2027 Medicare lab fee schedule points to 15% cuts across many test codes

Preliminary data for the 2027 Clinical Laboratory Fee Schedule (CLFS) indicate substantial downward pressure on Medicare reimbursement for lab services.

CMS released information on the 2027 payment rates ahead of final rates expected in November, projecting that the methodology used to set the rates would save $1 billion annually for Medicare. Hospital-based and freestanding labs should prepare for rate decreases of 15% on hundreds of tests.

For the first time since 2018, CMS is applying the market-based methodology legislated in the Protecting Access to Medicare Act of 2014 (PAMA). Instead of relying on historical Medicare rates to set CLFS rates, PAMA requires determining a weighted median of the rates paid by private insurers. That calculation is based on reporting by labs.

“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 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 [ACA] exchanges.”

Medicaid fee-for-service lab payments are statutorily prohibited from exceeding the corresponding CLFS rate, while ACA health plans generally use it as a baseline in contracting.

How steep the 2027 Medicare laboratory payment cuts could be

The latest reporting cycle was based on payment data spanning the first six months of 2025, with reporting taking place over a three-month period ending July 31, 2026.

CMS used data from 6,304 applicable labs, after quality-control exclusions, to compute the 2027 rates. Compared with 2026 CLFS rates, 1,171 codes had a lower calculated median, while 186 were higher and 169 stayed the same.

The actual decline in payment for those codes would be less significant than the data reporting indicates because 2026 federal budgetary legislation established a 15% cap on payment reductions each year from 2027 through 2029. That cap would apply to numerous lab tests in categories where many rates otherwise would drop more significantly, as indicated by the collective numbers for those categories:

• Chemistry (-16%)
• Molecular Pathology (-22%)
• Genomic Sequencing (-23%)
• Microbiology (-19.3%)
• Immunology (-19.3%)

Most tests falling under the category of Proprietary Lab Analysis, for which the reported change is -2.4%, would not be subject to the cap.

The American Clinical Laboratory Association (ACLA) wrote that 775 lab tests would be subject to the maximum 15% cut in 2027, along with additional reductions in 2028-2029.

Why the laboratory reporting mix matters for Medicare rates

CMS noted that a significantly higher segment of the reporting came from hospital outreach labs in the latest cycle, compared with the prior round, which took place in 2017. Hospital labs accounted for 13.6% of the total reporting pool (875 of 6,411), whereas nine years ago, the share was just 1.1% (21 of 1,942).

Thus, while the preliminary 2027 rates represent a substantial decrease, the unadjusted reductions (without the 15% cap) could have been more substantial. Commercial payment rates for hospital outpatient department labs are between 65% and 531% higher than for independent labs, according to a 2021 report, meaning the higher proportion of hospitals in the reporting pool may have put upward pressure on the weighted rates.

Even so, the ACLA said data was reported from only 2% of all Medicare Part B labs that billed Medicare in 2024, including less than 20% of hospital outreach labs and only 1% of physician office labs.

“The result is a distorted and incomplete picture of the market that drives payment cuts,” according to the association.

The ACLA noted that in the aftermath of PAMA, labs experienced three consecutive years of payment cuts of up to 10%, then six years of payment freezes. Now they face steeper cuts for the next three years.

Congressional proposals could reshape future CLFS reductions

Advocates such as the American Hospital Association, the American Medical Association and the ACLA have asked Congress to pass legislation that would limit the scheduled cut and update the lab-payment provisions in PAMA.

The Reforming and Enhancing Sustainable Updates to Laboratory Testing (RESULTS) Act would cap annual rate reductions at 5% and likely would increase the payment rates being reported by labs. Such an increase would be expected due to provisions excluding Medicaid managed care rates from the reporting and establishing an independently operated claims database from which to derive the rates for widely available tests. The database would allow for better representation of higher-reimbursement labs in Medicare rate setting.

Among other provisions, the bill also would ease the reporting burden on labs by switching from a triennial to a quadrennial rate-setting cycle.

The RESULTS Act has sponsorship by 62 Republicans and 59 Democrats in the House, giving it a bipartisan basis. However, neither the House bill nor a companion Senate bill has advanced past the committee level. Congress will have a compressed post-election window in which to pass full-year FY27 spending and potentially a slew of other year-end legislation.

The RESULTS Act, along with other bills, did get posted for discussion in an early-2026 House subcommittee hearing.

“Since the passage of PAMA, we have seen drastic cuts in reimbursement for lab tests with cuts as high as 30% from previous rates,” Rep. John Joyce (R-Pa.) said during the Jan.8 hearing. “These cuts across the board impact testing for everything from a skin biopsy to a complete blood count. This under-reimbursement is a dire threat to access for seniors across our country.”