INDEPENDENT PAYMENT ADVISORY BOARD
The ACA authorized a new Independent Payment Advisory Board (IPAB), a 15-member board that is required to recommend Medicare spending reductions to Congress if projected spending growth exceeds specified target levels, with the recommendations taking effect according to a process outlined in the ACA. To date, no members have been appointed to the Board. Many policymakers have expressed opposition to IPAB, and there have been several legislative attempts to eliminate it. The CMS Office of the Actuary has estimated that the IPAB process will first be triggered in 2017, based on its most recent Medicare spending growth rate projections.11
Repealing IPAB would be expected to:
- Increase Medicare spending over time, in the absence of the Board’s cost-reducing actions. CBO projectsMedicare savings of $8 billion as a result of the IPAB process between 2019 and 2026.12
How would ACA repeal affect the solvency of the Medicare Hospital Insurance trust fund?
Fully repealing the ACA would accelerate the projected insolvency of the Medicare Hospital Insurance (HI) trust fund, out of which Part A benefits are paid. This would result from higher spending for Part A services due to higher payments to Part A service providers (such as hospitals) and Medicare Advantage plans for services provided under Part A, along with reduced revenues, if the additional 0.9 percent payroll tax on high earners is repealed. As a result, Medicare would not be able to fulfill its obligation to pay for all Part A-covered benefits within a shorter period of time if the ACA is repealed than if the law is retained.
Prior to enactment of the ACA in 2010, the Medicare Trustees projected that the Part A trust fund would not have sufficient funds to pay all Part A benefits beginning in 2017. Following enactment of the law, the insolvency date was extended. The current insolvency date is projected to be 2028. Repealing the ACA is expected to push up the insolvency date.
Discussion
The Medicare provisions of the ACA have played an important role in strengthening Medicare’s financial status for the future, while offsetting some of the cost of the coverage expansions of the ACA and also providing some additional benefits to people with Medicare. Savings were achieved in part by reducing payments to providers, such as hospitals and skilled nursing facilities. Medicare provider payment changes in the ACA were adopted in conjunction with the ACA’s insurance coverage expansions, with the expectation that additional revenue from newly-insured Americans would offset lower revenue from Medicare payments. In addition, Medicare savings were achieved through lower payments to Medicare Advantage plans.
Congressional action to repeal the ACA appears imminent, but it is not yet clear whether Congress will repeal the ACA in its entirety or keep certain provisions in place. Previous Congressional proposals have taken different approaches. For example, the House Budget Resolution for Fiscal Year 2017, introduced by Chairman Price in March 2016, proposed a full repeal of the ACA. The House Republican plan, “A Better Way,” introduced by Speaker Ryan in June 2016, proposed to repeal some of the ACA’s Medicare Advantage payment changes, along with repealing IPAB and CMMI, the additional Medicare payroll tax on high earners, and certain other tax and revenue provisions, but appears to retain other Medicare provisions, including changes to provider payment updates and the benefit improvements.13
A majority of Americans have expressed support for some of the ACA provisions that affect Medicare, including the elimination of out-of-pocket costs for many preventive services, closing the Part D coverage gap, and the higher Medicare payroll tax for higher-income workers.14 Some industry stakeholders have expressed concern about the implications of retaining the ACA’s savings provisions, yet repealing the ACA’s coverage expansions.
Aside from uncertainty about whether any of the ACA’s Medicare provisions will be retained, questions have arisen as to what changes policymakers could advance through the legislative process known as “reconciliation.” Policymakers are considering repealing the ACA as part of budget reconciliation legislation, which requires only a simple majority in the Senate to pass. Senate rules (the so-called “Byrd Rule”) limit the scope of reconciliation legislation to provisions with budgetary effects, including spending and revenues. Most of the Medicare provisions in the ACA have budgetary effects, according to CBO, so would likely be considered in order in the context of a reconciliation bill.
As a result of the Medicare provisions included in the ACA, Medicare spending per beneficiary has grown more slowly than private health insurance spending; premiums and cost-sharing for many Medicare-covered services are lower than they would have been without the ACA; new payment and delivery system reforms are being developed and tested; and the Medicare Part A trust fund has gained additional years of solvency. Full repeal of the Medicare provisions in the ACA would increase payments to hospitals and other health care providers and Medicare Advantage plans, which would likely lead to higher premiums, deductibles, and cost sharing for Medicare-covered services paid by people with Medicare. Full repeal would also reduce premiums for higher-income beneficiaries, and reduce payroll tax contributions from beneficiaries (and other taxpayers) with high earnings. Repealing the ACA would have uncertain effects on evolving payment and delivery system reforms. Partial repeal of the law could also have implications for Medicare spending, the Part A trust fund solvency date, and beneficiaries’ costs. Policymakers who seek to repeal the ACA may need to address the implications for Medicare, beneficiaries, and other stakeholders.
