Medicare Part B spending on lab testing isn’t following the Protecting Access to Medicare Act (PAMA) script. For the third straight year since the PAMA pricing system has been in place, overall year-over-year spending on lab tests increased in FY 2020, this time by 4.2 percent from $7.7 billion to $8.0 billion. This figure is in line with the average annual increase of 4.3 percent over the past five years.
However, there is an explanation for what happened in 2020. COVID-19 tests, which didn’t even exist before the pandemic, drove the increase in overall spending, accounting for about 19 percent of total Medicare Part B spending on lab tests during the year. In 2020, Medicare Part B spent $1.5 billion on COVID-19 tests, according to the U.S. Department of Health and Human Services Office of the Inspector General (OIG).
When COVID-19 tests were removed from the calculation, spending for all other tests as a group decreased by 15.9 percent from 2019, from $7.7 billion to $6.5 billion. However, this dip in spending on non-COVID-19 tests is also something of an outliner to the extent it resulted not just from PAMA price cuts but also the decline in overall healthcare utilization during the pandemic.
At $4.99 billion, Medicare Part B spending on the top 25 tests increased by 8 percent in 2020. After not existing in 2019, four different COVID-19 tests cracked the top 25 in 2020, including the rapid COVID-19 test (procedure code U0003) that was number 1 on the list, with $1.02 billion paid for more than 10 million of the tests. “This marks the first time a new test entered the top 25 as the number 1 test since OIG began monitoring spending on the top 25 tests in 2014,” the OIG report notes.