$1 billion could be saved on Medicare lab tests, OIG finds

Payments for Medicare laboratory tests were 38% higher than what the lowest-paying insurers paid for the same tests in 2011, federal auditors said.

The Dept. of Health and Human Services Office of Inspector General is recommending that lawmakers enact legislation to allow Medicare officials to lower payment rates for lab tests. The Centers for Medicare & Medicaid Services could have saved $910 million in 2011 if it paid labs the same reduced fees set by other public insurance plans, a June 11 OIG report stated.

Labs receive payments set by a Medicare fee schedule that’s updated annually. In 2010, Medicare paid a total of $8.2 billion for lab tests.

The OIG compared Medicare payments to pay data from 50 state Medicaid programs and three Federal Employees Health Benefits plans. “However, unlike Medicare, FEHB programs incorporate factors such as competitor information, changes in technology used in performing lab tests, and provider requests in their payment rates,” the OIG said. “Some state Medicaid programs and FEHB plans required co-payments for lab tests, which, in effect, lowered the costs of lab tests for the insurer.”

CMS is exploring Medicare statutes to determine if it can revise the lab fee schedule to reflect price adjustments that are used by others, Medicare officials said. A change to Medicare law would be needed to establish new co-pays and deductibles for lab tests.

Laboratory professionals warned against drawing quick conclusions from the OIG study. For instance, the OIG evaluated payments for only 20 of 1,100 lab tests, the American Clinical Laboratory Assn. said in a June 12 statement. In addition, there is wide variation in prices paid by FEHB plans.

“Despite clinical labs only accounting for 1.6% of annual Medicare spending, payment for lab services have been cut by over 11% since 2010 and face double the amount of cuts already scheduled for the next 9 years,” the ACLA stated. “The OIG study used Medicare payment data from 2011. In 2013 alone, Medicare payment for lab services was cut by 5%.”