Testing labs rally to kill Medicare pay cuts

• Congress has given the testing industry short-term reprieves for the past five years. But because of recent changes to how congressional scorekeepers analyze the sector, pushing off the scheduled cuts now would add to the deficit, instead of saving tax dollars.

The issue has stayed largely under the radar as Congress debates whether to extend enhanced Obamacare premium subsidies. But testing policy has big implications as precision medicine evolves and patients show up with more complicated cases.

• The testing industry and allied medical groups want a permanent fix, arguing that member companies' laboratory services influence 70% of clinical decisions.

Driving the news: A 15% reduction to Medicare payments for nearly 800 lab tests is set to take effect Jan. 31, followed by additional cuts in following years.

• The change stems from 2014 legislation that aimed to align Medicare reimbursements for lab tests more closely with commercial payments.
• Medicare cuts that previously went into effect from the legislation cost labs nearly $4 billion over three years. Since then, the diagnostics industry has successfully argued the cuts are based on incomplete and outdated pricing information.

What they're saying: Clinical lab companies say letting the cuts take effect will leave them with less money to spend on creating new diagnostics or technologies to generate quicker results.

• "Labs play a critical part in trying to keep the nation well — identifying that risk before it ever even happens," said Yuri Fesko, chief medical officer at Quest.
• "Prevention is the thing that's going to take a back seat here if we really have to face these kinds of cuts," he said.
• The cuts could also derail progress toward personalized medicine, which hinges on having a comprehensive understanding of the patient's molecular profile, said Susan Van Meter, president of the American Clinical Laboratory Association.

The intrigue: Until recently, delaying the payment changes was projected to save taxpayer dollars.

• Federal budget analysts previously used the Consumer Price Index as a proxy for lab payments. That measurement showed that delaying the changes appeared to save Medicare money.

• But the analysts have changed their model and now estimate that delaying the payment cuts will add to Medicare costs.
• Budget officers projected last month that it will cost the federal government $49 million to delay the cuts until the end of January.

Lawmakers in the House and Senate introduced a bipartisan bill in September that aims for a permanent fix, including capping future Medicare payment cuts for the sector at 5% annually.

• It can "stop devastating cuts that would have threatened access to routine and lifesaving tests," Rep. Richard Hudson (R-N.C.), a lead sponsor of the bill, told Axios in a statement. LabCorp is headquartered in North Carolina.

Reality check: Congressional scorekeepers haven't priced out the permanent fix legislation yet, but it's almost certain to cost more than delaying the cuts again.

• Rob Smith, managing partner at Capital Alpha Partners, thinks the most likely scenario is that Congress opts to delay the Medicare cuts again before they're set to go into effect.
• "It seems to be sort of lumped in with the 'extenders,' measures that just tend to get done by virtue of their own inertia," Smith said of the delays. "It's a little more difficult now that [it costs money]. But I don't think that expense is prohibitive by any means."