OIG Reports that 2018 Medicare Part B Lab Test Spending Increased Despite PAMA Cuts

It wasn’t supposed to happen like this. The expectation was that the new PAMA market-based pricing system was going to save Medicare 10 percent or more on lab test reimbursements. But it hasn’t happened, at least not in 2018, the first year under the PAMA scheme. That’s the surprising conclusion of a new OIG report finding that Medicare Part B spending on lab spending actually increased during the year. The OIG’s Findings As the PAMA law requires, the OIG analyzed 2018 claims data for tests reimbursed under the Part B Clinical Laboratory Fee Schedule (CLFS) in comparison to 2017 CLFS spending. Results: Even though 75 percent of the tests were subject to the PAMA fee cuts, Medicare spending on CLFS lab testing increased $459 million, from $7.1 billion in 2017 to $7.6 billion in 2018. In other words, the rate cuts weren’t enough to offset the increased spending for other tests. The OIG pinpoints two forms of tests as being responsible for the increase. Genetic Tests Medicare spending on genetic tests went from $473 million to $969 million as a result of higher utilization and the addition of new and expensive tests to the CLFS. Spending on genetic tests increased to $969 million from $473 million due to new and expensive tests entering the fee schedule and an increase in volume of existing genetic tests, the report said. According to the OIG, total spending on genetic tests increased to 13 percent of Medicare spending for lab tests in 2018, versus 7 percent in 2017. Claims for genetic tests increased from 950,000 units to 1.76 million and the number of tests that Medicare reimbursed increased to 199 from 110. The following chart illustrates how three expensive genetic tests drove spending increases: Top 25 Medicare Reimbursed Tests in 2018 (Genetic tests in boldface)

Test Description (Procedure Code)	2017 Fee Sched Rate	2018 Fee Sched Rate	2018 Test Volume (Millions)	2018 Medicare Spending (Millions)	Change from 2017 Spending (Millions)
Blood test, comprehensive group of blood chemicals (80053)	$14.49	$13.04	41.64	$537.10	+$64.37
Blood test, lipids (cholesterol and triglycerides) (80061)	$18.37	$16.53	28.58	$463.58	+$48.66
Blood test, thyroid stimulating hormone (TSH) (84443)	$23.05	$20.75	21.39	$434.71	-$49.26
Complete blood cell count (red cells, white blood cell, platelets), automated test (85025)	$10.66	$9.59	41.14	$391.09	-$41.09
Vitamin D-3 level (82306)	$40.61	$36.55	8.94	$318.95	-$28.97
Drug test(s), definitive, 22 or more drug class(es), including metabolite(s) if performed (G0483)	$253.87	$246.92	1.30	$313.43	+$6.90
Testing for presence of drug (80307)	$79.81	$71.83	3.38	$236.07	-$3.74
Hemoglobin A1C level (83036)	$13.32	$11.99	19.68	$232.32	-$24.34
Gene analysis (colorectal cancer) (81528)	$512.43	$508.87	0.34	$167.67	+$50.66
Drug test(s), definitive, per day; 15-21 drug class(es), including metabolite(s) if performed (G0482)	$204.34	$198.74	0.82	$159.32	-$2.96
Blood test, basic group of blood chemicals (80048)	$11.60	$10.44	12.72	$132.52	+$2.70
Molecular pathology procedure level 9 (81408)	NA	$2,000.00	0.06	$117.92	New to CLFS
Parathormone (parathyroid hormone) level (83970)	$56.62	$50.96	2.34	$115.90	-$9.34
Drug test(s), definitive, per day; 1-7 drug class(es), including metabolite(s) if performed (G0480)	$117.65	$114.43	1.05	$113.94	+$3.69
Cyanocobalamin (vitamin B-12) level (82607)	$20.68	$18.61	5.63	$102.53	-$11.32
Drug test(s), definitive, per day; 8-14 drug class(es), including metabolite(s) if performed (G0481)	$160.99	$156.59	0.64	$96.59	-$4.08
PSA (prostate specific antigen) measurement (84153)	$25.23	$22.71	4.30	$95.57	-$9.64
Thyroxine (thyroid chemical) measurement (84439)	$12.37	$11.13	7.26	$79.42	-$6.76
Test for detecting genes associated with breast cancer (81519)	$3443.30	$3,873.00	0.02	$76.62	+$16.48
Bacterial colony count, urine (87086)	$11.07	$9.96	7.40	$73.31	-$9.08
Blood test, clotting time (85610)	$5.39	$4.85	14.84	$72.69	-$19.48
Ferritin (blood protein) level (82728)	$18.70	$16.83	3.94	$65.12	-$4.80
Natriuretic peptide (heart and blood vessel protein) level (83880)	$46.56	$41.90	1.56	$64.79	-$5.68
Detection test for digestive tract pathogen (87507)	$571.72	$514.55	0.12	$56.79	$22.57
Detection test for organism (87798)	$48.14	$43.33	1.23	$52.09	$22.68

Source: OIG Automated Chemistry Tests The other driver of higher spending was automated chemistry test reimbursement, which increased by $82 million due to the removal of a previous discount on the tests that was no longer allowed under PAMA. In explaining the spending increases, the OIG also cited the one-time increases resulting from spending on tests for which the national rate was actually higher than the local payment rates it replaced. That bump was due to the transition to the new system and won’t recur. Takeaway As it usually does when it comes to spending for lab tests, the OIG suspected foul play and called for more oversight over genetic tests, particularly molecular pathology tests which accounted for 50 percent of all Medicare genetic test expenditures. “Even a small number of inappropriate tests could expose Medicare to extremely high spending,” the agency warned. The OIG also recommended that CMS “seek legislative authority to establish a mechanism to control costs for automated chemistry tests.” While indicating that it “neither agreed nor disagreed” with the recommendation, CMS said it would “monitor utilization and spending associated with these codes” and consider OIG’s advice in determining what to do next.