It happened in the middle of the night: after months of debate and hours of back and forth that went until 3 AM on February 9, 2018, the Senate voted 71-28 in favor of a stopgap budget bill—known as the Bipartisan Budget Act of 2018—that officially repealed the Medicare cap on therapy services. PTs, OTs, and SLPs around the country—especially those with Medicare claims sitting in limbo as they awaited further instruction from CMS—breathed a collective sigh of relief at the news. While this victory is a major milestone for the rehab therapy community, many therapists still have questions about what it means—specifically, what it means for their Medicare claims. Fortunately, we’ve got answers. To that end, here’s everything PTs, OTs, and SLPs need to know about the therapy cap repeal and what’s happening with 2018 Medicare claims for therapy services:

The PT’s Guide to Billing - Regular BannerThe PT’s Guide to Billing - Small Banner

Is the cap really gone?

When news about the permanent cap repeal hit, it sparked a whole lot of celebration—but not everyone was quick to bust out the confetti and noisemakers. For one thing, the language of the bill indicates there would still be a “cap” of $2,010 on physical therapy/speech services and occupational therapy services, respectively. However, as in years past, Medicare beneficiaries may still exceed this “soft cap,” but providers must affix the KX modifier to any claims above $2,010 to receive reimbursement. This includes any claims that exceed the $3,000 targeted review threshold. Additionally, CMS will not subject claims over the $3,000 threshold to the targeted medical review process unless the provider falls into a small percentage of therapists who meet certain criteria (e.g., the provider has a high claims denial rate or demonstrates aberrant billing practices compared to peers). This process will be effective until December 31, 2027.

Furthermore, if the provider wishes to administer treatment that falls outside of medical necessity or the provider believes Medicare will not cover the service, then he or she must obtain a signed Advance Beneficiary Notice of Non-Coverage (ABN) before providing the service and append the GA modifier to the claim.

Now, here’s the not-so-good news: to offset future costs associated with eliminating the hard cap, Congress enacted a payment differential for PTAs and COTAs, which means therapist assistants will be reimbursed 85% of the amount PTs and OTs receive for the same services. This reduction—which the APTA strongly opposes—is set to go into effect on January 1, 2022.

How does this help rehab therapy patients?

Now, you might be thinking, “That sounds like the exact same process as before.” And you’d have a point. But, here’s why this is actually a good thing: the language in the Balanced Budget Act of 1997—the bill that originally introduced therapy cap legislation—imposed a hard cap on therapy services and placed financial liability for any claims exceeding the hard cap on Medicare beneficiaries. However, every year since the cap’s adoption, Congress has voted to extend an exceptions process for claims exceeding the hard cap. So, while an exceptions process has pretty much always been in place, legislators never intended for it to be a permanent solution. And as we learned in January, implementation of a hard cap without an exceptions process has been a very real threat for the past 20 years.

Long story short: The threat of a hard cap is gone, and Medicare beneficiaries can still obtain medically necessary therapy services beyond the $2,010 limit as long as the provider affixes the KX modifier to the claim.

What happened with Medicare claims submitted in January?

As we mentioned in this post, starting January 1, 2018, CMS:

  • Held any claims with a “date of receipt” between January 1 and January 10 that contained the KX modifier.
  • Paid any claims without the KX modifier that did not exceed the cap.
  • Denied any claims that exceeded the $2,010 limit and did not have the KX modifier.

Furthermore, CMS wasn’t exactly explicit about what “date of receipt” meant, but we know now that the agency was talking specifically about claims with dates of service in 2018. Starting January 25, CMS advised Medicare Administrative Contractors (MACs) to begin processing these held claims. Furthermore, as of January 31, MACs processed any claims received after January 10 and continued to process these claims on a 20-day rolling hold (e.g., claims from January 11 were processed on January 31, claims from January 12 were processed on February 1, and so on). The purpose of this rolling hold was to reduce the number of claim denials triggered by hard cap legislation.

What’s happening with those denied claims?

If you submitted claims with the KX modifier for dates of service occurring in 2018, and CMS denied those claims due to hard therapy cap legislation, there’s good news: because the cap repeal is effective retroactively, CMS has instructed all MACs to:

  1. automatically reprocess those therapy claims affected by the legislative lapse, and
  2. initiate reprocessing for all affected claims within six months.

This process should be totally automatic, and it should not require further action from providers. But if you have any questions, CMS recommends reaching out to your regional MAC. (You can find your MAC’s contact information here.) Additionally, you can see all of this information straight from the source in this educational document from CMS.


So, there you have it. While this isn’t the total overhaul some might’ve expected, the threat of a hard cap on therapy services has been removed—and that’s a good thing. Still, Medicare policy regarding outpatient rehab therapy is far from perfect, and we certainly haven’t seen the last late-night Senate debate over healthcare legislation. But, we’re staying optimistic. After all, eliminating the hard cap is certainly a step in the right direction, and it’s a positive change for rehab therapy patients across the country.

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