Medicare payments reduced for 2011

CMS actions result in lower Medicare reimbursement rates; APAPO continues advocating for practitioners

by Government Relations Staff

January 13, 2011 — On January 1, 2011, Medicare payment changes took effect for psychological services reimbursement. The American Psychological Association Practice Organization (APAPO), with strong support from grassroots psychologists, successfully lobbied Congress to block the projected 25 percent Sustainable Growth Rate (SGR) cut while gaining a law that extends the five percent payment restoration for Medicare psychotherapy services through 2011. 

Despite these successes, Medicare providers will see an average six percent reduction in psychological services reimbursement in 2011 due to changes in the Medicare Economic Index (MEI) and an ongoing reduction in practice expense values. 

The Medicare Economic Index (MEI)

In 2011, the Centers for Medicare and Medicaid Services (CMS) is updating the MEI, an important measure of business productivity used to determine Medicare fees, to reflect recent cost data. This update will benefit those specialties for which equipment and supply expenses tend to be high. 

Because CMS is required by law to keep its payments budget-neutral, any increases in payment must be offset by reducing other aspects of payment. Consequently, as a result of the MEI changes, psychologists and other provider groups whose payments are based primarily on their professional work – rather than on use of equipment and supplies – will see decreased Medicare payments. CMS is projecting a four percent reduction in Medicare reimbursement for psychological services related to the MEI. 

The payment reduction takes effect despite concerted advocacy by the APAPO, which flagged the issue for both CMS and Congress by submitting a comment letter (PDF, 21.9 KB) objecting to the MEI cuts. The letter argued that psychologists should not be penalized for providing cost-effective services with minimal overhead.

In addition, taking advantage of our lobbying presence and relationships on Capitol Hill, the APAPO and grassroots psychologists persuaded 22 members of the House of Representatives to send a bipartisan letter (PDF, 114 KB) to CMS, urging the Centers to explore alternative approaches to the MEI update and protect mental health services.

Changes in Practice Expense

In 2011, for the second year in a row, psychologists will experience an average two percent reduction in payment for practice expense. This reduction is part of an ongoing payment reduction plan that CMS opted to implement over a four-year period beginning in 2010. These cutbacks are based on results of a CMS survey that included psychologists’ operating expenses.

The multi-specialty survey launched in 2007 was intended to obtain current data about the indirect costs of providing services. Prior to this survey, CMS had no baseline indirect practice expense data for a number of specialties, including psychology; psychologists’ overhead expenses per hour were linked to those reported by psychiatrists. The CMS survey results provided more specific indirect cost data for psychology and other specialties. 

Because the survey data for psychology indicated that indirect practice expense costs were lower than figures CMS had been using, the agency decided to reduce Medicare payments for psychological services by two percent on average annually from 2010 through 2013, resulting in a total reduction of eight percent.

APAPO continues advocating for appropriate practice expense values related to psychological services. In a December 2010 comment letter to CMS, APAPO encouraged the agency to act on the recommendation from the Medicare Payment Advisory Commission (MedPAC) that CMS develop a plan to ensure the accuracy of practice expense values in the long term and consider alternatives for collecting specialty-specific cost data or options to decrease the reliance on such data.

Physician Quality Reporting

In 2011, the Physician Quality Reporting Initiative (PQRI) will be renamed the Physician Quality Reporting System. Psychologists reporting individual measures will be able to choose whether to report on the entire calendar year or on the six-month period from July 1 to December 31, 2011. 

The percentage requirement for successful reporting will be reduced from 80 percent of applicable Medicare Part B patients to 50 percent. Psychologists who successfully report in 2011 will receive a bonus payment of one percent based on total Medicare claims, not just the claims for which measures were reported.

Beginning in 2011, CMS is required by law to list the names of eligible professionals who have satisfactorily reported under the Physician Quality Reporting System. This information will be posted on a CMS website in 2012 after the 2011 incentive payments are made.


For additional information, contact the Government Relations department by e-mail or call 202-336-5889.