Advocacy - Lab Advocate
A recent report from the US Department of Health and Human Services (HHS) Office of Inspector General (OIG) shows a 5 percent decline in Medicare Part B spending on clinical lab testing in 2023. The decrease, primarily attributed to falling COVID-19 test volumes, highlights significant shifts in laboratory spending patterns and the growing role of advanced diagnostics like genetic testing.
COVID-19 testing expenses dropped 56 percent in 2023 to $751 million, accounting for 9 percent of Medicare lab spending, compared to 20 percent in 2022. Meanwhile, spending on genetic testing surged 29 percent to $1.8 billion, reflecting a 41 percent increase in test volume. Tests like cancer sequencing panels saw particularly rapid growth, with volumes rising 59 percent year over year. These trends underscore the increasing importance of molecular diagnostics in Medicare spending.
The report also examined the impact of the Protecting Access to Medicare Act (PAMA), which was intended to align Medicare reimbursement rates with private payor rates. The methodology used to set rates under PAMA by the Centers for Medicare and Medicaid Services (CMS) relied on data that overrepresented large laboratories that enjoy advantages of economy of scale, leading to lower rates than reflect actual market rates. The changes have reduced spending on routine tests like blood and drug assays—down 20 percent since 2018—spending on genetic testing has risen dramatically. Since PAMA's passage in 2014, Medicare spending on genetic tests has quadrupled, driven by a rapid expansion in test offerings and growing demand for precision medicine tools. Overall, these changes in spending patterns reveal a broader shift toward advanced diagnostics, which now dominate Medicare’s top 25 tests by spending. All genetic tests in this group saw increases in both order volumes and payment rates.
As laboratories embrace high-value tests, they are likely to encounter new challenges related to reimbursement, volume growth, and maintaining equitable access to advanced diagnostic technologies. ADLM will continue to monitor these trends and advocate for policies that support the sustainability and growth of laboratory medicine in a rapidly changing healthcare landscape.