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Medicare Program Expects Slow Growth in Healthcare Costs

The Affordable Care Act has established cost containment strategies for the Medicare program and it is expected to make a big impact on keeping healthcare costs low in the coming years.

By Vera Gruessner

The federal government is continually striving to reduce healthcare costs while providing better quality care for the patient community. Last week, the Centers for Medicare & Medicaid Services (CMS) announced in a news release that the agency has released a final rule aligning with a section of the Protecting Access to Medicare Act of 2014 (PAMA), which will require clinical laboratories to provide information regarding the reimbursement amounts paid by private payers for diagnostic tests.

Medicare Spending Growth

CMS will then be using these private health payer rates to determine their own Medicare rates for laboratory testing in an effort to decrease healthcare costs for the Medicare program. The Clinical Laboratory Fee Schedule created from the commercial payer data will go into effect on January 1, 2018.

The CMS ruling will also provide provisions to relieve administrative burdens on smaller independent laboratories, according to the news release. The final rule also responded to public comments by postponing the implementation date from January 2017 to January 2018 so that laboratories have enough time to create the IT systems necessary to collect the data needed by the federal agency.

This also means that laboratories will have sufficient time to perform end-to-end testing before sending in information to CMS. Under the current Clinical Laboratory Fee Schedule, CMS pays about $7 billion to Medicare-enrolled laboratories every year. The federal government is looking to reduce these healthcare costs for the Medicare program by implementing this new rule and aligning commercial payer rates with public healthcare coverage spending.

Any laboratory that receives at least $12,500 from the Medicare program will be required to report private payer rates. This will include 95 percent of physician office laboratories and half of independent laboratories.

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“We estimate that about 55 percent of independent laboratories and about 95 percent of physician office laboratories will be precluded from reporting private payor data as a result of the low expenditure criterion,” a fact sheet from CMS stated.

“However, even though the low expenditure threshold will substantially reduce the number of physician offices and independent laboratories for which private payor rates must be reported, we estimate those physicians and laboratories for which private payor rates will be required to be reported account for approximately 92 percent of CLFS spending on physician office laboratories and approximately 99 percent of CLFS spending on independent laboratories.”

Additionally, CMS reported that it will pay a new subset of clinical laboratory tests called advanced diagnostic laboratory tests at the price listed for nine months. When it comes to the growth in healthcare costs, CMS has also reported in a news release that the Medicare Trustees found a continuation of slow spending growth and “an improved long-term outlook” when compared to last year.

“Growth in per-Medicare enrollee costs continues to be historically low even as the economy continues to rebound. While this is good news, we cannot be complacent as the number of Medicare beneficiaries continues to grow,” Andy Slavitt, CMS Acting Administrator, said in a public statement. “That’s why we must continue to transform our healthcare system into one that delivers better care and spends our dollars in a smarter way for beneficiaries so Medicare can continue to meet the needs of our beneficiaries for the next 50 years and beyond.”

Funding related to Medicare’s hospital insurance coverage will maintain good standing until 2030, which is 13 years longer than the Medicare Trustees predicted in 2009 ahead of the Affordable Care Act. In recent years, growth in Medicare’s healthcare costs per beneficiary has been slow with an average 1.3 percent rise across the last five years.

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In fact, Medicare spending in 2014 was lower for Part A and D than the organization predicted while healthcare costs for Part B ended up larger than estimates showed. The Affordable Care Act has established cost containment strategies for the Medicare program and it is expected to make a big impact on keeping healthcare costs low in the coming years.

The growth of per-enrollee Medicare spending is expected to be nearly 1 percent lower than overall healthcare spending across the next decade. Additionally, the news release states that Part B premiums will not increase for about 70 percent of beneficiaries. The future for the Medicare program looks bright over the coming years due to the cost containment strategies within the Affordable Care Act.

As the federal government continues to strive for reduced healthcare spending, public coverage options should benefit consumers and the overall patient community since this would mean fewer premium increases and greater healthcare access.
Keeping the Medicare program going strong over the coming years is a necessity to manage the health of the baby boomer population. The Affordable Care Act and other government provisions have made public healthcare coverage more sustainable for the coming years.


Dig Deeper:

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