In a March 6 letter to House Majority Leader John Boehner (R-Ohio) and Senate Majority Leader Harry Reid (D-Nev.), the American Clinical Laboratory Association (ACLA) asks that the current level of cuts to Medicare lab fees be revisited and relief provided.

Under current law clinical labs face a reduction in Medicare payments approaching 23 percent over the next 10 years.

ACLA warns that the cumulative effect of cuts on the books threatens the ability of clinical labs to continue serving beneficiaries, especially those that are the sole provider in rural areas and to nursing home and homebound populations.

The causes are threefold:

• The revised annual update formula for the Part B lab fee schedule, enacted by the Patient Protection and Affordable Care Act of 2010 (PPACA) and effective in 2011;
• The 2 percent cut in 2013 to help pay for a physician fee fix, enacted in the Middle Class Tax Relief and Job Creation Act of 2012; and
• The 2 percent automatic cut (or sequestration) over the next 10 years required by the Budget Control Act of 2011.

Under PPACA, the annual update to the lab fee schedule is the consumer price index for all urban consumers (CPI-U, determined by the rate published June 30 of the previous year by the Bureau of Labor Statistics); minus a productivity adjustment (though the law guarantees that this adjustment, currently an estimated 1.3 percent, will never result in an update below 0 percent); minus an additional cut of 1.75 percent from 2011 through 2015, which can cause the update to fall below 0 percent.

The Middle Class Tax Relief and Job Creation Act of 2012 targeted clinical labs for a fee reduction of 2 percent in 2013, or a savings of $2.7 billion over 10 years, to help pay for canceling a 27.4 percent cut in Medicare physician fees, due March 1 under the sustainable growth rate formula, and freezing these fees at current levels through Dec. 31, 2012. The cost of the short-term physician fee fix is $18 billion, ACLA noted, and labs shoulder a “disproportionate share of the offsets in the bill, a full 15 percent though labs represent only 1.6 percent of Medicare spending.”

This 2 percent cut is on top of the PPACA-mandated cuts. “As [this 2 percent] reduction is applied after the update is calculated, the resulting 2013 update amount becomes the new reset base” for 2014 and subsequent years, according to a summary prepared by staff of the House committees on Ways and Means and Energy and Commerce.

The big unknown is whether the 2 percent sequestration will take effect in 2013. This automatic cut would be triggered unless Congress enacts a broad deficit-reduction package of at least $1.2 trillion or up to $1.5 trillion in federal spending, split equally between defense and nondefense spending.