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Act Now: The Therapy Cap Exceptions Process Expires March 31

For years, rehab therapists have had a love-hate relationship with Medicare’s therapy cap exceptions process. Click here to learn more about it, here.

Brooke Andrus
5 min read
March 13, 2014
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For years, rehab therapists have had a love-hate relationship with Medicare’s therapy cap exceptions process. On the one hand, therapists often see it as a barrier to providing patients with the care they need; on the other, it’s the only means for therapists to continue treatment after a Medicare patient has exhausted his or her annual payment allotment for therapy services (a.k.a. the therapy cap). Reform of the cap has been a long time coming, and yet, year after year Congress has instead opted to merely re-extend the exceptions process. At the end of 2013, lawmakers issued a temporary extension to the cap with plans to reconvene in 2014 to revisit the issue. But that extension is set to expire March 31, and a permanent solution has yet to emerge from Capitol Hill.

The Story of the Cap and its Exceptions Process

Introduced as part of the Balanced Budget Act (BBA) of 1997, the therapy cap places a yearly limit on Medicare’s coverage of outpatient therapy services. In 2014, that amount is $1,920 for occupational therapy and an additional $1,920 for physical therapy and speech therapy, combined. The cap applies to all Part B outpatient therapy settings and providers, including private practices, skilled nursing facilities, home health agencies, outpatient rehabilitation facilities, comprehensive outpatient rehabilitation facilities, and hospital outpatient departments.

This limit was always meant to be a “hard cap.” But in 1999—the first year an absolute cap was set to go into effect—and every year since, Congress has acted to prevent the enforcement of a true cap. And that’s how the exceptions process came to be: since 2005, therapists have been allowed to continue treatment above the therapy cap as long as their services qualify as “medically necessary” according to Medicare.

Eventually, the exceptions process evolved into a two-tiered system in which therapists can continue treating past the cap up to a second cap threshold—$3,700 in 2014—as long as they attest that ongoing therapy is medically necessary as justified by supporting documentation in the patient’s medical record. (They do this by attaching the KX modifier to any post-cap claims they submit to Medicare.) However, providing services beyond this secondary threshold involves a tedious manual medical review process that, according to this report from the Center for Medicare Advocacy, “deters many providers from processing Exceptions, thus limiting beneficiary access to needed therapy services.” Essentially, the $3,700 threshold “serves as a de facto absolute cap for many beneficiaries,” meaning “many beneficiaries who need ongoing therapy go without therapy services altogether.”

This is especially true for individuals with chronic conditions who require care on an ongoing, long-term basis. While Medicare has made strides to ensure coverage for these individuals—most recently as part of a court-ordered effort to dispel the myth of patient improvement as a condition of reimbursement—conflicting Medicare policy verbiage makes it unclear as to whether Medicare will apply this rule above the cap. Specifically, Subsection A of the Medicare Claims Processing Manual reads: “...atypical use of the automatic exception process may invite contractor scrutiny. Particular care should be taken to document improvement and avoid billing for services that do not meet the requirements for skilled services, or for services which are maintenance rather than rehabilitative treatment.”

If there’s one thing that lawmakers and therapy providers can agree on, it’s that there has to be a better—and less confusing—alternative to the therapy cap exceptions process. But while government leaders tend to err on the side of cost savings (i.e., putting a total kibosh on treatment above the cap), providers are calling for a system that will ensure patients always have access to the therapy services they need. Of course, the definition of “need” is an endlessly debatable topic, as discussed in this blog poston medical necessity. With so many different points of view, it’s no wonder the proposals on the table vary so widely, with possibilities ranging from doing away with the cap entirely to making it even more restrictive.

Here’s a breakdown of the proposed solutions included in the Center for Medicare Advocacy report referenced above:

Senate Finance Committee: Repeal and Replace the Cap

The Senate Finance Committee (SFC) introduced legislation that would eliminate the cap and replace it with a medical review program involving prior authorization of services. With this system, the Secretary of Health and Human Services would be responsible for identifying services for medical review based on factors like “outlier billing patterns and newly enrolled providers.”

According to the report, the SFC still needs to flesh out the details of how this system would work, but as the report states, “it is clearly an acknowledgement that the current therapy cap policy is broken and needs to be repealed, along with instituting a more targeted approach toward medical review.”  

MedPAC Recommendation: Lower the Cap

The Medicare Payment Advisory Commission (MedPAC) recommended reducing the therapy cap from $1,920 to $1,270 and instituting a catch-all exceptions process akin to a “more streamlined” version of the current manual medical review process. As the report explains, “In short, MedPAC's solution to beneficiaries' current challenges accessing ongoing, medically necessary therapy services is to lower the therapy cap, eliminate the automatic review and apply manual medical review to all claims that exceed the cap.” The author goes on to suggest the impact of this proposal, if adopted, would be “limiting Medicare expenditures...while ignoring the welfare of Medicare beneficiaries.”

If you’re a rehab therapist who treats Medicare patients, the outcome of the therapy cap saga will directly affect the way you provide—and receive reimbursement for—your services. So make sure your voice is heard before it’s too late. The APTA has set up this page to ensure that members and nonmembers alike can take action. Simply follow the instructions under the “Take Action” section at the bottom of the page.


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