We stand on the threshold of a new era of personalized medicine—one when treatments will be able to be precisely calibrated for individual patients to achieve maximum effectiveness. 

 

The foundation of this new era of healthcare is advanced molecular diagnostics. The mapping of the human genome is providing unprecedented information about how specific diseases affect individuals. As a result, newer, faster, more accurate molecular diagnostics are being developed which will identify diseases earlier—even before symptoms occur—whether a treatment will or will not be effective, and what the best way is to administer that treatment.

 

The advent of personalized medicine will not only mean better outcomes for patients, but for the health care system as a whole, as diseases will be detected earlier when they are less expensive to treat and when there is a greater chance for complete recovery. Eliminating the expense associated with latter stages of disease will save the healthcare system untold billions and allow more resources to be devoted to areas such as preventive services, to help combat disease before they even start.

 

Unfortunately, the promise of molecular diagnostics and personalized medicine might not be realized because of Medicare reimbursement policies that were devised for diagnostics technologies of 1984, back when a cell phone was the size of a brick and cost $4,000.

 

AdvaMed—the Advanced Medical Technology Association—has long urged Congress to reform the outdated Medicare reimbursement policies for state-of-the art diagnostics. If critical steps aren’t taken, the diffusion and adoption of technologies key to personalized medicine might be fundamentally inhibited. And ultimately, there will be little incentive to innovate in the area of molecular diagnostics without these necessary changes. 

 

It is staggering to realize how fundamental diagnostics are to modern healthcare and how little they contribute to healthcare costs: clinical laboratory tests influence as much as 70 percent of health care decisions, yet they account for less than 2 percent of Medicare spending.

 

Unfortunately, the current Medicare reimbursement system focuses on treatment of acute conditions instead of the prevention and management of chronic diseases. What can be lost in the Medicare reimbursement process is an understanding that clinical laboratory tests provide physicians with greater information to make smarter, customized healthcare decisions and help prevent deaths, adverse events, and additional costs. 

 

The Institute of Medicine in 2000 and the Lewin Group in 2005 both found that the current Medicare Clinical Lab Fee Schedule is flawed, complex, lacks transparency, and does not efficiently incorporate new technologies. The Lewin study also found the fee schedule has no way to account for the value of diagnostics to health care and provides few incentives for new test development. 

 

Specifically, the study found that Medicare payment policies for new diagnostic laboratory tests are “archaic, impractical and severely flawed.” Lewin noted that Medicare often pays substantially less for a new test that offers greater benefits to patients and the health care system than an older test, providing little incentive for the development and adoption of new diagnostic tests.

 

Furthermore, the fee schedule has not been updated for inflation in 11 of the past 16 years and will not receive another update until 2009. That means that each dollar paid in 2004 under the fee schedule was equivalent to 75 cents in 1984 dollars, after adjusting for inflation and congressionally mandated payment cuts. 

 

In order to address these issues and encourage innovation that will enable personalized medicine to fulfill its promise, it is important for Congress to pass the Medicare Advanced Laboratory Diagnostics Act, which will reform many of the outdated Medicare policies that discourage the development and adoption of new clinical diagnostic laboratory tests.

 

The bill would establish a demonstration project to test a new Medicare payment system for certain molecular diagnostics. The demonstration would incorporate into the payment system the value of diagnostics in patient care management, a test’s associated resource requirements, and its potential to reduce long-term costs. It would also allow for a process to adjust items still on the fee schedule through a reconsideration process to correct historic errors that set inadequate reimbursement for diagnostic tests; improved processes for obtaining adequate reimbursement for new diagnostic lab tests; and more transparency with respect to Medicare reimbursement decisions.

Prospects for passage of this legislation were greatly enhanced when Sen. Charles Schumer (D-New York), an influential member of the Senate Finance Committee, recently introduced the Senate’s version of the measure. Key sponsors of the legislation in the House include Representaives Bobby Rush (D-Illinois), Michael Ferguson (R-New Jersey), Mike Thompson (D-California), and Phil English (R-Pennsylvania).

Momentum is growing to enact this needed reform to modernize Medicare’s outdated reimbursement policies that will finally let the full potential of innovative molecular diagnostics and personalized medicine thrive.