1. “Health Care Reform Gets Underway – What it Means for the Future of Laboratories… Plus, the Latest on FDA Oversight of LDTs” Alan Mertz, President, American Clinical Laboratory Association November 5, 2010 California Clinical Laboratory Association

5. Major Thrust of HCR Two Major Components
$938 Billion* In Subsidies & Medicaid Expansion for Coverage
15-18 Million More Eligible for Medicaid
15 Million Eligible for New Subsidies & Access to “Network Exchange”
$1.089 Trillion in New Taxes & Medicare Cuts to Finance
$523 Billion in Medicare Cuts
$569 Billion in New Taxes
* Includes $40 billion for small business subsidies

6. Overview – Health Care Reform
Lab Coinsurance & Federal Tax on Labs Proposed
Proposals Dropped, Replaced With1.75% CLFS Reduction
“Productivity Adjustment” Applies to Providers
Prevention and Wellness Provisions
Independent Payment Advisory Board
Other Provisions
TC Grandfather Clause
“Date of Service” Demo
Cost Containment and “Quality” Initiatives

7. All Sectors Asked to Contribute Savings
Pharma, Hospitals, Nursing Homes, Health Plans, Device Manufacturers and Others Asked to Contribute Savings
Most Providers Were Asked for Savings Entirely Through Reductions in Medicare Reimbursement
President Wins Key Support In Battle For Health Reform

8. Summer 2009 – Bills Take Shape
Bills Included “Productivity Adjustment” on Medicare Providers
Permanent Annual Reduction of %
House Bill Cut CLFS Deeper ($7.3 Billion over 10 Years) - NO Protection from Negative CPI Update
Senate Bill Protects Against Negative CLFS CPI Update ($5 Billion over 10 Years)
Both Bills Eliminated Existing .5% Reduction in CLFS
Final Enacted Bill: Senate Version
January 2011 Productivity Adjustment Will Take CLFS Update to Zero, but No Lower

9. Senate Finance Committee Proposes Lab Coinsurance
July 2009, Senate Finance Informs Industry that Medicare Laboratory Coinsurance Will Be in Senate Finance Committee Bill
20% Reduction in the CLFS, Labs Required to Collect from Beneficiaries, $20 billion “Savings”
Lab Community Unites in Opposing Proposal

10. CQ HEALTHBEAT NEWS Aug. 6, 2009 – 4:25 p.m.
AARP Pressures Finance Panel to Reject Lab Co-Pays
By John Reichard, CQ HealthBeat Editor
Senate Finance Committee negotiators are under pressure from the senior lobby AARP and the clinical lab industry to reject the use of Medicare clinical lab co payments to help pay for a health overhaul.
An AARP official reacted strongly Thursday to reports that the committee would consider charging co-payments. Saying that President Obama has twice assured AARP members that he won’t cut Medicare benefits to pay for an overhaul, AARP legislative policy director David Cerner warned in an interview that “to turn around and cut Medicare benefits is going to significantly affect support for health care reform.”
Assuring senior support for a health overhaul is already a delicate issue for Democrats because of several hundred billion dollars in planned Medicare cuts to hospitals, health plans, and other providers. Arguably those cuts would not affect care to seniors because of improvements in provider efficiency. But AARP is drawing the line at Medicare revisions that would cut benefits or add to out-of pocket costs.
Democrats also have asserted that a health overhaul will lower cost burdens. But AARP lobbyist John Rother noted that “any requirement that seniors be billed for “Adding the paperwork and additional overhead associated with collections for coinsurance would add costs to the system, not save costs. It would make Medicare Source: CQ HealthBeat News
“any requirement that seniors be billed for part of the cost of laboratory services would simply shift costs to beneficiaries, not save costs. Lab services are a function of physician decisions, not patient preferences.
Adding the paperwork and additional overhead associated with collections for coinsurance would add costs to the system, not save costs. It would make Medicare less efficient and raise the costs of supplemental insurance coverage. For these reasons, AARP opposes this idea.”

11. America’s Healthy Future Act of 2009
Chairman’s Mark
Chairman’s Mark
America’s Healthy Future Act of 2009
“The Chairman’s Mark would impose a fee on any covered entity offering clinical laboratory services…$750 million annually…”

12. Senate Finance Proposes New Fed Tax on Lab Revenue
Lab Coinsurance Dropped, New Fed Tax on All Lab Revenue Proposed in Senate Bill
2-3% New Tax on All Labs, All Revenue (Government, Private, CLFS, PFS, Pathology…)
Permanent Tax Computed to Collect $7.5 Billion From Labs Over 10 years

13. “– Strike ―Annual Fee on Clinical Laboratories”

14. Additional Adjustment to CLFS Replaces Lab Tax
-1.75% in each of
Taken from CPI Adjusted CLFS, But Can Reduce CLFS Below Zero
Replaced Proposal For New Federal Fee/Tax on All Lab Revenue
Total Over Is $5 Billion

15. Lab Tax – CLFS Reduction Comparison
Lab Tax Medicare Reduction $7.5B Tax $5B Cut All Revenue (Gov & Private) Medicare CLFS Reimbursement Only All Labs (Ind, Path, Hosp, POL)* All Labs With CLFS 2-3% Tax 1.75% Reduction Permanent, Starts 2010 Applied in Years * Labs Under $500,000 Annual Rev Exempt

16. Bottom Line: CLFS 2011 January 2011: .5% Reduction Eliminated
1.2% Productivity Adjustment Will Reduce CPI to Zero
1.75% Additional CLFS Reduction Applied
Net Change to CLFS: Minus 1.75%

17. Prevention & Wellness (PW)
HCR Requires that New Network Exchange Plans Have No Beneficiary Cost-Sharing for PW
Limited to Lab Tests That Receive “A or B” Rating from US Preventative Service Task Force (USPSTF)
Broadened USPSTF Membership and Evidence Considered

18. Independent Payment Advisory Board
15-Member Board Submits Proposals to Congress to Reduce Medicare Spending if Medicare Per Capita Spending Exceeds “Average CPI”
Takes Effect for Lab 2015 (All Others 2014)
Beginning 2018, Average CPI Plus 1% Triggers
Board’s Proposal Becomes Law Unless Congress Enacts Alternative to Reduce Equivalent Amount of Medicare Spending

19. Other Important Issues
Laboratory Specific
TC Grandfather Extended to December 31, 2010
“Date of Service” Demonstration Program
Cost Control & “Quality” Initiatives
Patient Centered Outcomes Research Institute
Accountable Care Organizations
Center for Medicare & Medicaid Innovation
The Latest on the Physician Fee Schedule/SGR

20. Latest on FDA Oversight of LDT’s
Until Summer 2010, Asserted Authority, “Enforcement Discretion”
DTC Flare Up Spring 2010
July 2010 FDA Public Meeting on LDTs, Intends to Regulate LDTs
Series of Meetings Reveals FDA “Draft Guidance” Likely “Very soon” on LDTs
Major Stakeholder Meeting With FDA Nov 22

21. Latest on FDA Oversight of LDTs
Key Issues
Definition of LDT, Scope of Oversight
Grandfathering, Rare-Low Volume Tests
Registration and Listing
Overlap of CLIA/CMS & FDA
Risk Classification
Evidence Requirements
Draft Guidance on Framework/Process Timing Likely “Very Soon”