Medicare covers medically necessary physical therapy (PT) services aimed at restoring function, improving movement, or slowing functional decline following an injury, illness, or surgery. The financial structure determining how much the program pays is complex, depending on the service setting and specific annual limits. Understanding the specific rules and financial thresholds in place for 2022 is necessary to determine the program’s contribution versus the patient’s out-of-pocket costs.
Coverage Based on Medicare Part
The setting where physical therapy is received dictates whether Part A or Part B provides coverage. Medicare Part A covers physical therapy when it is a bundled component of an inpatient stay, such as in a hospital or a skilled nursing facility (SNF) following a qualifying hospital stay. In this scenario, the cost of therapy is included within the facility’s overall payment and is not billed separately.
For most individuals receiving ongoing rehabilitation, physical therapy falls under Medicare Part B, which covers services in an outpatient setting. This includes therapy provided in a private practice, an outpatient hospital department, a comprehensive outpatient rehabilitation facility, or in a patient’s home under certain circumstances. Part B covers the majority of outpatient physical therapy services, and its rules also apply to services provided in a skilled nursing facility once the Part A benefit period has ended.
Calculating Patient Out-of-Pocket Expenses
The patient’s financial responsibility for Part B-covered physical therapy is based on a standard deductible and coinsurance model. Before Medicare pays its share, the beneficiary must first meet the annual Part B deductible, which was $233 for 2022. This deductible applies to all Part B services, not just therapy, and must be paid each year.
Once the deductible is satisfied, Medicare Part B typically pays 80% of the Medicare-approved amount for the services. The beneficiary is responsible for the remaining 20% coinsurance for each visit. For example, if Medicare approves a $100 charge, the program pays $80, and the patient owes $20. Supplemental coverage, such as a Medigap policy or a Medicare Advantage (Part C) plan, may cover some or all of these out-of-pocket costs.
The Outpatient Therapy Thresholds
Medicare utilizes financial thresholds that necessitate additional administrative steps to ensure continued coverage, though it does not impose a hard cap that stops payment entirely. For 2022, the threshold amount for combined physical therapy and speech-language pathology services was $2,150. Once allowed charges reached this amount, the provider was required to attest that the services remained medically necessary.
This attestation is accomplished by appending the KX modifier to the claim line for services exceeding the $2,150 threshold. The modifier signals that the provider has documentation justifying the need for continued treatment. Failure to include the KX modifier on claims above this amount results in an automatic denial of payment. This threshold system replaced the previous hard cap, allowing beneficiaries access to medically necessary care beyond a fixed limit.
A second, higher financial limit triggers a targeted medical review process for services with high utilization. For 2022, this separate threshold was set at $3,000 for combined physical therapy and speech-language pathology services. Claims exceeding this higher amount may be flagged for review by a Medicare contractor to verify that the services were appropriate and properly documented. This review focuses on providers with unusual billing patterns or high denial rates.
Establishing Medical Necessity for Payment
Medicare only pays for physical therapy services if they are deemed “medically necessary,” regardless of meeting financial thresholds. This requires that the services be skilled, reasonable, and necessary to treat the patient’s condition or restore function. The treatment must require the skills of a qualified therapist and cannot be safely or effectively carried out by non-skilled personnel or a home exercise program.
Payment also requires a formal written Plan of Care (POC) established by the treating therapist, which outlines specific treatment goals, frequency, and duration. This plan must be certified by a physician or other allowed non-physician practitioner. Ongoing documentation must demonstrate the patient’s progress toward the established goals, as insufficient documentation can lead to non-payment by Medicare. If the services are not considered skilled, reasonable, and necessary, Medicare will deny the claim, and the beneficiary may become responsible for the entire charge.