Payroll tax law results in Medicare psychotherapy payment reduction

Legislation averts SGR cut scheduled for March 1

By Government Relations staff

February 23, 2012—On February 17 Congress passed the Middle Class Tax Relief and Job Creation Act of 2012.The new law signed by President Obama averts the Medicare Sustainable Growth Rate (SGR) payment cut of 27.4 percent scheduled to take effect on March 1 for the remainder of 2012.

However, the legislation failed to include a provision to extend a Medicare psychotherapy payment boost of five percent, despite active advocacy by the APA Practice Organization (APAPO) and grassroots psychologists throughout the U.S. As a result, psychologists and other mental health professionals will experience a five-percent decline in reimbursement for Medicare outpatient psychotherapy services beginning March 1.

APA Executive Director for Professional Practice Katherine C. Nordal, PhD, expressed strong disappointment about the adverse effect of the law on patients who need mental health services. “To think that Congress would pass a bill with a price tag of $144 billion but fail to spend $25 million for the psychotherapy payment provision is unconscionable,” she said. “It’s a form of discrimination against those with mental health needs that APA and the APA Practice Organization have been battling for decades.” 

Nordal observed that some of the most vulnerable people in the country will be affected by the law. “These cuts will impact funding not only for outpatient psychotherapy services but also for community mental health centers, state hospitals and private hospitals with mental and behavioral health units.”

Based on a 2008 survey by the American Psychological Association (APA), an estimated 3,080 psychologists have discontinued their participation in Medicare, and they cited reimbursement rates as a primary reason.

The Centers for Medicare and Medicaid Services (CMS) slashed Medicare psychotherapy payment rates as part of its Five-Year Review in 2006. Since that time, due to persistent pressure from the APA Practice Organization and grassroots psychologists, professional psychology has succeeded in gaining four laws that restored five percent of the payment. Two-thirds of the resulting $110 million in Medicare psychotherapy reimbursement has accrued to psychologists.

The latest victory occurred at the end of 2011, when Congress extended the payroll tax cut for two months through February 2012 and included the psychotherapy payment restoration in the legislation. Given the short time frame, psychology mobilized immediately to call on members of Congress to continue the payment restoration for the remainder of 2012.

Federal Advocacy Coordinators for the APA Practice Organization prompted grassroots psychologists nationwide to generate more than 8,000 emails to members of Congress through APAPO’s Legislative Action Center.  The APA Practice Organization facilitated direct engagement of psychologists with their elected officials in face-to-face meetings on Capitol Hill and scores of phone calls with key members of Congress and their staff. These actions complemented our lobbyists’ ongoing advocacy efforts on the Hill.

The recent flurry of activity built on many months of advocacy efforts. For example, since the beginning of 2011, the APA Practice Organization engaged psychologists to send more than 45,000 email messages to their elected officials about the importance of maintaining the increased psychotherapy payments.

“We are grateful to the many psychologists who took time from their practices to participate in the intensive campaign to advocate for their patients and the profession,” said Nordal. She noted that psychologists face an increasingly challenging environment in this election year with Congress embroiled in deep partisan divisions and facing budget challenges that put Medicare payment rates in peril.

APAPO’s Assistant Executive Director for Government Relations Marilyn Richmond, JD, added that House Republicans expressed their resistance to renewing the proposed Medicare extenders and subjected them to intensified scrutiny.

“We were unfairly excluded,” asserted Richmond, noting that the outpatient psychotherapy provision was one of several payment extenders to which House and Senate leaders had previously agreed but which were dropped from the legislation just before passage.

Eight extenders were included in the law. However, two were scheduled for elimination within a few months and four pertained to reimbursement for hospital-related services – which suffered large Medicare and Medicaid cuts elsewhere in the legislation to help pay for the SGR fix.

Hundreds of psychology leaders nationwide will continue taking messages to Capitol Hill about the importance of adequate Medicare funding for psychological services during the March 2012 State Leadership Conference.

We will continue to inform members about significant developments through our PracticeUpdate e-newsletter and other vehicles.


For more information, contact the Government Relations department by email or at (202) 336-5889.