Congress Introduces Repeal of Medicare Therapy Caps

Carl J. Pucci in Finance & Reimbursement

A congressional bill to permanently repeal the Medicare Part B Outpatient Therapy Caps, retroactive to January 1, 2018, has been introduced. AHCA expects the therapy cap repeal to survive within the ultimate passage of the bill. Below is the AHCA Bulletin with more details: 

On Monday evening, Congressional leadership released a short-term plan to fund the federal government through March 23, 2018. The bill contains notable benefits for our profession, including a permanent repeal of the Medicare cap on therapy services and two years of funding for other Medicare extenders. The even better news is that there is no cut to our Part A Medicare to pay for this. The original proposal called for a $2 billion market basket cut but we succeeded in keeping that out of the bill.

What's in the Bill

The bill repeals Medicare Part B outpatient therapy caps retroactively to January 1, 2018. This is important in two ways. First, it means our residents will no longer have to worry if Medicare will pay for important therapy services. Second, it eliminates the largest recurring risk of skilled nursing facility (SNF) offsets since the doc fix. Since Congress will no longer have to pass annual or biannual patches to the therapy exceptions process, this dramatically reduces our risk of being cut every year.

Also included in the bill are some measures that will give regulatory relief concerning how therapy is tracked and reviewed. The legislation permanently restores the limited targeted post-pay medical review program established under the Medicare Access and CHIP Reauthorization Act (MACRA). The program lowers the medical review pool threshold for annual beneficiary covered charges from $3,700 for physical and speech and language therapy services combined or occupational therapy services to $3,000. It also limits annual funding for these reviews to $5 million annually. This eliminates the risk of previously problematic recovery audit contractors (RAC) reviews, prior-authorization and pre-pay reviews, as well as 100% review programs.

Part of the bill is paid for by creating a new designation of physical therapy and occupational therapy assistant services on Part B therapy claims and reducing payment for those services by 15% starting in 2022. The overall impact on SNFs would vary depending on the percentage of treatments furnished by therapy assistants. SNFs with no therapy assistants will not be affected. Most medium to large SNFs likely operate with between 25-50% of therapy furnished by therapy assistants, so we estimate the negative revenue impact for most of these SNFs starting CY 2022 would range from 2.9-5.9% of their Part B Medicare payments. We are currently conducting additional impact analyses and will provide updates as they become available.  
Without repeal of the therapy caps, revenue and quality of care could suffer significantly. We estimate, without repeal, that SNF Part B therapy revenues would decline more than $811 million per year (37% of total Part B payments). SNF Requirements of Participation require maintaining resident function at the highest practicable level. However, most long-term residents are on Medicaid or otherwise may have limited funds and cannot pay privately for therapy services. This could stress SNF nursing staffing further to address the functional needs of these residents if therapy is not an option. As a result, we believe the benefits of permanently repealing the therapy cap outweigh the therapy assistant pay-for.

Path to Passage

There is partisan disagreement over parts of the bill unrelated to our sector and the path to passage is slightly murky. The bill can pass with Republican support alone in the House, but the GOP will need Democratic support to break the 60-vote filibuster threshold in the Senate.

What we do know is that the House will likely vote on and pass the bill Tuesday evening. Republicans included a year-long extension of defense spending in the bill to garner the support of more conservative members of the party.

Senate Democrats want to see any defense spending extension matched with a non-defense extension. Republicans need at least nine Democratic Senators to vote for the legislation, and will need one more if Senator John McCain, currently undergoing cancer treatment in Arizona, cannot make it to D.C. Many expect the Senate to reject the House version, amend the bill to match defense and non-defense extensions, and send that version of the bill back to the House.

The deadline to extend federal government funding is this Thursday, February 8. House Democrats are scheduled to attend their annual party retreat starting Wednesday afternoon but may be forced to stay in Washington while the Senate reaches a deal.

We don't know with certainty what will happen with the continuing resolutions to fund the federal budget, but we do believe that the elimination of therapy caps should stay in whatever is ultimately passed. We will continue to keep you updated as the bill moves this week.


Mark Parkinson
President & CEO


Carl J. Pucci
Chief Financial Officer
518-462-4800 x36