Coverage and reimbursement vary by specialty designation so it is important that you know your specialty code. Without this information, you will not know which of your services are considered covered Medicare services.

Reimbursement Terms

There are several terms that are important to know when trying to understand Medicare reimbursement. While each of these terms appear in the glossary of this document, they are covered here to assist the reader with the sections that follow.

Actual Charge - A provider's usual fee, i.e., what one normally charges when not limited by contract with a third party insurer. In dealing with Medicare, clinical psychologists can indicate this amount on the HCFA 1500 form, but may not collect any amount above the Medicare approved amount.

Approved Amount - Entire payment Medicare will "approve" for collection. This includes the payment made by Medicare and the amount owed by the beneficiary, but does not necessarily reflect the balance of the bill (this is assuming the psychologist's actual charge is more than Medicare's approved amount).

Accepting Assignment - The provider agrees to accept the carrier's determination of the approved amount as the full fee for the service rendered. The provider also agrees to collect only the difference between the Medicare approved amount and the actual Medicare payment made to the provider for the service. For example, Medicare pays 80% of the approved amount for inpatient psychological services. Therefore, the Medicare beneficiary is responsible for the remaining 20% of the approved amount.

Participating Provider - A provider who agrees to "accept assignment" for all services provided to all Medicare patients for the following year. Because "clinical psychologists" MUST accept assignment, they are also considered "participating providers".

Non-Participating Provider - An 'independently-practicing psychologist' who chooses not to sign a participation agreement. These providers can choose to accept assignment on a case-by-case basis, however services that are unassigned are subjected to the "limiting charge" restriction.

Limiting Charge Restriction - Cap on the actual amount a non-participating 'independently-practicing psychologist' may collect. The limiting charge is 115% of the Medicare non-participating approved amount (which is 95% of the participating provider fee schedule amount) when the 'independently-practicing psychologist' does not accept assignment of the claim. For example, if Medicare's approved amount for a participating provider is $100, the non-participating provider may only collect a total of $109.25 for the service, or 115% of $95.

Clinical Psychologists

Medicare reimburses qualified "clinical psychologists" for both therapeutic and diagnostic services in both inpatient and outpatient settings. Qualified "clinical psychologists" are required by law to "accept assignment" (see definition above). Essentially, this means that "clinical psychologists" who are Medicare providers must accept Medicare's "approved" reimbursement rate as payment in full for the services they provide to Medicare beneficiaries. This does not mean, however, that a "clinical psychologist" MUST treat every beneficiary that comes to the office. "Clinical psychologists" can choose to refer a beneficiary to another "clinical psychologist" if they are unable to treat the patient.

Independently-Practicing Psychologists

Medicare will cover only diagnostic services provided by 'independently-practicing psychologists'. Therapeutic services by 'independently-practicing psychologists' are not covered by Medicare. 'Independently-practicing psychologists' are not required to accept assignment. However, when providing diagnostic services, non-participating 'independently-practicing psychologists' who do not choose to accept assignment are subjected to a limiting charge (see definition above).

Psychologists may not choose to be an 'independently-practicing psychologist' for some situations and a "clinical psychologist" on other occasions. Each provider receives only one specialty designation. If you believe you have been incorrectly designated to one or the other specialty, contact your local carrier for clarification on this matter.

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