Medicare Compliance & Reimbursement

Therapy caps reduce provider spending but threaten to escalate benes' out-of-pocket burden

Upon recommendation from the Government Accountability Office, therapy caps went back into effect Jan. 1, 2006, at $1,740 per bene. The $1,740 limit applies to OT services and to PT and SLP services combined.

There are notable ebb-and-flow relationships between therapy caps and therapy spending, a recent Medicare Payment Advisory Commission report reveals. When therapy caps were imposed in 1999, Part B therapy spending decreased 34 percent. The number of therapy users decreased, with eight percent of benes exceeding the caps. When the moratorium went into effect in 2000, outpatient therapy spending more than doubled, jumping from $1.8 billion to $3.7 billion by 2003. An increase in per-user spending isn't the only reason for the upsurge--the overall number of users has risen as well.

During the brief periods in 1999 and 2003 when therapy caps were active, nonhospital service facilities showed significant declines in therapy spending. In contrast, hospital outpatient facilities, which were exempt from the caps, experienced spending growth. When the caps were lifted, nonhospital outpatient therapy spending rebounded. Spending for independent therapists also increased when the Balanced Budget Act of 1997 raised spending limits from $900 to $1,500. At the time, the caps applied to providers--not to beneficiaries--allowing benes who'd capped out their therapy claims with one provider to switch to another.

Growth in outpatient therapy services during 2004 contributed to increased spending on services related to the physician payment update, CMS told MedPAC. In the midst of current budget reconciliation and physician payment debate, the reinstituted caps have many physician groups and politicians reeling. "Medicare patients should not be victims in the Washington budget battle," says American Occupational Therapy Association president Dr. Carolyn Baum. "CMS should use its authority to enable patients to receive the services they need as we wait for the Congress to pass a federal budget.

To view the full report, visit www.medpac.gov/publications/other_reports/Dec05_Medicare_Basics_OPT.pdf.