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HHS Report Finds Medicare Lab Spending Dropped 5 Percent in 2023 on Lower COVID-19 Volumes

NEW YORK – Medicare Part B spending on clinical lab testing declined by 5 percent year over year in 2023, according to a recent report from the US Department of Health and Human Services (HHS) Office of Inspector General (OIG).

HHS OIG attributed the drop to a decrease in spending on COVID-19 testing, which in 2023 fell to $751 million, down 56 percent from $1.7 billion in 2022. COVID-19 tests accounted for 9 percent of Medicare lab spending in 2023, down from 20 percent in 2022. Respiratory panel testing for COVID-19, influenza types A and B, and respiratory syncytial virus (CPT code 87637) increased, however, making its first appearance in the top 25 at number 15.

Meanwhile, spending on genetic testing rose to $1.8 billion in 2023, up 29 percent from $1.4 billion in 2022. Genetic test volume rose 41 percent year over year, from 1.7 million tests in 2022 to 2.4 million tests in 2023.

Chemistry and other testing was flat year over year at $5.3 billion.  

The OIG report is required under the Protecting Access to Medicare Act (PAMA), which Congress passed in 2014 with the goal of controlling Medicare lab spending by aligning Medicare reimbursement rates with the rates paid by private insurers. As part of the law, OIG must release an annual analysis of Medicare lab spending, including a list of the top 25 lab tests in Medicare spending for each year.

Under PAMA, labs were required to report data on their private payor reimbursement rates which was then used to set new reimbursement rates for Medicare. Reporting was required every three years, and tests could see their Medicare reimbursement rates cut by as much as 15 percent per year until they reached equivalence with private payor rates.

To date, only one set of rate cuts — based on 2016 lab data — has taken place, as Congress has for the last six years passed a series of one-year delays to PAMA's price cuts and reporting requirements.

The recent OIG report indicates that PAMA has proved successful in controlling Medicare spending on routine assays like common blood and drug tests, with spending on these tests falling 20 percent from 2018 to 2023. Overall Medicare lab spending (exclusive of COVID-19 testing) has continued to grow, however, due to increasing spending on genetic testing.

While, as the report notes, Medicare spending on genetic testing has fluctuated somewhat year to year, it has generally followed an upward trend, rising roughly fourfold since PAMA's passage — from $466 million in 2014 to $1.8 billion in 2023. Over the same period, the number of genetic test procedure codes in the Medicare clinical laboratory fee schedule has risen from 66 to 415.

The top 25 tests by Medicare spending in 2023 reflects this trend. Of the seven tests in the top 25 that saw their volumes grow year over year, five are genetic tests, and all four tests that saw double-digit volume growth are genetic tests. The fastest-growing test by volume was CPT code 81455, which covers cancer sequencing panels. Test volume for this code rose 59 percent year over year.

According to OIG, all genetic tests in the top 25 saw increases in both order volumes and spending.

Genetic tests also had the highest payment rates among the top 25 tests, with their prices ranging from $508.87 for Exact Sciences' Cologuard test to $5,000.00 for Guardant Health's Guardant360 CDx. The highest-priced nongenetic test topped out at $246.92 for drug testing of 22 or more drug classes.