Medicare Overpaid for Lab Services for Years, Will Reduce Fees: Dr. Oz

Medicare has been overpaying for laboratory services for years but will reduce rates to match the commercial market in 2027, the federal government announced Sept. 21.

The reduction should net $1 billion in annual savings for taxpayers, according to a statement from the Centers for Medicare and Medicaid Services.

Administrator Dr. Mehmet Oz acknowledged that the agency had paid excessive rates for some time, but added, “[The agency] is working to ensure that Medicare isn’t paying more than private insurers for the exact same tests.”

Medicare reimbursement rates for simple laboratory services—such as blood tests and urinalysis—have been about 16 percent above the marketplace average, according to an agency statement.

Medicare has been paying even more highly inflated rates for other lab services including immunology and genomic sequencing.

Industry leaders criticized the new rate schedule, saying it would make healthcare less available to seniors. 

“The rates released today will impose steep annual payment cuts that threaten seniors’ access to essential laboratory services, which are critical to every step in their health care journey,” Susan Van Meter, president of the American Clinical Laboratory Association, said in a Sept. 22, statement.

Dr. Jim Zhai, president of the College of American Pathologists, said the fee reductions were unsustainable. “Cuts of this scale threaten the stability of the laboratory infrastructure that patients and physicians rely on for accurate and timely diagnoses,” Zhai wrote in a Sept. 22 statement.

The fee schedule has been updated only once since 2014 due to legislative delays, according to the agency. In the meantime, data indicate that commercial rates for these services have gone down substantially.

The Consolidated Appropriations Act of 2026 enabled the agency to collect private-sector payment data once every three years.

Medicare spent about $8 billion on laboratory tests in 2023, according to the Office of Inspector General. That included nearly 39 million comprehensive metabolic panels, a routine test of organ functions, costing more than $405 million, and 25.3 million cholesterol checks that were billed for more than $330 million.

Spending on more expensive genetic testing increased 32 percent from 2022 to 2023, reaching $1.8 billion. Some genetic tests cost nearly $5,000. Medicare has been overpaying for genetic tests by 23 percent, officials said.

A 16 percent overpayment on the $8 billion total lab testing amount would be nearly $1.3 billion.

Federal law prohibits Medicare from reducing laboratory payment rates by more than 15 percent a year, so the agency will phase in the rate change through 2029.

The 2027 rates will be published early in October. The public will have 30 days to comment on the proposed rates, which will be finalized in November. 

The rates take effect on Jan. 1, 2027.