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 39 percent drop, adjusted for inflation. 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.
As a result, psychologists are leaving Medicare, reducing their patient loads, and refusing to take new patients. A 2008 APAPO member survey determined that although 28,000 psychologists were Medicare providers, 3,000 who once participated had dropped out, primarily due to low reimbursement rates. This problem has undoubtedly worsened since 2008, as payment has continued to drastically decline.
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 2 percent each year through 2010.
In 2009, CMS announced a new series of Practice Expense adjustments, causing an additional 2 percent annual decrease for psychologists for 2010 through 2013.
In 2011, psychologists suffered a 4 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.
Psychologists Medicare services payments repeatedly are being cut to support increases in payments for evaluation and management (E&M) services. Psychologists do not benefit from E&M payment increases, since Medicare does not allow them to bill for these services.
Psychologists and other mental health providers suffered the largest of all provider cuts (7 percent) due to a CMS decision to increase E&M payments in the 2006 Five-Year Rule. In response, Congress passed a 5 percent psychotherapy payment restoration (MIPAA extender). Unfortunately, this extender expired in 2012, leaving psychologists with a 5 percent reduction in psychotherapy payments.
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 to provider payment, including most recently its action to halt a scheduled 26.5 percent cut that would have taken place on January 1st.
Psychology appreciates the attention that members of the House Ways & Means, Energy & 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 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 2 percent each year through sequestration.
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.
