Certain services are not covered under Medicare. Also, if a psychologist performs a service that is not within the scope of his/her license or state law, the service would be disallowed.

Carrier Screens

All Medicare carriers use screening criteria or computer edits to assist them in their initial determinations of medical necessity. For some services, there are national screens based on national policies that are developed by HCFA and do not vary from carrier to carrier. Local screens are developed by the different carriers and do vary by location. Finally, HCFA may use provider-specific screens that focus on selected providers.

Screens are not limits or ceilings on services. Screens are parameters HCFA or the carrier uses to determine reasonable levels of care. Screens are used to suspend a claim for review. Carriers are expected to manually review services that exceed screens, but in actual practice, the amount of additional review may be minimal. Many services that exceed screens do seem to be rejected initially.

The most common screens (and the ones that have the greatest impact on psychologists) are based on frequency. These screens allow automatic payment for a set amount of services over a period of time for specific diagnoses. For example, so many hours of testing are allowed, as are so many therapy sessions or hours of therapy a month before Medicare questions the service.

Policy for Psychological Services

In 1996, a Carrier Medical Director workgroup developed a comprehensive policy for psychological services. While this was not a national HCFA policy, it was implemented in most states with little change. The ramifications of this policy have been increased requests for documentation to support the medical necessity for individual therapy sessions that exceed 20 visits in a calendar year or per "episode of illness." There have also been increased denials based on specific diagnoses such that the carrier claims the beneficiary cannot "benefit from treatment." Certain physician services in nursing homes and skilled nursing facilities fall under national screens so it is possible that parameters are being developed for psychologists in nursing homes as well. There are most definitely local screens for psychological services. It is a good idea to know the screens for your services and to carefully document why additional services were reasonable and necessary. National screens are of public record in the form of national policies. However, because local screens vary from carrier to carrier and because they change over time, they are not readily available at a national level. Providers usually learn the screens when their claims are rejected or reduced. Some carriers provide information on screens upon request or through Internet access. State psychological associations may also have this information. HCFA has also indicated that local policies will be made available on or through the HCFA sponsored website (http://www.lmrp.net) in the near future. Further Medicare information can be accessed directly through HCFA's website at (http://www.HCFA.gov).

Medical Necessity

Along with specifically excluded services such as "consultation" services, by law Medicare pays for only those services that are "reasonable and necessary for the diagnosis or treatment of an illness or injury or to improve the functioning of a malformed body member." Therefore, preventive services (unless enumerated by separate provision in the law) and across-the-board screenings are not covered. Also services that Medicare does not deem to be reasonable and necessary will not be reimbursed under Medicare.

Medicare determination of what services are "reasonable and necessary" will not always match the providers' or the beneficiaries' view of needed services. However, claims denials or claims reductions based on the "reasonable and necessary" requirement are always open to appeal. Occasionally, psychologists will find that a claim is denied although the service is clearly a reasonable and necessary covered service. In this case, there may be an error in the HCFA 1500 claim form. These forms must be filled out completely, carefully, and legibly.

Since Congress and the Administration do not want Medicare beneficiaries to suffer excessive out-of-pocket expense, providers are normally financially liable for services that are deemed not "reasonable or necessary." HCFA's requirements for determining liability¹³ are quite strict with regards to whether or not a provider could reasonably have been expected to know that Medicare would pay for the service. One sentence in an old newsletter or a previous denial for the same service usually suffices as proof that the provider could reasonably be expected to know that the service would not be paid for by Medicare. HCFA states that the psychologist is not financially liable if he/she did not know and could not have been reasonably expected to know that Medicare would not pay for the service. For example, in the absence of any previous notification, having a billing history that clearly demonstrates correct coverage assessments by the provider would show that the provider was not likely to know that the service would not be covered. In these cases, psychologists may collect payment from beneficiaries for services that are considered by Medicare to be not "reasonable and necessary." However, in situations in which services furnished do not meet locally acceptable standards of practice, the provider is considered to have known that Medicare payment for the service would be denied.

Advance Beneficiary Notice

Another circumstance where the psychologist is not financially liable is if, before the service was provided, the beneficiary received a written notice from the psychologist explaining that the service would not likely be covered and the beneficiary signed a statement agreeing to pay for the service. This is called an advance beneficiary notice (ABN) and is different from a "private contract" which is covered elsewhere in this document. Psychologists are required to provide ABNs before they provide services that they know or believe Medicare does not consider reasonable and necessary. A properly executed ABN acknowledges that coverage is uncertain or yet to be determined, and stipulates that the patient promises to pay the bill if Medicare does not. Patients who are not notified before they receive such services are not responsible for payment. The ABN must be sufficient to put the patient on notice of the reasons why the psychologist believes that the payment may be denied. The objective is to give the patient sufficient information to allow an informed choice as to whether to pay for the service.

Instructions regarding adequate written notice to beneficiaries are very stringent. A form letter to all beneficiaries for all services is unacceptable. A general statement that Medicare denial is possible or that payment by Medicare is uncertain would also be unacceptable. Notices should only be given when there is genuine doubt regarding Medicare's payment for a particular service. According to HCFA instructions, the advance notice to the beneficiary must "clearly identify the particular service, must state that the physician [or psychologist] believes Medicare is likely to deny payment for the particular service and must give the physician's [or psychologist's] reason(s) for his/her belief that Medicare is likely to deny payment for the service."¹⁴ HCFA's sample notice¹⁵ follows:

Psychologist notice to beneficiaries:

"Medicare will only pay for services that it determines to be 'reasonable and necessary' under section 1862(a)(1) of the Medicare law. If Medicare determines that a particular service, although it would otherwise be covered, is 'not reasonable and necessary' under Medicare program standards, Medicare will deny payment for that service. I believe that, in your case, Medicare is likely to deny payment for (specify particular service(s)) for the following reasons: (the psychologist indicates the specific reason(s) for his or her belief that the service(s) would not be covered)_________________

Beneficiary Agreement:

I have been notified by my psychologist that he/she believes that, in my case, Medicare is likely to deny payment for the services identified above, for the reasons stated. If Medicare denies payment, I agree to be personally and fully responsible for payment. Signed,
(Beneficiary Signature)

Acceptable reasons to list in the notice to beneficiaries include¹⁶:

• Medicare does not usually pay for this many visits or treatments.
• Medicare usually does not pay for this service.
• Medicare does not pay for this because it is a treatment that has yet to be proven effective.
• Medicare usually does not pay for like services by more than one provider during the same time period.
• Medicare usually does not pay for this many services within this period of time (be specific).
• Medicare usually does not pay for more than one visit a day.

The above notice and agreement must be attached to the HCFA 1500 claim form when the claim is initially submitted. Carriers have been advised by HCFA not to reject a claim simply because the waiver is attached. Along with the advance beneficiary notice, a cover letter to beneficiaries explaining why they are being asked to sign a form might be useful. Such a letter might explain that Medicare and providers do not always agree on what constitutes quality care, possibly because expenditure reduction is a priority for the federal government while quality of care is your top priority. It is also useful to explain that by signing the statement, the beneficiary understands that they agree with your professional judgment, wants the additional services and is willing to pay for those services in the event that such services are deemed not "reasonable and necessary."

Medicare does not hold the beneficiaries financially accountable for the professional judgment of their providers, therefore the providers are financially responsible for the reasonableness and necessity of the services they provide. Services that are denied because they are not deemed "reasonable and necessary" are often covered services, but are denied or reduced because they have exceeded some boundaries, i.e., individual therapy is a covered service but individual therapy four times a week would probably be considered not "reasonable and necessary". Psychologists who provide psychological testing may find that their claims are reduced rather than denied outright. Carriers reduce the number of hours in the claim and pay a lesser amount. This reduction is usually based on whether or not the carrier deems the additional hours to be reasonable and necessary.

There are certain situations where Medicare coverage of particular services is less definitive resulting in questions regarding what a provider can charge the beneficiary for such services. If existing policy specifically states that the service is not a covered Medicare service, like psychophysiological therapy (psychotherapy incorporating biofeedback training - CPT codes 90875 and 90876), then there is no limiting charge (see glossary) and the provider can charge whatever she/he wants. Similarly, in situations where services are sometimes covered but, due to specific Medicare coverage restrictions, the particular service rendered might not meet these coverage requirements, then there are no limiting charges, and the provider can again charge what they like (see section on family psychotherapy as an example). However, coverage in this case is based on carrier discretion and thus the provider cannot be certain whether the service will be paid until the carrier makes its coverage determination. If the provider chooses to collect more than the Medicare approved amount (see glossary) from the beneficiary and Medicare pays the claim, then any monies collected above what Medicare approves would have to be repaid to the beneficiary. In this situation, an ABN is an "enlightened and prudent practice," though not a requirement. The ABN should be designed to clearly indicate the intent of the provider and thus may protect the provider if a claim is questioned by either the carrier or the beneficiary. The ABN basically states, in advance, why the provider does not think Medicare will cover the service (see sample under section entitled "Advance Beneficiary Notice").

There are some situations where a service would be covered by Medicare, however the beneficiary, for reasons of his or her own, declines to authorize the psychologist to submit a claim or to furnish confidential medical information to Medicare that is needed to submit a proper claim. Examples would be where the beneficiary does not want information about mental illness or HIV/AIDS to be disclosed to anyone. This arrangement does not require a private contract, however the psychologist may not charge more than the limiting amount (115% of what Medicare allows). The psychologist should have this request in writing and in the beneficiary's file. Moreover, the beneficiary can choose to have the claim submitted at a later date, at which point, if the service is paid by Medicare, the psychologist must pay back monies collected beyond what Medicare allows.

In the case of a service not being covered due to reasons of "medical necessity" (typically frequency of services fits here), then the provider is not subject to Medicare's approved amount as long as they have given the beneficiary an ABN. This is the only scenario where an ABN is required. Otherwise, if Medicare does not cover the service and no ABN was given, it is likely the psychologist will not get paid by Medicare for the service. Furthermore, because the beneficiary was not expected to know it would not be covered, and the provider should have known it would not be covered, the provider cannot collect any payment from the beneficiary for the service.

Evaluation and Management Services

There are also times when a psychologist is authorized to provide a service, but the service still falls under Medicare's exclusions. Consultation is one example of a service within the scope of a psychologist's license, but not reimbursable to psychologists under Medicare. Medicare does not reimburse psychologists for any "evaluation and management" (E&M) services. These services have CPT codes that begin with the numbers 99, and are followed by three additional numbers. All of these services are grouped under the "Evaluation and Management" section of the CPT coding manual. Medicare also restricts the individual psychotherapy services with E&M to physician use only.

It is HCFA's policy that E&M services can only be provided by and paid to physicians. At present, psychologists are not defined as "physicians" for Medicare coverage, therefore HCFA will not pay for any E&M services provided by psychologists, even if provided under an "incident to" arrangement with a physician (see "incident to" section)¹⁷.

Diagnostic Screenings

Psychological testing of patients exhibiting symptoms is covered, however, Medicare does not cover routine or preventive services unless the service is explicitly provided for in the law (e.g. pap smears are specifically mentioned in the law as a covered service). For example, across-the-board screenings in nursing homes are non-covered services. Psychologists who work in nursing homes should be aware that nursing home legislation requires screening of all residents, but Medicare does not cover these screenings as separately payable services under Medicare Part B. Although there may be a fine line between whether or not a service is covered under Medicare, psychologists would be wise to demonstrate caution. It is important to keep careful documentation of symptoms and services rendered as post-payment audits are a common Medicare practice.

Experimental Treatments

Services that are considered experimental or investigational treatments are not covered under Medicare. While the exclusion is clear (no new, non-proven services are paid for under Medicare), there may be a question as to Medicare's classification of a service. Beneficiaries receiving unusual or new treatments should probably sign an advance beneficiary notice indicating that they understand that Medicare will not likely pay because the treatment has not yet been proven effective. Medicare also does not pay for services that it considers to be unsafe and/or ineffective.

Services with Coverage Restriction Guidelines

BIOFEEDBACK - Some services are paid for only when utilized for a very specific diagnosis. Coverage of biofeedback therapy, for example, is limited under national coverage policy to those instances where it is reasonable and necessary for the individual patient for muscle reeducation of specific muscle groups or for treating pathological muscle abnormalities of spasticity, incapacitating muscle spasm, or weakness, and more conventional treatments (heat, cold, massage, exercise, support) have not been successful¹⁸.

FAMILY PSYCHOTHERAPY - Similarly, family psychotherapy has some coverage restrictions. Medicare will only cover family counseling services where the primary purpose of the service is, "the treatment of the patient's condition." Specifically, Medicare identifies the following two situations where family counseling would be covered: "1) where there is a need to observe the patient's interaction with family members; and/or 2) where there is a need to assess the capability of and assist the family members in aiding in the management of the patient."¹⁹ Medicare will not cover counseling that is principally concerned with the effects of the patient's condition on the family member being interviewed. This type of counseling is not considered part of the psychologist's personal service to the patient.

Return to Top
Return to Table of Contents