Medical Device Link.

Originally Published IVD Technology July 2004

Commentary

Susan Zagame Reardon, JD, is director of federal affairs at Ortho-Clinical Diagnostics (Raritan, NJ) and a member of the IVD Technology editorial advisory board. She can be reached at sreardo1@ocdus.jnj.com.

Last summer, Mary Jo Bonifas, a lab manager in Dubuque, IA, heard that Senator Chuck Grassley (R–IA) supported a 20% copayment on lab services for senior citizens. Senator Grassley, she learned, is the chairman of the Senate Finance Committee. This committee was responsible for shaping the Medicare prescription drug legislation, also known as the Medicare Modernization Act (MMA). She also learned that the copayment provision would save the government approximately $19 billion and would help to pay for the expensive prescription drug benefit that was being debated at the time. As an active member of the Clinical Laboratory Management Association (CLMA) and an Iowa resident, Mary Jo felt compelled to let the Senator know her opposition to the copayment plan. 

Mary Jo began arming herself with information demonstrating that a copayment provision would not be good public policy. She learned that since labs bill Medicare directly for tests and receive a preset fee schedule amount, the administrative cost for collecting the average copayment would eat up most of the money that would be collected. Based on her own experience, she knew that since most lab tests are performed outside a doctor’s office, there would be no contact with the patient, which would make collection even more difficult. She also became knowledgeable about the origins of the Medicare clinical lab fee schedule and the reasons why copayments were yet another unjustifiable cut to reimbursement for lab tests. 

After obtaining this information, Mary Jo started to call, write, and e-mail Senator Grassley to voice her views on the copayment provision. She contacted her colleagues at other labs in Iowa. Together, they told the Senator that the copayment plan would result in lost revenues for the state of Iowa. They educated senior citizens, who in turn expressed their opposition to the copayment provision to Senator Grassley. Mary Jo also spoke repeatedly with the Senator’s top aide and attended town hall meetings led by the Senator, where she constantly and forcefully raised the copayment issue. 

Mary Jo clearly had made her point. Her decision to get involved in a federal issue that had real consequences for the lab she worked in and the patients it served contributed to the elimination of the copayment provision from the MMA. 

Upcoming Issues

Figure 1. Congressional cuts to the clinical laboratory fee schedule have resulted in flat spending for lab services, while total Medicare expenditures have increased. Source: Centers for Medicare and Medicaid Services (Baltimore) (click to enlarge).

The defeat of the copayment provision was an important victory for the IVD industry as well. A study by the Moran Co. (Washington, DC) estimated that if the copayment plan had passed, the total administrative and bad debt costs to labs over 10 years would have been at least $16.2 billion, a 19% reduction in reimbursement for laboratory tests. This reduction could have impaired the financial stability of laboratories, thereby diminishing their purchasing power and making it difficult for IVD manufacturers to introduce new laboratory tests, systems, and platforms to the market. 

While the 2003 copayment battle has been won, larger battles loom ahead for the IVD industry. Congress is faced with a greater-than-expected price tag for the prescription drug legislation, increasing deficit spending, the war in Iraq, and other fiscal priorities. After the presidential and congressional elections in November, there will be a concerted effort to find savings from every possible source. 

Created by an act of Congress in 1984, the clinical laboratory fee schedule has been a target for budget savings. Lab tests have undergone the statutory annual consumer price index adjustments only six times during the past 20 years (see Table I). With the defeat of the copayment provision in the MMA, Congress decided to freeze the fee schedule for an additional five years, yielding an estimated $8 billion in savings over 10 years. The cumulative impact of these Congressional cuts to the fee schedule has resulted in flat spending on lab services, while total Medicare expenditures have increased substantially (see Figure 1). 

While the IVD industry has endured a freeze in the fee schedule in the past, sustaining growth with flat Medicare reimbursement levels will be difficult. Since Medicare and Medicaid together pay approximately 35% of the nation’s healthcare bill, any cuts in these programs influence the ability of labs to invest in new IVDs. 

Table I. Trends in Medicare payments for a hypothetical test reimbursed at $1.00 in 1984, and the annual and cumulative effect of both annual consumer price index adjustments to the National Limitation Amount (NLA), the maximum payment amount established by Congress and based on a percentage of the national median derived from local Medicare contractors’ payment rates. Dollars have not been adjusted for inflation. Source: Becton, Dickinson and Co. (Franklin Lakes, NJ) (click to enlarge).

Another issue with enormous consequences for the IVD industry is the requirement mandated by the MMA that the Centers for Medicare and Medicaid Services (CMS) conduct a competitive bidding demonstration for laboratory services. With a competitive bidding demonstration for durable medical equipment yielding savings of 17–22%, both CMS and members of Congress believe similar savings can be found for Medicare’s lab bill. Florida is already executing a plan to competitively bid lab services for its Medicaid recipients and is aiming for a winner-take-all result. However, a reduction in revenues of these dimensions could wreak havoc on laboratories and IVD manufacturers. 

Getting Involved

With these and other pertinent issues, it is imperative for IVD manufacturers to engage themselves in the public policy process at the grassroots level. The following are ways in which manufacturers can make their voices heard.

Know who represents whom in Congress. Although most people can identify at least one of their senators, many have no idea who their congressman is. The House of Representatives Web site (www.house.gov) and the Senate Web site (www.senate.gov) can help to identify the congressmen in each district and the senators in each state. 

Learn key facts about senators and congressmen. The Web sites listed above contain biographical and other background information about every senator and congressman. It is important to know whether they have a history of supporting or opposing medical technologies and other health-related issues in order to be prepared for any communications with them. IVD manufacturers should also find out which committees their representatives belong to. The key committees that handle issues related to the IVD industry are the Ways and Means, and Energy and Commerce committees in the House of Representatives, as well as the Finance, and the Health, Education, Labor, and Pensions (HELP) committees in the Senate. These committees have jurisdiction over FDA and CMS. 

Learn about the issues facing the IVD industry. Most of the trade associations that represent the IVD and clinical laboratory industries have Web sites that contain a wealth of information on relevant federal issues. Of particular note is the Advanced Medical Technology Association (AdvaMed; Washington, DC) Web site (www.advamed.org). 

Attend local events featuring representatives. Many congressmen hold regular town hall meetings, attend events in their home districts, and are available to meet their constituents. Since House members must run for reelection every two years, they are especially interested in maintaining a visible presence in their home districts. Town hall meetings and other events present opportunities for IVD manufacturers to introduce themselves to their congressional representative and senators and provide information on the IVD industry and the role of IVDs in contributing to healthcare and the economy. 

Invite representatives to manufacturing facilities. Most members of Congress are delighted to participate in plant tours. In addition to being a place to meet their constituents, IVD manufacturing facilities represent jobs, innovation, and contributions to healthcare, all positives with which congressmen like to be associated. 

Be a teacher. Most congressmen do not know what an IVD is. Therefore, IVD manufacturers need to educate their representatives about IVDs, the industry, and how public policies either help or harm the industry. In doing so, it is important to be credible, informative, direct, concise, and respectful, without using technical jargon. 

Become involved in trade association activities. AdvaMed actively lobbies for the IVD industry and organizes lobby days in Washington, DC, every year. While this effort involves hundreds of people lobbying on a wide variety of medical device and diagnostic issues, it is well organized and has contributed to AdvaMed’s notable success on important legislation. Many lab industry organizations also have active government affairs initiatives and coordinate their activities under the umbrella of the Clinical Laboratory Coalition in order to present a united front to Congress. 

E-mail, fax, and call representatives when they cannot be seen in person. Since the anthrax incident in Washington a few years ago, regular mail is the least preferred method of communicating with congressmen. IVD manufacturers should consult the Web addresses listed above for contact information. When communicating with members of Congress, it is important to be brief, direct, and persuasive. In e-mail messages, manufacturers should list their home or work addresses and identify themselves as constituents.

Contribute time and money to election campaigns. It is extraordinarily expensive to run for political office. Media buys are the single largest expense, sometimes consuming millions of dollars. Consequently, congressmen must engage in nonstop fund-raising. So while members of Congress will see and help constituents regardless of whether they have contributed, access can become easier for contributors.

Conclusion

The IVD industry is at a critical juncture. Exciting new diagnostic technologies, such as those that match patients to therapies, hold the promise of substantially improving patient care. However, many of these technologies may not be realized if public policies are adopted that create regulatory, reimbursement, and global environments that hinder their development and market adoption. IVD manufacturers can play a key role in influencing Congress to adopt policies that will ensure a bright future for IVDs and the patients who will benefit from them.

In looking back on 2003, Bonifas said, “If I learned one thing from this experience, it was that members of Congress truly depend on their constituents to inform them of the impact that legislation will have on the folks back home. They welcome the opportunity to meet with them, whether in Washington or back home at town meetings. Several Iowa congressional offices now contact me whenever a Medicare issue comes up. One person can have an impact.” 

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