How much Medicare pays for outpatient physical therapy (PT), speech-language therapy (SLP), and occupational therapy (OT) depends on where you receive the therapy.
For therapy received in a doctor's or therapist's office, a rehabilitation facility, or a skilled nursing facility while you're an inpatient, Medicare will pay 80% of the Medicare-approved amount. You or your supplemental medigap insurance or Medicare Advantage plan are responsible for the other 20%.
There are limits on the total amount Medicare will pay for therapy in these settings. These limits are called "therapy caps." Medicare will pay up to $1,880 per year for outpatient physical therapy and speech-language pathology (combined, in 2012). There is a separate cap of $1,880 (in 2012) for occupational therapy. However, you might be able to qualify for an exception so that Medicare will continue to pay for therapy after you reach the cap.
If you receive therapy at home from a Medicare-certified home health care agency as part of a comprehensive Medicare-covered home health care program, Medicare will pay 100% of the cost. If you receive therapy at home that is not part of a Medicare-covered comprehensive home health care plan, Medicare will pay 80% of approved charges up to the yearly caps of $1,880 described above. For information on home health care, see our article on Medicare coverage for home health care.
For mental health services provided on an outpatient basis, Part B pays only 50% of approved charges. This is true whether the services are provided by a physician, clinical psychologist, or clinical social worker at a hospital, nursing facility, mental health center, or rehabilitation facility. The patient is responsible for the yearly deductible, for the unpaid 50% of the Medicare-approved amount, and, if the provider does not accept assignment, for the rest of the bill above the Medicare-approved amount, up to an additional 15%.
There are financial advantages and disadvantages to receiving Medicare-covered therapy at a hospital outpatient department instead of in a doctor's or therapist's office, or at home. One advantage of going to a hospital outpatient department is that Medicare Part B pays the full Medicare-approved amount for the therapy, except for a patient copayment for each visit. Another advantage is that there is no yearly cap on the amount Medicare will pay for therapy provided at a hospital outpatient department.
The disadvantage is that a hospital outpatient department may charge you an unlimited amount above the Medicare-approved amount for the therapy—an amount you are personally responsible for. Medicare pays hospital outpatient departments differently from how it pays doctors and other providers. Unlike charges for doctors or other providers, for each service, the patient may be responsible for a copayment that varies with the type of service provided. These copayments are sometimes smaller than the 20% coinsurance amount you would pay if you received the same service at a doctor's office or clinic. (Note, however, that if a doctor who is not employed by the hospital outpatient department provides services to you at the hospital, that doctor will bill you separately and Medicare will pay only 80% of the Medicare-approved amount for that bill.)
As with individual doctors, the hospital does not have to accept "assignment" of the Medicare-approved amount as the full charge for a particular service. Before you begin therapy at a hospital outpatient department, find out if the hospital will accept "assignment" of the Medicare-approved amount as the total amount of the bill.
If the outpatient hospital department does not take assignment, unlike doctors, a hospital outpatient department is not restricted to charging only 15% more than the Medicare-approved amount. Their charges can go as high as they want, and you would be personally responsible for everything above the Medicare-approved amount.
Because of this loophole in Medicare rules, Medicare patients wind up paying on average almost 40% of the total charges for hospital outpatient department charges. For outpatient surgery, and for outpatient radiology and other diagnostic services, patients end up paying about 50% of total hospital charges. Because of these high costs, you should be wary of receiving medical care at a hospital outpatient department.
There are several ways to respond to the high prices charged by hospital outpatient departments. First, before you receive any care at a hospital outpatient department, ask their financial office whether they accept assignment of the Medicare-approved amount as payment in full (except for your copayment). If so, find out what the copayment is. You'll then know the total amount—that is, the per-service copayment —that you'll have to pay each time you receive the service.
If the hospital outpatient department does not accept assignment of the Medicare-approved amount, find out in advance how much more than the Medicare-approved amount the hospital will charge. If it's just a little bit higher, you might want to receive your treatment there anyway, if the care is recommended by your doctor and the facility is convenient for you. But if it is more than you can comfortably afford, you might want to consider getting your therapy somewhere else.
If the hospital's charges will be considerably higher than the Medicare-approved amount, explain the situation to your doctor and ask whether the service could be performed just as well in a doctor's office or at an independent clinic or laboratory. If not, ask whether there is another hospital outpatient department where the service could be performed. If so, find out what that hospital's charges would be.
For an explanation of Medicare Part B payments, including the 15% limiting charge on doctors who don't agree to accept assignment for all Medicare claims, see our article on what you pay for with Medicare Part B.
by: Attorney Joseph Matthews