Image of male nurse pushing senior woman in a wheelchair in nursing facility

Teresa Hildebrandt would like to begin preparing for the onset of the Medicare therapy caps this January. But she knows a lot can still happen between now and then. “It’s kind of hard putting programs in place to work within the caps when you’re not even sure they’re going to go through,” says Hildebrandt, the administrator of Good Samaritan Communities of St. Peter, a 55-bed skilled nursing facility in St. Peter, MN.

If history is any guide, Hildebrandt has reason to hesitate about creating a contingency plan. Three moratoria have been placed on the caps since they were included in the Balanced Budget Act of 1997. The last moratorium, which went into effect with the Medicare Modernization Act of 2003, is scheduled to expire Dec. 31.
Like other providers, Hildebrandt is hoping for another moratorium or even a repeal of the caps before their scheduled onset, but the December deadline still looms large.
The caps would place an annual limit of approximately $1,700 on outpatient physical and speech therapy and $1,700 on occupational therapy. Many residents who reach the limit of these caps will be forced to do without, people in the provider and therapy community say.
“From our perspective, the big deal is these caps are just very, very arbitrary,” says Mark Besch, vice president of clinical services for Aegis Therapies, which has 800 contracts with skilled nursing facilities, including many at Beverly Enterprises Inc. “They certainly limit Medicare benefits to what we feel in our segment are really the most frail, the most potentially in need of rehabilitation services,” Besch said.
The caps pose a lot of potential problems for all parties involved, according to Peter Clendenin, executive vice president for the National Association for the Support of Long Term Care. Rationing of services, confusion about the financial limits, and poorer outcomes are just some of the possible effects.
Providers had a taste of the caps when they were enacted in 1999 and for three months in 2003. Caps during these periods had the “effect of slamming on the brakes,” Clendenin said.
Holding off on therapy was a common occurrence.
“There is a built-in incentive to save your benefit, even if your patient has a real serious injury,” said Dave Mason, vice president of government affairs for the American Physical Therapy Association. “We know there were lots of conversations between therapists and patients even in anticipation of the cap coming in, (saying) ‘Gee, what should I do? Should I continue this or should I save this?'”
Residents, in some cases, can get therapy from skilled nursing facilities until they reach the cap and then receive services at a hospital. According to the therapy rules, while the cap applies to outpatient therapy under Part B in skilled nursing facilities, hospitals that deliver outpatient therapy under Part B are excluded from the cap. Also, the cap does not apply to in-patient therapy at a SNF or hospital or SNF patients covered under Part A.
But residents in skilled nursing facilities are most at risk if the caps are put into place, providers say.
Because of their potential for co-morbidities, higher acuity and longer lengths of stay, this group would hit the caps faster than other groups. 
“They’re the most frail and the most needy and they’re the ones getting the short end of the stick,” says Tracy Gregg, president of Sundance Rehabilitation Corp., Alexandria, VA, which has more than 3,000 therapists.
A major problem in the system is that residents who are eligible for outpatient treatment at a hospital after they exceed the cap will not use it.
They might be too frail, are more comfortable staying in one setting, or cannot reach the hospital because of distance or lack of assistive mobility, providers say.
“Even if a beneficiary understands the rules of the game, they may be disinclined,” Mason says.
In 1999 when there were caps in effect, only 11% of beneficiaries used more than one setting for therapy services, including the hospital, according to the 2004 Final Project Report prepared for the Centers for Medicare & Medicaid Services.
“This suggests that provider preference or availability may supercede the motivation or ability to change providers to obtain additional coverage,” the report says.
Another group of skilled nursing facility residents is bound completely by the cap. These are residents who receive Part B services and are staying in Medicare-cert