Congress Delays Part B Price Cuts but Nixes Long-Term SALSA Solution
Legislation offering permanent relief from both PAMA price cuts and reporting didn’t make it into the federal spending bill passed Dec. 23.
For the fourth year in a row, the US Congress stepped in at the last moment to impose a one-year delay on the next scheduled round of Protecting Access to Medicare Act of 2014 (PAMA) Part B lab test fee cuts slated to take effect on Jan. 1. But the glass half-empty part of this year’s PAMA situation is that the Saving Access to Laboratory Services Act (SALSA) legislation that would have provided permanent relief from both PAMA price cuts and reporting didn’t make it into the $1.7 trillion federal spending bill passed on Dec. 23. So, as 2023 begins, the lab industry is basically in the same situation as it was at the start of last year.1
The PAMA Market Pricing Status Quo
Bottom line on top: Because of PAMA, thousands of non-hospital clinical labs across the US are getting less than adequate compensation for the tests they provide to Medicare beneficiaries. The problem isn’t the PAMA law that Congress passed in 2016 to ensure that Medicare Part B prices for lab tests under the Clinical Laboratory Fee Schedule (CLFS) be based on actual rates charged to private payors in the market where the tests are provided. The reason things went awry is that the Centers for Medicare & Medicaid Services (CMS), the agency responsible for putting market-based pricing into action, didn’t recognize what the market actually was and is.
Specifically, in defining “applicable laboratories” whose price data count toward calculating market rates for particular lab tests reimbursed under the CLFS, CMS omitted hospital and community-based labs. In addition to being a large part of the lab testing segment, the excluded labs have the size and economic leverage to command higher prices from private payors. Consequently, not calculating their pricing data had the effect of unfairly deflating market rates.
From the very beginning, the lab industry has objected to the CMS “applicable laboratories” distortion and even gone to court to challenge it. In June 2021, it looked like a turning point had been reached when the influential and nonpartisan Medicare Payment Advisory Commission (MedPAC) vindicated the lab industry’s claims by issuing a report to Congress concluding that the CMS data collection process did indeed lead to deeper payment cuts than would have been made had price reporting been more representative of the lab industry as a whole.2 MedPAC also called on Congress to address the problem by requiring a random-sampling approach to collecting lab price data while also reducing the number of labs required to report data to alleviate the administrative burden on labs.
What Could Have Been—the SALSA Bill
Unfortunately, the MedPAC report hasn’t had the desired impact—at least not yet. As 2021 ended, Congress delayed PAMA cuts, but didn’t do anything to address the fundamental PAMA problems cited by MedPAC. Finally, in the summer of 2022, senators and representatives from both parties proposed the bipartisan SALSA bill,3 proposing to:
- Require CMS to use a more statistically reliable representative sample of lab test prices to determine CLFS reimbursement rates;
- Stop the price cuts scheduled to take effect on January 1, 2023;
- Impose a 5% cap on annual price cuts and increases for any particular test; and
- Provide labs administrative relief by increasing the time between PAMA price reporting periods from three to four years.
SALSA won the praise and support of the lab industry, which lobbied hard for its passage. The hope was that Congress would include SALSA as part of the massive end-of-year federal government spending bill. But while the spending bill did provide for another one-year Medicare price cut delay, it didn’t include SALSA or anything else addressing the problems cited by MedPAC. It’s been reported that Congress got cold feet when the Congressional Budget Office projected that SALSA would cost $6 billion over 10 years. Under federal pay-as-you-go rules, the legislators would have had to make at least equivalent cuts from other programs to justify including SALSA in the spending package.4
While certainly disappointing, the fizzling of SALSA is by no means the end of the story. The lab industry has at least gained one more year of breathing space. The MedPAC report is still out there, as is its recommendation that Congress adopt legislation to fix the PAMA market pricing and reporting mess. SALSA still enjoys bipartisan support, although it also comes with a $6 billion price tag. So, even if it didn’t happen in 2022, there’s reason to hope and even believe that some kind of SALSA-like solution will come to pass in 2023 and that we won’t have to write another article like this one next January.
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