The Honorable John Chafee
U.S. Senate SD-219
Washington, DC 20510

Dear Chairman Chafee:

The American Association for Clinical Chemistry (AACC) supports efforts to improve the financial integrity of the Medicare program. However, we do not believe further reductions in provider payments will solve the problems facing the federal insurance program. We are especially concerned that the President's recent Medicare proposal may further weaken the financial solvency of many clinical laboratories, which are still laboring under the $2 billion in cuts imposed by the Balanced Budget Act of 1997.

Specifically, the President's Medicare reform plan would cut laboratory payments by more than $8 billion over the next ten years by re-establishing a 20 percent copayment for clinical laboratory services and reducing the consumer price index (CPI) update for laboratories by one percentage point annually for 2003 - 2009. The CPI is currently frozen from 1998-2002. In addition, the President recommends greater use of competitive bidding for Part B services, including laboratory testing. We believe these proposed cuts are unwarranted, given that payment for clinical laboratory services has declined as a percentage of Part B outlays, from 2.6 percent in 1994 to 1.8 percent in 1997.

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 will 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 physician's medical decisions.

The President is also seeking to reduce the CPI update for clinical laboratories. If adopted, laboratories would be forced to go 11 years without a full inflationary update (1998-2009). 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 projects 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 copayment, CPI update reduction and competitive bidding proposals during any forthcoming debates on Medicare.

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 (405) 271-3571 or Vince Stine, Director, Government Affairs, at (202) 835-8721.



K. Michael Parker, PhD

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