Medicare:

Outpatient Rehabilitation Therapy Caps Are Important Controls But Should Be Adjusted for Patient Need

HEHS-00-15R: Published: Oct 8, 1999. Publicly Released: Oct 8, 1999.

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Pursuant to a congressional request, GAO provided information on the: (1) rationale for imposing per-beneficiary limits on Medicare's coverage of rehabilitation therapy services; and (2) effect of the therapy caps on Medicare beneficiaries' access to needed care.

GAO noted that: (1) the per-beneficiary caps on coverage of outpatient rehabilitation therapy services are part of a larger effort by Congress to curb Medicare spending for post-acute care services; (2) in particular, Medicare spending for outpatient rehabilitation therapy services, between 1990 and 1996, grew at nearly double the rate of Medicare spending overall; (3) at the same time, inadequate program controls failed to ensure that this spending growth was warranted; (4) under the fee schedule and coverage caps imposed by the Balanced Budget Act of 1997 (BBA), Medicare can moderate the price and utilization of these services; (5) the beneficiary caps are unlikely to affect the vast majority of Medicare's outpatient therapy users; (6) only a small share of beneficiaries uses outpatient therapy extensively; (7) furthermore, most of the users with greater needs will likely have access to hospital outpatient departments, which are not subject to the $1,500 caps; (8) in addition, owing to Health Care Financing Administration's (HCFA) partial approach to enforcing the caps while year 2000 adjustments are made to Medicare's automated systems, noninstitutionalized beneficaries can avoid having the caps curtail service coverage by switching providers; (9) however, the caps may restrict coverage for some nursing facility residents; (10) studies are under way or planned to better assess the effect of the caps and evaluate alternative utilization controls; (11) BBA required HCFA to recommend a need-based payment system by 2001, which could help target payments to beneficiaries who genuinely require more services than are covered under the current dollar limits; and (12) such a system would raise the dollar limits for therapy users with extensive needs and lower them for users with modest needs.

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