Preparing for the Medicare-Medicaid Buzz Saw

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MEDICAID PROGRAMS IN TWO STATES ARE CURRENTLY TARGETING laboratory testing services as a source of cost savings. It’s not coincidental that the states involved are Florida and California. During the past 15 years, both states have stayed at the cutting edge of managed healthcare. Many “innovations” (read: a way to pay providers less for the same service) have started in these two states, then been copied by payers in other states.

It is this history of being first to introduce experimental new approaches to controlling utilization and reducing reimbursement that draws my attention. Once again, Medicare officials in both Florida and California are ready to implement radical changes in long-standing procedures for authorizing providers and establishing reimbursement levels. In both cases, the primary target is laboratory testing services.

These are not auspicious developments for the laboratory testing industry. It has just finished a tough fight to avoid the re-imposition of a 20% co-pay for lab testing under the Medicare Part B schedule. Now, on both coasts, two of the nation’s largest states—caught in difficult budget squeezes—have drawn a bead on laboratory testing services as the potential source for cost reductions. I see this as a portent of what can be expected to spread to the Medicaid programs in other states.

Because of the significant presence maintained by government health programs such as Medicare and Medicaid in many regions, radical and arbitrary attempts by healthcare bureaucrats to squeeze out more concessions from clinical laboratories will grow in number. I believe that most laboratory directors and pathologists are not psychologically ready to deal with this new development. I predict we will see a noticeable shift in longstanding Medicare and Medicaid policies.

Going forward, everyone agrees that government-funded health plans will lack the financial resources required to support the increased demand for health services. No one questions the impact of current demographic trends. If you match this consensus against the “surprise” introduction of new lab services contracting arrangements by Medicaid officials in Florida and California, one obvious conclusion is that Medicare and Medicaid programs are becoming a financial buzz saw, ready to cut into the heartwood of the lab industry’s finances.

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