Every year, between 20 and 75 percent of patients do not respond adequately to the medication they have been prescribed. That high failure rate drives up healthcare costs. The president of the American Clinical Laboratory Association has estimated that the nation’s healthcare system could save $110 billion each year if genetic tests were used to individualize prescriptions for patients.
Employing genetic testing to steer colorectal-cancer patients onto appropriate drugs could save more than $600 million annually. The Journal of the American Medical Association has reported that such testing could help predict the effectiveness of specific chemotherapy treatments for breast-cancer patients -- and yield $400 million in savings in the process.
Yet federal officials have not brought their payment policies in line with this new science. In order to bring more clarity to the billing process, CMS has moved away from having labs bill for every step of a test separately -- and instead assigned new, test-specific codes.
Unfortunately, CMS chose a pricing method for these new codes that allowed local Medicare contractors to slash the rates they will pay for molecular diagnostics by as much as 80 percent.
CMS’s decision affects all Americans -- not just those on Medicare or Medicaid. Many insurance companies base their reimbursement policies on those of the agency. With payment rates plummeting, some laboratories may no longer be able to afford to run these critical tests. While these tests have typically been billed at $1200 to $3500, margins aren’t that high. Consequently, genetic testing could end up being available only through elite academic institutions -- not through community hospitals, where the vast majority of patients are diagnosed and treated.
Moreover, low payment rates will make it harder for medical innovators creating new diagnostic technology to recoup their significant upfront investments. That will slow the pace of medical development.
Molecular diagnostics have turned previously deadly diseases into manageable or even curable conditions. And they have saved the healthcare system money in the process.