Dive Brief:
- The Centers for Medicare and Medicaid Services on Monday posted preliminary rates for clinical diagnostic laboratory test codes, a step toward setting Medicare payment rates in 2027 under the Clinical Laboratory Fee Schedule.
- Medicare rates for lab services are tied to those paid by private insurers. The CMS determined that Medicare has been paying about 16% more in total for lab services than private payers.
- The American Clinical Laboratory Association warned the steep annual payment cuts threaten patient access to critical lab testing services and continued investment in diagnostic innovation. Shares of Quest Diagnostics and Labcorp came under pressure after the rates were released, with Quest falling almost 5% and Labcorp down more than 3% in Tuesday morning trading.
Dive Insight:
The rate adjustments for lab tests would save the government an estimated $1 billion annually, according to the CMS. By law, Medicare payment for a clinical diagnostic test cannot be reduced by more than 15% per year through 2029. The CMS said it would phase in the reductions.
“Taxpayers and Medicare patients have been paying excessive rates to labs for years, but with some help from Congress, CMS is working to ensure that Medicare isn’t paying more than private insurers for the exact same tests,” CMS Administrator Dr. Mehmet Oz said in a statement.
Congress enacted the Protecting Access to Medicare Act, or PAMA, in 2014, requiring the CMS to periodically update payment rates for most lab services based on what private insurers pay.
ACLA said the proposed rates would reduce payments for almost 1,200 tests, including 775 tests that would face the maximum 15% cut in 2027, followed by more reductions in 2028 and 2029.
The new rates rely on data from just 2% of all labs paid under Medicare Part B in 2024, the trade group said.
“The result is a distorted and incomplete picture of the market that drives payment cuts,” said ACLA.
PAMA has already resulted in three consecutive years of payment cuts of up to 10%, followed by six years of payment freezes. Labs now face three more years of cuts of up to 15% starting in 2027, the group said.
The CMS expects to finalize the 2027 payment rates in November.
