walsh* https://www.msu.edu/~jbsl/pdfs/2007-2008_Walsh.pdf