Medicare Compliance & Reimbursement

 New Bill Jeopardizes Ove $18 Billion in Lab Revenues

Just when labs thought it was safe to go back in the water, the copayment sharks have begun circling once again, with their eyes still set on labs' financial limbs.

Less than six weeks ago, House and Senate conferees agreed to drop from a tax relief bill a provision which would have required a 20-percent copayment and deductible from Medicare beneficiaries seeking clinical laboratory services. But the battle over copayments didn't end there, as the provision found its way into the Senate's version of S.1, the "Prescription Drug and Medicare Improvement Act of 2003." The Senate June 27 passed this Medicare reform legislation with a 76-21 bipartisan vote.

While the Senate may have approved a devastating 20-percent coinsurance requirement, the House version - which passed with a razor-thin vote of 216-215 - did not include copay language, reports Jeffrey Boothe, an attorney with Holland & Knight in Washington who also serves as outside counsel to the Wayne, PA-based Clinical Laboratory Management Association.

Differences between the Senate and House versions of the bill now will be ironed out in a lengthy conference, predicts Boothe. "The way these conferences work is that everything hangs on everything else, so nothing is ever final until they finally report a bill out of conference," he states. And given both the extensive scope of the prescription drug bill and the fact that laboratory co-payments act as "a linchpin to the overall financing of the bill," Boothe suspects the copay issue will be lingering until the very end.

This "financial linchpin" status of lab copays in the Senate's version is largely the work of Senate Finance Committee Chairman Charles Grassley (R-IA) and his provision to increase rural health care benefits. "The way that Senator Grassley was able to pay for the expansion of rural health benefits was on the back of clinical laboratories through the co-pay provision," Boothe tells MLR. The 20-percent laboratory copayments would be expected to generate $18.6 billion in savings over the next 10 years to offset the costs of expanding rural health care.

The Senate July 7 announced that its conferees for the bill would include Senate Majority Leader Bill Frist (R-TN) and Senate Minority Leader Tom Daschle (D-SD), as well as Sens. Max Baucus (D-MT), John Breaux (D-LA), Grassley, Orrin Hatch (R-UT), Jon Kyl (R-AZ), Don Nickles (R-OK), and John D. Rockefeller IV (D-WV).

The House July 14 named Reps. Marion Berry (D-AR), Michael Bilirakis (R-FL), Tom DeLay (R-TX), John Dingell (D-MI), Nancy Johnson (R-CT), Charles Rangel (D-NY), Billy Tauzin (R-LA), and Bill Thomas (R-CA) as its conferees.

 What Labs Stand to Lose

So what does all of this mean to a lab's bottom line? Since 1984, there has been no copayment or beneficiary cost-sharing for Part B clinical laboratory tests. If the Senate's current copay provision were enacted, Medicare would pay only 80 percent of these lab services and beneficiaries would pony up the remaining 20 percent. This means that labs would be responsible for chasing down their patients for nearly $2 billion each year for the next 10 years.

And there, of course, is the problem: Labs would have to collect these copayments themselves.

"Already labs are pressed for time and money, and I think what this lab copayment will add is a huge administrative burden to try to collect these copays," says Dr. LoAnn Peterson, a professor of pathology at Northwestern University and the vice president of the American Society for Clinical Pathology in Chicago, IL.

Congress may believe that co-pays are an easy answer, but the truth is that it's anything but easy for labs, she argues. Labs "would have to set up a whole administrative system to figure out when are we supposed to get the copay, how do we get it, and who do we bill," explains Peterson.

Labs would require full-time staff just to track down these payments, and in many instances, the cost of collecting the copay would exceed the copay itself, she notes.

One industry expert who echoes Peterson's concerns cites a 2000 study that determined the average payment for a Medicare clinical laboratory diagnostic test was $14.

"A 20-percent copayment on a $14 test is $2.80," says the source, "and when billing patients for the co-pay, there's more involved than just licking a stamp and putting it on an envelope. So, you can presume that it's going to cost more than $2.80 to administer the billing portion of the copay."

Labs should get the word out to seniors and Medicare beneficiaries in their communities, urges Dr. Mark Birenbaum, administrator of the American Association of Bioanalysts in St. Louis. Medicare patients should be aware that not only would they have to pay 20 percent of the lab service, but they also would be responsible for any amount left on their Part B deductible, stresses Birenbaum. "So it could be that if their deductible's not met, a two-to-five dollar type of coinsurance payment could instead be up to $100," he maintains.