Bad news: Medicare to cut fees in 2002; economy blamed

 The National Psychologist, Vol. 11, No. 1, p 22.

By Paula E. Hartman-Stein, Ph.D.

            Reimbursement  for all Medicare services by psychologists and other healthcare providers will decline in 2002.  In mid-December, Congress was still scrambling to limit the reductions—thereby minimizing the impact, but the prospects were doubtful, hampered by the nation’s economic slump.

The reductions range from 2 to 11% and vary by both region of the country as well as specific service codes. These overall reductions are predicated on the conversion  factor that is tied to the gross domestic product (GDP), current enrollment in the traditional Medicare program, and spending due to new laws or regulations.      

             Practitioners who conduct psychological testing stand to be impacted the most because of 10 to 11% reductions in testing codes in most regions. This returns the fees to 1997 rates. This reduction is primarily due to the lack of work values for these codes, part of the equation in the Resource Based Relative Value Scale (RBRVS) formula. A survey to determine the work value of testing services, currently being developed by Tony Puente, Ph.D. from Wilmington, N.C., will be circulated among practitioners in 2002.  

 “We did relatively well regarding psychotherapy compared to some medical services,” said James Georgoulakis, Ph.D., APA’s representative to the American Medical Association’s Relative Update Committee,. By comparison, evaluation and management codes experienced 15% fee reductions.  

Georgoulakis reported that the Centers for Medicare and Medicaid Services (CMS) are “under pressure to ratchet down reimbursement rates.”  

            Reimbursement for the initial diagnostic interview had formerly been capped at $153 on average reduced to $145 in 2002. A 50-minute out-patient psychotherapy session averaged $101 with a cut to $96, and a 20 minute psychotherapy session was reduced on average from $68 to $64.  

            Reducing therapy fees has the greatest effect on psychologists who treat Medicaid patients, a large portion of the population in nursing home settings. Medicare pays for 50% of psychotherapy fees rather than 80% that is reimbursed for medical services. Some state Medicaid programs do not reimburse the practitioner the remaining portion of the allowed Medicare fee. With indigent clientele even a 5% reduction in fees can have a substantial negative impact on service providers.  

            Psychologists’ reactions to the proposed cuts vary nut are generally negative.  Joseph Casciani, Ph.D. from California voiced strong concerns. “This is unconscionable, and no matter how unintended these changes were due to the intricacies of the RBRVS formulas they will have a very adverse impact on all Medicare beneficiaries. If implemented, these fee reductions will only add another barrier to working in our specialty area.”  

            Sara Qualls, Ph.D. from Colorado Springs, CO who is the in-coming President of APA Division 12, Section II related her concerns to fears about the future status of geropsychology. “As an academic trainer as well as provider, I find the reimbursement decrease very discouraging. How are we to attract top people to the field when the primary insurance carrier both lowers reimbursement from a below-market value to a farther-below market value?”

             Upon learning of the possible fee cuts, some practitioners are glad they took their accountants’ advice to diversify their professional work. Michael Salamon, Ph.D. from Hewlett, NY noted that his center started providing behavioral healthcare to all age groups for the last five years. “Even though we built diversification in, we are still struggling,” he observed.  “The new Medicare decrease just makes it that much more difficult.”  

Similarly, Margaret Norris, Ph.D. from College Station, TX does not plan on giving up on working with older adults. “My professional identity with and commitment to geropsychology is too strong to surrender my specialization over completely, but I am already starting to plan ways in which I might increase the proportion of non-Medicare patients in order to partially compensate for this possible fee cut,” she said.  

            Karl Knobler, Ph.D. from Berkeley, CA expressed concern that “social policy is created such that senior citizens and their emotional lives are being marginalized by decisions.  It shows that the government is not interested in valuing them—because it doesn’t value the people who do the work. We are like teachers, venerated, but not paid.”  

            Meanwhile, the Medicare Physician Payment Fairness Act of 2001 has been introduced by Senators Jim Jeffords (I-Vt.) and John Breaux (D-La), S.1707.  It would lower the 2002 cuts to .9% and similar legislation is pending in the House Energy and Commerce Committee. It would also require the Medicare Payment Advisory Commission which  advises Congress on Medicare issues to suggest ways to modify or replace the formula in time for the 2003 update.  


Paula Hartman-Stein, Ph.D. is a clinical psychologist and consultant specializing in assessment and therapy with older adults in Kent, OH. She teaches online courses in geropsychology for the Fielding Institute in Santa Barbara. Her website is