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National Medicare Advocates Alliance

ISSUE BRIEF #15                                                                                          FEBRUARY, 2012




Extender Bill – 2012

As discussed below, action by Congress is required by end of the month to prevent cuts, or preserve, several important Medicare provisions.  In December 2011, Congress passed the Temporary Payroll Tax Cut Continuation Act of 2011, extending these provisions through the end of February 2012.  For a discussion of this bill, see previous CMA Alert “Payroll Tax Extension Includes Important Provisions for Medicare Beneficiaries” (December 29, 2011), available at:

The Following Medicare Provisions Are At Stake

  • The Qualified Individual (QI) Program, one of the Medicare Savings Programs (MSP), allows state Medicaid programs to pay Medicare Part B premiums for individuals with incomes between 120% and 135% of the federal poverty level (FPL) who are otherwise not eligible for Medicaid.
  • Medicare therapy caps exceptions process. (See discussion, below.)
  • Under the current sustainable growth rate (SGR) payment formula for physicians, doctors face a cut of almost 30% in Medicare payments starting March 2012. 

2.      review of medicare therapy caps and exceptions process

Therapy Cap Exceptions Process

For many years, Medicare has imposed a limit on the amount of coverage available for beneficiaries receiving outpatient therapy services. Two distinct caps were placed on therapy services: For physical therapy and speech language pathology services combined, the limit on incurred expenses is $1,900.00 in 2013 for occupational therapy services, the limit is $1,900.00 in 2013. A beneficiary must first cover the deductible, and pay 20% coinsurance. Medicare will then cover the remaining 80% up to the annual cap. To compensate somewhat for these coverage limits, Congress passed an "Exceptions Process" in the Deficit Reduction Act of 2005 (DRA).   The American Taxpayer Relief Act extended the exceptions process to December 31, 2013. The following discussion provides more information about this Exceptions Process.[1]

Medicare Caps for Physical Therapy/Speech Pathology Services and Occupational Therapy

The Balanced Budget Act of 1997 (BBA ’97) placed limitations on the amount of financial coverage available to Medicare beneficiaries receiving outpatient rehabilitation therapy services (except those provided under arrangements with a hospital[2]), including physical therapy, speech-language pathology services, and occupational therapy. Two categories were defined, one covering physical therapy services and speech-language pathology services combined, and the other covering occupational therapy services. These so-called therapy caps are indexed each year by the Medicare Economic Index (MEI), per the BBA ‘97. The caps were intended to become effective in 1999.

In 1999, Congress passed the Balanced Budget Refinement Act[3] that placed a moratorium on the ‘‘therapy caps.’’ Except for a short time in 2003, Congress continued this moratorium through December 2005. The moratorium was not renewed for 2006, however, and the caps were set at $1,740 for each of the two categories. For calendar year 2009, CMS established a combined therapy cap of $1,840 per beneficiary for outpatient physical therapy and speech language pathology services and a separate cap of $1,840 for outpatient occupational therapy services.[4] The beneficiary must first cover the deductible and pay 20 percent coinsurance. Medicare will then cover the remaining 80 percent up to the annual cap.  PPACA extended the therapy cap through December 31, 2010.[5]  Please check the CMS website pages at for updates and other therapy caps developments and information.

Exceptions Process

Congress passed the Exceptions Process in the DRA of 2005 to allow individuals and providers to seek coverage above the cap. The Exceptions Process is available for medically necessary rehabilitation services in all settings on or prior to December 31, 2010.[6] Either a provider or the beneficiary can submit a request for an exception. Although both automatic exceptions, which are automatically approved, and those requiring manual approval by Medicare were authorized by the DRA, beginning January 1, 2007, there is no manual process for exceptions and all services that require exceptions to caps will be processed using the automatic exceptions process.

  • Automatic Exceptions

Automatic Exceptions are available for diagnoses and procedures that are either directly related to the condition, any associated complexities that may negatively impact recovery from that condition, and/or particular evaluation services.

A list of condition codes that fall into the ‘‘automatically’’ excepted category can be found at  (site visited June 1, 2010).[7] Diagnoses and procedures that qualify as Automatic Exceptions do not require specific documentation for submission to the Medicare contractor. Although not required, it should be helpful to submit documentation demonstrating the ‘‘medical necessity’’ of the automatically excepted diagnosis. Keep copies of everything that is submitted.

While not specifically stated by CMS, complexities warranting an Automatic Exception appear to be: (1) Physical ailments that lead to complexities in treating the targeted condition of the body and (2) Complications of care management flow leading to a potential delay in treatment.

Depending on the nature of the complexity, an Exception should be approved for any complexity affecting the beneficiary’s ability to recover from the underlying condition. Complexities due to physical ailments must also be connected to a condition, especially if they are to qualify as an Automatic Exception. Some complexities will qualify as an Automatic Exception even if they are connected to a condition that is not specifically listed in the ICD-9 list of automatically excepted diagnoses. This can be the case, for an unrelated condition that causes a complexity affecting the rate of recovery for the condition that triggered the therapy. For example, if the beneficiary is experiencing a musculoskeletal problem that is not associated with the condition for which the therapy is being provided, but it does impact the ability of the patient to recover, then this complexity can qualify as an automatic exception for any additional treatment required because of the complexity. (CMS example of this: a wrist injury that prevents the use of a cane.)

‘‘Complexities’’ due to care management issues can be excepted for a variety of CMS provided reasons, such as the beneficiary requires treatment within 30 treatment days of being discharged from a hospital or skilled nursing facility (SNF), or a beneficiary needs to return to a pre-illness or injury living situation, or a beneficiary is unable to reach an outpatient hospital therapy service due to lack of access (thus resulting in approval for treatment at a non-hospital based facility). Additionally, if a beneficiary requires physical therapy and speech therapy simultaneously, this particular type of complexity will be the basis for an exception once this double treatment reaches the cap.

For evaluation services to be excepted from the therapy cap, they must be contained in the following list of Outpatient Rehabilitation Healthcare Common Procedure Coding System (HCPCS) Codes and will only be excepted from the cap once the cap is reached (a retroactive exception): 92506 (evaluation of speech), 92597 (oral speech device evaluation), 92607 (evaluation for prescription for speech-generating Augmentative and Alternative Communication [AAC] device), 92608 (each additional 30 minutes required for evaluation), 92610-92611-92612-92614-92616 (swallow evaluations), 96105 (assessment of aphasia), 97001 (physical therapy evaluation), 97002 (physical therapy re-evaluation), 97003 (occupational therapy evaluation), 97004 (occupational therapy re-evaluation).

  • Limitations

Only 15 additional days of treatment can be requested at any one time. However, a plan justifying any additional treatment days, including any days beyond the initial 15, must be submitted with the Exceptions request.

  • Contractor’s Decision Process

If the Medicare Contractor does not make a decision regarding an Exception within ten days, the services are automatically considered ‘‘medically necessary’’ and the requested therapy treatment is automatically approved. Note: The CMS information on this ten-day deadline for a decision though infers that the contractor does not need to notify the beneficiary of a decision within those ten days. Thus, the beneficiary or provider should inquire if the ten day window has closed and a decision has not been received.

  • Exclusion from the Cap

Importantly, the payment cap does not apply to therapy services rendered in an outpatient hospital facility or in an emergency room. Therefore, beneficiaries who reach the payment cap can consider receiving additional services in an outpatient hospital setting. This exclusion does not include therapy services provided at SNFs.

  • Appeals

CMS’s notices regarding the therapy cap Exceptions Process note that because the caps are statutorily based a decision is difficult to appeal. However, an appeal is not precluded.  Advocates should approach an unsatisfactory Exceptions decision as they would any other Part B denial and consider an appeal.


Overview of Supreme Court Challenge    

After the Affordable Care Act (ACA) was signed into law in March 2010, a number of lawsuits challenging various provisions of the law were filed in federal courts. Although many cases were dismissed, several appellate courts issued decisions on the merits of the law.  The Supreme Court agreed to consider several issues related to the constitutionality of the ACA, and has scheduled oral arguments over three days, March 26-28, 2012. 

For an overview of the challenges to the ACA, see Kaiser Family Foundation report “A Guide to the Supreme Court’s Review of the 2010 Health Care Reform Law” (January 2012), available at: For news updates, legal analysis and all official documents (including briefs) relating to challenges to the Affordable Care Act, see: .

  • Special Presentation: Rochelle Bobroff, Directing Attorney, National Senior Citizens Law Center (NSCLC)

Joining five other national organizations that represent the interests of elderly and disabled people, the Center for Medicare Advocacy filed an amicus brief on January 30 in the United States Supreme Court supporting a position of the federal government in the Affordable Care Act (ACA) litigation. The amicus brief was drafted by attorneys from the National Senior Citizens Law Center and AARP. The brief is available at:

The brief does not address the constitutionality of the minimum coverage provision, (which is also known as the individual mandate), but argues that other provisions of ACA are severable from the minimum coverage provision if the Court strikes it down.  The specific focus of the amicus brief is the effect of a holding of unconstitutionality on ACA's changes to the Medicare and Medicaid programs for people over 65. The brief thoroughly explains how, since ACA's many improvements to Medicare and Medicaid can stand alone and will not be affected if the minimum coverage provision is struck down, those provisions are severable. The goal, of course, is to insulate the Medicare and Medicaid improvements and ensure that they are not eliminated in the event that the minimum coverage provision is invalidated.

4.      Litigation Update

In Hooper v. Sullivan (1989 WL 107497 (D. Conn.)) the Center for Medicare Advocacy reached a settlement in a class action case challenging the application of a “three-hour rule” to deny Medicare coverage to patients in rehabilitation hospitals.  A screening criterion in the Medicare Intermediary Manual required that patients receive at least three hours per day of physical and/or occupational therapy.  This was being used by Medicare contractors to create an irrebuttable presumption of noncoverage for patients who did not require or could not tolerate three hours of therapy per day. 

  • The parties came to an agreement that denials based on the three-hour rule or other rules of thumb were not appropriate.  As part of the settlement, the court entered an order calling for a revision of the Medicare Intermediary and Hospital Manuals.  CMS also issued a bulletin to all rehabilitation facilities in Region I. 
  • However, recent changes in regulations governing inpatient rehabilitation coverage (42 C.F.R. §412.622(a)(3)(ii)) have been interpreted to support the use of a three-hour rule to deny coverage.  The Center understands that Medicare contractors are again denying inpatient rehabilitation coverage on the basis that a patient does not require and receive three hours of therapy each day. 
  • The Center is considering action to enforce the Hooper court’s 1989 order. We are interested in hearing about any individual (particularly from New England) who has recently been affected by the three-hour rule, and whether advocates, organizations, or providers are also seeing application of this rule.




[1] This material comprises part of Chapter 6 of the Medicare Handbook, Stein, Chiplin, editors. (Aspen Pub., 2012). Written by attorneys from the Center for Medicare Advocacy. Reprinted with permission from the publisher.  Copyright © 2012.  All Rights Reserved.
[2] See Medicare Claims Processing (MCP) Manual, CMS Pub. 100-04, Ch. 5, §10.2, available at (site visited June 1, 2010).
[3] Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999, Pub. L. No. 106-113 (Nov. 29, 1999).
[4] See 72 Fed. Reg. 66,356 (Nov. 27, 2007).
[5] PPACA, §3103.
[6] PPACA, §3103.
[7] See also  (site visited June 1, 2010).




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