Medicare Part B Spending on Lab Tests Increased in 2021, Driven By Higher Volume of COVID-19 Tests, Genetic Tests, and Chemistry Tests

KEY RESULTS

Medicare Part B spent $9.3 billion on laboratory (lab) tests in 2021, a 17-percent increase from 2020. The spending increase resulted from increased volume for three types of tests: COVID-19 tests, genetic tests, and chemistry tests. Genetic tests exceeded pre-pandemic spending levels, while chemistry test spending increased from 2020 but did not fully return to pre-pandemic levels.

WHY WE DID THIS STUDY

The Protecting Access to Medicare Act of 2014 (PAMA) changed the way the Medicare program sets payment rates for lab tests by aligning Medicare payment rates with rates paid by private payers. The Centers for Medicare & Medicaid Services (CMS) calculated new rates that took effect in 2018, lowering Medicare payment rates for many tests. As part of PAMA, Congress also mandated that the Office of Inspector General (OIG) publicly release an annual analysis of the top 25 tests based on Medicare spending and that it conduct analyses that OIG determines appropriate. OIG issued the first report in 2015, analyzing Medicare Part B payments for lab tests in 2014. This data brief provides an analysis of Medicare payments for lab tests in 2021.

HOW WE DID THIS STUDY

We analyzed claims data for lab tests performed in 2021 that CMS paid for under the Clinical Laboratory Fee Schedule (CLFS). These tests are covered under Medicare Part B and do not include tests that Medicare paid for under other payment systems, such as the payment system for critical access hospitals or the Hospital Outpatient Prospective Payment System. We identified the top 25 lab tests based on Medicare spending for tests performed in 2021. We also identified key statistics and emerging trends, including Medicare spending by procedure code and test category.

WHAT WE FOUND

Medicare Part B spending on lab tests increased by $1.3 billion in 2021, from $8.0 billion in 2020 to $9.3 billion in 2021. The 17-percent increase was the biggest change in spending since OIG began monitoring payments in 2014.

In 2021, Medicare Part B spent $2.0 billion on COVID-19 tests, a 29-percent increase from 2020. Medicare Part B paid for 26 different procedure codes for COVID-19 tests, including code U0005, a new code that incentivized faster test turnaround times. More than 10 million enrollees received at least 1 COVID-19 test paid for by Medicare Part B.

Medicare Part B spending on non-COVID-19 tests also increased. Total spending on four categories of high-priced genetic tests increased by 56 percent, from $1.2 billion in 2020 to $1.9 billion in 2021, exceeding pre-pandemic spending levels. Spending on chemistry tests—the largest category of tests by both spending and volume—increased from $1.9 billion in 2020 to $2.1 billion, but remained below pre-pandemic levels.

Medicare Part B spent $5.5 billion in 2021 on the top 25 tests, which accounted for 59 percent of total test spending. The factors that affected overall spending also contributed to the increase in spending on the top 25 tests. These factors were the increased volume for COVID-19 tests, the continued growth of high-priced genetic tests, and the increased volume for panel and chemistry tests.

WHAT WE CONCLUDE

The COVID-19 pandemic continued to have an impact on Medicare Part B spending on lab tests. Spending on COVID-19 tests increased in 2021, driven by more people receiving more tests. However, the decline between pre-pandemic levels for chemistry tests and the 2020 and 2021 levels could indicate that people are not seeking the routine or preventive care appointments where these tests are ordered. The second year in a row of low volume for chemistry tests raises questions about the pandemic's long-term impact on Medicare enrollee health.