In this article we discuss the caps on Medicare coverage for beneficiaries needing occupational, physical and speech therapy. Back in 1999, Sen. Charles Grassley (Rep.-Iowa) introduced legislation to establish exceptions to the cap for beneficiaries who need more extensive therapy than the cap would allow. The proposed Act is entitled Medicare Rehabilitation Benefit Improvement Act of 1999. A moratorium was imposed on the caps, but that moratorium will expire on July 1, 2003.

It was part of an agreement that increased Medicare payments about $11 billion over a 5 year period of time. In the bi-annual report released by the Medicare Payment Advisory Commission on June 2, 1999, the Commission called for changes in the therapy caps discussed below. Please see our article " Is Quality of Care Being Affected by Medicare Payments Cuts?".

Under the 1997-Balanced Budget Act spending caps were placed on the amount of money that could be spent on rehabilitative therapy for Medicare beneficiaries. The caps are as follows:

Medicare will pay $1,272 (80%) and the beneficiary will pay $318 (20%). The cap will be based on services paid for, not on services billed.

To find out more on this topic you can go to which is the group we refer to in the article-The American Physical Therapy Association 

The caps do not apply for respiratory therapy. The caps do not apply to the homebound elderly receiving therapy at home under Medicare or, for the first 100 days, to patients in skilled nursing facilities. Also exempted from the caps are hospital outpatient departments.

The caps were intended to apply to Medicare beneficiaries who were homebound, but who went to freestanding rehab facilities. Unfortunately Medicare computers do not have the programming to keep track of how much therapy is being provided to beneficiaries except those in nursing homes. Thus nursing home residents are the only ones to whom the caps have been applied. It does not take long before the cap is reached for a beneficiary who has been afflicted by Parkinson's disease, broken hip, stroke, etc. Protests have poured into the CMS and to congressional representatives and we will keep you advised on this matter.

Recently a great deal of publicity has focused on the usage of doctor's offices for what is called "off-site location" as clinics that administer various types of physical therapy. These sites are called comprehensive outpatient rehabilitation facilities (CORF). It has been alleged that many of these part-time rehabilitation centers are merely subterfuges for Medicare fraud, abuse and kickbacks. The Balanced Budget Act of 1997 revised the way Medicare would pay for outpatient treatment as discussed below. Some health care businesses saw a way to take advantage of this system. If a doctor would sub-let a portion of his office part time he would be reimbursed up to $3,000 per month.

As the law now stands the primary (main) CORF facility is the only one subjected to a certification inspection. Thus the off-site locations are not subject to inspection at all. A conflict of interest may arise since the doctor from whom the space is leased on a square foot basis, may feel an indirect pressure to refer patients to the site located in his office.

As we pointed out in our article Selecting a Nursing Home, many nursing homes have opted to cut back on long term care residency space in order to expand space for acute care treatment. This took place because it was more lucrative for the home to treat sub acute Medicare residents for short stays rather than long term care residents. With the caps in place this is no longer such a clear-cut matter. As a result of the caps the shortage of trained physical therapists is no longer true. According to the American Physical Therapy Association about 3% of the trained therapists are now unemployed as opposed to being fully employed just 18 months ago.


By Allan Rubin
update June 22, 2003

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