Medicare and the Laboratory

Extract

This article discusses the impact on the laboratory of Medicare payment policies and limitations imposed on payment for laboratory services. As the size of the population receiving Medicare benefits increases, and other payers adopt similar polices, the challenge to the laboratory becomes greater.

The Medicare program was created by legislation amending the Social Security Act that was signed into law on July 30, 1965 by President Lyndon Johnson. The bill-signing ceremony was held at the Truman Library in Independence, MO, as a tribute to former President Harry S. Truman, who had first proposed health insurance legislation 20 years before.¹

Medicare legislation passed despite opposition from the American Medical Association, which characterized it as socialized medicine.

Medicare has grown as the population has aged and currently covers 44.8 million beneficiaries², about 14% of the U.S. population, with this number expected to grow significantly as the 76 million members of the baby boomer generation, born in 1946–1964 ³, become eligible for the program's benefits. By 2031, the number of beneficiaries will be an estimated 77 million⁴. Medicare beneficiaries typically constitute a significant percentage of patients served by hospital laboratories, physician office laboratories, and independent laboratories. A report by the Institute of Medicine reported that in 1999, clinical laboratories derived 29% of their revenues from Medicare and 12% from Medicaid⁵.

The Medicare program is designed to cover the cost of diagnosis and treatment for illness, and does not cover wellness services or screening for disease in the absence of symptoms. A few notable…

Abbreviations: ABN = Advance Beneficiary Notice; ASCLS = American Society for Clinical Laboratory Science; BBA = Balanced Budget Act; CBC = Complete blood count; CCI = Correct Coding Initiative; CLFS = Clinical Laboratory Fee Schedule; CMS = Center for Medicare and Medicaid Services; CPT = Current Procedural Terminology; DRG = Diagnosis Related Group; EOB = Explanation of Benefits; FI = Fiscal intermediary; HCFA = Healthcare Financing Agency; HCPCS = Healthcare Common Procedure Coding System; HMO = Health Maintenance Organization; ICD = International Classification of Diseases; LCD = Local Coverage Decision; LMRP = Local Medical Review Policy; MAC = Medicare Administrative Contractor; MUE = Medically Unlikely Edit; NCD = National Coverage Decision; PC = Professional Component; TC = Technical Component; TEFRA = Tax Equity and Fiscal Responsibility Act; UB = Uniform Billing