Joint Deficit Committee Urged to Reject Laboratory Cost Sharing

For Release: August 25, 2011

Contact: Alan Mertz, President, ACLA; 202-637-9466

Joint Deficit Committee Urged to Reject Laboratory Cost Sharing
Collecting the fees could cost more than the income received and harm access for beneficiaries says American Clinical Laboratory Association

Asking Medicare beneficiaries to pay as much as 20% of the cost of their laboratory tests could cost more than it saves, force many smaller labs to stop serving the most vulnerable beneficiaries, and cause thousands of laboratory personnel to lose their jobs, said the American Clinical Laboratory Association (ACLA) in a letter to the Joint Select Committee on Deficit Reduction.

Adding cost sharing for laboratory services in Medicare – through either 20% coinsurance or a flat copayment per test – was one of the Medicare proposals reportedly “on the table” during negotiations leading up to the debt ceiling legislation and creation of the Joint Select Committee on Deficit Reduction.

“Both of these alternatives [lab coinsurance or copays] would have the same negative consequences for patients and the providers that perform their laboratory testing, and represent a virtually unworkable policy for laboratory services,” wrote ACLA in the letter sent to all Committee members August 25. “Over the past nearly three decades, coinsurance or copays for laboratory services have been considered and rejected time and again by independent outside organizations, government agencies, and Congress.”

The reasons such proposals were rejected, according to the letter, include the likely reduction in patient access to needed tests, the large increase in new Medicare bills and paperwork burdens for beneficiaries, the impact on small laboratories that serve a large volume of Medicare patients, and the cost of collecting the new fees. ACLA said in the letter that the cost of collection could overwhelm potential savings.

“The average coinsurance per claim would be $6.20, and the average copayment per claim would be $3.00-$6.00,” said ACLA. “This compares with collection costs estimated to be at least $3.50 per bill (and could be many times that if repeated collection attempts were necessary). Thus the costs of collection could easily exceed the amount of potential cost-savings. ”

ACLA also stressed that Medicare beneficiaries could face an avalanche of new paperwork due to the large volume of Medicare bills they would now receive for lab services. “The volume of bills generated for small amounts would be staggering; over 215 million new bills to beneficiaries for an average of $6.20, with 70 million of those bills being for less than $2.”

The impact of proposed new Medicare fees also would be devastating to the thousands of smaller laboratories who are often the sole providers of laboratory services to Medicare’s most vulnerable beneficiaries in nursing homes and other similar settings, said the ACLA letter.
“While $6 lost per claim doesn’t sound like a significant amount of money, in fact, when the average claim is only $20, a loss of $6 per claim amounts to a 30% reduction in reimbursement to these laboratories – an amount that could swiftly put them out of business. Nursing homes could be left with no choice but to send beneficiaries by ambulance to the hospital for routine blood work — at considerable cost to Medicare.” [Laboratories that specialize in serving nursing homes have a high concentration of “dual eligible” beneficiaries (Medicare beneficiaries who also qualify for Medicaid), and Medicaid most often does not pay for such cost sharing.]

These Medicare cost sharing proposals would hit a clinical laboratory industry that has little left to cut. Reimbursement under Medicare has been systematically reduced over the decades, raising concerns about the ability of many laboratories to continue to serve Medicare beneficiaries. Payments have been reduced by about 40% in real (inflation-adjusted) terms over the past 20 years. In addition, Medicare reimbursement for laboratory services is scheduled to decline by an additional 19% over the next ten years under the recently passed health reform legislation.

While it is difficult to estimate the total jobs that could be lost from these proposals, the letter points out that there is the potential for tens of thousands of jobs lost, particularly among smaller, regional laboratories that are often the sole provider of laboratory services for nursing homes and similar settings.

The full text of the letter is available at the ACLA website, Contact ACLA president Alan Mertz for questions at 202-637-9466.

The American Clinical Laboratory Association represents the nation’s leading national and regional clinical laboratories on issue of common concern, including federal and state government reimbursement and regulatory policies.

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