Medicare Bill Brightens Mental Health Outlook for Psychiatrist

September 2, 2008

Psychiatrists were among the chief physician beneficiaries of the Medicare bill (HR 6331) that Congress passed in July. The Medicare Improvements for Patients and Providers Act of 2008 included an historic elimination of the discriminatory co-pay for Medicare outpatient mental health services.

Psychiatrists were among the chief physician beneficiaries of the Medicare bill (HR 6331) that Congress passed in July. The Medicare Improvements for Patients and Providers Act of 2008 included an historic elimination of the discriminatory co-pay for Medicare outpatient mental health services. As if to ensure that there are enough providers to handle the anticipated flow of new patients, the bill also provides a 5% increase in Medicare pay for psychotherapy services through 2009.

The bill wiped away the 10.6% cut in Medicare fees that was to have affected all physicians starting on July 1. Instead, Medicare fees will increase 0.5% in 2008 and 1.1% in 2009. Medicare will reimburse seniors for prescriptions of barbiturates and benzodiazepines starting in 2013.

The act was put together in a hurry (roughly within a month). The chief authors were Sen Max Baucus (D, Mont), chairman of Senate Finance Committee, and Rep John D. Dingell (D, Mich), chairman of the House Committee on Energy and Commerce. Neither of those committees, nor any other committee, held hearings on the bill. Congress waited until the last moment to avert the 10.6% fee cut (which Democrats and Republicans knew was coming since the start of this year). No one in either house did anything until June, at which point there was a mad rush. As a result, the bill, which had the narrow objective of averting the 10.6% fee cut, became a magnet for all sorts of subsidiary proposals advocated by various health care interest groups.

Psychiatrists made out as well-if not better-than anyone. Nick Meyers, director of government affairs for the American Psychiatric Association (APA), called the gradual elimination of the 50% co-pay for mental health services “probably the most far reaching change in Medicare treatment of mental illness in the 30-odd years I have been working in Washington. It is a very big deal.” The current 50% co-pay will be reduced by 5 percentage points a year starting in 2010 and by 10 percentage points in 2014 until the co-pay for outpatient mental health services becomes 20%-the same as it is for all Medicare medical services. The coinsurance reduction will lead more seniors to seek mental health coverage, although Meyers was unaware of any studies that look at numbers of Medicare recipients who have not sought care because of the 50% co-pay.

Certainly, it is logical to expect more seniors to now seek psychotherapy, which is the main reason that Congress endorsed the 5% payment increase for insight-oriented, behavior-modifying, or supportive psychotherapy and interactive psychotherapy. Those psychotherapy services can be provided in office or other outpatient facilities or in inpatient hospital, partial hospital, or residential care facilities. Meyers credited the APA with leading the lobbying for the 5% increase, which will benefit psychologists, social workers, and psychiatrists.

The 5% increase will be added to a 0.5% pay increase for the second half of 2008 and to a 1.1% increase in 2009. Those short-term increases simply papered over the long-term, underlying problem with the Medicare fee formula that calculates year-to-year increases (or decreases, as has been the case of late) based on a sustainable growth rate equation. For calendar 2010, physicians are facing a 20% reduction in fees, which will undoubtedly be averted, too, and probably again at the last minute.

But for the next 18 months, psychiatrists can concentrate on new patients-not flagging Medicare fees. And they will be able to prescribe barbiturates and benzodiazepines starting in 2013. (For unclear reasons, when Congress initiated the Part D outpatient drug benefit, via the Medicare Modernization Act, it barred inclusion of barbiturates and benzodiazepines on Part D drug plan formularies.)

Another important Part D formulary provision in the bill could affect psychiatric patients. When Congress established the Part D program, it identified 6 disease categories in which a prescription drug plan has to make available “all or substantially all” of the drugs in that category. Two of the categories are depression and psychosis. The Centers for Medicare and Medicaid Services (CMS) wrote the rules surrounding that provision. There was some concern within the psychiatry community that either an administration or Congress would eliminate antidepressives and antipsychotics or shift the definitions of diseases that qualified for “all or substantially all” treatment (those rules are not set in statute but administratively by CMS). The new bill establishes a statutory standard for “all or substantially all” categories. First, Health and Human Services must determine that there would be “major or life-threatening clinical consequences” if a category were not included. Second, those threatening consequences would be defined by “unique chemical actions and pharmacological effects of the drugs within the category or class, such as drugs used in the treatment of cancer.” This language essentially gives the antidepressives and antipsychotics permanence, and it opens the door to new categories being added-something the prescription drug industry is anxious to do.