Congress Should Halt Plummeting Psychologist Medicare Payment
Congress should halt plummeting Medicare payment for psychologist services by adjusting the payment formula and by addressing reductions due to the sustainable growth rate formula and sequestration.
Medicare beneficiary access to needed mental health services is now jeopardized due to extremely low psychologist reimbursement rates.
Psychologists provide 40 percent of outpatient and 70 percent of inpatient psychotherapy services and most of the diagnostic services to beneficiaries. Psychologists with social workers provide the vast majority of Medicare mental health services to patients.
But psychologist reimbursement rates are plummeting. In 2000 Medicare paid $98 for a 45 minute psychotherapy session (the most common service). Today, the program pays just $81, a 37 percent drop, adjusted for inflation. In fact, payments to clinical psychologists under Medicare have declined nearly 22 percent since 2007. Meanwhile, Medicare is falling far behind psychologists' reimbursement by private insurers. Medicare reimbursement rates for psychologists' services are now as much as 15 percent below private market indemnity insurance rates.
Medicare payment rates have continued to drastically decline. As a result, psychologists are leaving Medicare, reducing their patient loads, and refusing to take new patients. A 2013 APAPO member survey reveals that 26 percent of responding psychologists were previously Medicare providers but left the program, primarily due to low reimbursement rates. Half of those psychologists have left since 2008. This means that nearly 5,200 psychologists across the country are no longer providing the mental, behavioral and substance use disorder services that Medicare beneficiaries need.
Congress should adjust the Medicare payment formula, which simply is not working to provide for fair and appropriate payment for psychologists in the program.
Under the payment formula, Medicare increasingly pays more for higher-cost, technology-driven services with high overhead — therefore high Practice Expense. This means that services, like psychologists' services, which are relatively low overhead and cost are being paid at lower rates.
In recent years, several Medicare Practice Expense adjustments in the payment formula have ratcheted down psychologist Medicare payment rates:
- In 2006, CMS announced changes in the Practice Expense methodology for all providers. On average psychologist Practice Expense payments dropped by two percent each year through 2010.
- In 2009, CMS announced a new series of Practice Expense adjustments, causing an additional two percent annual decrease for psychologists for 2010 through 2013.
- In 2011, psychologists suffered a four percent loss in overall reimbursement when CMS rebased and revalued the Medicare Economic Index. This change shifted in the payment formula the portion allocated to professional work to increase the Practice Expense share. Thus high technology cost providers benefited to the detriment of low cost providers like psychologists.
Even more significant, in 2014, psychologists can expect Medicare Practice Expense changes in the payment formula for the new 2013 psychotherapy codes that will likely result in lower payments for the most commonly billed services. For example, the psychiatric diagnostic evaluation code (90791) could experience as much as a 21 percent reduction; the 30-minute psychotherapy code (90832) a 17 percent reduction; and the 45-minute psychotherapy code (90832) a four percent reduction.
Medicare mental health services will be severely undermined if psychologists no longer provide the services beneficiaries need. An adjustment should be made to the formula to ensure that psychologists remain in the program.
Congress should replace the failed sustainable growth rate (SGR) formula with a payment system that is fair to all providers.
Congress enacted the SGR as part of the Balanced Budget Act of 1997 to limit growth in Medicare provider payments and contain program costs. However, as the Medicare Payment Advisory Commission recently testified, the SGR formula is not working, and Congress should act urgently to repeal it. Indeed, Congress has had to intervene on at least 15 occasions to avert staggering SGR cuts. And, if Congress does not act, Medicare providers face another payment rate reduction of nearly 25 percent, on Jan. 1, 2014.
Psychology appreciates the attention that members of the House Ways and Means, Energy and Commerce and Senate Finance Committees have given to repealing the SGR formula early in this Congress. Psychology looks forward to working with Congress to replace the SGR with payment reforms, and proposals which enhance quality, care coordination, and efficiency should be encouraged. However, it is vitally important that new payment models treat all Medicare providers — both physicians and non-physicians equally to ensure fair and adequate reimbursement into the future.
Congress should find an alternative to Medicare savings other than undermining provider payment rates through sequestration.
The Budget Control Act of 2011 requires about $1 trillion in automatic, across-the-board spending cuts — known as "sequestration" — over nine years, unless Congress intervenes with other measures to achieve this spending reduction. Medicare provider payments will be cut by up to two percent each year through sequestration.
Psychologists and other Medicare providers experienced the first year of cuts in April 2013, after the American Taxpayer Relief Act of 2012 provided a modest delay.
While our nation needs to reduce the federal deficit, this Medicare provider payment reduction will devastate reimbursement levels into the future. This formulaic and arbitrary approach will undermine Medicare, as providers leave the program with continually lowered payments. Congress should eliminate these payment reductions and find a more targeted approach to addressing Medicare spending.