Lab Sector Continues to Actively Fight Potential Medicare Co-Payment Collections

While laboratory developed tests and PAMA’s impact on Medicare reimbursement are front of mind for most laboratories, there remains a lingering concern within the industry that the government hasn’t given up on the idea that laboratories should be on the hook to collect co-payments and deductibles from patients enrolled in Medicare.

The most recent trigger for that concern is a report released in April by the U.S. Department of Health and Human Services’ Office of the Inspector General, known as the Compendium of Unimplemented Regulations. Within the report is a list of the 25 top unimplemented regulations. Buried on page 50 of the 74-page report is a yet-to-be implemented recommendation for Medicare Parts A and B: “(The Centers for Medicare & Medicaid Services) should ... reinstate beneficiary deductibles and coinsurance (and notifications of amounts paid on their behalf) as a means of controlling utilization.” (See “OIG Highlights Top 25 Unimplemented Recommendations,” Lab & Pathology Insider, March 23, 2015). Such a measure could reduce costs to the Medicare program by as much as $2.4 billion a year. Co-payments for lab tests were eliminated when the Clinical Laboratory Fee Schedule was implemented in the mid-1980s.

However, given the often tiny co-payments associated with common laboratory tests that are performed on the Medicare population—essentially nuisance charges many enrollees would ignore—the sector sees it as a sort of slow death by millions of tiny cuts.

“The way it would usually be proposed, CMS would just cut the reimbursement by 20%, and we would be expected to collect it from the beneficiary,” said Alan Mertz, president of the American Clinical Laboratory Association, which pushed back against the long unimplemented proposal with a letter to the HHS Inspector General Daniel Levinson expressing its concern that this would be a misstep. It has careened through the HHS corridors since about 1990 and Congress killed co-pay legislation about a dozen years ago.

“Collecting coinsurance is uniquely difficult for labs because, unlike all other health care providers, labs typically do not have face-to-face encounters with patients. Most of the time, a Medicare beneficiary’s specimen is obtained somewhere else, such as a physician’s office, and sent to the lab, which then performs the prescribed testing,” Mertz wrote. “As such, labs must rely on billing and collections to obtain the cost-sharing amount from beneficiaries. If those good faith efforts do not succeed, laboratories must absorb those losses along with the added costs of collecting the cost-sharing.”

And Mertz noted that nearly a third of such co-payments would be completely uncollectible. About 18 percent of Medicare enrollees have incomes so low they are also eligible for Medicaid, and another 14 percent do not have Medigap or other supplementary insurance, suggesting again a financial obstacle toward making collections. Moreover, the amounts to be collected by labs would in many instances be minute: Mertz compared it to “that annoying phone bill for 72 cents.” Specifically, he mentioned the highly routine PT test for blood clotting times. According to Mertz, it is run about 24 million times a year for Medicare enrollees. Total reimbursement for that test is $5.36. A 20 percent co-payment would be $1.07. The cost of collecting such small sums would often be more than the payment itself, Mertz said.

And finally, Mertz noted, imposing co-payments would not actually control utilization, primarily because the decisions to run lab tests are made by clinicians, with relatively little input coming from patients. The ACLA also raised objections to another unimplemented regulation on the list: A periodic evaluation of the national fee schedule to ensure reimbursement is aligned with prices. “It’s a fairly outdated proposal,” Mertz said, adding that it really didn’t take the pending implementation of the Protecting Access to Medicare Act of 2014 (PAMA) into consideration. “They just threw everything in there that’s ever been suggested.” In the meantime, it remains clear that the ACLA will be providing significant input anytime such proposals resurface.

Takeaway: The ACLA is zealously guarding the turf of the laboratory sector regarding even the discussion of implementing co-payments and deductibles for Medicare patients for services.