Outpatient therapy cap: The wolf may actually be at the door come July 1

Legislation to repeal cap yet to get a vote

It may be tempting to brush off the latest warning that the Centers for Medicare & Medicaid Services (CMS) will begin enforcing the $1,590 annual cap on outpatient rehabilitation therapy starting July 1. After all, the cap has been placed on moratorium three times since it was first mandated in the Balanced Budget Act of 1997. But sources close to the negotiations for another moratorium or outright repeal of the cap say it’s unlikely Congress will deal with the issue before July. That means outpatient therapy providers need to prepare to deal with the cap at least temporarily.

Legislators in both the Senate and the House of Representatives introduced bills March 6 that would repeal the cap. Sen. John Ensign (R-NV), along with 10 cosponsors, introduced the bill in the Senate. In the House, Rep. Phil English (R-PA) introduced an identical bill with 44 cosponsors.

It’s the same legislation that was introduced but never voted on last year. Given the estimated $400 million Medicare cost savings of implementing the cap, the legislation may take a back seat to other national priorities such as the situation in Iraq and the $400 billion Medicare prescription drug benefit President Bush is advocating, says Peter Clendenin, executive vice president of the National Association for the Support of Long Term Care in Alexandria, VA.

"We’re trying to get this on the table," Clendenin says. "We feel confident it will eventually pass, but it is unlikely Congress will take it up before July. We are meeting with CMS to convince them to further postpone the effective date based on a number of confusing legal and statutory requirements in the bill."

At press time, CMS had not changed the July 1 implementation date.

Clendenin’s organization is part of a national coalition of rehab providers and patient advocates who are working to overturn the cap, which would limit Medicare beneficiaries to $1,590 worth of physical and speech therapy combined per year. (The original amount for the caps was $1,500, but because it is indexed by the Medicare Economic Index each year, the 2003 amount will be $1,590.) Beneficiaries also would be subject to a $1,590 cap on occupational therapy services. The limitation does not apply to services provided at hospital outpatient departments.

"The law would repeal the caps entirely, and we feel very strongly that’s an important step to take that would benefit hundreds of thousands of Medicare beneficiaries who will have to go without therapy otherwise," Clendenin says. "No one thinks it’s a good idea. Neither Congress nor CMS is really committed to enforcing it, but they’ve never gotten around to repealing it either."

Clendenin estimates that one in seven Medicare Part B beneficiaries would exceed the cap. "And they’ll exceed it big, especially patients who have strokes or hip replacements," he says. "These are the frailest individuals with the highest level of acuity. Their therapy needs are well over $1,500. We estimate someone who’s had a stroke is going to need $3,000 to $4,000 worth of physical, occupational, and speech therapy to fully recover."

Patients still could pay out of pocket to receive services, but many can’t afford that expense, Clendenin says. "This will have a dampening effect on the amount of therapy," he says. "Patients could end up rehospitalized in a setting that’s 8 or 10 times more expensive than outpatient therapy. It’s pay me now or pay me later.’ It’s cost-shifting."

Dave Mason, vice president for government affairs at the American Physical Therapy Association in Alexandria, VA, says the cost issue will be the biggest hurdle with Congress. "Because Congress enacted this in 1997, savings were assumed because of the reduction of benefit payments. Those savings were built into the budget baseline," he says. "So repeal has a big cost impact. It’s not so much a policy argument that would defend the idea of a dollar limit. It’s more that to get rid of the policy will cost a lot of money. But this needs to be taken care of. The cap is just a bad idea."

Mason says no study was done to justify the amount of the cap. "The most onerous thing about the Medicare cap is the arbitrary dollar amount," he says. "There was no consideration of the patient’s needs. The patient is not even part of the equation."

APTA is making a strong suggestion that providers go ahead and make certain beneficiaries aware of the cap, Mason says. "There is a real dilemma here: Do I tell them now? On the one hand, I don’t want them to be surprised, but on the other hand, this may not come through, and I don’t want to worry them needlessly," Mason says. "If you have a chronic patient who is clearly going to need continuing therapy for an extended period of time, I think those folks need to know."

The beneficiary notification issue is one of the problems many rehab providers have with the cap. The cap applies per beneficiary, not per provider, so providers may not always know when a patient reaches the cap. Thus, providers run the risk of providing services that will not be covered. According to the therapy cap Program Memorandum published by CMS in February, "it is the provider’s responsibility to present each beneficiary with accurate information about the therapy limits." Providers are advised to use the Notice of Exclusion from Medicare Benefits form to inform beneficiaries of the limits at their first therapy visit.

"The problem is that no one will know they’ve hit the cap until they get a denial of services from Medicare," Mason says. "If beneficiaries get services at different locations, there is no way for the practitioner to know ahead of time when that will happen."

Therapy cap info will lag behind treatment

CMS officials told Rehab Continuum Report that this will indeed be an issue between July and October, when beneficiaries will begin to get a notice of how much money Medicare has paid toward the cap on the Medicare Summary Notice they receive monthly. Until October, the MSN will only notify beneficiaries when they have exceeded the cap. But providers and patients will need to remember that even the monthly notices will still lag behind the actual treatment. Providers eventually will be able to access a beneficiary’s progress toward the cap through CMS’ Common Working File system, which will track the therapy limit. "All providers who bill electronically will have access to these screens," a CMS official says.

The 2004 Medicare handbook will contain information about the cap, but CMS will not notify all beneficiaries about the cap until then. For now, CMS is relying on providers and a consortium of beneficiary advocates to disseminate information about the cap to beneficiaries.

Carolyn Zollar, vice president for government relations for the American Medical Rehabilitation Providers Association in Washington, DC, says the original intent of the cap may already have been accomplished by implementation of the physician fee schedule for rehab. "The fee schedule has had the effect of decreasing the amount and possibly the volume of services. That was the original objective of the cap," Zollar says. "There might be the question if you need the therapy cap at all if your objective was to reduce outpatient payments."

That theory was borne out in a CMS-commissioned study of the effects of the cap during 1999, the one year when it was applied. The DynCorp Report on Outpatient Therapy Utilization (see the full report at www.cms.hhs.gov/medlearn/therapy/dyncorprpt.asp) found that the application of the fee schedule, which began in 1999, "created a relatively level playing field of payments to providers furnishing similar services, and created the significant cost reductions desired by Congress." The study found that of those patients most likely to surpass the caps, a disproportionate number were women; people over age 80; racial minorities; and patients with stroke, hip fractures, Parkinson’s disease, swallowing disorders, and musculoskeletal conditions affecting the knee, hip, and shoulder.

Another report presented to CMS in 2001 by The Urban Institute of Washington, DC (available at www.cms.hhs.gov/medlearn/therapy) found that as many as 13% of beneficiaries were in danger of exceeding the cap.

Christina Metzler, director of federal affairs for the American Occupational Therapy Association in Bethesda, MD, says the cap brings up a host of clinical and ethical problems aside from the administrative headaches. "What do you do when you reach the cap and you know the patient can’t pay? You are supposed to refer them to an outpatient hospital department, but what if the patient has no transportation? Therapists will have to discharge the patient when they know the therapy isn’t over," Metzler says.

Therapists will need to tell patients up front about the cap and the likelihood of exceeding it, Metzler says. Given that many of those patients are frail elderly people who are likely to have memory impairment, it’s a huge burden to lay at their feet. "When patients are in crisis, this is one more thing they shouldn’t have to deal with," she says. "We’ve been working on this thing for five years. It was a bad policy to begin with, and it’s still a bad policy. We need to put the decision-making back into the arena between the professional and the patient. The government shouldn’t be dictating clinical practice."

Need More Information?

  • Peter Clendenin, Executive Vice President, National Association for the Support of Long Term Care, 1321 Duke St., Suite 304, Alexandria, VA 22315. Telephone: (703) 549-8500. E-mail: clendenin@nasl.org.
  • Dave Mason, Vice President for Government Affairs, American Physical Therapy Association, 1111 N. Fairfax St., Alexandria, VA 22314-1488. Telephone: (703) 684-2782.
  • Carolyn Zollar, Vice President for Government Relations, American Medical Rehabilitation Providers Association, Suite 300, 1606 20th St. NW, Washington, DC 20009. Telephone: (888) 346-4624.
  • Christina Metzler, Director of Federal Affairs, American Occupational Therapy Association, 4720 Montgomery Lane, P.O. Box 31220, Bethesda, MD 20824-1220. Telephone: (301) 652-2682. E-mail: cmetzler@aota.org.