Medicare to Adjust Lab Test Reimbursement: Impact and Implications

The Centers for Medicare & Medicaid Services (CMS) has released preliminary 2027 payment rates for clinical lab services. These rates might change reimbursement for millions of Medicare beneficiaries. The rates are based on private insurer payment data under the Protecting Access to Medicare Act (PAMA). This law aims to align Medicare reimbursement with market prices.

According to CMS, Medicare has been paying about 16% more for laboratory services than private insurers. This adjustment could save taxpayers roughly $1 billion annually. CMS Administrator Dr. Mehmet Oz mentioned that Congress’s help is crucial in ensuring Medicare’s payments are not exceeding those of private insurers. By making this preliminary information public, CMS aims for transparency, better pricing decisions, and reduced waste across the healthcare system.

Why It Matters

Laboratory tests are vital in current healthcare practices. They include routine blood work and advanced diagnostics. While the new rates do not change most Medicare beneficiaries’ out-of-pocket expenses directly, they can affect lab revenues. This has ignited a broader debate about the accuracy of Medicare’s payment methodology.

The updated rates, CMS says, will reflect market realities more accurately. There is concern among labs that reimbursement cuts could affect patient access to essential testing, especially in rural and underserved areas.

What to Know

CMS released preliminary weighted median private-payer rates for clinical diagnostic laboratory tests under the Clinical Laboratory Fee Schedule (CLFS). This system is used by Medicare to pay for various lab services.

Potential Reductions by Test Category
Source: CMS preliminary CY 2027 Clinical Laboratory Fee Schedule data

• Genomic sequencing: -23%
• Molecular pathology: -22%
• Microbiology: -19.3%
• Immunology testing: -19.3%
• Chemistry testing: -16%
• Proprietary lab analysis tests: -2.4%

This is the second data collection cycle since PAMA’s enactment in 2014. Due to legislative delays, a new reporting cycle will start in 2026, using updated data for 2027 rates. Payment reductions won’t occur at once. Federal law limits annual decreases to 15% through 2029.

Kevin Thompson, CEO of 9i Capital Group, views aligning payment schedules with private insurance data as beneficial. However, he acknowledges the additional costs Medicare incurs beyond basic service fees. CMS is accepting public comments on the preliminary rates for 30 days before finalizing them later in the year.

Industry Pushback

Quest Diagnostics criticized the preliminary rates and highlighted flaws in the PAMA reporting system. The company called for congressional reform through the RESULTS Act, citing the need for a broader reporting framework. Over 130 Congress members and 70 patient and provider organizations support this legislation.

A commissioned survey from Quest revealed that 96% of voters find diagnostic tests important for personal and family care. Also, 74% think Congress should act to prevent further payment cuts.

“Beneficiaries get caught up in Medicare’s broader coverage obligations versus private insurers’ abilities to restrict coverage and deny claims,” Thompson said.

According to the American Clinical Laboratory Association, nearly 1,200 tests could face cuts, including hundreds set for a 15% maximum cut in 2027. The concern is that repeated reductions might make certain tests less viable, especially for smaller labs.

What Happens Next

The public comment period will remain open for 30 days, after which CMS will review submissions. Final 2027 payment rates should be published in November. Kevin Thompson expressed concerns about potential Medicare shifts toward more restrictive practices, akin to Medicare Advantage, to control costs.

“Reductions could have tradeoffs,” Thompson said. “Lower reimbursements might lead to wider healthcare system costs or affect beneficiaries’ access to services.”