Coronavirus testing in the U.S. was limited for months because of low Medicare payments.

Coronavirus testing in the U.S. was limited for months because of low Medicare payments.

The federal Medicare program lowballed payments for a coronavirus lab test early in the outbreak, limiting the number of labs screening Americans for the deadly disease at a time when the nation needed all the tests it could get.

The low price was on a test that tells if a person is currently sick, and is performed on samples from hundreds of nasal swabs at a time. The price limited what big labs could collect from insurance companies, and made it harder for small labs that specialize in such testing to enter the COVID-19 testing market.

The Medicare program paid just $51 for the test during the first three and a half months of the year. That’s around half the $96 price tag for a similar test for the flu, and about one-third of the cost for a respiratory panel. The result was another setback early in the coronavirus pandemic on the very companies that could have more quickly ramped up testing of patients.

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The U.S. Centers for Medicare and Medicaid Services doubled its payment to $100 per test two weeks ago, on April 14. But by then, the country had lost time, and labs that were already in the market had lost money.

Low reimbursements played a role in testing shortages, Seema Verma, the administrator for the U.S. Centers for Medicare and Medicaid Services, said during a discussion with reporters earlier this month. She said the agency could determine this because it can see who is performing the tests.

“There are a lot of labs that are just not performing this test, and we recognized that there may have been some issues with reimbursement,” Verma said. “We’ve had conversations with the labs and there’s a lot that’s involved in running this high-throughput test and that’s why we’re increasing the reimbursement.

“So, that should increase testing capacity across the country,” Verma said. “There’s a lot of unused capacity.”

Julie Khani, the president of the American Clinical Lab Association, said her organization advocated for higher reimbursements starting in March. By the time Medicare increased the test reimbursement, her members had performed 2.1 million tests.

A nurse in a hazmat suit swabs a woman's nose during a test for coronavirus at Somerville Hospital in Massachusetts.

“They were completely focused on doing all they could to meet patient needs for testing,” Khani said.

“We strongly advocated for a reimbursement level that’s going to result in all laboratories who have the expertise to perform this testing to be able to, you know, get into the game, make sure they have enough of their supplies and resources.”

Rick Martin, the CEO of a small Texas lab called MicroGenDx, said $50 per test barely covered his cost. And working at cost is not enough because his company is out-of-network for most private health insurance companies and struggles to get paid. Martin said historically only about half of his tests ever get reimbursed.

“I couldn’t afford to have insurance companies not pay me,” Martin said.

Instead, his company invoiced patients directly and let them negotiate with their insurance companies. He was hopeful because of the movement to make COVID-19 testing free to patients.

“If I file claims for every patient or every person to their insurance company, my claims would be at the bottom of the process until after the in-network labs like LabCorp and Quest,” Martin said. “And then there was a probability that they wouldn’t pay us.”

Labs are now hoping the change will have a ripple effect on how much they will make from state Medicaid programs and private insurance companies, which often base their prices on what Medicare pays for lab tests. So far, labs are still waiting on those increases.

Stephen H. Rusckowski, the CEO of Quest, said in an investor call last week that his company has been approaching all the major insurance companies to see what they will pay. He said the Medicare increase gives the lab leverage to get those payments raised.

Adam Schechter, the CEO of LabCorp, said Wednesday that the new $100 reimbursement is “at a good rate.” He pointed to the complexity of the diagnostic test — which is more intricate than the antibody tests that use blood samples and are becoming more prevalent.

To collect a sample for a molecular test, a medical provider puts a long swab up a patient’s nostril until it hits the throat. The lab then separates out small pieces of the sample, a process called RNA extraction. The lab then processes those pieces to find any viral pathogens.

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Martin is still having trouble getting insurance companies to honor the new billing code that goes with the higher payment rate. His staff has been contacting insurance companies to see if they will honor the new code so he can get paid the new rate. He can afford a loss on some tests but not when he’s doing thousands.

“We lose a lot of money,” Martin said. “I can do that and file claims when I’m doing 300 or 400 tests a day which is my core business. But when I’m doing 3,000, 4,000, 5,000 a day, I can’t afford for that to happen.”

Khani, from the lab association, is also advocating for direct payments to laboratories. She pointed to a $25 billion allocation that Congress earmarked for laboratory testing. She said the U.S. Department of Health and Human Services can directly allocate some of that to labs.

“All laboratories that have the expertise to perform this testing must have the resources to do so,” Khani said.

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