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Therapy Caps: A Minibus Rider

shutterstock_573245464In a recent post, we provided additional details on the structure, funding, and evaluation of the Maternal, Infant, Early Childhood, Home Visiting (MIECHV) program. In this post we will go into detail on the background and outlook for outpatient therapy caps.This is part of our ongoing series on the potential riders on a health care minibus. The “minibus” refers to a handful of policy provisions tied together in one piece of legislation. This minibus will carry a number of provisions into law, although the number of riders onboard the minibus and when the minibus leaves the station remain to be seen.

Future posts will review additional details of other potential riders on the minibus.

Therapy Caps Overview

Medicare covers medically necessary outpatient physical therapy, occupational therapy, and speech-language pathology services. The program currently has limits on how much it pays for outpatient therapy services in a calendar year. The therapy cap applies to all Part B outpatient therapy settings and providers. In 2017, the annual therapy cap for occupational therapy is $1,980 and the annual combined cap for outpatient physical therapy and speech-language pathology services is $1,980. However, there is currently an exception process to avoid these caps. The exception process was extended via the Medicare Access and CHIP Reauthorization Act (MACRA), which extended the exceptions process through December 31, 2017.


The Social Security Amendments of 1979 placed limits on Medicare payment for therapy services, specifically services furnished by a physical therapist in independent practice. This cap slowly increased from 1979 to 1994 when the Social Security Amendments of 1994 placed a $900 cap on therapy services.

The Bipartisan Budget Act of 1997 replaced the $900 beneficiary cap with a $1,500 cap applied to all outpatient services provided in skilled nursing facilities, physician’s offices, home health agencies, and physical therapist in private practice offices. However, since then, Congress has acted over 16 times to prevent the implementation of the therapy caps through an exception process or a moratorium on the cap, essentially waiving the limit.

The exception process was established through the Deficit Reduction Act of 2005 and allows for the continuity of care for medically necessary services. If payments for therapy services provided during a calendar year exceed the caps, the exceptions process allows providers and other practitioners to request an exception on a beneficiary’s behalf when services are reasonable and necessary. The renewal of this exceptions process has longstanding bipartisan support, and it has since it went into effect, from a number of members still in Congress today.


The latest exceptions process was extended via MACRA. Congress will have an opportunity to address the cap when a number of health care related programs expire at the end of September, or they could look to address it at the end of the year. Recommendations on therapy caps have ranged. Some recommendations to avoid the cap include repealing the cap, extending the exceptions process, or increasing the limits. In 2013, the Medicare Payment Advisory Commission (MedPAC) recommended reducing each therapy cap from $1,920 to $1,270, implementing a manual medical review for services over the threshold, permanently including services delivered in hospital outpatient departments under therapy caps, and applying a 50% procedure payment reduction to the practice expense portion of outpatient therapy services provided to the same patient on the same day.

Of all the extenders, addressing therapy caps has the strongest support in Congress.  There is no one in Congress who is pro-therapy caps.  The question is not if therapy caps will be delayed yet again, but if the atmosphere is right for a permanent solution.

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