Genetic Testing and Value-Based Care: A Double Edged Sword for State Medicaid Agencies

July 30, 2021

Precision medicine has the potential to revolutionize treatment for previously incurable diseases like cancer and other conditions. One of the most important tools in the field of precision medicine is genetic testing. In recent years, the number of genetic tests has proliferated – with over 75,000 different tests now on the market. By 2025, some experts believe that spending on genetic testing will reach $17.6 billion.

As state Medicaid agencies strive to reduce healthcare costs and grapple with value-based payments, it should come as no surprise that reimbursement for genetic testing is top of mind for many state plans.

Lowering the Total Cost of Care Through Genetic Testing

Rising healthcare costs is a problem that isn’t going away. PWC’s Health Research Institute estimated that in 2020 medical costs would increase 6%. Both precision medicine and value-based care are seen as potential solutions to this challenge.

When considered in isolation, many of the genetic tests that underpin precision medicine are costly. As state Medicaid agencies and other payers shift to value-based or episode-based payment models, however, the expense is often justifiable. For example:

  • A study of 13,000 behavioral health patients found that genetic testing led to fewer drug prescriptions. This saved payers $1,036 on average on prescriptions and patients exhibited 17% higher medication adherence rates. In addition, genetic tests are increasingly being used to inform treatment decisions in different fields. Testing can identify more effective medications that can be administered to patients earlier in their treatment. Many of these drugs have fewer negative side effects and some are available at a lower cost than other alternatives.  
  • On the payer side, Harvard Pilgrim Health Care recently became the first commercial payer to enter into an outcomes-based contract for a high-cost gene therapy to treat a rare form of blindness. A thoughtful approach to selecting or constructing the right value-based model for different drug categories will help catalyze towards value-based care and ensure that the right drug reaches the right patient at the right time.  

Bridging the Gap Between Genetic Testing and Payment Policies

Despite the promise associated with many genetic tests, state Medicaid agencies still face numerous hurdles when it comes to reimbursing members for these services. For instance, the CPT codes associated with genetic testing number in the hundreds, while thousands of tests are available to patients. In addition, only a limited number of CPT codes have been created for tests that analyze multiple genes. More specificity is needed for genetic tests, since both labs and payers struggle with panel codes.

In addition, state Medicaid agencies rightfully want evidence that genetic tests deliver value for patients. In many cases, more clinical studies are needed to show the utility of genetic tests. In the context of precision medicine and value-based care, financial models need to be created to demonstrate that the upfront costs associated with genetic testing are offset by the lower overall cost of treatment for a patient’s entire episode of care.

State Medicaid agencies can also take steps to ensure that their genetic testing expenditures are benefitting members. Here are three recommendations:

  1. Analyze genetic testing claim trends. Typically, prenatal tests represent the lion’s share of genetic testing claims. This category is followed by genetic tests to detect hereditary cancer. When analyzing genetic testing claims, state Medicaid agencies often discover indications of overbilling, such as claims for multiple tests or incorrect coding. In some cases, tests are not rejected even though they don’t conform to the state Medicaid agency’s medical necessity rules due to the coding complexities.
  2. Regularly update reimbursement policies. Genetic testing reimbursement policies should be based on solid clinical evidence. State Medicaid agencies may develop their own team of in-house genetic experts or use outside genetic consultants to create and update their genetic testing reimbursement policies to validate the clinical necessity of the claims.
  3. Leverage technology to identify genetic testing overpayments. HMS’ Genetic Testing solution uses claims filtering algorithms and payment integrity rules to automatically identify genetic testing claim overpayments in pre- and post-pay environments. This technology-based service helps payers analyze inappropriate code combinations, detect incorrectly billed volumes, and identify experimental, investigational, and unproven tests. Although results vary by client, one of HMS’ state clients has experienced a 100% uphold rate associated with $26.5M in client savings.

Genetic testing, precision medicine, and value-based care are all healthcare trends that are here to stay. To navigate this new landscape, state Medicaid agencies need to utilize a variety of tools and techniques to deliver better patient outcomes while lowering healthcare costs. To learn more about how we can help, feel free to contact us.




Previous Article
Spotlight on Social Determinants of Health: Economic Stability
Spotlight on Social Determinants of Health: Economic Stability

See more
How Pre-Payment Integrity Can Incentivize Evidence-Based Care
How Pre-Payment Integrity Can Incentivize Evidence-Based Care