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(p. 280) Opportunities and Challenges of Medicare 

(p. 280) Opportunities and Challenges of Medicare
(p. 280) Opportunities and Challenges of Medicare

Amy S. Rosett

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Subscriber: null; date: 20 September 2017

Medicare is the federal health insurance program for people aged 65 and older, and those with permanent disabilities, end-stage renal disease, or amyotrophic lateral sclerosis (ALS). Although it is widely used, it is poorly understood by beneficiaries, healthcare providers, and the general public. Since Medicare is a federal program, there are federal laws and regulations involved that are different than the rules of private health insurance. Periodically there are news stories about doctors leaving the program and disgruntled patients (Beck, 2013), and yet there are studies showing that (1) many providers continue to take Medicare patients (Boccuit, Fields, Casillas, & Hamel, 2015; Lieberman, 2013; Shartzer, Zuckerman, McDowell, & Kronick, 2013; Wasik, 2013) and (2) patients are highly satisfied with their Medicare insurance (Davis, Stremikis, Doty, & Zezza, 2012; Goforth, 2015). Finally, the program is often caught up in partisan politics; some legislators claim it cannot be sustained and should be dismantled whereas others want it to be expanded and available for all.

The number of Americans with Medicare coverage has been increasing steadily, especially as those in the “baby boomer” generation have been turning 65. Specifically, according to, when Medicare reached its 50th anniversary in July 2015, over 55 million people were enrolled in Medicare. Furthermore, this number had increased by 3 million since 2012. Of historical interest, Medicare was started under President Lyndon Johnson’s leadership as part of his social reforms. It was passed by Congress as Title XVIII of the Social Security Act, The Health Insurance for the Aged and Disabled Act, guaranteeing health insurance to those over 65 regardless of medical history or income.

An important issue for mental health professionals is whether the profession is ready to meet the growing needs of older adults. The Center for Workforce Studies of the American Psychological Association (APA), in its 2015 Survey of Psychology Health Service Providers (Stamm et al., 2016), found that 37% of licensed psychologists frequently or very frequently provided care to adults age 65 to 79 and an additional 25% did so occasionally. When asked about providing care to (p. 281) adults age 80 and older, only 9% reported doing so frequently or very frequently and an additional 17% did so occasionally. These data are consistent with the observations of many clinical geropsychologists that there is a growing need, and thus increasing work opportunities, for professionals with this interest and expertise.

Nearly all clinical geropsychologists and other health professionals who specialize in working with older adults are Medicare providers. The field has a number of subspecialties, including neuropsychological assessment, capacity evaluations, widowhood and grief, caregiver issues (including caregiving of others and the need for caregiving), promoting healthy aging, adjustment to changes in health and/or lifestyle, and diversity issues as related to older adults. For clinicians who have an interest in working in long-term care settings, such as skilled nursing and assisted living facilities, almost all the residents are Medicare beneficiaries. Several online resources provide more information about geropsychology, including and

Colleagues sometimes state that they wouldn’t want to be a Medicare provider because they don’t want to work with “old people with dementia.” This is a misguided assumption about working with these beneficiaries. People over the age of 65, and especially those in the first decade or so, often present with issues and lead lives that one would think of as being “middle-aged” rather than “elderly.” There are many factors that contribute to this observation: People take better care of themselves and their health, and our culture today accepts that older people are working and living more actively. Frequent issues raised in psychotherapy by these “young older adults” include workplace stresses, even if it is ambivalence about retirement; parenting, even if it is about raising their grandchildren; concern about their parents who are still living in their late 80s and 90s; and wanting to reduce depression, anxiety, and a wide range of stresses.

Some psychotherapists recognize the importance of becoming a Medicare provider because they want to continue the clinical work with their current clients who are turning 65 years old. As described later, they could still opt out of Medicare and sign a contract to work together and be paid a private fee directly from the client. However, most Medicare beneficiaries want to use their health insurance rather than pay out of pocket. This is especially true if they had been submitting superbills to their previous health insurance company for partial reimbursement of their psychotherapy.

Since Medicare also covers people with a permanent disability of any age, providers do not necessarily work with older adults. Often, clients with disabilities have chronic medical needs and will benefit from treatment by health-oriented clinicians. With the current emphasis and growing opportunities within integrative care, psychotherapists interested in working in medical settings will very likely meet clients who have Medicare as their insurance. Medicare beneficiaries are likely to be seen by other specialties such as neuropsychologists and rehabilitation psychologists and social workers. Even children and adolescents with chronic illnesses and on the autism spectrum might qualify for Medicare.

Overall, there are many people with a great number of mental health needs for evaluation and treatment who seek the services of Medicare providers. Furthermore, physicians who appreciate the value of psychological and neuropsychological evaluations and treatment are often looking for psychologists and clinical social workers who are Medicare providers. If mental health providers network with physicians and other professionals who work with Medicare beneficiaries, it can be a relatively smooth process to build and sustain a private practice. Incidentally, at present (p. 282) licensed marriage and family therapists and licensed professional counselors cannot be Medicare providers.

Federal law requires that all physicians and other healthcare professionals who provide services to Medicare beneficiaries either enroll in Medicare or formally opt out of the program. Those who decide to opt out must still follow specific guidelines, including having clients sign a contract that neither they nor the healthcare provider will bill Medicare for the services. This law is one that many psychologists and clinical social workers are not aware of or ignore. It is an important decision to either enroll in or opt out of Medicare as a provider. One intention of this chapter is to offer a basic understanding of the program so that readers will be able to make an informed decision, taking into account their clinical interests and work experiences. Thus, this chapter will explain how the program is structured and both the opportunities and challenges of being a Medicare provider.

Although the information here has been researched to ensure it is current and accurate, aspects of Medicare change over time. Also, despite the fact that Medicare is a federal program, aspects of the program vary by state. Periodically the information provided by Medicare has a disclaimer that it is not a legal document and is subject to change. The same is true for this chapter. Although the basic structure of Medicare has been consistent over many years, it is likely that the laws and regulations regarding it may change, so readers should seek updated information.

Structure of Medicare

Medicare is the federal health insurance program for people who are 65 and older, people of any age with permanent disabilities (defined as being on Social Security disability for at least 24 months), and people with end-stage renal disease or ALS. It is administered by the Centers for Medicare and Medicaid (CMS). CMS contracts with insurance companies, referred to as Medicare Administrative Contractors (MACs), to provide most services, including processing claims, enrolling healthcare providers, handling claims appeals, answering beneficiary and provider inquiries, and detecting fraud and abuse. As defined in the Social Security Act, CMS has both national coverage determinations (NCDs) and local coverage determinations (LCDs). Most mental health services fall under LCD, which means that each MAC can determine whether a particular service is covered. The MAC for a particular location can be found on or Incidentally, Medicare uses so many acronyms that one can search “Acronyms” on to view pages of them arranged alphabetically.

Medicare coverage is separated as follows: Part A—Hospital Insurance, Part B—Medical Insurance, Part C—Advantage plans, and Part D—Prescription plans. The services provided by psychologists and social workers fall under Part B as “fee-for-service.” In the past few years, CMS documentation often refers to the coverage provided under Parts A and B as “traditional” and/or “original” Medicare. These terms are used to distinguish this coverage from “Advantage” plans. Medicare Advantage (MA) plans are offered by private insurance companies to cover the benefits of Parts A and B. More information about the MA plans will be given later in this chapter.

(p. 283) Psychologists and social workers are required to “accept assignment” for all Medicare services. This means that they agree that the Medicare-allowed charge is the full payment for any service. The reimbursement for each service is determined by a complex formula that considers technical skills, risks and costs to the provider, and geographical region. The amount allowed can be found on the website of the MAC, under Medicare Physician Fee Schedules (MPFS). According to the website of Noridian, one of the MACs, over 7,400 unique services are covered in this schedule; the services reimbursable to psychologists and social workers are listed by the CPT code. Also on the Noridian website, below the MPFS is a tab labeled “Allowed Amount Reductions.” The reimbursement reductions pertinent to mental health services will be explained in the “Challenges” section.

Beginning in 2014, Medicare pays 80% of the total allowed charge; this percentage increased gradually from 50% over the previous four years. By increasing to this level, there is no longer a disparity between mental health and non–mental health services. Who pays the remaining 20%, which is referred to as the co-insurance or co-pay? Technically it is the client’s responsibility, so most clients also purchase a supplemental insurance plan. Although this is a dated term, sometimes clients refer to these plans as “Medi-gap” plans since they cover the gap between what Medicare reimburses and what is owed to the provider.

Numerous insurance companies offer Medicare Supplemental plans. A provider does not have to be “in-network” with the company in order to get paid the full amount due. For nearly all states, the plans, which are identified by a letter, vary in terms of coverage and benefits; the website has a helpful tutorial that details this information. For practical purposes as a provider, it is helpful to know that if a client’s supplemental insurance falls under “Plan F” (which is not always marked on the supplemental insurance card), then the annual deductible for Medicare Part B services will be covered.

In 2016 the annual deductible rose to $166 after being $147 for several years. Although these deductible amounts are significantly lower than those for most private insurance companies, Medicare beneficiaries usually do not expect to have to pay anything to their healthcare providers. Nonetheless, it is both allowed and appropriate to be paid directly by the client if the allowed amount is not fully covered by CMS or a supplemental plan. In addition to having an annual deductible, beneficiaries pay a monthly premium for Medicare Part B, which is usually deducted from a person’s monthly Social Security benefits. Knowing such facts is important for both providers and clients: Providers should know what they are expected to be paid, but also it is reassuring to the beneficiaries that providers understand how Medicare works.

To provide guidance to Medicare beneficiaries, it is helpful to build a good working relationship with a reputable insurance agent who has specialized knowledge about the Medicare plans and regulations. There are numerous plans with slight differences in coverage. Also, there are only specific times in the year when Medicare patients can purchase and change their plans. Under specific conditions, if a person delays enrolling in Medicare, there will be additional costs.

If a client has not purchased a supplemental plan or the supplemental plan does not cover 100% of the co-pay, the client is expected to pay the amount due. This is how Medicare defines the term “balance billing.” Within the field of psychotherapy, the term “balance billing” sometimes is referred to as billing the difference between the amount paid by insurance and the (p. 284) psychotherapist’s full fee. However, this is not allowed within Medicare since psychologists and social workers cannot collect any fees beyond the allowed amount.

In the past few years some insurance companies have offered “high-deductible supplement” plans with much lower monthly costs. As the name implies, clients have to pay the 20% co-pay until they reach a specific out-of-pocket expense and then the plan begins to pay. This plan might make sense for someone with limited financial resources and excellent health who might not incur many medical costs. Another possibility is that a past and/or current employer may provide Medicare supplemental insurance as an employee benefit. However, these plans may not cover the full 20% of the co-pay.

At least one major private insurance company offers a supplement plan that is marked both “PPO” and “Exclusive Provider Organization” on the front of the card. Although stating “PPO” (preferred provider organization) would lead many to assume that it would cover any Medicare provider, the term “Exclusive Provider Organization” means that it is actually similar to a health maintenance organization (HMO) and covers the co-pay only if the clinician is also an in-network provider with the company. Sneaky, yes; allowed, apparently. It seems that such obfuscating rules occur more when working with private insurance; in general, Medicare rules and fees are more transparent.

Issues of insurance coverage, Medicare or otherwise, should be discussed openly, preferably during the initial phone contact or certainly during the first session. Most psychotherapists state their fees in their forms to consent for treatment. Striking through the full fee and writing something like “Will accept Medicare and Supplement (or co-pay of $XX) as full fee” with your initials can be a reassurance for the client and a protection for the provider.

Medicare does have one exception to this rule: The client is not responsible for the 20% co-pay if there is severe financial need, which includes having Medicaid. These clients are commonly referred to as “Medi-Medi.” They are also referred to as “dual eligible” since they qualify for both federal government programs. Specific rules prohibit Medicare providers from “balance billing” Medi-Medi clients.

Medicaid is administered by the states and there are wide differences in how plans are structured. Therefore, whether or not a Medicaid program will cover the 20% co-payment for a Medi-Medi beneficiary varies among the states. Even within one state, whether the co-payment is covered might depend on other factors. Thus, providers should consult their state’s Medicaid program to clarify if there will be any coverage. If the Medicaid program does not cover the co-payment, the provider will still be paid the 80% of the allowed amount by Medicare.

CMS has recently started the Medicare-Medicaid Coordination Office in order to improve the services available to dual-eligible clients throughout the country. The goal is to provide coordinated medical, behavioral health, long-term institutional, and home- and community-based services. For example, in California there is now a voluntary program called Cal MediConnect, which is part of the Coordinated Care Initiative. Some Medi-Medi beneficiaries are placed in managed care health plans, which are expected to offer more comprehensive and accessible services. However, these clients might not be able to continue treatment with their Medicare providers, including psychotherapists, if they are not in-network with the managed care plan. The program does allow them to disenroll and continue to have both traditional Medicare and Medicaid. Both options have benefits and limitations, so each client will have to decide based on his or her individual needs.

(p. 285) A nonpartisan, nonprofit organization, Center for Medicare Advocacy, Inc., offers more detailed information regarding coverage, rights of beneficiaries, costs, and legal matters. Started by one attorney in 1986, it is now staffed by attorneys, advocates, nurses, and technical experts. The group’s website,, is an excellent resource for both Medicare beneficiaries and healthcare providers.

Being a Medicare Provider

Psychologists and social workers who decide to become Medicare providers will be in demand, especially as the number of beneficiaries increases. The regulations, expectations, reimbursements, and limitations for providers are available. Unfortunately, many times they are described using terms and acronyms that can make them seem more complicated than they actually are. This section of the chapter will demystify the process by offering straightforward explanations and practical guidance about working within the Medicare system.


Medicare has slightly different rules for psychologists and social workers with regard to providing mental health services; these are outlined in a booklet titled “CMS Mental Health Services” that can be accessed on One advantage of Medicare, as opposed to many private insurance companies, is that it will accept any willing psychologist or social worker who meets the educational and licensing criteria as described in the booklet. Providers can apply right after they are licensed; in contrast, some private insurance companies allow applicants to apply to be in-network providers only after have been licensed for two years.

Becoming a Medicare provider begins with enrollment. The regulations about enrolling or opting out are found at The links to the provider enrollment form and the opt-out affidavit are on the websites of each MAC. Providers can enroll either through the Internet-based Provider Enrollment, Chain and Ownership System (PECOS) or by downloading the form called CMS-855I, completing it, and mailing it in with the supporting documents. The faster PECOS system allows providers to enroll, make any changes, view their enrollment information on file, or check on the status of an application via the Internet. For more information, search PECOS on to access “The Basics of Internet-Based Provider Enrollment, Chain and Ownership System (PECOS) for Physicians and Non-Physician Practitioners.”

Medicare providers sometimes complain about delays in being accepted in the program. However, in nearly every situation the reason is that the person made at least one error when completing the application. Therefore, regardless of how the application is submitted, the provider should fill in every question while talking on the telephone with a customer representative from the enrollment department of his or her MAC. This will increase the likelihood that the application will be processed efficiently. Overall, the CMS application form might seem long, but actually many of the pages are not relevant to psychologists or social workers.

(p. 286) Prior to applying, it is important to have the following: (1) an office address, which cannot be a post office box and should not be your home address since it will be listed on the website for the public, listed on; (2) a copy of Internal Revenue Service documentation proving you have a tax identification number (TIN); (3) a National Provider Identifier (NPI) number; (4) a bank account for your business for the electronic transfer of funds (ETF), and this information will be in the Electronic Funds Transfer Authorization Agreement (CMS-588 form); and (5) a copy of your doctoral diploma for psychologists or master’s diploma for licensed clinical social workers. There is a question on the application about the provider’s specialty; licensed psychologists should mark only “Psychologist, clinical” and not “Psychologist billing independently,” even though both categories might seem accurate.

Medicare regulations authorize clinical psychologists to (a) provide “physician” services consistent with their state laws; (b) have employees provide services to their Medicare clients under “Incident to” rules, described later in this chapter; (3) provide professional services without physician supervision, involvement, or oversight; and (d) perform and supervise psychological and neuropsychological testing without a physician’s order. In contrast, independently practicing psychologists have more limited benefits. For example, any testing must be ordered by a physician or clinical psychologist, they cannot supervise testing done by others, and their work within facilities is more restricted. Also, independent psychologists are not listed as providers on the website used by the general public to find providers, which can be a good source for referrals.

Also, it is highly recommended to use a billing service, the Medicare portal, or a billing clearinghouse. Any of these services allow providers to submit their billing electronically; the advantages of doing this are discussed later in this chapter. Providers will need information about the selected billing service for the application. This can be added at a later date if you are unsure about using such a service.

The effective date of filing an enrollment application is the date the MAC receives all the information for verification. Once approved, a Provider Transaction Access Number (PTAN) will be assigned. This might happen before the application process is completed. Once the PTAN is received, the provider should confirm with his or her MAC the date he or she can begin to work with Medicare clients and the date when billing can be submitted.

Providing Services

Medicare requires that all services meet “medical necessity.” Throughout CMS documentation, this is described as items and services that are reasonable and necessary for the diagnosis or treatment of an illness or injury. Psychological assessments and interventions are covered services. In fact, Medicare recognizes the importance of services to maintain progress and to prevent decompensating, such as avoiding a psychiatric hospitalization. There are no restrictions on a psychotherapist’s orientation or specific interventions. Mental health services do not need to be preauthorized, are not limited to a specific number of sessions, and are not routinely reviewed by CMS. Covered services include individual, family, and group psychotherapy, as well as hypnotherapy, biofeedback therapy, and psychoanalysis. Incidentally, family therapy, which includes (p. 287) couples therapy, is allowed when the primary purpose is treatment of the client’s condition, while marriage counseling is not covered.

Health and Behavior (H&B) interventions have been allowed by CMS since 2002. The treatment focuses on the psychological factors that influence or interfere with physical health problems. The goal of the treatment is to improve the client’s health and well-being, with the focus on the biopsychosocial factors of a physical illness. H&B interventions often involve collaboration with the primary care physician and thus might be particularly appropriate when working in an integrative healthcare setting. Likewise, since Medicare clients often have significant medical problems, due to age or being on permanent disability, allowing H&B services expands the range of services mental health providers can provide. A clinical example of when H&B interventions might be appropriate would be a referral from an endocrinologist of a diabetic patient who refuses to comply with dietary restrictions. In psychotherapy the provider could address any underlying psychological factors as well as needed behavioral changes.

Medicare also covers psychological, neurobehavioral, and neuropsychological assessments. Dr. Antonio Puente, a highly respected neuropsychologist and the American Psychological Association’s 2017 president, has extensive information, including approximately 50 slides on the Medicare requirements for assessments; his website is

Medicare specifies that there should be a “reasonable expectation of improvement.” Thus, the provider should consider and document if the client can benefit from services during the initial evaluation. This issue should be periodically addressed in the session notes, especially if the patient has any cognitive impairment.

Medicare often denies psychotherapy services for clients diagnosed with dementia, while allowing neuropsychological assessments and psychiatric medication evaluations. However, if a person presents with symptoms of early dementia, the psychotherapy usually focuses on problems associated with the cognitive decline, such as an adjustment disorder, anxiety, or depression. Thus, the provider should diagnose and bill accordingly. Frankly, psychotherapy is not going to “treat” the dementia per se. Both legally and ethically, the client should be able to benefit from services, so psychotherapy should be discontinued if the dementia progresses to a level that this standard cannot be met.

Telepsychology, defined as the use of communication technologies to provide psychological services, is allowed by Medicare but only under specific conditions, and this may limit its usefulness. It is restricted to rural communities. The client must go to an “originating site” and not stay at home for the session. The sites must be approved by CMS; examples include doctors’ offices, community clinics, and hospitals. The provider must use an interactive audio and video telecommunications system that provides real-time communication. Medicare does not reimburse for sessions via telephone.

Medicare does have some specific different rules for psychologists and social workers; these are described in detail on in the booklet titled “CMS Mental Health Services.” Although psychologists work independently, CMS expects them to consult with each client’s primary care physician about the psychological services being provided and to do so only with the consent of the client. The chart should include the date the client did or did not give consent, as well as the date the consultation occurred. If the consultation does not happen, the psychologist should still record the date and how the physician was notified. This communication attempt is (p. 288) not required when the client’s primary care physician made the referral. This rule might be considered a safeguard to ensure that the client’s care is coordinated and/or an implicit presumption that the physician is treated with greater regard in the healthcare system. Similar rules are not described for social workers.


Every billed service must have documentation that can stand on its own to meet the criteria of medical necessity. Therefore, the documentation for any service should include (a) an evaluation of symptoms necessitating the service, (b) an appropriate diagnosis, and (c) a treatment plan that addresses the therapeutic modalities and interventions the provider intends to use in order to meet the goals of the treatment. It is also important that the diagnosis and CPT procedures on the billing claim be consistent with what is documented in the client’s chart.

When conducting the evaluation, the provider might find that the client does not meet the criteria for services or cannot benefit from psychotherapy. This should be documented in the initial evaluation and no additional services would be provided under Medicare. Nonetheless, if the provider is to be reimbursed for the evaluation, there would need to be a diagnosis rather than a Z code. Z codes are conditions that are not mental disorders and yet might be a focus in the evaluation and treatment because they contribute to a person’s functioning; two examples include “parent–child relational problems” and “acculturation problems.” For each situation the provider would have to decide if ethically there is an appropriate diagnosis in order to be reimbursed.

Since the CPT codes 90832, 90834, and 90837 for individual psychotherapy services are based on the number of minutes of “face-to-face” time spent with the patient, Medicare expects that the provider will record the time spent with the client. The provider should write down the exact start and stop times to fulfill this requirement. Incidentally, these codes correspond to 16 to 37 minutes, 38 to 52 minutes, and greater than 53 minutes, respectively.

If CMS audits a session note, one focus will be if the recorded time matches the CPT code used on the billing claim form. If the session is billed at a greater time than the time recorded, it is referred to as “Upcoding.” “Downcoding” occurs if a session is billed as shorter that what is documented in the record. CMS also refers to “Miscoding” services when no time is documented. If this happens, the session is reimbursed at the lowest possible time period, namely 90832. Miscoding of individual psychotherapy services also occurs when the notes indicate that the actual services were not individual psychotherapy but instead a different type of service, such as an assessment or group psychotherapy.

Each psychotherapy session and the corresponding note must demonstrate medical necessity by documenting current symptoms observed and/or reported by the client, including quotes when appropriate. There is no required format for charting. However, notes that are strictly narrative might omit necessary criteria, which can be problematic if audited. To meet the requirements of Medicare, it is important to include the following: face-to-face time of the session, modality, frequency, results of clinical tests, functional status, medication monitoring, a diagnosis, symptoms, treatment goals, interventions, and progress to date. Many clinicians also include the client’s responses to the interventions, progress to date, prognosis, and plan for ongoing treatment, which (p. 289) can be as simple as referring to the next scheduled appointment. The documentation should show continuity from one session to the next.

Billing and Reimbursement

Medicare reimbursement fees might be considered moderate to many professionals. Of course this depends on factors such as their years in practice, geographical location, and demands for their services. Nonetheless, Medicare reimbursement rates are almost always better than or equal to most private insurance in-network fees.

Medicare strongly encourages providers to submit billing electronically. Services are billed using the HCFA 1500 claim form. Claims will be accepted up to one year after the date of service, but providers are encouraged to bill much sooner. Should there be any problems with the coverage of either Medicare or the supplemental plan, this will be discovered only when the claim is processed. Providers should use a billing clearinghouse, Medicare’s portal system, or a professional biller. When bills are submitted electronically, Medicare will reimburse the 80% of the allowed fee via electronic funds transfer within 15 days, as is required by federal law.

Providers may submit paper claims if there are fewer than 10 full-time employees who are Medicare providers in their practice. However, there are several disadvantages to using paper claims: (a) the information has to be entered each time, (b) there is no check for errors prior to submitting the claim form, and (c) the claim will take approximately 30 days to be reimbursed. Apparently, Medicare has started to scan all non-electronic claims and then they are processed by a computer. If the form is not legible enough for this system, the claim may be returned and the reimbursement will be delayed.

As of October 2007, providers may charge a Medicare client directly for missed appointments. It is important to explain this in advance, such as when reviewing the informed consent policy, commonly during the first session. Medicare does not make any payments for missed appointments, and thus neither the provider nor beneficiaries can submit billing for missed appointments to Medicare.

Opting Out of Medicare

A psychologist or social worker might decide not to enroll in Medicare and prefer to opt out. This is done by submitting an affidavit form, which is located on the MAC’s website; providers can find the list of the MAC websites by searching on or A private contract must be signed between the professional and the beneficiary that explicitly states that neither one can submit billing to or receive payment from Medicare; instead, the beneficiary pays the clinician out of pocket. The exact wording and requirements for the private contract can also be found on the MAC’s website. In 2015 there were several changes in the law related to Medicare, including that a provider now needs to opt out only once, rather than every two years. However, the contract with the beneficiary still must be signed every two years. A provider who decides to enroll in Medicare after opting out should contact his or her MAC for the exact rules for and time periods when this can happen.

(p. 290) Mental health professionals often ask how Medicare knows if they enrolled or opted out. Consider a psychologist or social worker who does not want to accept Medicare reimbursement and also does not know that he or she should opt out. The provider has not had his or her clients who are Medicare beneficiaries sign the private contact that specifies that they will not bill Medicare directly. Uninformed, the client, or someone on the client’s behalf, might decide to submit his or her billing to Medicare for reimbursement. The CMS computer system will recognize that a provider has neither enrolled nor opted out of the program. The provider would likely receive a letter instructing him or her to reimburse the client all the fees collected or threatening him or her with large fines if he or she fails to enroll or opt out. These letters seem to vary depending on the MAC and the LCD policy.


Medicare can seem like a daunting, highly regulated insurance system, especially when a clinician does not understand how it works. However, guided by the belief that “knowledge is power,” understanding the potential challenges can help the provider be prepared for them. By including this section, it is expected that potential providers can make a more informed decision about enrolling in or opting out of the program.


Since Medicare is a federal program, it involves politics. In Congress one party generally favors traditional Medicare and the other generally favors Medicare Advantage plans. The Center for Medicare Advocacy,, provides excellent information about this issue. According to its website, there is a concern that Congress may address proposals to shift Medicare to a voucher system to purchase private insurance and other proposed changes to traditional Medicare. Some providers appreciate certain advantages of being a Medicare provider rather than being an in-network provider for a private insurance company, such as the transparency of rules and fees. Thus, there is concern that traditional Medicare might be replaced with vouchers for private insurance companies.

As of April 1, 2013, CMS began paying 2% less than the MPFS due to the federal requirement under sequestration, as approved by Congress. This reduction applies only to the 80% of the total allowable fee. Three years later, sequestration is still in effect “until further notice.” This is an example of how a political decision can be discouraging to Medicare providers.

For nearly two decades, reductions in the reimbursement rates to Medicare providers were often threatened as the result of a flawed plan to control spending on physician services, known as the Sustainable Growth Rate (SGR), which was part of the Balanced Budget Act of 1997. It was informally called the “Doc Fix” because if triggered, it could have required a significant cut to the reimbursements to providers. Some years the reduction was projected to be over 25%. Although widely recognized as problematic, including by both Democrats and Republicans in both the (p. 291) House of Representatives and the Senate, for many years there were only temporary stopgap measures passed. Often these measures were part of other political bills that passed just days before, and even occasionally after, the SGR cuts were scheduled to occur. This created a stressful situation, discouraging some psychologists and social workers from enrolling as Medicare providers.

The Medicare Access and CHIP Reauthorization Act of 2015 (MARCA), which was signed into law in April 2015 with overwhelming support in both the Senate and the House of Representatives, included a permanent repeal of the SGR. MARCA stabilized the current reimbursement rates, although it permitted only slight increases between 2015 and 2019. It also included a new system of reimbursing providers with both incentives and reductions for quality performance.

The new plan, called the Merit-Based Incentive Payment System (MIPS), will incorporate (1) the Physician Quality Reporting System (PQRS), which will be outlined below, (2) a Value-Based Payment Modifier, and (3) a system for incentivizing the use of certified electronic health records. At the time of writing this chapter, details of the MIPS system are open for public comment. Therefore, the exact details are unclear; as they develop, the information will be available on

In general, it is important to recognize that Medicare will be shifting toward increasing the exchanging of client information among providers. Psychologists and social workers might find some of these expectations contrary to the ways in which clients’ confidentiality and privacy are protected. After such programs are more clearly defined, each individual provider will have to decide if he or she will participate.

Quality Payment Programs

In the past few years, if you asked any provider about the greatest challenge of working within Medicare, it is very likely that the response will be “PQRS.” The PQRS applies to nearly all providers, whether they are physicians or eligible providers, including psychologists and social workers. Overall, Medicare is moving away from paying providers a fee just based on time spent with clients. The goal is to focus on quality by having providers perform brief assessments relevant to their specialization.

One hears about primary care physicians having very brief appointments, such as annual examinations lasting under 15 minutes. The concern is that such brief visits might miss important health concerns and risks. By encouraging providers to assess their clients more thoroughly, Medicare is moving toward increased accountability of providers. Thus PQRS attempts to monitor if providers are doing their due diligence. As psychologists and social workers, we spend much more time with our clients than most other providers and ideally ask about a number of psychological and health-related issues. Therefore, using these measures may not seem necessary. However, Medicare doesn’t distinguish between specialties with regard to the overall structure of the system, so this includes following the same regulation for all Medicare providers.

PQRS started with only “incentive payments” (awarding bonuses) for satisfactory participation. Beginning in 2013 “payment adjustments” (imposing penalties) for the failure to successfully (p. 292) report on PQRS measures was added. Starting in 2015, there were only penalties and no longer bonuses. The penalty is a reduction of 2% of all MPFS allowed charges for the calendar year two years after the year the provider did not participate in PQRS. Thus, if a provider who did not report PQRS measures in 2014 had a 2% reduction in all reimbursements in 2016, regardless of participation in 2015 and/or 2016.

One of the biggest challenges with PQRS is that the instructions for participation are detailed and poorly explained in any CMS documentation reviewed to date. CMS contacted providers at the end of 2015, informing them that they will receive the 2% cut because they had not participated in 2013. However, there was not a concerted effort to inform them of this in 2012 or even in early 2013 so that they could learn what to do in order to avoid this cut. Many providers report being frustrated and dismayed by the lack of communication and education about PQRS. Often they just assume that it is “only 2%” so they don’t bother to participate.

Furthermore, the required number of measures to be submitted increased dramatically. In 2013 the minimum amount to avoid the penalty cut was completing only one measure on at least one client, although providers still had to understand PQRS in order to fulfill this requirement. In 2014 the minimum level of participation increased to reporting on three measures for at least 50% of “applicable” patients seen during the calendar year. Then in 2015 (and for 2016), the number of measures tripled to nine measures. In addition, many providers complained that participation is difficult and time-consuming. Although it does take time to learn how to comply with the requirements, actually doing the measures with clients can take just a few minutes, and all but one of the measures for psychologists and social workers are administered only once a year. Nonetheless, unless the provider learns the details of PQRS from someone with a strong knowledge of the system, it is extremely difficult to comply and thus a great challenge for Medicare providers.

In the spring of 2016 CMS announced that as part of the transition to the new quality payment program, MIPS, the current PQRS program will end that calendar year. Even though physicians are expected to start using MIPS in 2017, psychologists and social workers, as well as certain other non-physician providers, do not have to begin until 2019. Therefore, they will not be required to report on any quality measures in 2017 and 2018 and will not have MIPS adjustments applied to their Medicare payments until 2021.

Although aspects of the MIPS program have not been finalized at the time of writing this chapter, there are some important aspects that are known, according to a document under “Quality Payment Program” on First, the number of measures that providers will have to report on will be six, rather than the nine required by PQRS. Second, there will be both positive and negative payment adjustments. Finally, these adjustments, which are listed as “maximum negative adjustments” that have corresponding positive adjustments, are significantly greater than with PQRS: In 2019 it will be 4%, in 2020 it will be 5%, in 2021 it will be 7%, and in 2022 and after it will be 9%. There are other details involved that seem confusing and might be changed. Nonetheless, it is evident that the MIPS program will lead to larger reimbursement changes than the 2% cut with PQRS. Thus it will be important for psychologists and social workers to learn about the program. It is hoped they will be able to benefit from the positive payment adjustments. Incidentally, as with PQRS, there will still be a two-year gap, so participating in MIPS in 2019 means that the reimbursement will be adjusted in 2021.

(p. 293) Poor Communication

CMS provides several avenues to learn the rules and expectations of Medicare, and a number of topics can be found on and the website of the provider’s MAC. However, even though Medicare regulations are readily available, they can be difficult to comprehend. Although the MACs often have customer service representatives available to answer questions, often they are just reading and trying to explain the same regulations from the same sources. Although representatives can explain a Medicare regulation, often they cannot explain the subtleties of a situation, especially if it involves clinical intervention or judgment.

An excellent example of this is the issue of whether psychological assistants can work with Medicare clients in an outpatient setting. Medicare has specific rules for “incident to” services, and psychologists (but not social workers) are allowed to have an employee provide them in certain settings. These services are defined as “an integral, although incidental” part of professional services. Per the CMS website, the regulations include that the psychologist “personally performed an initial service and remains actively involved in the ongoing course of treatment” and “must provide direct supervision, that is, you must be present in the office suite to render assistance, if necessary” and that there be “a valid employment arrangement” between the psychologist and the psychological assistant. Furthermore, the services are “commonly rendered without charge (included in your physician’s bills),” and then CMS details how to bill for “incident to” services, implying that there can be charges for these services. Incidentally, one rule that is clear is that “incident to” services cannot take place in a skilled nursing facility.

Given these regulations, psychologists quite familiar with Medicare can disagree about whether psychological assistants can conduct individual psychotherapy sessions. Can they lead psychotherapy group sessions? Is it different if the group sessions involve using mindfulness relaxation as opposed to a process-oriented group? There are no clear answers to these questions. Furthermore, this is an issue that might fall under LCD, so one MAC might consider the role of a psychological assistant differently than another MAC. This is one of the challenges of Medicare: Even though there might be precise wording, certain clinical issues are still ambiguous.


There seem to be “urban legends” about Medicare audits and how to avoid them, short of not being a Medicare provider at all. Furthermore, tales about audits seem to vary by location, indicating that MACs deal with them differently. Also, they seem to vary by specific time periods. For example, in the greater Los Angeles area, many psychologists report getting audited at the same time in the mid-1990s, but that has not happened since that time. As with any health insurance, Medicare can review a provider’s documentation to ensure that proper payment was made only for medically necessary services. However, these audits are rarely reported. Meanwhile, the best way to handle such an audit is to have thorough documentation of clinically appropriate services, as discussed earlier in this chapter.

In 2005 Medicare began the Recovery Audit Program in select locations using data based on a program called Comprehensive Error Rate Testing. In 2010, the Recovery Audits expanded (p. 294) nationally, performed by four companies that each have a distinct region of the United States. The goal of this program is to identify and correct both overpayments and underpayments for Part A and B services. Overall, a vast majority of the overpayments were found within Part A hospital services. Details of these programs, including the exact amounts of money involved by state, settings, and specific concerns, are readily available on

In addition, Medicare is making a concerted effort to find and punish those who engage in fraud and abuse. Various Medicare-related websites for both providers and beneficiaries offer information about reporting possible abuse and fraud. Recently there seem to be more stories about such illegal actions, whether they are committed by large hospitals, skilled nursing facilities, small companies, or individual providers. Often the media reports stories of fraud in the millions of dollars. Frankly, exposing and punishing those who take advantage of the Medicare system makes it a better, more cost-effective program for everyone.

Medicare Advantage

As mentioned earlier in this chapter, Medicare’s Part C is hospital and medical insurance provided by private insurance companies called Medicare Advantage (MA) plans. Some MA plans are structured like a PPO plan; others are like HMOs. Although all MA plans must offer the same coverage as traditional Medicare, they vary greatly in terms of additional benefits and costs. Some of them include medication coverage, eliminating a beneficiary’s need to purchase a separate Part D plan. In addition, the MA plan might add benefits that are not included in most traditional Medicare plans, such as dental and vision coverage and gym memberships.

However, the MA plans that are HMOs generally limit coverage to in-network providers, which might restrict a patient’s access to services. The MA plans structured like a PPO usually allow clients to select any Medicare providers. However, a Medicare provider may not want to work with a PPO-style MA plan since the plan does not always have to pay the provider the allowed amount set by CMS. Furthermore, the MA plan might pay a smaller percentage of the fee to the provider and the client may be required to pay a greater percentage of the fee. Also, similar to private insurance rules for in-network providers, the MA plan may have its own rules for paperwork by the provider, such as requiring preauthorization for treatment, which is not necessary with traditional Medicare.

Sometimes even clients do not know whether they have an MA plan, especially since they still might have their original Medicare card. One way a provider can check is by looking on the back of the additional insurance card. If there is a statement such as “Providers should submit claims to XYZ insurance company directly and not bill Medicare,” it is nearly certain that it is a MA plan. It is then best to call the insurance company directly to clarify the coverage, any co-payments due by the beneficiary, and any other expectations. Some providers are comfortable taking MA plans, especially if they are also providers for the particular insurance company. Others prefer not to because of the additional co-payments and/or other requirements of the company. Providers should consider such factors to decide whether to accept MA plans and from which insurance companies.

(p. 295) CMS Definition of Psychologists

This leads to the final challenge and current controversial issue: The American Psychological Association is lobbying to have psychologists included in the CMS definition of “physician.” Currently psychologists are the only doctoral-level healthcare providers who are considered “non-physician practitioners.” In addition to physicians, the current CMS definition includes dentists, podiatrists, optometrists, and chiropractors. If the definition is changed, psychologists will be able to reimbursed for additional services and might earn greater bonus payments. However, they will likely be required to participate in certain value-based programs or be subject to greater pay reductions. Some people believe that it is only fair that doctoral-level professionals should be recognized for their extensive training and large role as providing a significant number of the mental health services to Medicare beneficiaries. Others are leery of the new and possible future regulations as there is a shift toward reimbursement based on performance and would rather observe the changes to other professions first. Since legislation has already been introduced in Congress about this issue, it is likely a matter of when, rather than if, the change occurs.

Concluding Thoughts

By being a Medicare provider, psychologists and social workers have the opportunity to work with diverse patients in a wide range of settings. In particular, providers who have an interest in clinical geropsychology would want to consider enrolling in Medicare. Overall, many Medicare psychologists and social workers seem to appreciate certain advantages: (1) there is a growing demand for their services, (2) Medicare will accept providers once they are licensed, (3) Medicare does not mandate preauthorization or other requirements that many private insurance companies have for their in-network providers, (4) the reimbursement is often equal to or better than that of private insurance companies, and (5) providers are paid in a timely manner.

Nonetheless, Medicare has rules, restrictions, and expectations that can be challenging. The shifting focus to pay-for-performance means that in the future providers may have to comply with additional requirements or face a reduction in reimbursement. Regardless of whether providers enroll in or opt out of Medicare, doing one or the other is required under federal law. It is hoped that the information provided in this chapter allows readers to make an informed decision in line with their clinical experiences and interests.


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