Medicare Payments for Clinical Diagnostic Laboratory Tests in 2016: Year 3 of Baseline Data

WHY WE DID THIS STUDY

Beginning in 2018, the Medicare program will change the way it sets payment rates for clinical diagnostic laboratory tests (lab tests) under Part B. CMS will replace current payment rates with new rates based on current charges in the private health care market. This is the first reform in 3 decades to Medicare's payment system for lab tests. As part of the same legislation reforming Medicare's payment system, Congress mandated that OIG monitor Medicare payments for lab tests and the implementation and effect of the new payment system for lab tests. This data brief provides the third set of annual baseline analyses of the top 25 lab tests.

HOW WE DID THIS STUDY

We analyzed claims data for lab tests that CMS paid for under Medicare's Clinical Laboratory Fee Schedule. 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 Outpatient Prospective Payment System. We identified the top 25 tests based on Medicare payments in 2016. We also identified key statistics and emerging trends, including Medicare payments by procedure code, beneficiary, lab, ordering provider, and test category.

WHAT WE FOUND

Medicare paid $6.8 billion under Part B for lab tests in 2016, a total that changed very little in the 3-year period from 2014 through 2016. Medicare payments were concentrated among a small number of tests and labs. The top 25 tests by Medicare payments totaled $4.3 billion and represented 60 percent of all Medicare payments for lab tests in 2016. The top 6 tests, which remained consistent with the top 6 from the previous 2 years, totaled $2.4 billion in 2016. More than half of payments for the top 25 tests went to 1 percent of labs.

Medicare payments for four categories of tests changed notably over time, despite little change in the total payments for all lab tests. In comparison to Medicare payments for other test categories, payments for two categories of tests-an emerging category of tests and microbiology tests-increased notably from 2015 to 2016. Drug tests and molecular pathology tests decreased notably during the same period.

WHAT WE CONCLUDE

Lab tests play a critical role in delivering health care for the millions of Medicare beneficiaries who receive tests each year. Although CMS paid for Medicare beneficiaries to receive over 1,000 different lab tests in 2016, 25 tests accounted for 60 percent of Medicare payments for all tests. Changes in the Medicare payment rates for these 25 tests could have a significant impact on overall Medicare spending for lab tests when the new payment system for lab tests goes into effect in 2018. The information presented here will be useful in monitoring the effects of changes to Medicare's payment system for lab tests. We will continue to monitor Medicare payments for lab tests and to identify emerging trends.