Medicare Part B lab-test spending rose 17% in 2021 to $9.3 billion: OIG report

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Medicare Part B spent $9.3 billion on laboratory tests in 2021, a 17% increase from 2020, according to the U.S. Department of Health and Human Services (HHS).

The increase in spending stemmed from a rising volume of COVID-19 tests, genetic tests, and clinical chemistry tests, according to a new report released by the HHS Office of Inspector General (OIG). Genetic tests exceeded pre-pandemic spending levels, while chemistry test spending increased from 2020 but did not fully return to pre-pandemic levels.

Specifically, the report found that Medicare Part B spending on lab tests increased by $1.3 billion in 2021, from $8 billion in 2020 to $9.3 billion in 2021. The 17% increase was the biggest change in spending since OIG began monitoring payments in 2014.

More than 10 million enrollees received at least one COVID-19 test paid for by Medicare Part B.

Part B medical insurance helps cover services from doctors and other healthcare providers, including preventive services such as screenings and annual wellness visits.

The newly released report was published as a result of the Protecting Access to Medicare Act of 2014 (PAMA), which 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 OIG publicly release an annual analysis of the top 25 tests based on Medicare spending.

OIG analyzed claims data for lab tests performed in 2021 that CMS paid for under the Clinical Laboratory Fee Schedule (CLFS).

The tests, covered under Medicare Part B, 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.

In 2021, Medicare Part B spent $2 billion on COVID-19 tests, a 29% increase from 2020, and it paid for 26 different procedure codes for COVID-19 tests, including a new code that incentivized faster test turnaround times.

Total spending on four categories of high-priced genetic tests increased by 56%, from $1.2 billion in 2020 to $1.9 billion in 2021, exceeding pre-pandemic spending levels, the report noted.

Spending on clinical 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.

Overall, Medicare Part B spent $5.5 billion in 2021 on the top 25 tests, which accounted for 59% of total test spending.

The decline between pre-pandemic levels for chemistry tests and 2020 and 2021 levels could indicate that people are not seeking the routine or preventive care appointments where these tests are ordered, OIG noted, adding that 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.

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