PAMA Medicare reimbursement

Nov. 21, 2018

Today, medicine is more personalized than ever. The tools at physicians’ disposal to treat and manage illness are leaps and bounds ahead of the standard of care available several years ago. However, ground-breaking treatments depend on providers’ ability to quickly and reliably diagnose and monitor a variety of biologic indicators.

In response to this need, the U.S.’ clinical laboratories have developed a robust national infrastructure that helps ensure patients’ diverse health needs can be addressed and treated while avoiding costly, serious complications in the future. Whether a clinical lab is serving patients commuting in major urban cities, identifying diseases and conditions in hospital or physician office-based labs, or serving homebound individuals or those in skilled nursing facilities, each lab is a critical part of our broader health system.

For seniors and other Medicare beneficiaries, labs are indispensable and vital to the Medicare safety net. On average, Medicare beneficiaries receive some 16 lab tests annually, accounting for more than 400 million tests administered each year.

Congress recognized the importance of the U.S.’ clinical laboratories as integral to the foundation of personalized medicine. In a desire to establish a reimbursement model that would help sustain this push moving forward, Congress passed the Protecting Access to Medicare Act (PAMA) on a bipartisan basis. Everyone, including Congress, believed this would result in a more stable and predictable payment model for Medicare lab tests, ensuring Medicare beneficiaries’ continued access to lab testing. As part of the law, Congress directed the Department of Health & Human Services (HHS) to develop a methodology by which laboratories would be reimbursed based on the prevailing commercial market rates for a particular lab test.

Unfortunately, in its implementation of PAMA, HHS chose to disregard the instruction from Congress. Rather than collecting data from a representative sample that reflects the totality of the laboratory market, HHS constructed a system whereby less than one percent of labs would ultimately provide their rates. Perhaps predictably, HHS cherry-picked only the lowest cost labs for this purpose, thus effectively cutting rates for the most commonly used tests by more than a third.

Doug Badger, a health policy expert and scholar at the Galen Institute wrote, “In relieving most laboratories of the reporting burden, it imposed a more onerous burden on many clinical labs: sharp reductions in Medicare reimbursement rates based upon an unrepresentative segment of the clinical laboratory industry.”1

As a result, access to laboratory services for Medicare beneficiaries hangs in the balance. Medicare beneficiaries especially those who rely on in-home care, or those residing in skilled nursing facilities or living in rural areas face the greatest risk.

While the cuts are phased in over several years, clinical labs are already being forced to cut back on the services they provide. In many cases, particularly with high-risk patients, labs have developed processes to allow them to collect and analyze samples within a matter of hours so that treatment can proceed along the right course. However, with these draconian cuts, something has to give—and seniors, unfortunately, will be the ones bearing the brunt of these cuts.

The harm is hardly theoretical; that’s why three dozen patient and provider organizations, including the American Academy of Family Physicians, America’s Essential Hospitals, and the American Kidney Fund recently sent a letter to Congress2 arguing that:

Without action by Congress, PAMA will create serious healthcare access and public health issues for Medicare patients. Without ready access to clinical laboratory services, patients risk missed or delayed diagnoses, increased barriers to maintaining their health, and forgoing the opportunity to prevent even worse health outcomes or disease. In a medical age where technology is pushing healthcare closer to patients, the bureaucratic policies implemented through PAMA will drive care and the promise of better health further away from patients.

The American Clinical Laboratory Association (ACLA) has filed a lawsuit arguing that HHS has disregarded the will of Congress and exceeded its authority with its flawed data collection process. We are also working closely with Congressional leaders to remedy the serious problems arising from PAMA.

While Medicare beneficiaries will feel the initial brunt of the harms, the missteps with PAMA implementation hurts us all by weakening the U.S.’ vital national laboratory infrastructure. There is still time to take action, but we must act now before the cuts do even more lasting damage.

  1. Badger. Can Medicare Pay Market Rates? Accessed October 1, 2018.
  2. PAMA Stakeholder Letter to Congress. Accessed October 1, 2018