TRENDS & PERSPECTIVES
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“Since 1965, Medicare has paid private insurance companies to process [laboratory] claims based on cost, with little attention paid to performance or efficiency,” the budget plan states. “The Medicare Modernization Act of 2003 requires that CMS (Baltimore) transition to competitive contracts by 2011. The administration is accelerating implementation, with completion targeted in 2009, to interject competition into the awarding of fee-for-service processing contracts.”
Industry advocates believe that there is going to be tremendous pressure to cut Medicare spending, so it is possible that competitive bidding will get some consideration. Nonetheless, it is believed, competitive bidding is not a good policy.
“There are so many lab tests and so many issues concerning people getting immediate access to them that a competitive bidding program would be extremely complicated,” says David Nexon, senior executive vice president at AdvaMed (Washington, DC). “For example, do you have competitive bidding for every test, which means then trying to assess the volume of the test for each provider? Just thinking about how you would do competitive bidding for lab tests structurally is very challenging.”
Competitive bidding also presents disincentives to the IVD industry for making incremental improvements to existing products and investing in the development of significant technological innovations. The bidding process will be blind to the long-term savings and health benefits of new technologies, as it considers only immediate costs.
“IVD manufacturers are immensely creative,” says Nexon. “They’re always coming up with new tests. Particularly in this age of molecular diagnostic tests, which is one of the main ways we’re going to make medical progress. Besides, it’s hard to see how you would competitively bid a brand-new test to begin with.”
Competitive bidding for laboratory services is nothing new. As recently as 2005, CMS had announced its initial plans for such a competitive bidding demonstration project. The objective of the project was to demonstrate whether or not clinical laboratory services can be provided in a more efficient and higher quality way.
Industry analysts point out that Congress has rejected competitive bidding for lab tests in the past and is likely to reject it again. However, vigilance is necessary since nothing can be taken for granted.
“AdvaMed will be working hard to explain the problems with competitive bidding and to keep it from happening,” says Nexon. “In the end, I think we’ll be able to stop it. But I think that there’s a much more serious push to cut Medicare spending than there’s been since the Balanced Budget Act of 1997. I would not say it’s probable that any of these things are going to happen. But we have to be a little more worried about it in this environment than we might have been in the past because of the push for deficit reduction by both the president and the Congress.”
Besides the competitive bidding issue, another priority area for AdvaMed this year will be pushing for legislation that would improve the transparency opportunities for appeals and reclassification of existing tests. Last year, a group of congressmen introduced a bill designed to reform Medicare reimbursement policies that in their current form discourage the development and adoption of new clinical diagnostic lab tests.
More importantly, this bill would set up a new system on a demonstration basis of paying for new molecular diagnostic tests. Such a system would be based on the cost of the resource, use, and value of a test, rather than plugging it into the old fee schedule and trying to adjust it with gap-fill measures.
“We’re optimistic about getting this legislation passed this year,” says Nexon. “It’s going to be introduced shortly in the House and Senate, and we’re hopeful to be able to get it moved. I think there’s much broader recognition of how antiquated and inappropriate the current lab fee schedule is. Our major effort is going to be to pass this legislation to fix it.”
