Physical Therapists’ Guide to Medicare

Physical therapists must contract with Medicare to treat Medicare patients—and the rules aren’t always easy to follow. Here’s the physical therapists’ guide to Medicare.

Here’s the physical therapists’ guide to Medicare—everything you need to know about enrolling, treating patients, and billing under Medicare.

Heidi Jannenga 5 min read March 2, 2024

Heidi Jannenga professional headshot, who is a contributor at WebPT.

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In the ever-evolving healthcare landscape, understanding the intricacies of insurance regulations and coverage is crucial for a successful business. For physical therapists, learning to navigate the complexities of Medicare is a necessity and a valuable asset in ensuring optimal patient care and practice sustainability. But most clinicians don’t have the time—let alone desire—to sit around and read through every change and new regulation. That’s why we have created the physical therapists’ guide to Medicare: to offer one source of truth to get started treating patients and close the textbook or web browser.

What is Medicare?

Before diving into the physical therapists’ guide to Medicare, let’s discuss what Medicare is exactly. Administered by the Centers for Medicare and Medicaid Services (CMS)—a component of the Department of Health and Human Services (HHS)—the Medicare program covers Americans aged 65 and older who have worked and paid into the system as well as younger people with disabilities and those with end-stage renal disease or amyotrophic lateral sclerosis (ALS).

According to the authors of this article, “Medicare is designed to absorb risk,” whereas “commercial insurers will always seek to minimize their exposure to risk.” As a government program, Medicare provides coverage to healthy individuals and those who currently have—or may develop—expensive or complex medical issues requiring significant medical intervention. Commercial insurers, on the other hand, must “protect [their] business interests by avoiding those most likely to use medical care.”

As of September 2022, Medicare was providing coverage to more than 65 million Americans. In 1996, this number was only 19.1 million. According to a report published by The Commonwealth Fund, on the whole, Medicare covers about 75% of its beneficiaries’ healthcare costs, and about 70% of beneficiaries are between the ages of 65 and 85. Medicare has a resource for eligibility requirements for prospective enrollees.

What are Medicare’s four parts?

Medicare has four parts: A, B, C, and D—and, “each covers a distinct set of services and benefits.” Additionally, there are supplement plans that fill in Medicare coverage gaps. Here’s what you need to know about each of Medicare’s parts:

Parts A and B

Medicare Part A is inpatient hospital insurance and Part B is supplementary medical insurance. Together, they form what is referred to as “Original Medicare.” While Part A covers inpatient hospital and skilled nursing facility care, home health care, and hospice care, Part B covers doctor’s services, rehab therapy services, and other outpatient care and supplies not covered under Part A.

If you’re in private practice and accept Medicare beneficiaries, you most likely provide services that fall under Medicare Part B. It’s important to note that Medicare does not cover Medicare Part B services for patients receiving Part A services. Thus, be sure to ask all patients about concurrent care.

In most cases, Original Medicare beneficiaries can choose their provider and facility—as long as that provider is enrolled in Medicare and accepting new patients. Most patients don’t pay a premium for Part A but pay a premium for Part B (based on income level and Social Security benefits). Patients usually pay a deductible and coinsurance when they access both Part A and B services.

Part C

Medicare Part C—a.k.a. Medicare Advantage (MA)—plans are provided by private companies that have received approval from Medicare to offer all-in-one hospital and medical insurance. Prescription drug coverage is also usually bundled in Part C plans—and many Part C plans offer additional coverage beyond what original Medicare provides, including dental and vision. For some patients, MA plans may be more cost-effective than Original Medicare. While Medicare funds MA plans, questions about coverage, out-of-pocket costs, billing, and referrals should be directed to the providing company.

Part D

Prescription drug coverage falls under Medicare Part D. Patients with Original Medicare may pay a monthly premium for a Medicare prescription drug plan provided by a private company. However, Medicare Advantage beneficiaries with plans that offer prescription coverage are usually required to obtain prescription drugs through the MA company. Premiums for Part D vary and are typically weighted so that higher-income beneficiaries pay more.

Medicare Supplement Plans

Patients with Original Medicare can purchase a Medicare Supplement policy that helps cover healthcare costs that Medicare Parts A and B don’t. That includes copays, coinsurances, deductibles, and—depending on the plan—healthcare services incurred while traveling abroad.

What is medical necessity?

All Medicare benefits are determined by medical necessity, which means that clinicians must provide justifiably reasonable and necessary care according to evidence-based clinical standards of care. The definition of “reasonable and necessary” varies based on both National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs). Each provider is responsible for knowing the current NCDs and LCDs governing their practice. However, in most cases, the medical necessity of services is determined based on:

You can download the Medicare NCD Manual from CSM’s Internet-Only Manuals page and identify the LCDs associated with your particular geographic region by using the search tool found on the right side of the Medicare coverage database page.

To learn more about providing Medicare patients with services that are not medically necessary, click here.

What was the ruling on the Medicare Improvement Standard?

In January 2013, the US District Court for the District of Vermont ordered CMS to clarify sections of its Medicare Benefit Policy Manual—which, as it turns out, does not require improvement as a condition of coverage. As part of this settlement, CMS also had to create and distribute new educational materials to correct long-standing and widespread misunderstandings about the Improvement Standard. While the settlement went into effect immediately for Medicare and Medicare Advantage plans, CMS had until January 2014 to comply with this order.

Here are some important things to note:

How do I treat Medicare patients?

A rehab therapy clinic must accept Medicare to treat Medicare patients. Furthermore, per Chapter 15, Section 40.4 of the Medicare Benefit Policy Manual, physical and occupational therapists in private practice cannot “opt-out” of Medicare and therefore may not enter into private contracts with Medicare beneficiaries. In other words, rehab therapists who have a relationship with Medicare can’t accept cash payments from Medicare patients for medically necessary physical therapy services.

According to an article from the U.S. Census Bureau, every one of the estimated 73 million Baby Boomers will be 65 or older by 2023. That creates a potentially huge business opportunity for outpatient practices. That being said, there are successful outpatient clinics that are 100% cash-based. For more information on treating Medicare patients and the cash-pay world, understand what accepting Medicare assignment means.

How do I enroll in Medicare?

If you’re interested in accepting Medicare Part B patients, use the below instructions to enroll online:

  1. Read the Internet-based Provider Enrollment, Chain and Ownership System (Internet-based PECOS) document, which outlines the enrollment process, provides an overview of Medicare’s terminology, and details the information you’ll need to provide to enroll.
  2. Ensure you have a National Provider Identifier (NPI), which is a user ID and password from the National Plan and Provider Enumeration System.
  3. Log in to Internet-based PECOS using your NPI.
  4. Complete, review, and submit an electronic enrollment application. You’ll then receive a Certification Statement.
  5. Sign and date the original Certification Statement in blue ink and mail it, along with any requested supporting documents, to the designated Medicare contractor within 15 days of your electronic submission. Your effective date of filing is the date the Medicare contractor receives the Certification Statement. Please note that a Medicare contractor will not process the online application without a signed and dated Certification Statement.

Resources

What are the Medicare documentation requirements for physical and occupational therapy?

Medicare reimburses therapists when the documentation and claim forms accurately report the provision of medically necessary covered services. So, in addition to being legible and relevant, documentation must defend the services that therapists bill. Furthermore, documentation must comply with all applicable Medicare regulations and support included CPT codes. You can reference the latest Medicare documentation requirements published in 2022.

Please note that therapists should also follow any state or local laws regarding documentation and the professional guidelines of the American Physical Therapy Association (APTA) or the American Occupational Therapy Association—even if Medicare does not require it.

Elements of Patient Care