Medicare Pays $900 Million a Year Too Much for Lab Tests

Medicare, the U.S. health program for the elderly and disabled, spends $900 million more a year than it should for medical lab services and should seek authority from lawmakers to cut its bills, auditors said.

Medicare spent about $8.2 billion on lab services in 2010, more than any other insurer in the nation, while paying from 18 percent to 30 percent more for 20 of the highest-volume and most expensive tests, according to the Health and Human Services Department’s inspector general. The Centers for Medicare & Medicaid Services, which runs the $574 billion health program, said the agency is exploring whether it can revise payments to labs, according to a report issued today by Daniel Levinson, the HHS inspector general.

“The lab test payment rate structure is outdated and should be changed,” Levinson said in his report.

Quest Diagnostics Inc. (DGX) and Laboratory Corporation of America Holdings, the two largest lab services companies in the U.S., each receive at least 15 percent of their annual revenue from Medicare, according to data compiled by Bloomberg. Spokesmen for the companies didn’t immediately respond to e-mails and telephone calls seeking comment on the report.

Quest, based in Madison, New Jersey, fell less than 1 percent to $62.55 at the close in New York. LabCorp, based in Burlington, North Carolina, fell less than 1 percent to $100.49.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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