Therapy cap moratorium, 75% rule addressed in Medicare drug bill

Rehab providers are relieved, but know therapy cap issue isn’t dead

If all your news of the Medicare prescription drug bill that President Bush signed into law on Dec. 8 has come from local newspapers, news magazines, or network newscasts, you may have missed two golden nuggets in the law that address major rehab issues. Buried in the voluminous bill underneath high-profile issues such as the drug benefit are a two-year moratorium on the outpatient therapy cap and language that directs delayed implementation and further analysis of the 75% rule.

"I have not seen anything in the press about the therapy cap, but certainly getting rid of the cap is a benefit to our patients and to the clinicians," says David Perry, PT, a member of the American Physical Therapy Association’s (APTA) federal government affairs committee. He is the owner of Perry Therapeutics in Grosse Pointe Woods, MI. "The physical therapy profession and the patients we serve came out very much winners with this legislation, [though] the legislation has its flaws," he says. "The headlines in the newspaper all talk about the prescription drug package, which was probably the weakest gain, and from some people’s perspective, may even be a loser for seniors. But that was the legislation we needed to tag along with to get the benefits for physical therapy."

The law applies a two-year moratorium on the therapy cap, which had been set at $1,590 for physical and speech therapy services combined, with another limit of $1,590 on occupational therapy services. The cap was on from Sept. 1, 2003, until the law was signed on Dec. 8. Services rendered from Dec. 8 through the end of 2005 will not be subject to the cap.

The law also requires that a study be done by March 2004 on therapy cap alternatives and outpatient therapy utilization. By October, a study by the comptroller general of the U.S. General Accounting Office (GAO) on conditions appropriate for cap exemptions must be completed. Also included is a required Medicare Payment Advisory Commission (MedPAC) study on allowing Medicare fee-for-services beneficiaries direct access to outpatient physical therapy.

Yet another benefit is that the law prevents a scheduled 4.5% cut in Medicare payments to physical therapists and other providers from taking effect in 2004, replacing it with a 1.5% increase for 2004 and 2005. "The cap issue was first pushed as an independent bill. Direct access is being pushed as an independent bill, but they weren’t going to fly through Congress," Perry says. "That’s just the reality of the system, so this was the vehicle we were fortunate enough to have legislative support to tag along with."

The APTA had hoped for a pilot project on the direct access issue, but was happy enough to get the MedPAC study, Perry says. "The bill was introduced earlier this year that would provide for direct access under Medicare in those states where direct access is allowed by the state practice act. That bill is still out there, but the reality of that bill passing as a stand-alone bill is probably still a few years away," he says. "The study mandated in the new law provides the profession and the associations an opportunity to work with CMS [Centers for Medicare & Medicaid Services] to have input into it. It’s another step in the right direction."

The APTA has taken the stand that providing greater access to physical therapy will ease the burden on the health care system. "There are certain conditions where it’s very clear that the patient requires the services of a physical therapist," Perry says. "You’ve got the time factor and the expense of going to a physician first, when what you really needed to do is get in quickly to see your physical therapist. The more quickly you can get in with the physical therapist in certain conditions and the more quickly that treatment can be initiated, the more quickly the patient can recover. In the more acute phase, the impact can be greater and you will need fewer visits," he explains. Physical therapists are trained to recognize what is within their scope and what isn’t, Perry says, so they know when to refer a patient back to a physician.

Despite the benefits of the Medicare law, he acknowledges that it could be a short-lived victory. "The law is still there from the original Balanced Budget Act of 1997 that instituted the cap. What passed was instructing CMS not to implement the cap for two years, so the issue still exists," Perry says. "At the end of that two years, if the law has not been changed, the law theoretically would go back into effect. Work still needs to be done to provide a change in the law or an alternative mechanism to save money."

That is precisely the issue that bothers many physical therapists and has engendered heated discussions within the profession in the weeks since the law was signed. Peter van Well, PT, a physical therapist in Redford, MI, says he is happy about the physical therapy relief in the law but worries at what cost that relief comes. "Medicare in the end is not a blank check. It has limited funds, and in the end, someone will have to sacrifice," van Well says. "I understand that many are saying, As long as it is not us.’ But in the end, we will be affected. To me, it is an ultimate reality."

He points out that while physical therapists are concerned about access to care for their patients, they also are concerned about their ability to earn a living. "It is clear that the government believes we rehab professionals are, if not too expensive, at least very expensive; and likely in their opinion, there is not enough evidence that what they pay for is truly effective," van Well says. "And so they begin to restrict access and, thus, expense. Things happened to others for the past years, and we weren’t crying foul then. Now it affects our pockets, and now it becomes a problem. I, too, am a PT; and I, too, wish to make an honest buck for my family; and I, too, want the cap to go. But another moratorium is just that: another moratorium. A year from now we’ll have to go through this again."

Paul Simonetti, DPT, MTC, a physical therapist with Chestertown (MD) Orthopedics and Sports Medicine, agrees that the law is not a total victory. "Clearly, this is a victory, but it can only be viewed as a short-term, stopgap measure to a much larger issue. Let us not set up the ticker tape parades yet," he says. "Perhaps before the end of 2005, a new payment scheme may be created to replace the one currently being used. If not, we are faced with either a reinstatement of the cap or a new legislative battle to again provide relief from this piece of bad legislation."

Further analysis on 75% rule

On the 75% rule issue, the language included in the legislation does not have the force of law but rather is a directive, says Rochelle Archuleta, senior associate director for policy development — post-acute care for the American Hospital Association in Washington, DC. It states the conferees’ concern that the 75% rule would have "severe consequences" for access to inpatient rehabilitation hospital services and urges further analysis of which conditions are clinically appropriate for inclusion in the calculation of the 75% rule. It also directs the GAO to issue a report on the current list of conditions and to delay implementation of the rule until the report is finished.

"We are hopeful that the administration will follow the directives in the report," Archuleta says. "At this point, the fate of CMS’ draft final rule rests in the secretary’s [of Health and Human Services (HHS)] hands," she says. "CMS and HHS have been negotiating changes to the draft final rule. It’s unclear what the final HHS position will be."

One option, Archuleta says, is for HHS to sign off on the draft final rule, which would then go to the Office of Management and Budget (OMB) for review prior to publication in the Federal Register. That option would be contrary to the recommendation in the drug bill conference language. Another option is for HHS to act on the "stop, study, revise" position in the prescription drug law. "We’ve heard they may forward the draft final to OMB and commission a study," Archuleta says.

Similar language can be found in the FY 2004 Omnibus Appropriations bill (H.R. 2673), which also is directive and not mandatory. It is similar to what is found in the Medicare conference report, but directs CMS to contract with the Institute of Medicine (IOM) to issue a report on the clinically appropriate standards for inclusion in an inpatient rehabilitation facility. It also suggests delaying implementation of the local medical review policies until the report is finished.

"We are thrilled to have both," says Carolyn Zollar, JD, vice president for government relations at the American Medical Rehabilitation Providers Association. "The language in the appropriations bill is more consonant with our advocacy efforts in that it urges an IOM study and mentions the local medical review policies, too," she adds.

Need more information?

  • David Perry, PT, Perry Therapeutics, 2065 Van Antwerp, Grosse Pointe Woods, MI 48236. Phone: (313) 882-9614.
  • Peter van Well, PT, 9664 Hemingway, Redford, MI 48239. E-mail:
  • Paul Simonetti, DPT, MTC, Chestertown Orthopedics and Sports Medicine, 100 Brown St., Chestertown, MD 21651. Phone: (410) 778-3445.
  • Rochelle Archuleta, Senior Associate Director, American Hospital Association. Phone: (202) 638-1100. E-mail:
  • Carolyn Zollar, Vice President for Government Relations, American Medical Rehabilitation Providers Association, 1710 17th St. N.W., Washington, DC 20036. Phone: (888) 346-4624.