Medicare Cap Rate on Laboratory Reimbursements Would Be Removed Under New Bill

On Thursday, a new bill was introduced  in the Assembly that, if passed, would remove  the current 80% cap on Medicare reimbursement rates for laboratories in California.

Under Assembly Bill 265, authored by Assemblywoman Cottie Petrie-Norris (D-Laguna Beach), laboratories would be given full reimbursement for the first time since 2018 when the Protecting Access to Medicare Act (PAMA) came into effect. PAMA’s weighted median private payor rates came into conflict with California’s market-based system established by the 2012 Budget Act. Medi-Cal rates were subsequently slashed, upending the fee-for-service Medi-Cal reimbursement rate. While the 80% Medicare cap on laboratory reimbursement rates was instituted, the action did stave off a projected 24% cut in Medicare reimbursements for doctors.

Assemblywoman Petrie-Norris wrote AB 265 to help laboratories be on better footing to help with the COVID-19 pandemic and resume operating how they had been pre-PAMA. The Assemblywoman also noted that the bill would protect tens of thousands of laboratory jobs across the state, the loss of which would hurt both the unemployment rate and COVID-19 rates in California.

“Laboratories provide 75,826 California jobs that we cannot afford to lose in the face of an unprecedented unemployment crisis and the COVID-19 pandemic,” noted Assemblywoman Petrie-Norris on Thursday. “With the protection of tens of thousands of California jobs, we can also ensure the stability of critical Medi-Cal services across the state.”

Supporters of AB 265 have included many lab service providers, who would benefit from such a cut removal.

“Planned Parenthood Affiliates of California applauds Assemblymember Petrie-Norris for introducing AB 265, a necessary step to protecting Medi-Cal lab rates from unduly cuts. Maintaining investment in Medi-Cal rates supports providers on the frontlines of the COVID-19 pandemic, along with the many patients who are being dually impacted by COVID-19 and systemic racism,” explained President and CEO of Planned Parenthood Affiliates of California Jodi Hicks this week. “A critical step in the fight for health equity, this bill ensures safety-net providers, like Planned Parenthood, are able to provide and be adequately reimbursed for critical health services, like HIV and STI tests.”

However, many have opposed this bill, including many medical professionals who say that PAMA is vital to keeping Medicare afloat.

“If you get rid of that cap, that means a much greater cost on the taxpayer,” explained former lab technician Daniel Pike to the Globe. “Lab companies will scream about that, but where do you think the rest of that reimbursement will come from? Labs just don’t want to pay that much more for a service that they charge for.”

An almost identical bill last session, AB 1327, also authored by Petrie-Norris, had failed in September. Despite being passed unanimously by both the Assembly and the Senate, Governor Gavin Newsom vetoed the bill citing misplaced costs. Newsom has not given any indication of which way he is siding over AB 265 as of Thursday.

AB 265 is expected to go to committee in the coming weeks and is widely expected to pass both houses once again.