COVID-19 relief legislation that lets providers in some cases set their own prices on COVID tests has resulted in charges as high as $14,750, a new study finds.
Providers billed insurers $144 on average for COVID diagnostic tests, with the prices ranging from one penny all the way up to $14,750, according to a new study in the Journal of General Internal Medicine, which drew on about 182,000 claims for tests provided by independent laboratories and outpatient hospital settings. For comparison, Medicare’s rate is $51.
After reading articles about sky-high bills for COVID tests, Ge Bai, an author of the study and associate professor of accounting and health policy and management at Johns Hopkins University, said she was skeptical and wanted to check for herself.
“Then after we looked at the data we were like, ‘Wow, that is happening,'” she said. “There are very high charges.”
The Coronavirus Aid, Relief, and Economic Security Act caps the prices out-of-network insurers pay for COVID tests at the provider’s publicly listed cash charge, which gives those providers “complete discretion” in determining the price, Bai said. However, the law also allows insurers to negotiate lower prices with out-of-network labs.
Bai said the loophole exposes less powerful health plans to predatory billing.
The CARES Act precludes providers and insurers from billing patients for COVID tests, but consumers ultimately shoulder the costs in the form of higher premiums and other out-of-pocket costs.
Bai noted that most providers didn’t charge exorbitant amounts. Just 8% of tests cost insurers more than $306.
The typical value, or interquartile range, of charges from independent labs, which performed about 50% of COVID tests in the study, was $67 to $100. The most expensive bill from an independent lab was $14,750. Bai could not share the names of the providers responsible for the highest charges.
For outpatient hospital settings, which performed about 35% of tests, that typical range was $94 to $204. The highest bill from a hospital outpatient facility was $2,436.
Bai said independent labs tend to charge less because they’re trying to gain market share. Patients tested at independent labs also tend to be healthier than those tested in hospital outpatient facilities, and thus more able to price shop, Bai said.
At the low end, the one cent bills were from providers who opted not to charge for the COVID tests and used that amount as a placeholder to show the test was performed, Bai said.
The study, which has undergone peer review, also analyzed nearly 319,000 claims for antibody testing and found less variation than with COVID tests.
Providers charged $64 on average for antibody tests—compared with a Medicare rate of $42—and the typical range was $42 to $55. The actual range, including outliers, was $4 up to $1,515 among independent labs, which provided 97% of antibody tests included in the study.
Bai said the prices tend to be lower on antibody tests because the patients aren’t experiencing symptoms, unlike during a COVID test. Like with the diagnostic tests, Bai noted healthier patients have more ability to do price comparisons because there’s less urgency.
The study also found wide variation in average COVID diagnostic test and antibody test charges by state.
Diagnostic tests were as cheap as $65 on average in Utah up to $506 on average in Washington, D.C. Antibody tests ranged from $46 on average in New York and $195 in New Mexico.
Arkansas, Louisiana, Missouri and New Mexico had particularly high average charges for both tests. By contrast, Georgia, Kansas, Massachusetts, Maryland, North Carolina, Nevada and Oklahoma had low charges for both tests.
Bai said her team could not identify a clear trend that explains the significant variation in average test price across states.
Insurers and lab providers disagree on the effects of letting insurers negotiate lower prices on tests. The Pacific Business Group on Health, a large coalition of employer payers, told Modern Healthcare labs could potentially refuse to negotiate, forcing insurers to pay a cash price that has little relationship to the actual cost of the test.
By contrast, the American Clinical Laboratory Association, which includes giants LabCorp and Quest Diagnostics, argues labs may not have legal recourse to force payment of the cash price if insurers try to negotiate a lower price.
To avoid exceedingly high outlier charges on COVID diagnostic tests, Bai said a good approach might be setting a ceiling at $500. While not a good approach during normal times, the pandemic and resulting urgent need for tests might be necessary to protect small insurers, she said. Setting a high ceiling can also prevent supply shortages, she said.
Under current law, providers can set their own prices, Bai said.
“It actually gives the provider leverage,” she said. “The provider can say: ‘See? The CARES Act tells me this is how much I can charge. It’s based on the price I say.’ ”