Unbiased Analysis of Today's Healthcare Issues

Medicare Reimbursement Information IV

Written By: Jason Shafrin - Sep• 03•09

The Medicare Reimbursement Series Continues. The sources of this information is MedPAC’s Payment Basics.

Clinical Laboratory Services:

  • Under Part B, Medicare covers medically diagnostic and monitoring laboratory services ordered by a physician.
  • Medicare does not cover routine screening tests except for cholesterol and blood lipid tests, fecal occult blood testing, Pap smear tests, prostate-specific antigen tests, and diabetes screening tests.
  • In 2007, Medicare payments for clinical lab services totaled $6.8 billion. Overall lab spending declined by 1 percent between 2006 and 2007 due to a drop in hospital-based lab spending. Medicare spending for lab services grew by an average of 9 percent per year between 1999 and 2006.
  • Medicare sets payment rates for more than 1,100 Healthcare Common Procedure Coding System (HCPCS) codes used in billing for laboratory services.
  • For new lab tests, CMS “crosswalks” to assign the test to a similar existing HCPCS. If the new lab test is dissimilar from all existing tests, CMS relies on a “gapfilling” method in which the carriers independently set rates for the first year of use.
  • There is no beneficiary copayment.

Durable Medical Equiment (DME)

  • Medicare spent about $8.6 billion on DME in fiscal year 2007. Medicare spending for oxygen and related supplies accounts for one-quarter of total DME expenditures.
  • Generally, current fees are an average of the allowed charges from 1986 and 1987, adjusted by the consumer price index for all urban consumers to account for inflation.  However, there are exceptions to this for pharmaceuticals associated with DME use, home oxygen, and customized equipment.
  • Each state has its own fee schedule to take into account regional cost variation.
  • A pilot program using competitive bidding method was found to decrease DME costs 17%-22%.  A competitive bidding process for DME was to be phased in nationwide, starting with 10 metropolitan statistical areas (MSAs) in 2008 and expanding to 80 MSAs by 2009.  However, this schedule may be delayed due to problems with bidding software and organizational issues.

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