INTRODUCTION: A Medicare beneficiary's annual outpatient therapy expenditures that exceed Congressionally-established caps are subject to extra documentation and review requirements. In 2011, these caps were $1,870 for physical therapy (PT) and speech-language pathology (SLP) combined, and $1,870 for occupational therapy (OT) separately. This article considers the distributional effects of replacing current cap policy with equal caps by therapy discipline (PT, OT, and SLP) or a single combined cap, and risk-adjusting the PT cap using beneficiary characteristics and functional status. METHODS: Alternative therapy cap policies are simulated with 100 percent Medicare claims for 2011 therapy users (n=4.9 million). A risk-adjusted cap for annual PT expenditures is calculated from a quantile regression estimated on a sample of PT users with diagnoses and clinician assessments of functional ability merged to their claims (n = 4,210). RESULTS: Equal discipline-specific caps of $1,710 for each of PT, OT, and SLP result in the same aggregate Medicare expenditures above the caps as 2011 cap policy. A single combined-disciplines cap of $2,485 also results in the same aggregate expenditures above the cap. Risk adjustment varies the PT cap by as much as 5 to 1 across beneficiaries and equalizes the probability of exceeding the PT cap across diagnosis and functional status groups. DISCUSSION: Equal discipline-specific caps for PT, OT, and SLP are more equitable to high users of both PT and SLP than current cap policy. Separating the PT and SLP caps is a change that policymakers could consider. Risk adjustment of the therapy caps is a first step in incorporating beneficiary need for services into Medicare outpatient therapy payment policy
Refinements of the Medicare outpatient therapy annual expenditure limit policy
Amico, P., Pope, G., Pardasaney, P., Silver, B., Dever, J., Meadow, A., & West, P. (2015). Refinements of the Medicare outpatient therapy annual expenditure limit policy. Physical Therapy, 95(12), 1638-1649. https://doi.org/10.2522/ptj.20140423
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