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Labs in Battle Over New Tax

Clinical labs didn’t get the diagnosis they were hoping for in the Senate Finance Committee’s health care reform framework.

The labs, including big industry players such as Quest Diagnostics and Lab Corp., lobbied hard to convince the Finance panel to scrap the idea of adding co-payments for lab work done for Medicare patients.

Although Finance Chairman Max Baucus (D-Mont.) did agree to drop the co-payment issue, the panel ended up proposing an annual fee, or tax, on the labs, most likely based on each lab’s revenue. The tax would raise $750 million annually to help pay for the health care bill.

“We’ve already met with the Baucus staff this morning,” Alan Mertz, president of the American Clinical Laboratory Association, said Wednesday. “We have raised our objections with them. We’re launching a grass-roots campaign today.”

That campaign is being branded “Stop the Tax on Clinical Laboratory Services.”

Mertz said his organization and its member labs also are reaching out to bipartisan Senate Finance negotiators to voice their opposition to the proposal, which Mertz said has baffled his industry.

“This came out of left field,” he said. “We had never even heard of such a tax until basically [Tuesday] morning. ... We’ve never seen a bill or another Member of Congress propose such a tax.”

Labs aren’t the only medical players upset by the Baucus framework.

AdvaMed, which represents the medical device industry, is also lashing back against a $4 billion annual fee, said the group’s president and CEO, Stephen Ubl.

Ubl said that in addition to that fee, which would be targeted directly at medical devices, his group would also be affected by the financial hit on clinical laboratories. “That’s going to have a residual impact on our members,” Ubl said.

“Candidly, we support many of the elements of the Baucus proposal,” Ubl added. “We are going to make every effort to educate Members about this policy both here and back home.”

A Senate aide close to the health care reform negotiations said that all players in the medical industry will have to pay a price for reform.

“Everyone who benefits from health reform has a responsibility to play a role, including health care providers, individuals and employers,” said the Senate source. “The Finance Committee and the White House struck a deal with the pharmaceutical industry to contribute to reform, and they agreed to contribute $80 billion. A similar deal was struck with the hospital industry. Other industries that are looking at more than 46 million new customers in the newly insured Americans also have a responsibility to contribute.”

But the labs say their industry is being asked to pony up more than its fair share.

“It is a significant and disproportionate impact to our industry,” said Laure Park, vice president of communications and investor relations for Quest Diagnostics.

Charles Silverman, director of government affairs and regulatory policy for Quest, added that the labs already were expecting — and had agreed to take — a hit of $5 billion over 10 years as part of a productivity adjustment that would affect labs’ Medicare reimbursement rates.

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