Medical Tuesday Blog

Can Medicare Pay Market Rates?

Sep 14

Written by: Del Meyer
09/14/2018 12:14 PM 

by Doug Badger

Published on July 24, 2018

Abstract

The Centers for Medicare and Medicaid Services (CMS) launched a new system of Medicare

reimbursement for clinical diagnostic laboratory services in January 2018. The new fee

schedule reduces 2018 rates by 10 percent, compared with 2017 rates, for 17 of the 25 tests that collectively accounted for 63 percent of Medicare lab test outlays in 2016.  Since the statute limited cuts to 10 percent in each of the first three years, payments will be reduced for most or all of these tests in 2019 and in 2020. Congress directed CMS to devise a new clinical laboratory fee schedule based on the volume-weighted median price paid by private insurers for each of roughly 1,300 clinical tests. 

CMS chose to collect data from only a small segment of the clinical laboratory sector, giving disproportionate weight to rates paid by private insurers to the two largest clinical laboratory chains. The inescapable outcome of the CMS methodology is that the market data upon which Medicare reimbursement is based does not reflect the market composition of the clinical lab industry. The agency chose this methodology in order to minimize reporting requirements on the vast majority of clinical

laboratories. In relieving most laboratories of the reporting burden, it imposed a more

onerous burden on many clinical labs: sharp reductions in Medicare reimbursement rates

based upon an unrepresentative segment of the clinical laboratory industry.

CMS and Congress should consider alternative methodologies for aligning Medicare payment for clinical lab services with those of private payors.

Officers: Grace-Marie Turner, President • Thomas C. Jackson, Treasurer • John S. Hoff, Esq., Secretary

P.O. Box 130 • Paeonian Springs, VA 20129 • Phone 703-687-4665 • www.galen.org

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