A new report released this week by HHS’s Office of the Inspector General (OIG) found that Medicare could have saved $910 million in lab test fees in 2011. Medicare is the largest payer of lab services in the nation, according to CQ, but the program paid 18 to 30 percent more than other insurers. The program could have saved almost $1 billion if fees had matched the lowest rate charged to private companies in each geographic area.
OIG officials looked at 2010 claims data for the most frequently ordered and most expensive lab tests under Medicare. They compared Medicare rates for 20 tests representing 56 percent of Medicare costs for lab tests, with the maximum payments for the same tests allowed under each of 50 state Medicaid programs and the Federal Employees Health Benefits Program. They found at least one of the other programs paid a lower rate 94% of the time.
One explanation for the discrepancy is that most private insurance programs use Medicare rates as a starting point before applying their own discounts. State Medicaid programs are also banned from paying more than the Federal Medicare program. Medicare beneficiaries do not pay co-payments or deductibles for lab tests, a factor that decreases costs for private insurers. The report suggested that CMS officials should weigh whether future enrollees should begin to pay deductibles to lower costs.
As a remedy, the OIG suggested that Congress act to alter the fee schedule, since the Centers for Medicare and Medicaid Services (CMS) has a limited capacity to do so.
You can view the full report via the OIG website here.