Joseph Antos

What Congress gives, it can take away. Particularly if a different Congress is doing the take-away. That’s why the Independent Payment Advisory Board (IPAB) is doomed to failure, assuming that it can get off the ground. Laws can be changed. In the case of the inaptly-named sustainable growth rate (SGR), they are changed several times a year—a testament to the practical realities of price controls and formula-driven decision-making. The IPAB was created by an act of the last Congress and is supposed to meet an arbitrary spending target that is not feasible without structural changes in Medicare and the health care delivery system. The IPAB has one tool—price controls—to hit the same kind of fiscal target that the SGR has. If the board requires politically unacceptable payment cuts, a future Congress will neutralize IPAB just as it has neutralized the SGR. Congress could pass its own version of the IPAB cut if it plays by the Affordable Care Act’s (ACA) rules. Congress could also change IPAB’s charter or even abolish it. But that probably wil

The President’s Medicare plan contains nothing innovative or new, and does not change the structure of the program. Instead, it focuses on providers, adjusting payments and adding utilization hurdles without changing financial incentives. Most of the ideas were swept up from the CBO budget options book, so they score as savings. The provider cuts are not painless, but also not unexpected. Increasing premiums and cost-sharing is delayed until 2017, which makes no budget or policy sense but plenty of political sense. That adds up to acceptance by the “super” committee. However, if the tax changes are included, the package will fail to be enacted even though Congress could support the Medicare pieces. That gives Obama what he wants: an election-year debating point without having to sign even routine health spending reductions into law.

If health reform is enacted this year (or next), one thing is certain. The final bill will do little to change the fundamental economic incentives that drive health spending. This is disappointing but not surprising given the political forces at work. Although politicians argue that we need to bend the cost curve down, reform proposals will increase total health spending—confirmed by CMS actuaries, even assuming Medicare fee cuts that are unlikely to be implemented fully. For the most part, health reform will expand the current inefficient health system, hoping that another layer of regulation will produce better value for our money. Perhaps the single best idea is to reform the current tax break for insurance purchased through employers. The Senate Finance Committee included a tax on so-called Cadillac health plans, which would spur sales of lower cost insurance that promotes greater cost awareness and more efficient health care delivery. Not the ideal policy—capping the tax exclusion would be more direct and fairer to low-wage workers—but not bad. It now appear