Clinical Laboratory Testing: Providing Clinical Evidence for Diagnosis and Treatment Alan Mertz President American Clinical Laboratory Association

Most Medicare Beneficiaries Receive Lab Services from Hospitals or Independent Labs National Labs Make Up Only 20% of Total Medicare Spending 2 Data Sources: MedPAC, 2011 Data Book. G2 Intelligence, Lab Industry Strategic Outlook 2011 Market Trends and Analysis. ACLA internal analysis. Medicare Spending on Clinical Lab Fee Schedule in 2010 ($8.1B Total)

Medicare Beneficiaries Living in Rural Areas are Primarily Served by Small Clinical Laboratories Source: The National Market for Clinical Laboratory Testing, Medicare & Medicaid Research Review, 2012

Laboratory Test Reimbursement Most lab services are reimbursed under the Clinical Laboratory Fee Schedule (CLFS) – Small subset that require physician interpretation reimbursed under Physician Fee Schedule CLFS allows direct billing of labs for laboratory services – Separates ordering clinician from entity getting paid for the test Protects beneficiaries and health care system from incentive-driven overutilization of lab services

Clinical Lab Fee Schedule (CLFS) Created in 1984 with Annual Update for Inflation… But Payments Have Increased Only 7 Times in Past 30 Years $21.81 Year Medicare Payment for Lab Test ($10 in 1984) Updated for Inflation

Congress Passed Cuts to CLFS in 2010, 2011 and 2012… Current Law Calls for 8% Cut Over Next 5 Years* * Includes impact of sequestration -3% on1/1/ % on 4/1/ % over 5 years Productivity Adjustment (2010) % Cut to Labs (2010) -2% “Re- Basing” (2012) Sequestration (2011) Cuts to CLFS Payments

Projected Payments, Next 10 Years… With Inflation Updates

Projected Payments for a Test Paid at $10 in 2010 Projected Payments, Next 10 Years… NO Inflation Updates

Projected Payments for a Test Paid at $10 in 2010 Proposals for Combined Deductible & Uniform Coinsurance: Lab Test Payments Cut 20%

Projected Payments for a Test Paid at $10 in % Lab Coinsurance: Even Bigger Cuts, Since No Catastrophic Coverage

When Compared to Payments Adjusted for Inflation, Coinsurance Proposals Could Cut by Additional 20 – 30% Over Next 10 Years % % to -24% % to -30% Projected Payments for a Test Paid at $10 in 2010

Sources of Supplemental /Secondary Coverage for Medicare Beneficiaries Source: Examining Sources of Coverage Among Medicare Beneficiaries, Kaiser Family Foundation 2009