Medicare moves to cut lab payments to match private rates

Clinical takeaway: Practices billing Medicare for in-office lab tests should expect stepped payment reductions starting January 2027; the preliminary rates are open for public comment through Oct. 21. 

Lab payment rates for Medicare were supposed to track the market. Congress built that link in 2014, requiring the program to reprice most laboratory tests against what private payors actually pay. But legislative delays let that process run only once. In the years since, private-sector rates for most tests kept falling while Medicare rates stood still. The program has now ended up paying above market for the same tests private insurers get for less, and the gap has widened the longer repricing stalled. 

The Consolidated Appropriations Act, 2026 cleared CMS to collect updated private-payor data every three years, and the first collection under the restarted cycle is in. On Sept. 21, the agency released preliminary 2027 rates for the Medicare Clinical Laboratory Fee Schedule built on that data. This is the agency's first market repricing in years, and one it says will bring lab payments back in line with what the rest of the system pays. 

Medicare has been paying about 16% more than private payors for the same laboratory tests, according to the data CMS collected from laboratories. The agency estimates that closing the gap will save taxpayers about $1 billion a year. 

By law, Medicare payment for any clinical diagnostic lab test can fall no more than 15% per year, and CMS will phase the reductions in through 2029. Final rates are due in November 2026 and take effect Jan. 1, 2027. The comment window on the preliminary numbers and supporting data runs 30 days. Tests with no private-payor data reported got a separate track, priced after a public meeting CMS held Sept. 15 and 16. Those determinations publish in early October with their own 30-day comment window. 

The lab schedule is not the only Medicare payment line moving on Jan. 1, 2027. CMS has also proposed cutting the physician fee schedule conversion factor for 2027. For practices that run their own labs, the two changes arrive together: lower payment for the tests they perform and, if the physician proposal holds, lower payment for the visits that order them. 

"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," said Mehmet Oz, MD, administrator of the Centers for Medicare & Medicaid Services. 

Source: Centers for Medicare & Medicaid Services (2026 Sep 21) CMS announces new preliminary Medicare payment rates for laboratory services, saving taxpayers an estimated $1 billion annually