Medicare Update: Beneficiaries Just Got New Lab Payment Rates - Newsweek

Millions of Medicare beneficiaries could see changes in how common laboratory tests are reimbursed after the Centers for Medicare & Medicaid Services (CMS) released preliminary 2027 payment rates for clinical lab services.

The preliminary rates were released Monday and are based on the latest private insurer payment data collected under the Protecting Access to Medicare Act (PAMA), a law designed to align Medicare reimbursement with market prices.

CMS said the new rates show Medicare has been paying about 16 percent more for laboratory services than private insurers and estimates the changes could save taxpayers roughly $1 billion annually.

“Taxpayers and Medicare patients have been paying excessive rates to labs for years, but with some help from Congress, CMS is working to ensure that Medicare isn’t paying more than private insurers for the exact same tests,” said CMS Administrator Dr. Mehmet Oz in a statement.

“By releasing this preliminary information, we are providing greater transparency into the actual market rates for laboratory services, rooting out waste, and supporting better-informed pricing decisions across the healthcare system, including Medicaid and Affordable Care Act Exchanges.”

Lab testing plays a central role in modern health care, from routine blood work and cholesterol panels to advanced genetic and cancer diagnostics.

The new rates do not directly change what most Medicare beneficiaries are paying out of pocket for covered laboratory tests. However, the reimbursement levels can affect lab revenues and have become the focus of a broader fight over whether Medicare's payment methodology accurately reflects the cost of providing testing services.

CMS said the updated rates will better reflect market realities and reduce excessive spending, but lab groups are issuing warnings that significant reimbursement cuts could affect patient access to testing, particularly in rural and underserved areas.

CMS released preliminary weighted median private-payor rates for clinical diagnostic laboratory tests under the Clinical Laboratory Fee Schedule (CLFS), the system Medicare uses to pay laboratories for services such as blood tests, urinalysis, and molecular diagnostics.

The largest potential reductions were concentrated in genomic sequencing (-23 percent), molecular pathology (-22 percent), microbiology (-19.3 percent), and immunology testing (-19.3 percent), according to CMS.

Chemistry testing, a category that includes many routine blood tests commonly used by Medicare beneficiaries, showed an average potential reduction of 16 percent, but proprietary laboratory analysis tests saw a much smaller average reduction of 2.4 percent.

The agency said this is the second full data collection and reporting cycle for most lab tests since PAMA was enacted in 2014. Congress delayed the process several times before requiring a new reporting cycle in 2026, allowing CMS to use updated private-payor data to calculate the proposed 2027 rates.

According to CMS, these payment reductions will not occur all at once. Federal law limits decreases for a clinical diagnostic laboratory test to no more than 15 percent annually through 2029, meaning any larger reductions would be phased in over several years.

“Aligning the new payment schedule using private insurance data, which allows pricing to become more consistent across the industry, seems to be a good move,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek.

“For far too long, hospitals and labs have charged higher fees, but the reality is that there are additional costs within Medicare that go beyond simply looking at what a particular service costs. “

CMS is accepting public comments on the preliminary rates for 30 days before publishing final rates later this year.

Quest Diagnostics issued a statement criticizing the preliminary rates and said they highlight flaws in the PAMA reporting system.

In a statement provided to Newsweek, the company said the rates "clearly reflect the underlying flaws in the Protecting Access to Medicare Act (PAMA) rate-setting process and the urgent need for Congress to enact sustainable, long-term reform through passage of the RESULTS Act."

Quest said the current system fails to collect sufficiently representative private-payor data and added that Congress should replace the methodology with a broader reporting framework through the Reforming and Enhancing Sustainable Updates to Laboratory Testing Services (RESULTS) Act.

Currently, more than 130 members of Congress and 70 patient and provider organizations, including the American Medical Association, American Cancer Society and American Hospital Association, support the legislation.

“Passage of RESULTS is the right step to ensure our nation has a laboratory system that is strong, innovative and prepared to serve the healthcare needs of the 21st century,” the company told Newsweek.

Quest also commissioned a survey and found that 96 percent of registered voters considered diagnostic laboratory testing important to their own or their family's care, while 74 percent said Congress should act to prevent further payment cuts before patients are affected.

“The issue for many beneficiaries is that they get caught up in the politics of this. Private insurers would normally pay lower costs in many settings, while Medicare's costs are spread across the entire spectrum from hospitals and labs to insurers,” Thompson said.

“Think about hospitals that must treat Medicare patients and all the costs associated with that, while private insurers have greater ability to determine what they cover and under what circumstances. No one really talks about the fact that Medicare has a broader obligation to cover beneficiaries and medically necessary services, while private insurers can impose coverage restrictions and deny certain claims.”

According to the American Clinical Laboratory Association, nearly 1,200 laboratory tests could face reductions under the preliminary schedule, including hundreds that would receive the maximum allowable 15 percent cut in 2027.

"Beneficiaries shouldn’t interpret this as Medicare suddenly cutting access to blood work or charging them substantially more for laboratory tests, but the concern is whether repeated reimbursement reductions eventually make certain tests less economically viable for smaller or independent laboratories," Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.

The public comment period will remain open for 30 days, after which CMS will review submissions and finalize the 2027 Clinical Laboratory Fee Schedule.

Final payment rates are expected to be published in November.

Longer term, Thompson said he is concerned the new rates could push traditional Medicare toward operating more like Medicare Advantage, with greater use of prior authorization and potentially more coverage denials as the system looks for ways to control costs.

“As for pricing, there may certainly be reductions, but those reductions could come with tradeoffs,” Thompson said. “If reimbursement continues to decline, some of those costs could ultimately show elsewhere in the healthcare system or affect beneficiaries through access to services.”