President’s Speech Reinvigorates Health Care Reform Debate
Advocates Score Victory on Lab Co-Pays, But Threat of Lab Tax Looms as Health Care Reform Efforts Continue

The American Society for Clinical Pathology (ASCP) along with others in the laboratory community succeeded in defeating a proposed 20 percent co-pay on Medicare laboratory services. ASCP members sent more than 2,500 letters to their Senators voicing opposition to co-pays on services reimbursed under the clinical laboratory fee schedule. ASCP members pointed out that the co-pay would have shifted an estimated $23 billion over 10 years to Medicare beneficiaries and clinical laboratories. This is good news for Medicare beneficiaries, clinical laboratories and laboratory staff.

President Barack Obama’s health care reform address to a joint session of Congress has reignited a sense of urgency to get legislation passed and to get it passed quickly. “Now is when we must bring the best ideas of both parties together, and show the American people that we can still do what we were sent here to do.” the President said. “Now is the time to deliver on health care.”

That said, Congress has heeded the call. Of the five Senate and House committees asked to develop proposals, all have put forth reform for consideration. Among these proposals are provisions affecting clinical laboratories; these provisions are being examined as a means to finance health care reform. As readers of ASCP’s Daily Diagnosis (see Thursday, September 10) may already know, Senate Finance Chairman Max Baucus (D-MT) has proposed an annual fee, or tax, on the labs as part of his proposed Framework for Comprehensive Health Reform. This tax would amount to $750 million annually beginning in 2010. Congressional officials have not provided details of the proposal. In fact, the proposed fee on clinical laboratories amounts to just two sentences: “Under this [framework], an annual fee of $750 million would be imposed on clinical laboratories beginning in 2010. The fee would be allocated by market share, except for small businesses.”

Some experts have suggested that the fee would be based on revenues. Without details, however, it is unclear how the tax would be assessed. Would it be based on Medicare-related revenues? Would it be based on overall laboratory revenues? Would revenues related to pathology services be exempt in calculations of revenue? Additionally, while the proposal appears to exempt small businesses, it does not identify what constitutes a small business. Also, what type of labs would be included in the proposal? Hospital labs? Independent labs? Physician office labs?

The clinical laboratory fee is not the only proposal affecting laboratories in Senator Baucus' proposed health reform framework. The Senator’s framework includes a productivity adjustment proposal that would reduce the annual updates for Medicare services covered under parts A and B, such as clinical laboratory services. It should be noted that the Medicare Payment Advisory Commission, which makes recommendations to Congress on Medicare policy, uses a general economy productivity estimate, which over the last 10 years has averaged 1.3 percent. It is unclear what the legislation, once it is drafted, would specify.

The Baucus productivity adjustment proposal is conceptually similar to a proposal in the House of Representatives Tri-Committee bill. The bill—the joint efforts of the House Committees on Ways & Means, Energy & Commerce, and Education & Labor—proposes to reduce the annual update to the clinical laboratory fee schedule to account for expected improvements in productivity. The current draft of the House Tri-committee’s proposed adjustment, however, would not further reduce the Medicare annual update for clinical laboratory services when the annual adjustment to the fee schedule is negative or when the productivity adjustment would result in a negative annual adjustment to the fee schedule. It is unclear whether the Senate will adopt such a provision.

ASCP is working diligently with its partners in the Clinical Laboratory Coalition to address industry-wide concerns about the disproportionate impact that these proposals, particularly the proposed tax on laboratory services, could have on laboratories and Medicare beneficiaries’ access to laboratory services.