Medicare lab test spending grew in 2018 despite lower payment rates

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Total Medicare spending for clinical diagnostic laboratory tests increased in 2018, despite lower payment rates for most tests, according to a study released on August 6 by the Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services.

In 2018, the Medicare program changed the way it sets payment rates for lab tests for the first time in 30 years, replacing the previous payment rates with new rates based on payments made by private insurers. As part of the reform legislation, the OIG was tasked with monitoring Medicare payments for lab tests and the implementation and effect of the new payment system.

In its report, the OIG found that in 2018 Medicare spent $7.6 billion for lab tests, which is a 7% increase from $7.1 billion in the prior year. The main driver of the increase was genetics testing, which increased 105% from $473 million in 2017 to $969 million in 2018, in part due to both increases in existing genetics testing and new and expensive tests entering the Clinical Laboratory Fee Schedule.

In addition, spending on chemistry tests increased by $82 million from the prior year. The increase was attributed to certain chemistry tests having had a discounted rate that ended in 2018.

Finally, another driver of the increase was the adoption of a single national fee schedule, which had the effect of increasing spending on certain tests for which the national rate was higher than the local payment rates that it replaced.

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