Laboratory Fee Schedules Produced Large Beneficiary Savings but No Program Savings Gao ID: HRD-88-32 December 22, 1987

Pursuant to a legislative requirement, GAO reviewed the appropriateness and impact of Medicare's fee schedule payment system for clinical diagnostic laboratory services.

GAO found that initial fee schedules, established on a geographic basis: (1) significantly reduced beneficiary out-of-pocket costs; (2) affected neither beneficiary access to nor quality of laboratory services; (3) insignificantly reduced total payments to hospitals; (4) increased Medicare payments to hospitals for outpatient and referred-patient laboratory services; and (5) allowed about the same amount to independent laboratories and physicians as the reasonable charge system would have. GAO also found that: (1) the fee-rate caps held constant or reduced all fee rates; (2) a national fee schedule could increase total Medicare payments, since carrier rates vary widely for the same tests; (3) computation of the fee schedule based on a weighted average of the carrier rates, as capped by the 110-percent-of-median limit, would retain the reduction that resulted from the caps; and (4) the Health Care Financing Administration's method for calculating the national fee schedule, using area prevailing rates, could increase total Medicare payments.


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