Back To The Future Of Reimbursement For Psychological Services

In February 2014, I estimated that the national average for third party reimbursement for a diagnostic interview could stabilize at around $137 for doctoral providers from 2019-2023, that 45 minutes of psychotherapy would stabilize at about $88 during that same time frame, 60 minutes of psychotherapy at about $131, and psychological testing in the $82-$83 or so range per unit (see The Fix Is In).

I was wrong about how long it would take Congress to fix the problem, but pretty close on the long term estimates of reimbursement.

After having kicked the can down the road again in 2014, Congress blew it in March of 2015 but finally took the bull by the tail and looked the situation square on a month later. As a result, it’s now possible to reasonably project Medicare reimbursement for every healthcare procedure, including mental/behavioral health, for at least 10 years out.

In preparing to teach a graduate seminar on assessment in private practice, I’d crunched the numbers for past and estimated future Medicare reimbursement for psychological testing, and the growing gap between costs of providing services and reimbursement. Here’s what that looked like.

The picture looks pretty much the same for most psychological services.

Solid predictions are now possible for reimbursement for the next 10 years. Reasonable projections are also possible for what will happen after 2026, but since the USGS is predicting an 85% probability of a magnitude 5 or higher quake in California by then, I’m not going to speculate what will happen that far out.

The numbers below are not rank speculation, but rather are based on actual current and established future conditions that resulted from the “Doc Fix” that occurred in April 2015. That deal mandates an annual update of 0.5 percent from 2015 through 2019, with 2019 rates then maintained through 2025. Professionals participating in “incentive” program options will receive 0.75 percent annual updates after 2026 and those not participating will receive annual updates of 0.25 percent.

Potential implications for reimbursement in the commercial third party payer market — and your income if you provide these services on a third party-reimbursed basis — of course depend on your assumptions about what will happen in the future, and the relationship between Medicare rates and payment models and other payers. I’m making these assumptions:

(1) Commercial insurers will closely adhere to the amounts and rates of change adopted by Medicare for the foreseeable future, and indeed based on past history are more likely than not to “offer” lower reimbursement.

(2) There is not going to be any new budget deal that will substantially alter the model adopted with the 2015 “doc fix.” Even with Paul Ryan as Speaker — widely regarded to be among the most knowledgeable about fiscal, and particularly “entitlement”, policy — Congress simply is not going to want to touch this area at least until after the election and seeing who is in the White House.

(3) Given that the “cost curve” has been essentially flattened for the next 10 years, I doubt any new deals would increase the amount or rate of growth in reimbursement at the federal level, or among commercial payers. At least not for psychological services. If there is any increase in healthcare spending, it will be put into primary care, integrated care, drugs and alternative payment models, not fee for service. Indeed after 2026, Medicare will be going to a mostly “value based” payment model, and other payers will be moving at least as quickly in that direction.

(4) There are unlikely to be changes in RVUs for psychological service codes that would substantially impact total payouts for mental health services, in public or private sectors.

What you see is what you will get. Here are what the projections look like for Medicare reimbursement for key services.​

In other words, other than 0.5% “increases” from 2015 to 2019, rates will remain essentially flat for the next 10 years. Reimbursement for a diagnostic interview will settle in at around $136, at about $73 for psychological testing, about $87 for 45 minutes of therapy, and at about $131 for 60 minutes of therapy, for the foreseeable future, at the national level. “Individual mileage may vary” — but I doubt by much — depending on local conditions.

I will let you prognosticate what the inflation rate will be out to 2025. But, given that it has averaged around 3% over the last 100 years, well, you get the idea about what is all but certain to happen to the gap between the cost of providing psychological services and third party reimbursement for those services.

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