Medicare outpatient mental health coverage parity begins Jan. 1, 2014

After a five-year phase out, the mental health treatment limitation for Medicare outpatient services will no longer apply.

By Government Relations staff 

Beginning Jan. 1, 2014, Medicare will reimburse outpatient mental health treatment services at parity with other Part B services. Previously, Medicare beneficiaries faced a higher copayment for outpatient mental health treatment, known as the mental health treatment limitation. Beneficiaries were required to pay up to 50 percent of the approved amount for these services under the physician fee schedule, as opposed to Medicare’s 20 percent copayment for most other outpatient services. 

For more than a decade, APA and the APA Practice Organization (APAPO) worked to end the discriminatory mental health coverage. The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), enacted into law on Oct. 3, 2008, represented a big step toward ending health insurance benefits inequity between mental health/substance use disorders and medical/surgical benefits coverage in private health plans, but Medicare wasn’t required to comply with the law. 

The first step towards parity in Medicare coverage came in July 2008 when Congress enacted the Medicare Improvements for Patients and Providers Act (MIPPA). Under MIPPA, the Centers for Medicare and Medicaid Services (CMS) implemented a phase-out of the mental health treatment limitation over a five-year period from 2010 to 2014. 

Prior to 2010, Medicare’s payment liability for outpatient mental health services was limited to 62.5 percent of covered expenses incurred in any calendar year for an individual who was not an inpatient of a hospital at the time the expenses were incurred. Following the enactment of MIPPA, that limitation was gradually reduced over several years:  

  • From Jan. 1, 2010-Dec. 31, 2011, the outpatient mental health treatment limitation was 68.75 percent; Medicare paid 55 percent and the beneficiary paid 45 percent.
  • From Jan. 1, 2012-Dec. 31, 2012, the limitation was 75 percent; Medicare paid 60 percent and the beneficiary paid 40 percent.
  • From Jan. 1, 2013-Dec. 31, 2013, the limitation was 81.25 percent; Medicare paid 65 percent and the beneficiary paid 35 percent.
  • Beginning Jan. 1, 2014, the limitation will be 100 percent; Medicare will pay 80 percent and the beneficiary will pay 20 percent. 

With the end of the five-year phaseout of the mental health treatment limitation, Medicare will no longer lag behind private insurers in providing nondiscriminatory outpatient mental health coverage to millions of people across the country.