Death panel? No -- A promising way to control health costs

CNNMoney guest columnist Joshua Gordon is the policy director at The Concord Coalition.

It is the bogeyman of health care reform: An unaccountable "death panel" will "ration" care and tell doctors how to treat their patients.

For critics of the 2010 Affordable Care Act, it's a convenient talking point. The problem is it's a caricature. In fact, the Independent Payment Advisory Board is a central tool for controlling the cost of -- and thus saving -- Medicare, and won't harm patient care.

The political divide over who pays for health care is stark. Republicans want private health insurers to make health care payments along with substantially higher cost-sharing by individuals. Democrats and President Obama want retirees to continue in a system where the government is the predominant payer.

However, in either vision, the cost of care will be driven by what doctors say to their patients during office visits or in hospital rooms.

This is why the board, known as IPAB, is so important in the effort to control costs.

It will be made up of 15 experts, some suggested by congressional leaders and all confirmed by the Senate, appointed by the president to represent the major participants in the health care system, including patients.

These board members will not force doctors to hold back necessary, but expensive treatment, as some critics have charged. They also will not "ration" and choose who deserves to be treated. In fact, IPAB is specifically prohibited from rationing and limiting Medicare benefits, increasing costs for beneficiaries, and raising taxes.

Instead, while Congress retains the ultimate power over Medicare, IPAB will help ensure that innovations in cost control will get a fair trial based on medical expertise rather than political pressure.

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The board will be empowered to prod change in the financial incentives affecting doctors, hospitals and other providers -- the most fruitful avenue for cost savings in our health care system.

This is best understood by looking at the two most important factors driving health care spending: the amount of treatment prescribed by doctors and the price of those treatments.

Lowering health care costs is difficult because insurance companies generally lack enough market clout to bargain for lower prices from providers. While the government, through Medicare, is more successful than private insurers at taming prices because of its size, the extent of its success is often limited by political forces.

If Medicare tries to cut what it pays, providers can withdraw from the program -- a move that would surely send retirees, who tend to be active voters, screaming at their members of Congress.

Furthermore, when Medicare lowers payments, doctors can increase the volume of tests and procedures under Medicare's fee-for-service system. Congress has been reluctant to limit the growth in volume for fear of being accused of "interfering" in medical decisions and harming patient care.

Yet, research shows that Medicare expenses vary dramatically throughout the nation -- and that higher costs don't necessarily buy better health care. That suggests the volume of medical interventions is not correlated with better health.

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Thus, we need to focus on giving incentives to providers to reduce costs.

Instead of paying doctors more for volume, we could pay for quality.

Instead of having primary care doctors and specialists work separately, doctors could receive bonuses if integrated care saves costs.

Instead of having clinical practices differ based on where a doctor went to medical school, we could create well-designed studies to determine best practices. And instead of patients lacking a meaningful way to compare providers, we could offer incentives for providers that participate in public databases.

The 2010 health care law sets up experiments and pilot projects to see what works. Medicare has had previous pilot projects succeed at controlling costs, only to see more widespread adoption unfortunately blocked by a determined few in Congress.

But that's where IPAB comes in. The health care law delegates some of Congress's management to a panel of experts -- IPAB.

As established, IPAB will review such experiments and recommend which deserve widespread adoption. These will then be automatically implemented unless Congress and the president enact laws vetoing IPAB's recommendations. Furthermore, the recommendations will come annually, beginning in 2013, if the health law's savings targets aren't met, making them difficult to continually thwart.

Ultimately, IPAB will attempt to keep health care costs growing at the rate of economic growth plus one percent -- well below historic rates. The additional hope is that the board's recommendations will influence payment policy among private insurers and help slow costs system-wide.

IPAB is not perfect. There are numerous limitations on its power, especially during its first seven years in operation, and there is some uncertainty about its ability to function as intended. There are also bipartisan efforts in Congress to eliminate it entirely. But it is important to recognize that IPAB's critics tend to impute powers to it that it doesn't have in order to scare people about health care reform.

Ultimately, in a country struggling mightily with unaffordable health care costs now, and destined to struggle even more in the future, IPAB is one of the institutions that gives some hope that if we figure out how to control costs, we just might be able to put that knowledge to use.