History of Medicare Therapy Caps

1972: The 1972 Social Security Amendments" (Public Law 92-03) expands the scope of existing Medicare coverage of outpatient physical therapy to include the services of a qualified physical therapist in independent practice when furnished in the therapist's office or the patient's home. The primary purpose of this amendment was to make physical therapy more readily available to the beneficiary in cases where the therapist's office might be more accessible than a provider facility to which the beneficiary must travel.

1979: Section 279(b) of the Social Security Amendments of 1979 limits the payment for the services furnished by a physical therapist in independent practice to no more than $100 of the incurred expenses in a calendar year. This limitation reflected Congress' concern that the expansion in coverage would result in increasing the overall cost of physical therapy.

1980: Section 935(a) of the "Medicare and Medicaid Amendments of 1980" increases the amount payable for services furnished by a physical therapist to $500. The increase went into effect beginning calendar year 1982.

1989: Section 6113(d) of The Omnibus Budget Reconciliation Act (Public Law 101-234) increases the amount of the financial limit to $750, effective for services furnished on or after January 1, 1990.

1993: Section 1355 of the "Omnibus Budget Reconciliation Act of 1993" increases the limitation from $750 to $900 for services furnished on or after January 1, 1994.

1994: Section 143 of the "Social Security Amendments of 1994" requires the Secretary of Health and Human Services to conduct a study of the appropriateness of continuing the $900 cap under the Medicare program.

1997: The "Balanced Budget Act of 1997" imposes $1,500 cap on outpatient therapy services. Section 4541 (c) and (d) of the act increased the financial limitation to no more than $1500 of the incurred expenses in a calendar year, and applied it to outpatient therapy services furnished in skilled nursing facilities, physician’s offices, home health agencies (Part B), skilled nursing facilities (Part B), in addition to physical therapist private practice offices. The effective date of this $1,500 cap was January 1, 1999.

November 2, 1998: HCFA publishes a final rule implementing the $1,500 cap, effective January 1, 1999.

January 1, 1999: The $1,500 cap goes into effect.

November 19, 1999: Congress passes "Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999" mandating a two-year moratorium on $1,500 cap during 2000 and 2001.

November 29, 1999: President Clinton signs "Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999" into law.

January 1, 2000: The moratorium on the $1,500 cap goes into effect.

December 21, 2000: President Clinton signs "Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000", extending the moratorium of the $1,500 cap for an additional year, through 2002.

September 4, 2001: Sen. John Ensign (R-NV) introduces "Medicare Access to Rehabilitation Services Act" (S. 1394) that would repeal the cap.

February 28, 2002: Reps. Phil English (R-PA), Roy Blunt (R-MO), Frank Pallone (D-NJ), and Ben Cardin (D-MD) introduce "Medicare Access to Rehabilitation Services Act" (HR 3834) that would repeal the cap.

June 28, 2002: The House passes a two-year extension of the cap moratorium as part of a comprehensive Medicare bill (H.R. 4954).

October 1, 2002: Senate Finance Committee Chairman Max Baucus (D-MT) and Senator Charles Grassley (R-IA) introduce S. 3018, the "Beneficiary Access to Care and Medicare Equity Act," which included a two-year extension of the cap moratorium.

November 22, 2002: Congress adjourns without passing any Medicare reform legislation, including provisions to extend the $1,500 cap moratorium.

December 20, 2002: APTA and other therapy associations meet with officials from the Centers for Medicare & Medicaid Services (CMS) to seek guidance on preparations therapists should make to ensure they are in compliance, since a program memorandum instructing carriers and intermediaries on how to implement the cap has not been released.

December 23, 2002: In a memorandum to Medicare contractors, the Centers for Medicare & Medicaid Services (CMS) effectively delays implementation of the cap and says that it "expects to implement the provision in a prospective manner", implying that services provided between January 1 and the implementation date - which is not specified in the memo - will not apply toward the cap.

January 17, 2003: A major study of Medicare claims from 1998 to 2000 confirms that the fee schedule for outpatient therapy services is responsible for controlling the growth in payments, not the $1,500 cap on those services. The long-awaited DynCorp report bolsters arguments that the therapy cap should be repealed. DynCorp analyzed claims data from more than 15 million outpatient therapy claims per calendar year, examining utilization based on beneficiary demographic characteristics, the setting in which services were furnished, and the patient's primary claim diagnosis.

February 7, 2003: The Centers for Medicare and Medicaid Services (CMS) issued a program memorandum officially delaying implementation of the therapy cap until July 1, 2003. The memorandum instructs carriers and fiscal intermediaries to implement the $1,500 payment limit on Medicare outpatient therapy services provided on or after July 1 in a prospective manner through December 31, 2003. The cap for 2003 will actually be $1,590 - of which Medicare will pay up to $1,272 - because of the statutory requirement that the cap be indexed to medical inflation. The memorandum confirms that the cap is an annual limitation on allowed incurred expenses per beneficiary. Providers are told to notify beneficiaries about the cap, which was originally established in 1997 but has been under a moratorium, and the settings in which it applies, but not to use advance beneficiary notices (ABNs). Rather, the memo tells providers to use the Notice of Exclusion from Medicare Benefits (NEMB) form to make beneficiaries aware of the cap. Contractors are told to inform beneficiaries when they reach the cap, using existing Medicare Summary Notice messages, which have been revised to advise beneficiaries that the cap exists.

February 13, 2003: Congress passes the Consolidated Appropriations Resolution (H.J.Res. 2), completing the fiscal year 2003 budget and providing a 1.6 percent increase in payments under the Medicare physician fee schedule - but failing to repeal or block implementation of the therapy cap. President Bush signed the resolution into law February 20, 2003.

March 6, 2003: Legislation to permanently repeal the $1,500 therapy cap (the "Medicare Access to Rehabilitation Services Act"; S. 569/H.R. 1125) is introduced in the U.S. Senate by Senators John Ensign (R-NV) and Blanche Lincoln (D-AR), and in the House by Representatives Phil English (R-PA), Ben Cardin (D-MD), Roy Blunt (R-MO), and Frank Pallone (D-NJ).

May 2, 2003: The Centers for Medicare and Medicaid Services (CMS) issued a program memorandum which supplements PM AB-03-018, dated February 7, 2003. The PM adds a new MSN message, which would be effective October 2003, to inform patients about the cap. It also clarifies that due to consolidated billing SNF residents in the Medicare certified section of the facility would not be able to receive rehabilitation services from an outpatient hospital after the cap is exceeded. However, SNF residents who are in a non-Medicare certified section of the facility may be covered at the outpatient hospital facility. Beginning October, 2003, providers may access the accrued amount of therapy services from the ELGA and ELGB screens.

May 22, 2003: APTA, along with a coalition of rehabilitation provider and consumer organizations, met with Tom Grissom, Director of CMS' Center for Medicare Management and CMS staff to discuss the possibility of delaying implementation of the therapy cap. The Coalition raised concerns and legal arguments with respect to the implementation of the most recent program memorandum (PM) that CMS has published related to the cap (May 2, 2003, Transmittal AB-03-057). Grissom acknowledged that implementation might cause widespread disruption of therapy services. However, he said that a "middle course of action" might be to defer the effective date of the PM to October 1, 2003 - which would comport with the October 1, 2003, implementation date of the Transmittal. He stated that he would follow up with Administrator Tom Scully.

May 23, 2003: CMS issued program memorandum AB-03-073, which includes an article for intermediaries and carriers to use to inform providers about implementation of the caps. It clearly identifies the settings and the services subject to the cap. It also explains that a beneficiary, physician, therapist, or supplier who accepts assignment may appeal a claim denied due to exceeding the cap. Physicians, therapists, and other suppliers who do not accept assignment and institutional providers do not have the right to appeal.

June 25, 2003: The Medicare Rights Center, American Parkinson Disease Association, and Easter Seals brought a lawsuit against Tommy Thompson, secretary of the U.S. Department of Health and Human Services, and other government officials in U.S. District Court in Washington. The groups argued that CMS hadn't given its Medicare beneficiaries proper notice of the new caps, and sought a temporary restraining order preventing enforcement of the cap. 

June 30, 2003: The agency entered into a settlement agreement with the plaintiffs that enforcement of the cap would be delayed for 60 days. CMS would be committed to notify Medicare beneficiaries through Medicare Summary Notices and the CMS Web site that the caps will be enforced beginning September 1, 2003.

July 3, 2003: In a program memorandum (AB-03-097), CMS announces the delay in implementation of the Part B therapy caps from July 1, 2003, to September 1, 2003.

September 1, 2003: The $1590 cap went into effect.

September 4, 2003: The plaintiffs in the lawsuit filed a motion to enforcement the partial settlement agreement, or, in the alternative, to extend the moratorium on the cap to conform to representations made in the partial settlement agreement. They claimed that CMS stated that they would inform 90% of the Medicare beneficiaries about the cap, and that this goal was not achieved.

September 15, 2003: The parties went to court and the Judge decided that he would review the memorandums and make a decision at a follow-up hearing

September 22, 2003: Federal District Court Judge Emmet G. Sullivan ruled that CMS could enforce the caps.

October 8, 2003: A hearing was scheduled regarding the policy that Medicare beneficiaries in SNFs cannot go to an outpatient hospital department after exceeding the cap due to consolidated billing.

December 8, 2003: The President signed into law the Medicare Prescription Drug Improvement and Modernization Act (DIMA). The law placed a moratorium on the implementation of the cap beginning December 8, 2003, through December 31, 2005. The cap will go back into effect January 1, 2006, unless Congress takes action. The act requires the Secretary of HHS to submit reports required by the BBA of 1997 and BIPA on outpatient therapy utilization and alternatives to the cap. These reports must be submitted by March 31, 2004. The act also requires the GAO to study and report to Congress no later than October 1, 2004, on diagnoses that are likely to exceed the cap.

December 8, 2003: CMS issued Transmittal 42 to provide guidance regarding the moratorium on the cap. In this transmittal they reiterated that providers should continue to use the GP modifier to identify services provided as a physical therapy plan of care

December 9, 2003: CMS posted the following notice on their Therapy Resources web page: "From December 8, 2003, through December 31, 2005, there is no dollar limit on claims received for physical therapy, occupational therapy, and speech-language pathology services, regardless of date of service. Therapy modifiers are still required."

January 15, 2004: APTA, AOTA, and ASHA (the "TriAlliance") met with CMS officials regarding the development of alternatives to the cap. CMS stated that they have contracted with AdvanceMed to analyze data from therapy claims submitted in 2001 and 2002. This data will be useful in the development of alternatives to the cap. APTA will continue to work with CMS as they proceed with this research.

February 17, 2004: The TriAlliance sent a follow up letter to CMS expressing our views regarding research needed to develop alternatives to the therapy cap.

March 31, 2004: CMS responded to the TriAlliance letter dated February 17, 2004, stating that a number of our suggestions would be included in their project plans. They also indicated that they welcomed the participation of clinical experts to help determine the amount and type of services needed for patients with certain conditions.

April 13, 2004: APTA met with GAO staff to provide input to GAO as they go forward with their study on diagnoses that would exceed the cap. This study was mandated by the Medicare Modernization Act.

February 17, 2005: Legislation to repeal the therapy caps, HR 916 and S. 438, is introduced by Rep. Phil English (R-PA), Senator John Ensign (R-NV) and a bipartisan group in both the House and Senate.

November 4, 2005: U.S. Senate includes a one year moratorium in its version of the Budget Reconciliation package.

December 12, 2005: Nearly 40 patient and provider groups send a letter to Congress urging an extension of the moratorium on the therapy caps.

December 15, 2005: A majority of the U.S. House of Representatives signed on as co-sponsors on the bill to repeal the therapy caps, HR 916.

December 18, 2005: Language to allow for exceptions to the therapy caps is included in the Budget Reconciliation Conference Report.

December 19, 2005: Congress adjourns without passing the Deficit Reduction Act, allowing the therapy caps to go into effect - without exceptions - on Jan. 1, 2006.

December 22, 2005: Senate Finance Committee Chairman, Charles Grassley (R-IA) sends a letter to CMS urging an administrative delay in implementation of the therapy caps.

December 28, 2005: APTA sends a letter to CMS urging an administrative delay in implementation of the therapy caps.

January 1, 2006: Therapy caps go into effect.

February 1, 2006: Congress passes the Deficit Reduction Act including a provision to allow CMS to develop an exceptions process for beneficiaries needing coverage above the therapy caps - but only through December 31, 2006.

March 13, 2006: CMS implements the therapy cap exceptions process allowing for either automatic or manual exceptions to the therapy cap.

May 26, 2006: A bipartisan group of Senators sign onto a letter urging the majority leader to address the therapy caps and extend the therapy cap exceptions process beyond 2006.

June 28, 2006: APTA and a coalition of over 40 patient and provider groups urge Congress to extend the therapy cap exceptions process.

September 21, 2006: The Securing Effective and Necessary Individual Outpatient Rehabilitation Services (SENIORS) Act (S. 3912.HR 6132) is introduced by Senators Ensign, Lincoln, Talent, Collins, and Hatch and Reps English, Cardin, Blunt, and Pallone. The SENIORS Act would extend the therapy cap exceptions process beyond 2006.

December 7, 2006: Congress passes the Tax Relief and Health Care Act of 2006 including a provision to extend the therapy cap exceptions process through December 31, 2007.

December 20, 2006: President Bush signs Tax Relief and Health Care Act of 2006.

February 1, 2007: Legislation to repeal the therapy caps, HR 748/ S. 450, is introduced in the House and Senate.

July 12, 2007: The Centers for Medicare and Medicaid Services (CMS) releases "Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2008 and Other Part B Payment Policies," also known as the Medicare physician fee schedule proposed rule. CMS states that in accordance with the statute, it will continue to implement the therapy caps, but the therapy cap exceptions process will no longer be applicable beginning January 1, 2008. Congressional action is necessary to repeal the therapy cap, place a moratorium on its implementation, or extend the exceptions process in 2008.

July 24, 2007: Legislation to extend and improve the Children's Health Insurance Program (HR 3162) is introduced. It also includes language to extend the Therapy Cap Exceptions Process until 2009. The House passes this legislation.

August 31, 2007: APTA submits comments on the Center for Medicare and Medicaid Services' proposed Medicare physician fee schedule rule, including voicing concern about the negative impact that implementation of the financial limitations on therapy services without the extension of the exceptions process will have on Medicare beneficiaries needing therapy services.

September 9, 2007: The Senate receives HR 3162 and in conference drops amongst other Medicare provisions, the language extending the Therapy Cap Exceptions Process. The President vetoes the final bill October 3, 2007.

November 1, 2007: Centers for Medicare and Medicaid Services Releases the Medicare physician fee schedule final rule which includes the 2008 Therapy Cap amount of $1,810. This is a shared cap with speech-language pathology services and includes all outpatient settings except the hospital outpatient department.

December 29, 2007: President Bush signs the "SCHIP, Medicare, and Medicaid Extension Act" (PL 110-173) into law a six month extension of the exceptions process to July of 2008.

July 15, 2008: President Bush signs the "Medicare Improvement for Patients and Providers" (MIPPA) (PL 110-275) which provides for an 18 month extension of the exceptions process through the end of 2009. 

January 6, 2009: The "Medicare Access to Rehabilitation Services Act" (S 46/HR 43) was introduced by Senators John Ensign (R-NV), Blanche Lincoln (D-AR), Susan Collins (R-ME), and Ben Cardin (D-MD), and Representatives Xavier Becerra (D-CA), Mike Ross (D-AR), and Roy Blunt (R-MO).

January 1, 2010: Due to a lack of Congressional action, the 2010 therapy cap exceptions process expires with a $1,860 cap on Physical Therapy and Speech Language Pathology services.

March 3, 2010: President Obama signs HR 4691, the "Temporary Extension Act of 2010" reinstating the therapy cap exceptions process until March 31, 2010.

March 23, 2010: President Obama signs HR 3590, the "Patient Protection and Affordable Care Act" which extended the therapy cap exceptions process until December 31, 2010.

December 15, 2010: - President Obama signs Senate Amendment to HR 4994, the "Medicare and Medicaid Extenders Act of 2010" which includes an extension to the Medicare therapy cap exceptions process until December 31, 2011. 

December 23, 2011- President Obama signs H.R. 3765, the” Temporary Payroll Tax Cut Continuation Act of 2011” which includes a short-term two month extension of the Medicare therapy cap exceptions process until February 29, 2012.

February 22, 2012 - President Obama signs H.R. 3630, the “Middle Class Tax Relief and Job Creation Act of 2012” which includes a 10 month extension of the Medicare therapy cap exceptions process until December 31, 2012.

January 2, 2013 – President Obama signs H.R. 8, the “American Taxpayer Relief Act of 2012” which includes a 12 month extension of the Medicare therapy cap exceptions process until December 31, 2013.

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