Up to code: Who sets psychologists’ payment rates?

How revisions to psychological and neuropsychological testing codes may affect payments.

A psychologist’s insurance payment rates are determined by their patient’s health care insurer. Those rates, however, are influenced by Medicare’s Physician Fee Schedule, released annually by the Centers for Medicare and Medicaid Services (CMS).

CMS uses the fee schedule — a list of current procedural terminology codes (CPT), health care services, their relative values and fees — to reimburse Medicare providers for their services. The relative values for each service are based in part on recommendations from the American Medical Association (AMA)/Specialty Society Relative Value Update (RUC) Committee. The RUC reviews survey responses from psychologists and other providers to determine the relative values of health care services and their associated practice expenses.

AMA is currently revising the CPT codes for psychological and neuropsychological testing. Their relative values could change and that will likely be reflected in future Medicare fee schedules.

If you submit claims to Medicare on behalf of a patient, you should know that the Medicare fee schedule is updated yearly, with most policy changes occurring on Jan. 1. The changes are most often related to payment rates.

Although Medicare does not actually set the fees for other insurance plans, it can have a strong influence on how psychologists are reimbursed by other insurers.

History of the schedule

Twenty years ago, most health insurance policies were traditional, basic indemnity plans, also called “80/20” plans. Under these plans, the insurer paid 80 percent of the provider’s fee and the patient paid the remaining 20 percent. Payment rates were based on the “usual and customary rates” — the prevailing fees charged by practitioners in a region. Over time, if the prevailing fees rose, payment rates also rose. This scenario applied to nearly all health insurers, including Medicare. In 1992, Medicare took action to make its annual spending more predictable by creating the Physician Fee Schedule.

The Medicare Physician Fee Schedule includes relativity-weighted payment rates for services provided to the elderly and/or disabled population enrolled in Medicare Part B. These rates are based on the relative complexity of each medical service and the relative cost of the equipment needed to provide the service. The Medicare fee schedule has been widely adopted by the health insurance industry as an off-the-shelf alternative to creating their own fee schedules from scratch. Outside of Medicare, the fee schedule structure is used for a variety of patient populations, including those covered by Medicaid, Tricare and commercial insurance plans.

Medicare’s fee schedule is frequently used as a benchmark by other insurers, but commercial and private insurers are not required to adhere to the Medicare payment rates. They might decide to vary the payment rates according to the policy structure — paying for some services at a higher (or lower) dollar amount than Medicare does. They also have the ability to pay, or not to pay, for services that are covered by Medicare. For some state-based insurance plans such as Medicaid, the payment rates may be tightly regulated by the state government.

To track Medicare policy changes, you can subscribe to your local Medicare contractor’s listservs. You will also find information through the APA Practice Organization. Listservs and policy bulletins are also available for commercial policies. If you often file claims, it’s important at least to skim the listservs and bulletins for information related to behavioral and mental health services.