Despite Savings on Many Lab Tests in 2019, Total Medicare Spending Increased Slightly Because of Increased Utilization for Certain High-Priced Tests

WHY WE DID THIS STUDY

The Protecting Access to Medicare Act of 2014 (PAMA) changed the way the Medicare program sets payment rates for clinical diagnostic laboratory (lab) tests by aligning Medicare payment rates with private payment rates. Prior to PAMA, the Office of Inspector General (OIG) found that Medicare was paying significantly more than other payers for many lab tests. As part of PAMA, Congress also mandated that OIG publicly release an annual analysis of the top 25 tests based on Medicare spending. This data brief provides analysis of Medicare payments for lab tests in 2019, the second year of the new payment system.

HOW WE DID THIS STUDY

We analyzed all claims for lab tests performed in 2019 and paid for under the Medicare Part B Clinical Laboratory Fee Schedule (CLFS). We identified key statistics and emerging trends for the top 25?lab tests based on Medicare spending in 2019.

WHAT WE FOUND

Despite payment rate reductions on many lab tests, Medicare Part B spending increased slightly to $7.68 billion, a $93 million increase from 2018. Similarly, Medicare expenditures on the top 25 tests increased slightly in 2019 and analysis of these tests illustrates 2 trends that led to these spending outcomes.

First, 17 tests (among the top 25 tests) had payment rate reductions required under PAMA. For this group, overall Medicare spending decreased in 2019 compared to 2018. Second, payment rates for the remaining 8 tests (among the top 25) did not change in 2019, and overall Medicare spending for this group increased compared to 2018. Payment rates for these tests did not change either because their payment rates had already reached the rate required by PAMA, or the tests were relatively new to the CLFS and not yet affected by PAMA rate reductions.

WHAT WE CONCLUDE

Our analysis of Medicare Part B spending on lab tests demonstrates that the payment rate adjustment required by PAMA achieved expected savings for some lab tests that had payment rate reductions in 2019. However, the savings that resulted from lower rates were overtaken by increased Medicare spending on lab tests that had no payment rate change in 2019, including certain high-priced genetic tests.