The Honorable J. Dennis Hastert
U.S. House of Representatives
Office of the Speaker
H-232 Capitol Building
Washington, DC 20515

Dear Speaker Hastert:

The American Association for Clinical Chemistry (AACC) strongly opposes the President's proposed cuts in Medicare payments to clinical laboratories in his FY01 budget proposal. We believe these reductions are unwarranted and unsupported by any objective data. Further, the Administration and Congress recently agreed that the Balanced Budget Act of 1997 (BBA'97) cuts went too far and reduced the severity of those reductions on the health care community (laboratories were not included in that package). Yet the President's plan would impose new cuts on the laboratory sector.

Specifically, the President's budget plan would cut laboratory payments by $3.2 billion over the next five years by reestablishing a 20 percent beneficiary copayment for clinical laboratory services, cutting payments for four high volume laboratory tests by 30 percent and reducing the consumer price index (CPI) update by one percent for FY2003-FY2005 (once the current CPI freeze expires). In addition, the President recommends greater use of competitive bidding for Part B services, including laboratory testing. We believe these cuts are unjustifiable given that payments for clinical laboratory services has declined as a percentage of Part B outlays, from 2.7 percent in 1992 ($3.9 billion) to 1.6 percent in 1998 ($3.5 billion).

The Administration's proposal to adopt a copayment for laboratory services would not achieve its goal of streamlining the health care system or reducing test utilization. In fact, it would force laboratories to generate two bills for every patient, which will increase paperwork and costs. For example, the average clinical laboratory charge to Medicare was $9.66 in 1997. The copayment for this charge would be $1.93. However, it costs the laboratory between $3 and $5 to generate a bill. Thus, a laboratory would often lose money when billing the patient for the copayment. Also, it's important to note that the physician orders the laboratory test, not the patient. The introduction of a copayment, therefore, would have little or no effect on test utilization, since few patients will question their physicians' medical decisions. Congress has wisely chosen not to implement this provision on a number of occasions over the past decade. We urge you to do likewise this year.

In addition, the President is also recommending cutting payments for four commonly performed laboratory tests (these tests are used to diagnose thyroid disease and urinary tract infections, diagnose and monitor prostate cancer, and monitor diabetes) by 30 percent, which he claims are overpriced. We object to singling out individual laboratory tests for reductions. Instead, AACC believes the entire laboratory fee schedule should be recalculated, thereby ensure appropriate reimbursement for each tests-possibly increasing payments for some tests, while decreasing them for others. The Institute of Medicine (IOM) is currently conducting a study, at the request of Congress, to determine what is the appropriate payment methodology for clinical laboratory services. We urge you to delay any action on this recommendation until the study is completed and its findings evaluated.

Also, the Administration is proposing to reduce the CPI update for clinical laboratories by one percent from FY2003-FY2005. This would be on top of BBA'97, which froze the CPI update for five years. This is simply not fair given that laboratory costs increase just as those of other private sector and public entities.

And finally, we are concerned that the Administration is recommending the adoption of competitive bidding for Part B services without waiting for the results of its own demonstration project in this area. AACC recommends that any discussions of competitive bidding for laboratory services await the completion of the laboratory demonstration project. Therefore, AACC urges you to oppose the President's recommendations to establish a laboratory copayment, reduce test and CPI payments and adopt a competitive bidding model during forthcoming budget debates.

By way of background, AACC is the principal association of professional laboratory scientists--including MDs, PhDs and medical technologists. AACC's members develop and use chemical concepts, procedures, techniques and instrumentation in health-related investigations and work in hospitals, independent laboratories and the diagnostics industry nationwide. The AACC's objectives are to further the public interest and educational activities and to help maintain high professional standards.

If you have any questions or we may be of any assistance, please call me at (919) 684-8724 or Vince Stine, Director, Government Affairs, at (202) 835-8721.



Frank A. Sedor, PhD President

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