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HHS OIG Report Finds Medicare Spending on Lab Tests Increased 17 Percent in 2021

NEW YORK – A report from the US Department of Health and Human Services Office of the Inspector General released last month found that Medicare Part B spending on laboratory tests grew 17 percent year over year in 2021.

The $1.3 billion increase, up to $9.3 billion in 2021, was the biggest change in spending since OIG began monitoring payments in 2014, the report said, adding the uptick was driven by higher volumes of COVID-19 tests, genetic tests, and chemistry assays. 

Medicare Part B covers medical services such as doctors' services, outpatient care, and durable medical equipment.

The program spent $2.0 billion on COVID-19 tests, up 29 percent from 2020, paying for 26 different procedure codes for COVID-19 testing that included antibody tests, high-throughput tests, and panel tests and a new code to incentivize faster test turnaround times. The report noted that more than 10.1 million people received at least one COVID-19 test paid for by Medicare Part B, and that the volume of those tests increased 37 percent year over year in 2021 to 25.8 million. 

Spending for COVID-19 testing fluctuated throughout 2021, declining through the beginning of the year and increasing in August and December 2021 as a result of surges in cases fueled by the Delta and Omicron variants, respectively, the report said. It also noted that the increased availability of at-home COVID-19 tests could affect overall Medicare Part B spending for laboratory-performed tests in 2022.

Total spending on four categories of genetic tests increased by 56 percent year over year to $1.9 billion in 2021 and exceeded pre-pandemic spending levels, while spending on chemistry tests grew to $2.1 billion in 2021 but stayed below pre-pandemic levels. Genetic tests include molecular pathology tests, multianalyte algorithmic assays, genomic sequencing procedures, and proprietary lab analysis tests. Total spending on these tests accounted for 20 percent of Medicare lab test spending during the year, the report said.

Spending on genetic tests has more than tripled since 2014, and the growth was driven by both increasing volumes of claims for genetic tests and an increase in the number of procedure codes eligible for payment, according to the report. In 2021, the volume of genetic tests paid for by Medicare Part B grew 55 percent to 2.8 million, compared to 1.8 million in 2020, with an average payment of $666 per test. 

Chemistry assays are the largest category of tests by both spending and volume, the report noted. In 2020, spending on the category declined to $1.9 billion, but increased in 2021 to $2.1 billion, averaging about $13 per test. Volumes grew from 153 million tests in 2020 to 165 million in 2021, which could indicate Medicare enrollees resuming some medical care that had been postponed during the worst days of the COVID-19 pandemic. 2021 volumes were still 6 percent lower than in 2019, which the report said "raises questions about the continuing impact of the COVID-19 pandemic on the healthcare system," with enrollees possibly not accessing healthcare at the same level as before the pandemic.

Fifty-nine percent of total test spending — $5.5 billion — was on the top 25 tests. The top test paid for by Medicare Part B was a COVID-19 test that used high-throughput technology, code U0003, with volumes increasing 22 percent year over year in 2021. However, spending decreased on the code compared to 2021 after the Centers for Medicare and Medicaid Services decreased its payment rate. A total of $1.7 billion was spent on five procedure codes related to COVID-19 testing in the top 25, the report said.

Additionally, $803 million was spent on five procedure codes related to high-priced genetic testing in the top 25. Those codes had the highest payment rates, topping out at $3,873 per test, but the lowest volumes. A total of 809,671 tests were paid for across three molecular pathology procedure codes and two codes for multianalyte assays with algorithmic analyses, it noted.

Medicare Part B spent $1.8 billion on two other test categories: organ- and disease-oriented panel tests and chemistry tests. The second-highest test in the top 25 is the comprehensive group of blood chemicals test, which saw spending increase by 6 percent to $425.3 million in 2021 compared to 2020. Spending for the test, however, was still 13 percent lower than 2019 rates of $491.6 million.

The top chemistry test and fourth-highest test overall, the thyroid stimulating hormone test, saw spending decrease by 15 percent in 2021 compared to 2019. The report noted that volume for these tests has historically been steady, with spending declines driven by changes in payment rates due to the Protecting Access to Medicare Act rather than changes in volume, and declining volumes in 2021 could reflect lower healthcare utilization for Medicare Part B enrollees.