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POLICY INSIGHT
BEYOND THE NUMBERS

Repealing Two Health Reform Measures Would Be Unwise

The House will soon consider two bills that would repeal health reform’s Independent Payment Advisory Board (IPAB) and its excise tax on medical devices.  Repealing these provisions would be unwise, as we’ve previously explained.

IPAB is a presidentially appointed commission charged with developing ways to slow the growth of Medicare spending.  Repealing IPAB would cost an estimated $7 billion over the next ten years.  The House bill would offset this cost by rescinding funding for preventive health care.  Thus, repealing IPAB would be bad for controlling health care costs and for Medicare's beneficiaries.  It’s important to remember that:

  • The charge that IPAB will ration health care is false.  Health reform specifically prohibits the board from rationing health care, raising Medicare's premiums or cost sharing, cutting benefits, or restricting eligibility.
  • IPAB won't usurp Congress’ role in setting Medicare policy.  Congress can structure Medicare so that it meets health reform's spending targets without calling upon IPAB and, even if projected spending exceeds the targets, triggering IPAB’s role, Congress can modify IPAB's proposals through legislation.
  • Alternatives to IPAB would be far worse for Medicare beneficiaries.  If Congress repeals IPAB and Medicare costs rise faster than expected, Congress may be likelier to consider proposals to replace Medicare’s guarantee of health coverage with premium support, leaving most beneficiaries — especially those who are older and sicker — to face higher premiums and cost-sharing for services.
  • IPAB provides an important backstop to health reform’s other cost control measures.  Health reform trims payments to health care providers under Medicare's current payment mechanisms.  It also takes steps to restructure the health care payment and delivery system to stop paying providers for more visits or procedures and begin rewarding effective, high-value health care.  While these efforts have contributed to the recent slowdown in Medicare and overall health care costs, IPAB serves as an important backstop to contain costs if they fall short.

The other House measure would repeal the 2.3-percent medical device excise tax that Congress enacted to help pay for health reform.  Repealing the excise tax would cost $24 billion over the 2016-2025 period.  Our recently updated paper gives other reasons why Congress shouldn’t repeal the excise tax:

  • The tax does not single out the medical device industry for unfair treatment. The excise tax is one of several new levies on sectors that are gaining business due to health reform.  These other industries will seek comparable treatment if Congress repeals the medical device tax, likely leading to an even greater revenue loss.
  • The tax will not cause manufacturers to shift production overseas.  The tax applies equally to imported and domestically produced devices, and devices produced in the United States for export are tax-exempt.  The claim that the tax will lead to production moving overseas thus is a talking point that lacks any foundation.
  • The tax will have little effect on innovation in the medical device industry.  To the contrary, health reform may well spur medical device innovation by promoting more cost-effective ways of delivering care.

Repealing IPAB would restrict efforts to contain health care costs and put Medicare beneficiaries at greater risk.  Repealing the medical device tax would increase the deficit, and the arguments against it don’t withstand scrutiny.  Congress should reject these proposals.