Potential Vulnerabilities in CMS Oversight of Medicare Add-on Payments for COVID-19 Tests Show That Oversight of Incentive Payments Could Be Improved

The Centers for Medicare & Medicaid Services (CMS) established an add-on payment to incentivize laboratories to promptly complete COVID-19 tests (i.e., within 2 calendar days or less). Based on our analysis of $339.4 million in Medicare add-on payments made to 9,380 laboratories for COVID-19 diagnostic tests provided to more than 4 million enrollees during our audit period (January 1, 2021, through June 30, 2022), we determined that more than two-thirds of laboratories that billed Medicare at least once for the add-on payment during our audit period billed for that payment with all of their COVID-19 tests. We also identified the following potential vulnerabilities related to CMS and the Medicare Administrators’ (MACs’) oversight of add-on payments for COVID-19 tests: (1) CMS requirements related to supporting documentation for add-on payments were vague, and documentation from the laboratories was inconsistent; and (2) CMS and the MACs did not perform adequate reviews of claims for add-on payments. To determine whether the incentive payment achieved the intended result of laboratories’ prompt completion of COVID-19 tests, CMS would have had to perform manual reviews of supporting documentation, which could be difficult and costly to perform in the event of an audit or a medical review.

We understand that CMS had to quickly: (1) establish the payment rates for laboratories to bill for COVID-19 testing and create an add-on payment to incentivize laboratories to promptly complete COVID-19 tests and (2) establish documentation requirements to support the add-on payment. However, we believe that it is important for CMS and MACs to provide oversight of add-on payments to prevent fraud, waste, and abuse in the Medicare program. For incentive payments in general, it is important that CMS issue specific guidance on documentation that is expected to be maintained to support incentive payments and provide oversight to ensure that these payments are supported, especially in the event of a future public health emergency.

We shared the draft data brief with CMS, and it informed us that it did not have comments.

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