Medicare, Health Care Reform and Rehabilitation Services

No matter where you stand politically, health care reform is here and will remain in some form or fashion.

Any health care professional who has treated Medicare and Medicaid patients for the past decade knows reimbursement rates have steadily declined, while regulations for operations have increased. This means providers receive less money but spend more time and resources on meeting regulations and handling paperwork. This is nothing new, but it is something Medicare patients were only recently made aware of.

As children of aging parents, health care providers for Medicare recipients or Medicare recipients ourselves, we need to know what is happening with Medicare today. As of September 1, every Medicare recipient in the United States who has claimed $1,700 of rehabilitation services should have received a letter from the Centers for Medicare & Medicaid Services (CMS) informing them of a $1,880 Medicare cap for these services. The letter states that if they go over this cap, they will be financially responsible for the cost of these services beyond the cap. Most individuals will assume this regulation is part of the current health care reform or is the result of a change, but it is nothing new. Most Medicare recipients just did not know this existed. The end result is that many patients will self-discharge and discontinue services out of concern over the cost. They will do this without taking into account the impact this will have on their long-term outcomes following surgery, stroke, etc.

So where is this coming from? Most Medicare recipients do not realize the program has been functioning under a Medicare therapy cap since 1997. As part of the Balanced Budget Act, rehabilitation services were placed under a $1,740 cap for therapy services. This meant a Medicare recipient could receive only $1,740 of combined physical therapy and speech therapy services and $1,740 of occupational therapy services before having to cover additional charges.

So, if a Medicare recipient has a stroke, he or she gets the following covered: 10 to 15 sessions of speech and physical therapy and 10 to 15 sessions of occupational therapy. If the stroke is severe, this level of service is not even close to what is needed to restore that individual to independent living and a satisfactory quality of life. As a result, in 2006, as part of the Deficit Reduction Act, CMS was allowed to put in place an exceptions process allowing those in need of more “medically necessary” treatment to apply for exceptions to the cap. Today, rehabilitation providers still function under that same cap, which has been increased to $1,880.

Under the previous legislation, only outpatient providers were held to this cap, and hospitals were exempt. However, as of October 1, this cap applies to hospital-based centers as well, and it will be retroactive to January 1, 2012. Therefore, anyone using these services in a hospital will now experience the same Medicare cap restrictions as those using outpatient centers. Because hospital services are reimbursed at higher rates than non-hospital-based services, patients in those settings will only receive eight to 10 covered treatments, versus more in a traditional outpatient setting. Early estimates are that this could impact 30% to 40% of patients treated in hospital-based rehabilitation centers.

What does that mean for your patients? For those patients who receive services in non-hospital-based outpatient centers, nothing changes. These centers have operated for the past 10 years using these guidelines. The only difference is that patients are now aware of it. For those in hospital-based outpatient centers, this will be a huge shift for managing these services. Most providers know about the exemptions process and how to access it if it is in the best interest of the patient. As a physician, your support is critical to ensuring the patient gets the care you prescribe, and ensuring your signature on the plan of care is crucial. For more information about this topic, visit


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