Here’s the anti-Obamacare lawsuit that just might deserve to win

Will the Supreme Court take an anti-Obamacare case that actually should win?
(Alex Wong / Getty Images)

Lawsuits aimed at eviscerating the Affordable Care Act have been lining up in federal courts like airliners on America’s taxiways. Most are frivolous or partisan or both, and some have already been tossed. The Supreme Court on Friday will ponder whether to hear one that actually has some merit.

Half of it has merit, anyway. Coons v. Lew is a double-barreled attack on Obamacare’s individual mandate and its Independent Payment Advisory Board, or IPAB. The latter is a board empowered to hold Medicare spending below an inflation-indexed ceiling, chiefly by imposing cuts on provider reimbursements.

The constitutionality of the individual mandate has already been considered and settled by the Supreme Court, so that part of Coons v. Lew is a loser. But IPAB hasn’t been examined, and it should be -- and quite possibly eliminated.


Coons v. Lew was originally filed by the conservative Goldwater Institute of Phoenix in U.S. District Court in Arizona, which threw it out. The plaintiffs, including a physician who argues that IPAB has too much power and too little oversight by Congress, appealed to the 9th Circuit Court of Appeals in San Francisco. The appeals judges rejected the IPAB challenge as “unripe,” since the board hasn’t even been appointed yet, and under the law its first recommendation for payment cuts wouldn’t be implemented before 2020.

Legal observers think the Supreme Court on Friday will defer a decision on whether to take the case, because a brief on its merits that the court ordered from the government isn’t due until Jan. 21. Yet even if the court turns down the challenge outright, the IPAB warrants reconsideration by Congress. Here’s the story.

IPAB is one of the few provisions of the Affordable Care Act that takes direct aim at healthcare costs. But it’s a strange creature that has at once too much and too little power. The 15-member board, appointed by the president with Senate approval, swings into action whenever the annual increase in Medicare costs exceeds a certain threshold tied to economic growth.

When that happens, the board is empowered to make recommendations to bring costs back into line. But its proposals can’t involve rationing healthcare, increasing Medicare premiums or co-pays, cutting benefits, or restricting eligibility. As a result, IPAB must find savings in the payment and delivery of healthcare services--that is, in payments to doctors and hospitals--rather than loading costs on patients. The hope is that this focus will inspire greater creativity in how we pay and incentivize providers to achieve better patient outcomes. But it leaves IPAB with influence over a very narrow slice of the healthcare system. That’s too little power.

On the other side of the coin, Congress is given a very short time frame to rule on IPAB’s recommendations, once they’re filed. If Congress doesn’t act, the proposals go into effect automatically. And Congress can’t modify or reject them unless its modifications produce the same or greater savings. The IPAB provision in the ACA bristles with requirements for supermajority votes by Congress; repealing the provision itself requires Congress to act within a four-month window in 2017. IPAB decisions aren’t subject to court review. In those respects, IPAB has too much power.

IPAB has been controversial from the start. Conservatives caricature the board as a “death panel,” although obviously it has nothing like that level of authority. Some liberals are uneasy about its power, and dubious about its effectiveness. Timothy S. Jost, the estimable healthcare reform expert at Washington & Lee law school, has described its concentration of power as “troubling” and possibly unconstitutional.


Howard Dean, the former chairman of the Democratic National Committee and a physician, contends that IPAB is a rationing body in all but name. By setting reimbursement rates for given procedures and drugs, he wrote in 2013, “IPAB will be able to stop certain treatments its members do not favor by simply setting rates to levels where no doctor or hospital will perform them.” That sort of rate-setting, Dean wrote, “has consistently failed to control costs.”

Dean’s view was challenged by IPAB’s creator, former White House Budget Director Peter Orszag, who wrote that its task of “redesigning the payment system is a fundamentally different approach to containing costs”--not at all like “the old way” of just slashing what Medicare pays for services. Orszag and other IPAB defenders assert that giving IPAB independence from Congress is crucial, for lawmakers are simply unable or unwilling to act as “nimbly” (Orszag’s word) as the rapid changes in healthcare delivery require.

A complicating factor is that it’s unclear when or whether IPAB’s recommendations will be needed. The growth rate of Medicare costs has been falling dramatically. In 2011, for example, the Congressional Budget Office estimated that IPAB operations would save $14 billion in Medicare costs from 2012 through 2021. That was in February. One month later, the CBO concluded that Medicare cost growth had slowed so much that it didn’t project any savings from IPAB in that time frame.

What should really raise concern about IPAB is its extreme independence, which is one of the main points of attack in Coons v. Lew. The deliberate exclusion of Congress from oversight of any governmental operation is a worrisome development, rooted in the lawmakers’ recent inability, or refusal, to get anything done.

Yet simply cutting them out of the loop only makes them less functional in the long term, for the same reason that an unused muscle becomes atrophied. No one should be cheered at the spectacle of lawmakers depriving themselves of authority because they’re afraid that “politicians” can’t be trusted to act wisely. Nothing good comes of this approach. It gave us the 2011 sequester, which unnecessarily deprived the U.S. economy of potential economic stimulus when it was sorely needed (and still is). It also gave us the California stem cell program, which has the right to spend $3 billion in public funds with virtually no legislative oversight at all, and consequently after 10 years is still struggling to find its way.

The task of bringing down U.S. healthcare costs is a difficult and important one, involving science, economics and, yes, politics. It’s not a drawback that voters have a voice in the discussion, but a necessity. It’s not a virtue that IPAB circumvents politics, but a fatal flaw. Even if the Supreme Court doesn’t act to nullify or restructure IPAB, Congress should do so. Let the lawmakers take responsibility, and they may learn to exercise it intelligently. Stranger things have happened.


Keep up to date with the Economy Hub. Follow @hiltzikm on Twitter, see our Facebook page, or email