Physical therapy (PT) is a medical service designed to restore movement, reduce pain, and improve function following an injury, illness, or surgery. For people enrolled in Medicare, coverage is not determined by a simple visit count but by medical necessity and the location where the care is provided. Medicare’s coverage structure involves two main components, Part A and Part B, which provide different frameworks for physical therapy reimbursement based on whether the care is inpatient or outpatient.
Distinguishing Coverage Based on Setting
Medicare coverage for physical therapy is fundamentally divided based on whether the service is received during an inpatient stay or on an outpatient basis. Medicare Part A generally covers services provided within a facility setting, such as a hospital stay or a short-term admission to a Skilled Nursing Facility (SNF). This coverage is typically bundled into the overall payment for the stay, meaning the PT service is included as part of the facility’s daily rate.
Medicare Part B covers outpatient medical services, including therapy received outside of an inpatient stay. This includes therapy provided in a private practice clinic, an outpatient hospital department, or a comprehensive outpatient rehabilitation facility. In Part B settings, services are billed to Medicare on a per-service or per-session basis. The financial limits and cost-sharing rules for Part B are entirely different from those governing Part A.
Outpatient Therapy Financial Thresholds
For outpatient physical therapy covered under Medicare Part B, there is no fixed limit on the number of sessions a person can receive in a year, provided the services are medically necessary. Instead of a hard limit, Medicare uses financial thresholds, updated annually, to monitor the use of services and ensure appropriate care is delivered.
The previous hard cap on outpatient therapy was repealed, replaced by a flexible system requiring providers to confirm medical necessity above a certain dollar amount. For 2024, the primary financial threshold for combined physical therapy and speech-language pathology (SLP) services is $2,330. Once a patient reaches this amount in allowed charges within a calendar year, the provider must take a specific action to continue billing.
To confirm that services above the initial threshold are necessary, the physical therapist must apply the KX modifier billing code to the claim. By using this modifier, the provider formally attests that the additional services are medically required and that documentation supports the need for continued treatment. Medicare continues to cover the services as long as the provider properly uses the KX modifier and maintains detailed clinical records demonstrating necessity.
A second, higher financial threshold is in place to trigger additional scrutiny from Medicare contractors. This amount, set at $3,000 for combined PT and SLP services, triggers a Targeted Medical Review (TMR) process. Claims exceeding this higher threshold may be selected for review to verify medical necessity and proper documentation. This TMR threshold is scheduled to remain at this level until the end of 2027.
The purpose of the TMR is to focus on providers with unusual billing patterns or a history of high denial rates, not to automatically deny care. These financial thresholds emphasize that the total cost of care, not the number of visits, is the primary mechanism Medicare uses to monitor outpatient therapy utilization. Coverage for Part B physical therapy continues indefinitely as long as the treating therapist can demonstrate that the patient is progressing or that the therapy is necessary to prevent functional decline.
Coverage for Physical Therapy in Inpatient Settings
Physical therapy provided during a stay in a Skilled Nursing Facility (SNF) is covered under Medicare Part A, based on time limits and benefit periods rather than a financial threshold. This coverage is available only after a qualifying hospital stay of at least three consecutive days. The person must also require skilled services, such as physical therapy, seven days a week or a combination of skilled services five days a week.
The SNF benefit provides coverage for up to 100 days of skilled care per benefit period. A benefit period begins the day a person is admitted as an inpatient and ends after they have been out of a hospital or SNF for 60 consecutive days.
For the first 20 days of a covered SNF stay, Medicare typically covers the full cost, meaning the patient owes a $0 coinsurance. From day 21 through day 100, the patient is responsible for a daily coinsurance amount, which was $204.00 per day in 2024. After the 100th day of the benefit period, Medicare Part A coverage for the SNF stay ends, and the patient must pay all costs out-of-pocket.
In this Part A setting, physical therapy sessions are not individually billed to Medicare. Instead, the cost of the therapy, nursing care, meals, and other services is included in a single prospective payment rate paid to the facility. This payment model encourages the facility to manage all necessary rehabilitation services within a set budget.
Patient Financial Responsibility and Cost Sharing
Patients have financial responsibilities that contribute to the overall cost of care, whether therapy is covered under Medicare Part A or Part B. For outpatient services covered by Part B, the patient must first meet an annual deductible before Medicare begins to pay its share. This Part B deductible was $240 in 2024.
After the deductible is met, the patient is responsible for a standard coinsurance amount for each covered service. Medicare Part B pays 80% of the Medicare-approved amount, leaving the patient to pay the remaining 20% coinsurance. This 20% responsibility can add up quickly over numerous therapy sessions.
Some people purchase supplemental insurance policies, such as Medigap plans, designed to cover some or all of the out-of-pocket costs associated with Original Medicare. Depending on the specific Medigap plan, the patient’s 20% coinsurance and the annual Part B deductible may be covered, substantially reducing the financial burden for therapy.
Alternatively, many beneficiaries receive coverage through a Medicare Advantage Plan (Part C), offered by private insurance companies approved by Medicare. These plans must cover at least the same services as Original Medicare, including medically necessary physical therapy, but they often have different cost-sharing rules. Part C plans may charge a fixed copayment per visit rather than a 20% coinsurance and may require prior authorization for services.