CMS is preparing to reset Medicare laboratory payments in 2027 after the agency said new private-payer data showed the program is paying substantially more than commercial insurers for many clinical tests.
The agency said preliminary rates under the Clinical Laboratory Fee Schedule are about 16% lower on average than 2026 Medicare rates and estimated the changes could save taxpayers about $1 billion annually. The rates are based on the second full data-reporting cycle required under the Protecting Access to Medicare Act of 2014 and remain subject to public comment before CMS finalizes them in November.
Hospital labs represented about 13.6% of reporting laboratories in the latest cycle, up from 1.1% during the first round in 2017, according to CMS. The expanded hospital participation comes after years of industry criticism that the original data used to establish Medicare lab rates did not adequately represent the broader laboratory market.
“Taxpayers and Medicare patients have been paying excessive rates to labs for years, but with some help from Congress, CMS is working to ensure that Medicare isn’t paying more than private insurers for the exact same tests,” CMS Administrator Mehmet Oz, MD, said in a Sept. 21 news release. “By releasing this preliminary information, we are providing greater transparency into the actual market rates for laboratory services, rooting out waste and supporting better-informed pricing decisions across the healthcare system, including Medicaid and Affordable Care Act Exchanges.”
Eight things to know:
1. CMS estimates the new rates could save $1 billion annually. The agency said Medicare has been paying about 16% more for laboratory services than private payers, based on the newly reported data. CMS is seeking to better align Medicare’s 2027 Clinical Laboratory Fee Schedule with the weighted median rates private insurers pay for the same tests.
2. More than 1,100 lab codes could see lower rates. CMS calculated preliminary private-payer weighted medians for 1,528 laboratory codes. Of those, 1,171 have a weighted median below the 2026 Medicare rate, while 186 would have a higher rate and 169 would remain unchanged. Two additional codes did not have comparable 2026 Medicare rates.
3. Cuts will be capped at 15% per year through 2029. Payment cuts will not take effect all at once. Under changes enacted in the Consolidated Appropriations Act, 2026, Medicare payments for an individual clinical diagnostic laboratory test cannot fall more than 15% from the prior year’s rate in 2027, 2028 or 2029. That means tests with private-sector rates significantly below current Medicare reimbursement could face several consecutive years of reductions.
4. Molecular and genomic tests face some of the largest potential rate resets. Compared with 2026 Medicare rates, preliminary weighted private-payer rates are about 23% lower for genomic sequencing tests and 22% lower for molecular pathology. Microbiology and immunology rates are about 19.3% lower, while chemistry tests are 16% lower. Proprietary laboratory analyses show a much smaller potential decline of 2.4%. The statutory 15% annual cap would limit how quickly the larger reductions take effect.
5. Hospital labs played a dramatically larger role in setting the new benchmarks. CMS received data from 875 hospital laboratories during the 2026 reporting period, compared with 21 in 2017 — an increase of more than 4,000%. Hospital labs accounted for about 13.6% of reporting laboratories this cycle, compared with 1.1% during the first round. CMS said regulatory changes made in 2019 helped increase hospital participation.
6. The overall dataset is also much broader. A total of 6,411 laboratories submitted private-payer data, up 230% from 1,942 in the first reporting cycle. After certain exclusions, CMS used data from 6,304 applicable laboratories. Physician-office laboratories represented the largest group, with 3,262 reporting entities, followed by 1,499 other or unknown laboratory types, 875 hospital labs and 775 independent labs.
7. The new rates arrive after years of laboratory industry pushback. In December, the American Clinical Laboratory Association urged Congress to overhaul Medicare’s laboratory rate-setting process, arguing that the original PAMA reporting cycle captured data from fewer than 1% of laboratories and did not adequately represent the market. ACLA said the methodology had contributed to nearly $4 billion in Clinical Laboratory Fee Schedule cuts from 2018 through 2020. The American Hospital Association also supported legislation to revise the process. The latest reporting round addresses at least part of that criticism by incorporating data from more than three times as many laboratories as the first cycle and substantially increasing hospital participation. Whether laboratory groups view that expanded dataset as sufficiently representative is likely to be an important issue as CMS moves toward final rates.
8. Hospitals have 30 days to weigh in before final rates are set. CMS opened a 30-day public comment period on the preliminary rates and supporting data. The agency expects to publish final 2027 Clinical Laboratory Fee Schedule rates in November, with the rates taking effect Jan. 1, 2027.
