The Centers for Medicare & Medicaid Services (CMS)[1] sets reimbursement rates for in-vitro Diagnostic (IVD) tests for Medicare[2] in the U.S.
Under a law passed in 2014 called PAMA,[3] these rates are set based on the weighted median of what private payers pay for the same test.
Since taking effect on January 1, 2018, IVD test reimbursement rates have generally decreased and, in turn, have impacted the bottom line at clinical laboratories.[4] Despite increased push-back from the lab industry and even Congress on how data is collected to determine the market-based rates, the rates remain on track for additional cuts in 2020.
Background:
PAMA includes a provision focused solely on reducing what the government pays for IVD tests under Medicare. Previously set administratively, the rates must now be set based on what private payers pay for the same tests. The law requires CMS to adjust payment rates every three years based on data labs collect and report during a six-month period. For the first three years (2018-2020), cuts cannot exceed 10 percent and for the subsequent three years (2021-2023), cuts cannot exceed 15 percent.
The lab industry argued then and now that the rates do not incorporate enough data from both smaller and hospital laboratories, resulting in a skewed reflection of the entire market. The industry has ramped up lobbying efforts to urge Congress to take legislative action to modify PAMA so that payment cuts are lessened.
On December 19, 2019. Congress passed the Laboratory Access for Beneficiaries (LAB) Act as part of an end-of-year spending package.
The law delays by one year the reporting of lab payment data required under PAMA which the industry hopes will give hospital labs additional time to collect payment data and thereby increase their participation in the process. The law also calls for studies to assess how to improve PAMA implementation. Also, as we note in our upshot, the legislation does not change the payment cuts scheduled to go into effect in 2020 under PAMA.
Additional Reading:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ClinicalLabFeeSched/PAMA-Regulations
Footnote:
[1] The Centers for Medicare & Medicaid Services (CMS) is the single largest payer for health care in the United States. Nearly 90 million Americans rely on health care benefits through Medicare, Medicaid, and the State Children’s Health Insurance Program (SCHIP). These three major programs are administered by CMS, an agency of the U.S. Department of Health and Human Services (HHS). https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/RoadmapOverview_OEA_1-16.pdf
[2] Medicare is the U.S. federal health insurance program for people who are 65 or older, certain younger people with disabilities and people with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD). The Medicare program is administered by the CMS. https://www.medicare.gov/what-medicare-covers/your-medicare-coverage-choices/whats-medicare
[3] The Protecting Access to Medicare Act of 2014 (PAMA) required significant changes to how Medicare pays for clinical diagnostic laboratory tests under the Clinical Laboratory Fee Schedule (CLFS). Effective January 1, 2018, the payment amount for most tests equals the weighted median of private payor rates. Payment rates under the private payor rate-based CLFS are updated every three years. https://www.cms.gov/medicare/medicare-fee-for-service-payment/clinicallabfeesched/pama-regulations.html
[4] https://www.businesswire.com/news/home/20190430005515/en/LabCorp-Announces-2019-Quarter-Results-Increases-2019