Willard and Spackman's Occupational Therapy 11th Edition Chapter 74 PDF Free

Ovid: WILLARD & SPACKMAN'S Occupational Therapy
Authors: Crepeau, Elizabeth Blesedell; Cohn, Ellen S.; Boyt Schell, Barbara A.
Title: WILLARD & SPACKMAN'S Occupational Therapy, 11th Edition
Copyright ©2009 Lippincott Williams & Wilkins
> Table of Contents > XIV - Managing Practice > 69 - Payment for Services in the United States
69
Payment for Services in the United States
Helene Lohman
Amy Lamb
Learning Objectives
1. Describe the historical impact of health insurance on occupational therapy practice in the United States.
2. Explain the key types of governmental and private pay insurance, as well as other methods of payment that are accessed
by patients in occupational therapy practice.
3. Describe who are the uninsured in the United States and articulate issues related to lack of insurance.
4. Discuss how occupational therapists can become advocates for third-party coverage.
Susan, an occupational therapist who is a new graduate, works at an acute care hospital outpatient clinic. During her first month on the job, she
had two circumstances involving reimbursement for patients that awakened her to the realities of payment. One was the case of a patient on
Medicaid whom she followed for several visits. Very few patients in the clinic were on Medicaid. Susan was surprised to learn, after seeing the
patient for a few sessions, that his Medicaid benefits did not reimburse for occupational therapy services in their state. He ended up paying out of
pocket for some but not all of his expenses, and the hospital wrote off most of his expenses. The other patient was covered by a health
maintenance organization, which required preauthorizations for therapy treatment. Not knowing the system, Susan had failed to obtain necessary
preauthorization, and the patient's therapy was denied. Susan had just assumed that her manager would educate her about the specifics of
payment. Susan learned from these experiences the importance of understanding the nuances of different insurance plans and methods of payment.
INTRODUCTION: OVERVIEW OF PAYMENT

Payment issues are a major force affecting occupational therapy practice (Burke & Cassidy, 1991). When major changes occur with payment
sources, practice is transformed. Federal and state legislation regulating payment strongly influences the direction of these practice shifts. For
example,
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Medicare, Title 18 of the Social Security Act, enabled expansion of occupational therapy practice for older adults, and subsequent amendments that
changed how the law was regulated resulted in shrinking practice in some areas.
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In daily practice, the knowledge practitioners have about payment is often based on the typical sources that cover their patients and clients. Some
therapists who handle their own billing for services are very aware of the regulations affecting the payment that they receive. Others, like Susan,
depend on their billing department or their manager to keep them abreast of payment policies and procedures. We suggest that it is important for
all therapists, no matter where they work, to understand payment systems that affect practice and to be proactive by being aware of changes that
may affect practice. Why? Because obtaining payment is the “bread and butter” of most practices, and therapists should be involved in obtaining
optimal payment. This knowledge helps to support patients in their ability to access occupational therapy services.
This chapter provides a foundation about payment systems in the United States by first providing a brief history of insurance and then reviewing the
key payment sources that occupational therapists may encounter in practices. In addition, this chapter addresses the needs and issues of the
growing number of uninsured people in the United States and the effect of these numbers on heath care delivery. To fully understand payment
systems, knowledge is required about the legislation that affects reimbursement and associated regulations. Public policy related to payment is
discussed in this chapter, supplemented by some of the information mentioned earlier in Chapter 17. Documentation, which is directly related to
receiving third-party reimbursement, is discussed in Chapter 39. Therefore, it is important to consider those additional chapters to get a thorough
overall picture of payment for occupational therapy services.
HISTORY OF HEALTH INSURANCE

Health insurance was introduced in the United States in the 1700s with the federal Marine Hospital Service (McCarthy & Schafermery, 2001). This
insurance was an anomaly, as most people directly paid for any health care they needed until the twentieth century, when the insurance industry
grew (Patel & Rushefsky, 1995). During the twentieth century, several types of insurance were introduced, which laid the foundation for insurance
in the twenty-first century. Factors such as advances in medical treatment with expensive technological interventions, Americans wanting increased
value for their medical care, and expanding medical costs led to the development of the insurance industry (Shi & Singh, 2004). At the beginning of
the twentieth century, the first workers compensation laws were enacted. These laws were based on concerns for the well-being of injured workers.
They brought about a system that remains today of state legislation regulating the care of injured workers.
Third-Party Payment
In 1929, a model for hospital-based insurance, Blue Cross, and eventually a physician/medical services plan, Blue Shield, developed that laid the
foundation for modernday health insurance. Blue Cross/Blue Shield established a third-party payment system in which health care consumers paid a
set monthly premium to receive medical services (Patel & Rushefsky, 1995). Providers were reimbursed a fee for service based on “reasonable and
necessary” criteria with minimal restrictions on the numbers and types of interventions that consumers accessed (Sandstrom, Lohman, & Bramble,
2003). Fee-for-service type of payments occurred in indemnity plans, in which payments were made retrospectively to the provider.
The twentieth century also saw the growth of employer-based self-insurance plans. With self-insurance, businesses established their own internally
funded plans and determined what services to include. For example, businesses could choose to include or exclude occupational therapy as a service
if the insurance company from which they contracted services offered therapy in its menu of options. In 1965, federalization of health care
insurance was introduced with Medicare and Medicaid. Provision of these plans paralleled the fee-for-service approach toward payment of the time.
During most of the remainder of the twentieth century, health care insurance was based on a fee-for-service system with indemnity plans.
Shifting from Fee for Service to Managed Care

Legislation helped the health insurance industry to grow. Because of public policies that included tax incentives for employers and provided

protection of self-insurance plans from state laws (Employment Retirement Income Security Act of 1974), the insurance industry expanded,
especially in the area of self-insurance. The passage of the Health Maintenance Organization Act in 1973 laid the foundation for the development
and growth of managed care in the insurance industry. However, it was not until the 1980s and beyond that managed care came to dominate the
insurance market (Raffel & Barsukiewicz, 2002).
With the advent of managed care, a paradigm shift occurred that influenced health care payment. The insurance industry no longer focused on
providing unrestricted and unlimited coverage for health care services; rather, it focused on controlling costs and coverage. An analogy of this
paradigm change is like a change from having unrestricted food at a cruise ship buffet without considering the costs or amount of food being eaten
(fee-for-service/indemnity plans) to knowing the food allowance
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before the meal and being restricted to what you can order within that predetermined amount (managed care environment). Similarly, managed
care restricted payment for health care services. One result was a movement away from retrospective payment for treatments, in which payment
was made on the basis of what was billed, to prospective payments, in which the amount to be paid for services was established before the
treatment. In the mid-1980s, the advent of Diagnostic Related Groups (DRGs) for Medicare Part A patients in acute care hospitals reflected this
prospective approach and the overall paradigm shift. On the whole, these measures were intended to contain the spiraling costs that resulted from
Americans using their health care insurance with no limitations and thus consuming services much like those eating at a cruise ship buffet.
CONSUMER-DRIVEN HEALTH CARE

Now we are entering the age of consumer-driven health care. Some people believe that consumer-driven health care will eventually replace
managed care as demand for services and costs continue to rise, especially for businesses that provide health insurance as an employee benefit. A
factor that encourages this model is a large, aging baby boomer generation with high expectations for health care services (Bachman, 2004). This
economically driven approach, supported by public policy, involves lowering health care expenditures while at the same time providing consumer
control over health plans. Thus, decision making about health care moves to the consumer instead of to the insurer. An example of consumer-driven
health care is high-deductible health plans, which are often accompanied by a health savings account (HAS). These plans are also known as health
reimbursement accounts (HRA). HRAs or HASs allow people to save and apply pretax dollars to health related payments. Pretax dollars can be used
to pay for deductibles, coinsurance, copayments, and health insurance premiums, which are traditionally paid for with after-tax dollars. The
consumer can choose areas that are not always covered by some traditional insurance, such as payment for mental health services, to be
reimbursed. Currently, only a small minority of Americans are enrolled in these plans (Kaiser Family Foundation, 2006). However, consumer-driven
plans could grow because of regulations from the Internal Revenue Service (IRS) that allow people to roll over unused money from year to year.
Regulations also include a clause to cover expenses that are not in a plan but are identified by the IRS as “qualified medical expenses under IRC
Section 213 (2)” (Bachman, 2004, p. 17). Legislation will continue to push this approach forward, and the hope is that if these plans become more
common, businesses will help to educate their employees about making wise choices for health care options (Anonymous, 2005).
TYPES OF PAYMENT
This section briefly describes many different methods of payment for occupational therapy services. It helps to have an overall perspective of the
current status of how Americans are insured, which is presented in Figures 69.1 and 69.2. This section includes several case studies, which illustrate
payment systems.

Self-Pay
In the ideal world, all people would have access to health care at a reasonable cost. Yet the reality that exists presents a very different picture.
People who do not have health care insurance get sick and need therapy services. Some who do have insurance find that their plans might not cover
therapy, and most plans limit the number of visits or maximum allocable charges in a given time period. For those people, self-pay is an option, and
if they recognize the benefits from therapy, they might be willing to pay the bill. For example, some people choose to self-pay for occupational
therapy services beyond what is offered in the school system. Some older adults or their families self-pay for therapy services if the person who
needs the service does not qualify for Medicare reimbursement. Practitioners can learn from those in other fields who provide services that are not
traditionally covered by medical insurance, such as acupuncturists or neuropaths. Many health care plans do not cover such services, but some
people are willing to pay out of pocket for a perceived valuable service. Another reason for self-pay might be that a clinic does not bill insurers but
requires payment up front. Thus, patients must submit their own bills to the insurer for payment.

FIGURE 69.1 The nation's health dollar: where it came from, 2004. (From
http://www.cms.hhs.gov/NationalHealthExpendData/downloads/PieChartSourcesExpenditures2004.pdf)
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FIGURE 69.2 The nation's health dollar, where it goes, 2004. (From
http://www.cms.hhs.gov/NationalHealthExpendData/downloads/PieChartSourcesExpenditures2004.pdf)
Grants (Community Agencies)

One aspect of the American Occupational Therapy Association's Centennial Vision involves “Demonstrating and articulating our value to individuals,
organizations, and communities” (AOTA, 2006, p. 3). As Case Study 69-1 illustrates, assisting communities in nontraditional settings often entails
obtaining grant funding. Grant writing is an art that involves clear documentation along with understanding the focus of the granting agency. In most
cases, grant proposals must follow strict guidelines, and in all cases, they require careful documentation of the proposed program, service
recipients, and expected outcomes (Braveman, 2006). Grant funding can be obtained from federal, state, or local government agencies and from

private organizations. This type of “soft” payment provides funding for a prescribed time period, but when the grant is completed, practitioners
need to find other sources for program support.
Costs Embedded in Larger Structures

In some instances, therapists work in settings in which the cost for their services is embedded in a larger payment structure, such as a case rate. An
example of this type of coverage is by DRGs in acute care settings. With DRGs, hospitals receive from Medicare a set payment that is determined by
diagnosis. All hospital services that are provided to a patient, including occupational therapy, must then be embedded in the payment structure.
Government Payment in the United States

Although we do not have universal health care in the United States, as in other major industrial countries (e.g., Canada, the United Kingdom),
government funding does account for a large percentage of our health care dollar, as Figure 69.1 illustrates. The following sections outline key
government programs. Note that one is a federal program (Medicare), others are federal/state programs (Medicaid, State Children's Health
Insurance Program, IDEA), and one is a state program (Workers Compensation).
MEDICARE
The history of Medicare is important to consider because Medicare remains the principle financier of health care in the United States (Sandstrom et
al., 2003), and changes with the Medicare law have influenced overall health care provision and occupational therapy practice. This section includes
an overview of the history of Medicare followed by a discussion of what is included in the law and how it affects current occupational therapy
practice.
CASE STUDY: Jeff: Paying for Services in a Homeless Shelter

Jeff had a creative idea. He wanted to develop and administer a program to help displaced families in homeless shelters. He
knew from his professional education that occupational therapy services can be provided in many nontraditional settings in
the community. Jeff began a process of networking with people in his state and with professors at the local university.
Through this networking, he located a state grant for which he wanted to apply to finance his idea for the program. Jeff
partnered with a therapist at the university, and together they wrote a proposal for a grant, which was funded for three
years to develop Jeff's dream program. Jeff later reflected that he would never have been able to create this program
without his university partner's mentorship. Jeff also acknowledged that it was his dream paired with his knowledge that
ultimately provided access to occupational therapy for people without homes, who would not have been able to afford the
services.
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History
Part of the impetus for the Medicare law was to provide a solution to a growing concern about providing health care coverage for all Americans. An
earlier attempt during Harry Truman's presidency to amend the Social Security act to include health insurance for all workers and their dependents
as well as retired people had failed. Often with public policy, when a major bill has failed, there is an attempt to provide some type of fix to
appease the American people. In this case, the fix was Medicare, as it was argued that only 15% of older adults had health insurance (Bodenheimer
& Grumbach, 2005) and the older adult population had significant medical and financial needs. It was also acceptable to target older adults,
because everyone inevitably would age and need health care benefits (Fein, 1986; Patel & Rushefsky, 1999). In addition, because the original Social
Security law also targeted the aged, it was considered appropriate for public policy to again address the needs of that population (Fein, 1986).
Another factor was that President John Kennedy was not politically strong enough to push forward a national health insurance plan, having won the
election by a narrow margin (Patel & Rushefsky, 1999). One more factor that helped to push forward Medicare and other health policies was the
changing composition of Congress, which had become more liberal (Lammers, 1997).
Given these factors, Medicare was passed into law during Lyndon Johnson's presidency. As with any public policy, the final bill was a compromise
among different competing factions. In the U.S. system, all public policies involve compromises, which are worked out in conference committees.
Thus, the final Medicare bill met the agendas of Johnson's Democratic administration by including a national health insurance for older adults funded
through payroll taxes and of the Republicans by including a voluntary insurance program called Medicare Part B for physician and other services,
such as occupational therapy, which was funded through general revenues (Bodenheimer & Grumbach, 1999).
Where and how many therapists practice are directly linked to the Medicare law and changes made to the law over time. Therefore, it is useful to
understand an overview of key changes in the Medicare law since it was enacted in 1965. Table 69.1 highlights historical changes in the Medicare
law over the years that have influenced occupational therapy practice. From the inception of Medicare in 1965 until 1983, changes in the law
influenced occupational therapy practice in home health and hospice. In 1983, the introduction of a prospective payment system (PPS) in acute care
hospitals titled DRGs forever changed the landscape of Medicare reimbursement and, along with that, of occupational therapy practice. As a result
of the DRGs, occupational therapists began working in larger numbers in other settings besides acute care hospitals (Swartz, 1998). DRGs resulted in
shortened inpatient hospital stays and patients being discharged to other systems for additional care, such as outpatient therapy, inpatient
rehabilitation units, home health care (HHC), or skilled nursing facilities (SNFs). The introduction of PPS in acute care hospitals also led to the
development of new delivery systems. During the 1980s, subacute care units evolved to provide cost-efficient service to more acutely ill patients
who had been discharged from hospitals with complex medical and rehabilitation needs (Griffin, 1998).
The establishment of a PPS as a cost-cutting measure spread over the next 20 years (between 1983 and 2003) into many other treatment settings
covered by Medicare reimbursement. Even as early as 1984, there was discussion about launching PPS in SNFs (Scott, 1984). However, most of the
system changes occurred in the late 1990s (in 1997, PPS in SNFs) or early into the next century (in 2000, HHC; in 2002, PPS in inpatient
rehabilitation hospitals). In each of these settings, PPS is administered differently, but in all the systems, reimbursement for Medicare beneficiaries
is allocated prospectively rather than retrospectively. Other cost-cutting measures have been introduced, such as a managed care option for
Medicare beneficiaries and a cap on outpatient Part B therapy. As the large numbers of baby boomers age and qualify for Medicare coverage, one
can anticipate continual cost-cutting measures. Issues of solvency are and will continue to be discussed.
How the Medicare System Works

All Medicare beneficiaries are covered under Part A, and some elect to be covered under the voluntary program of Part B. Part A covers inpatient
hospitalization and critical access hospitals, SNFs, HHC, and hospice care. With Part B, the beneficiary pays a set fee per month to cover physician
and outpatient services such as diagnostic tests; outpatient surgery; physical, speech, and occupational therapy; HHC; blood tests; and some
preventive tests. Part B also covers some durable medical equipment. In 2006, the Medicare Prescription Drug Plans were initiated. It involves
beneficiaries paying a monthly premium, a yearly deductible, and partial copayments depending on the amount that is spent out of pocket (Centers
for Medicare & Medicaid Services, 2005).
As with any public policy, the original Medicare law was written very generally, with the interpretation of the law written into specific regulations,
which health practitioners follow to receive payment. These regulations are governed by fiscal intermediaries located throughout the United States.
Fiscal intermediaries monitor and pay
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claims and perform medical reviews, audits, and investigations. Although many regulatory changes have occurred with Medicare, such as the PPS,
the same guidelines remain for determining occupational therapy coverage. Reimbursement for occupational therapy treatments requires a
physician's order, and treatment must be completed by a qualified occupational therapist or occupational therapy assistant under the supervision of
a qualified occupational therapist. Treatment must be of reasonable duration and amount and must be appropriate for the patient's condition.
Treatment must also result in practical improvements in the patient's functional performance (Centers for Medicare & Medicaid Services, 1987).
TABLE 69.1 HISTORICAL HIGHLIGHTS OF CHANGES IN THE MEDICARE LAW INFLUENCING

OCCUPATIONAL THERAPY PRACTICE
Year Amendment/Change Impact on Occupational Therapy
July Medicare or Title 18 of the Social Security Act was Encouraged the growth of occupational therapy practice.
30, signed into law.
1965
1972 Medicare was extended to cover populations under age Extended occupational therapy services to those who were qualified
65 with disabilities and end-stage renal disease. to be disabled.
1980 The Omnibus Budget Reconciliation Act included Had the potential of expanding occupational therapy services in
occupational therapy as a qualifying service under Part B home health as occupational therapy solely could qualify a person
with home health and a provision established for skilled home health services if the person was considered to be
comprehensive outpatient rehabilitation facilities to be home-bound according to the law. The second provision allowed
Part B providers. occupational therapists to receive Part B reimbursement in
freestanding rehabilitation outpatient settings, which expanded
treatment coverage.
1981 The Budget Reconciliation Act eliminated occupational This change required nursing, speech therapy, and physical therapy
therapy as a qualifying service with home health. to qualify the patient for skilled care before occupational therapy.
(To date, this provision remains unchanged.)
1982 In the Tax Equality and Fiscal Responsibility Act, hospice Occupational therapists began to work in hospice.
benefits were enacted on a temporary basis.

1983 Change from “reasonable cost” payment to a Resulted in shorter acute care hospital inpatient stays, with
prospective payment system in hospitals (DRGs). patients often transitioned to other settings, such as SNFs, for
additional treatment. Occupational therapists began working in the
systems to which patients were being discharged, such as SNFs and
subacute care units.
1986 In the Consolidated Omnibus Budget Reconciliation Act Occupational therapists work in this area.
of 1985, hospice benefit became permanent.
1992 Physician services paid for on a fee schedule. Occupational therapists also bill Medicare from the fee schedule,
using Physician's Current Procedural Terminology Codes for Part B
services.
1997 The Balanced Budget Act (BBA) of 1997 included a Changed the approach of practice in SNFs.
Prospective Payment System for home health beginning Several legislative attempts were made to suspend and repeal the
in 2000. The act also included a prospective payment outpatient cap.
plan for Medicare Part A in SNFs beginning in 1998. The
BBA also established “caps” on Part B outpatient
rehabilitation services of $1500 for occupational therapy
and $1500 for speech therapy and physical therapy
combined.
The Balanced Budget Refinement Act called for the

establishment of a PPS in inpatient rehabilitation units.
1999 The $1500 cap became effective in January 1999 for While the caps were on moratorium, OT practice with Part B
non-hospital-based clinics. The Medicare, Medicaid, and remained the same.
SCHIP Balance Budget Refinement Act of 1999 was
passed, adding a two-year moratorium on therapy caps
in November 1999 (became effective in 2000). Increased
payment for RUGs. Added regulations for medically
complex patients.
2002 PPS was instituted in inpatient rehabilitation hospitals. Occupational therapists participate, completing the IRF-PAI for the
(Inpatient Facility Rehabilitation Patient Assessment patient classification payment system.

Instrument, IRF-PAI)
2000- Several acts placed moratoriums on the therapy cap While the caps were on moratorium, OT practice with Part B
2005 (2000, 2002). Several acts were introduced to repeal the remained the same.
cap (2001, 2002, 2003, and 2005). The cap became
effective (September 2003).
Another two-year moratorium was placed on the cap

December 2003.
2006- The therapy cap for hospital-based clinics was With the exemption, occupational therapists could apply for
2007 instituted. The passage of the Deficit Reduction Act of continued treatment for some patients.
2006 allowed for a temporary exemption process for the
therapy cap for certain conditions. Legislation continues
to be introduced to repeal the therapy cap.
Source: Compiled from American Physical Therapy Association (2007); Caring (1999); Chartlinks (2005); Mallon (1981); National Association
for the Support of Long Term Care (2005).
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PPS in Skilled Nursing Facilities

The introduction of PPS for Part A patients in skilled nursing facilities had a significant impact on how therapists practiced in those settings. The
PPS system in SNFs involves a mandated assessment structure with periodic patient reviews. The Minimal Data Set, a patient-screening form that
considers the patient's status, was instituted to determine clinical care of patients and payment. Sections of this instrument help to determine the
classification categories for patients and ultimately the allocation of time that patients can be followed. Patients who qualify to receive
rehabilitation are divided into five resource utilization groups (RUGs) ranging from ultra-high to low. Each group has a set amount of therapy
minutes that a patient receives in a week and the disciplines (ranging from one to three) that can follow the patient. For example, a patient who
qualifies to be in the “very high” RUG category is followed for 500 minutes by at least one discipline (Health Care Financing Administration, 1998).
PPS in SNFs is not without controversy. When PPS was instituted, consolidations and closures of rehabilitation companies occurred, along with losses
of therapy positions, salary cuts, and, in some situations, salary changes from a set amount to hourly payments (Steib, 1999). Concerns about the
quality of patient care in SNFs have been voiced in pilot studies examining the impact of the PPS (Brayford et al., 2002; Kennedy, Maddock,
Sporrer, & Green, 2002).
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Other expressed concerns are about treatment being less client-centered, ethics of treatment, and productivity demands, as well as less evaluation,
treatment, and documentation time. In addition, some therapists reported less continuing education money, reduced fieldwork placements at their

worksites, downsizing of departments, and lack of job security (Brayford et al., 2002; Kennedy et al., 2002). However, practitioners can learn and
have learned to work effectively with the PPS by understanding the regulations related to practice, being very time efficient, having good
communication skills with other disciplines (Brayford et al., 2002), and finding a mentor (Zellis, 2001).
PPS in Home Health Settings

Often, new changes in Medicare duplicate what has been effective with earlier initiatives. Thus, similar to the PPS system, which requires use of the
Minimal Data Set in skilled nursing facilities, home health practice includes an evaluation tool for Part A patients that is called the Outcome and
Assessment Information Set (OASIS). The OASIS is used to evaluate patient status and monitor outcomes for quality of patient care. Occupational
therapists can consult with the nurse who completes the OASIS about the primary diagnosis for which HHC is needed and about the patient's
functional status. Home health agencies are paid prospectively every 60 days an established amount based on calculations. This calculation is
derived from a case mix index and a clinical model from which patients are classified into groups called Home Health Resource Groups (Johnson,
2000). Other regulations that were made prior to the PPS remain intact, such as requiring home-bound status for patients under Medicare Part A and
the requirement that the other health care professions of nursing, physical therapy, or speech-language pathology must skill qualify a patient to
receive the Medicare benefit before occupational therapy can be provided.
PPS in Inpatient Rehabilitation Facilities

For inpatient rehabilitation facilities, the PPS includes an evaluation tool that is called the Inpatient Rehabilitation Facility-Patient Assessment
Instrument (IRF-PAI). The IRF-PAI is based on the Functional Independence Measure TM. Like the requirements in skilled nursing facilities, patients
are classified. However, in this system, patients are categorized in several ways: by impairment group code, by rehabilitation impairment category,
by case mix group, and by the presence of comorbidities. Within this system, occupational therapy practitioners can play an important role in
facilitating improved patient function from their interventions, as reflected by the scores on the IRF-PAI (Roberts, 2002).
MEDICAID
Because of an unmet societal need to help low income people, Medicaid, or Title XIX of the Social Security Act, was enacted in 1965. Medicaid
insures older adults, children and parents of dependent children, pregnant women, and people with disabilities who meet the eligibility
requirements. The majority of Medicaid recipients are children. Yet expenses for a small proportion of the Medicaid recipients, the older adults,
account for 70% of Medicaid spending because of extensive use of acute and long-term care services (Kaiser Family Foundation, n.d.). Medicaid pays
for 45% of nursing home care in the United States nationwide (Kaiser Commission on Medicaid and the Uninsured, 2007a). It is not surprising that
older adults need Medicaid services, especially for nursing home care, with the average cost of nursing home care in the United States being
$74,095 per year (MetLife Mature Market Institute, 2005).
CASE STUDY: Gina: Accessing Different Payment Sources to Work in One System
Gina's favorite population to work with was older adults. She had worked for years in skilled nursing facilities, but when
assisted living facilities grew as another living alternative for older adults, Gina decided to work in an assisted living setting.
She at first saw residents that qualified for therapy coverage under Medicare Part B. Gina kept current on changes in
regulations about the cap on therapy charges for patients receiving Medicare Part B coverage. There were many times when
the therapy cap was placed on a moratorium for therapy coverage and a point when it was enacted. When the therapy cap
was enacted, Gina carefully monitored the therapy dollars that were spent so that she did not go over the established

amount. In some cases, when the client's condition warranted, Gina requested an extension from Medicare for continued
therapy services. Gina's work with patients was well respected at the assisted living facility. As a result, the administrator
asked her to provide some consultation, which was paid for directly out of the facility budget. As Gina's practice grew, she
also began following some residents who paid out of pocket for her services (private pay). So at the same assisted living
facility, Gina was able to provide a variety of types of services and receive a variety of types of payments.
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Medicaid also provides support to 4 in 10 children who have special needs. The Early and Periodic Screening, Diagnostic, and Treatment benefit
covers a large amount of services for children (Kaiser Commission on Medicaid and the Uninsured, 2007a). Without Medicaid, many more people
would join the growing ranks of Americans who are uninsured (Kaiser Commission on Medicaid and the Uninsured, 2007a).
Medicaid is a program jointly financed by federal and state governments that is regulated by each state. It is considered to be a means tested
program as people qualify if their assets and incomes levels are below standards set by the program (Shi & Singh, 2004). States can chose to expand
their baseline Medicaid coverage and income eligibility requirements beyond the federal minimal requirements. Medicaid programs vary; each state
provides different services and different systems for delivery. Quite often, programs are administered by using managed care (Centers for Medicare
& Medicaid Services, 2006). Each state has a plan that documents how the program is administered, eligibility requirements, and required and
optional health services covered. Occupational therapy is one of the optional services; therefore, in some states, occupational therapy might not be
a covered benefit. In 2004, 29 states included occupational therapy as a covered benefit, and occupational therapy was not a covered benefit in 22
states (Kaiser Family Foundation, 2004). However, states are required to reimburse occupational therapy services for children covered under the
Early and Periodic Screening, Diagnostic, and Treatment benefit if ordered by a physician and deemed to be medically necessary (Mary Steiner,
personal communication, June 8, 2007). It behooves occupational therapists to be aware of changes on a state level and advocate for therapy
coverage in their state. Table 69.2 provides examples of required and optional Medicaid benefits.
STATE CHILDREN'S HEALTH INSURANCE PROGRAM

A more recent federal health insurance program, the State Children's Health Insurance Program (SCHIP), or Title XXI, was created in 1997 as part of
the Balanced Budget Act. This program provides health insurance to children and some parents in families that are ineligible for Medicaid and for
whom health insurance is either unobtainable or cost prohibitive. Like Medicaid, SCHIP is a federal- and state-financed program in which states
administer their programs (Kaiser Family Foundation, n.d.). SCHIP is quite an expansive health insurance program, covering one quarter of all
children in the United States. Since its inception, SCHIP has been successful in expanding health coverage and access to care as well as in
decreasing the number of uninsured children in the United States (Kaiser Commission on Medicaid and the Uninsured, 2007a).
TABLE 69.2 MEDICAID SERVICES*
Examples of Required Medicaid Services Examples of Optional Medicaid Services
♦ Physician, midwife, and certified nurse practitioner services ♦ Clinic services

services ♦ Nursing facility services for those under

age 21 years
♦ Laboratory and X-ray services ♦ Intermediate care facility/services for the

developmentally
♦ Inpatient hospital services disabled
♦ Outpatient hospital services ♦ Prescription drugs
♦ Early and Periodic Screening, Diagnostic, and Treatment ♦ Prosthetic devices and eyeglasses
services for individuals under age 21 years ♦ Dental services
♦ Nursing home care for people over age 21 years ♦ Physical therapy and related services
♦ Home health services ♦ Personal care services
♦ Family planning and supplies ♦ Rehabilitation services
♦ Rural health clinic/federally qualified health center services ♦ Occupational therapy
♦ Generally qualified health center services and any other ambulatory services ♦ Speech, hearing, and language services
offered by a federally qualified health center that are otherwise covered under
the state plan ♦ Private duty nursing
♦ Podiatrists' services
♦ Chiropractic services
♦ Transportation services
♦ Emergency hospital services

♦ Case management services
♦ Respiratory care services
♦ Home and community-based services for

individuals with disabilities and chronic
medical conditions
*The lists are not all-inclusive.
Source: Compiled from Kaiser Commission on Medicaid and the Uninsured. (2007b); ElderCare Online (2000); O'Connell, Watson, Butler, &
Straube (2004).
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PRACTICE DILEMMA
ANGIE: A THERAPIST WORKING WITH A PEDIATRIC CLIENT OVER THE YEARS IN DIFFERENT
SETTINGS WITH DIFFERENT PAYMENT STRUCTURES
Angie has seen Jamal, a 10-year-old child with cerebral palsy, in therapy for most of his young life. Angie has found that
during the time that she had seen him, not only had her skills developed as a therapist, but she had also learned about
different payment systems. Angie first saw Jamal when she was a therapist working in a neonatal intensive care unit in an
inpatient acute care hospital. Jamal's hospital therapy services were reimbursed by his parent's insurance plan, a managed
care organization (MCO). Angie worked with the MCO to obtain proper authorizations. Her focus for therapy with Jamal was
on his medical and developmental needs. Five years later, Angie again saw Jamal, this time through the school district,
where she had decided to contract part-time. There, she had to learn to change her focus from working in a traditional
medical model to working in an educationally based model. Angie's treatment approach with Jamal was to help him improve
his learning skills and to help him better participate in school activities. She worked with Jamal directly and consulted with
his teacher on ways to improve his writing skills and self-help skills needed to participate in the classroom and to help Jamal
modify some of his behaviors that were creating problems in the classroom. Angie participated in setting goals for Jamal's
Individualized Education Program (IEP). When Jamal was 7½, he fell and broke his wrist. Because Angie still provided some
contractual services at the hospital, she was able to follow Jamal in outpatient therapy. Again because of the setting and the
medical nature of his needs, his therapy was covered by his parent's MCO. In the hospital system, Jamal's goals were based
on regaining the functional use of his upper extremity.
Questions
1. Why were the therapy goals different in the school setting than in the hospital setting?
2. What public policies regulate payment for each of the settings?
3. How could Angie learn more about the payment systems in each setting?
INDIVIDUALS WITH DISABILITIES EDUCATION ACT

As of 2003, the highest percentage of occupational therapists (34.4%) were employed in school-based and early intervention practice (AOTA, 2003).
In school-based practice, the Individuals with Disabilities Education Act (IDEA), a federal/state program, regulates and finances services, including
occupational therapy, for children with special needs. The specifics of school-based practice are beyond the scope of this chapter. Nevertheless,
therapists working in that system will need to have a strong knowledge of the regulations related to the IDEA and the focus of occupational therapy
in the school system. It is beneficial for therapists to understand how IDEA finances services for children with special needs. Because it is a
federal/state program, IDEA provided some federal funding, but most of the financing for IDEA comes from taxpayers in local school districts
(Baumgartner, Berry, Hojnacki, Kimball, & Leech, 2002). Thus, IDEA is really a federal, state, and school district partnership. As a result, there will
be differences in services among school districts and across states. Occupational therapists' salaries, like all special education staff salaries, are
figured into a special education budget. A percentage of staff salaries are paid for by state dollars, and the remainder is paid for by the school
district. School districts determine whether therapists are contracted or hired as staff. Finally, states determine and regulate the payment rates for
therapy and that amount can vary (Steve Milliken, personal communication, June 6, 2007).
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WORKERS COMPENSATION
Workers compensation programs are state programs that pay for care of workers who have injuries or illnesses due to work-related causes. Each
state has a governing body that determines the administration of the state program. Like other programs that have been discussed in this chapter
(Medicaid, IDEA), workers compensation programs vary from state to state, and where they are located in the state government varies. Programs
generally pay for medical services to get the person back to work, for benefits for lost wages when appropriate, and for disability. Programs may
include services such as vocational rehabilitation, medical rehabilitation, job placement for someone with a permanent disability, and social services
(Workers Compensation Board, n.d.). Many of these programs use a managed care approach to run their programs. How workers compensation
programs are funded varies from state to state. Generally, they are financed through employer insurance, state funds, or self-insured businesses.
MANAGED CARE
Currently, managed care dominates the private health care insurance market (Dudley & Luft, 2007). Therefore, therapists in many settings will
likely see patients who are covered by some type of managed care plan. There are many definitions for managed care. For example, one definition
states that managed care is a “comprehensive health care which is provided to participating members of an organized health care organization
through the use of a network of health care providers and facilities; it uses a delivery system that secures cost effective health care”
(Medhealthinsurance, n.d.). Another definition states that “managed care is a healthcare system in which there is administrative control over
primary health care services in the medical group practice. The intention is to limit redundant facilities and services and to reduce costs” (Mosby,
2002). Thus, common to most definitions is the emphasis on controlling and reducing health care costs.
Managed care “integrates the functions of financing, insurance, delivery, and payment within one organization” (Shi & Singh, 2004, p. 326), and
most managed care organizations (MCO) include primary and preventive care (Shi & Singh, 2004). Health maintenance organizations (HMO),
preferred provider organizations (PPO), and point of service (POS) plans are examples of managed care options. Refer to Table 69.3 for a brief
description of these services. In recent years, options such as PPO plans have proven to be the most popular because of increased consumer choice

(Kaiser Family Foundation, 2006; Shi & Singh, 2004). Regardless of the type of plan, managed care includes five basic characteristics (Raffel &
Barsukiewicz, 2002, p.37):
A select panel of providers
Comprehensive health services
Quality tracking
Utilization review
Cost containment
Occupational therapy practitioners need to understand how each patient's plan works in order to receive payment. Information about a patient's
plan should be obtained or provided by the patient before the initiation of treatment. Some plans require preauthorization for beginning treatment
or authorization for continued treatment. Occupational therapists work with case managers who monitor care, and good communication is essential
for coordination of care (Sandstrom et al., 2003). Finally, managed care has not been without controversy with issues from consumers and health
care providers alike. The Patient Bill of Rights, an attempt at federal legislation to regulate managed care organizations better, evolved because of
controversies about managed care provision (Lohman, 2003).
PRACTICE DILEMMA
MARK:A THERAPIST WHO LEARNED A LESSON ABOUT THE DIFFERENCES BETWEEN STATE WORKERS
COMPENSATION PROGRAMS
Mark had just moved to another state and obtained a new position as an occupational therapist in a therapy clinic that
specializes in orthopedics. The first patient whom he saw, Richard, had injured his right hand in a work injury. Richard's
insurance coverage was workers compensation. Mark wrongly assumed that the workers compensation program would be
administered in the same way as the one he had been used to working with in another state. Therefore, Mark had not been
in contact with Richard's case manager. Two weeks into therapy, the case manager called, and Mark learned from that
conversation some of the differences in the state's workers compensation plan.
Questions
1. How can Mark find out what the workers compensation program in his state covers?
2. What does workers compensation cover in your state, and how is the plan administered?
P.960
TABLE 69.3 TYPES OF MANAGED CARE
Preferred Provider
Health Maintenance Organizations (HMOs) Organizations (PPOs) Point of Service Plans (POS)

These are the most restrictive of the managed care With these plans, participants These plans are a hybrid of an HMO and a
plans. They are based on the concept of having a can select from a pool of a PPO plan. The enrolled person has a
gatekeeper, usually a primary care provider, monitor limited number of health care primary care health practitioner who acts
control all care and referrals. As much as possible, providers. If the enrolled as a gatekeeper to manage care and make
health care is provided by the primary care provider. person goes outside of the referrals. The enrolled person also has the
Payment is based on a capitated predetermined fixed PPO for care, out-of-pocket choice of using a group of providers like a
rate per patient. costs are higher. PPO.
Source: Raffel and Barsukiewicz (2002); Sandstrom et al. (2003).
THE UNINSURED
In the early 1990s, President Bill Clinton advocated for health care reform, proposing a universal health care plan. One of the president's arguments
was the travesty of the 37 million Americans who had no health care insurance. The uninsured were not the poor or older Americans but rather the
working poor, those employed in low-wage jobs. Health insurance in the United States was primarily employment based (Raffel & Barsukiewicz,
2002), and individuals in many jobs did not receive health insurance benefits. Downsizing and corporate layoffs also contributed to the uninsured
pool (Johnson & Broder, 1997; Vigilante, D'Arcy, & Reina, 1999). In addition, many of the uninsured did not meet the qualifications for public
insurance, such as Medicaid.
Today, over 15 years later, the problem has worsened. There are now more than 47 million uninsured Americans (DeNavas-Walt, Proctor, & Lee,
2006). As in the early 1990s, most individuals who do not have health care insurance are employed (or are dependents of people who are
employed), but the employer does not provide health insurance and individual health insurance premiums are prohibitive for the individual. Young
adults age 18 to 24 years are more likely than any other age group to be uninsured (DeNavas-Walt et al., 2006). The composite of uninsured people
also includes immigrants, poor people without other public coverage, and even people with higher incomes (Herrick, 2006). Employees of small
businesses also contribute to the pool of uninsured numbers, as approximately two out of five small businesses do not provide health care insurance
(Kaiser, Family Foundation, 2006).
Lack of insurance coverage has many negative consequences. The uninsured are less likely to seek out health care or will postpone getting needed
health care because of costs. The uninsured obtain less preventive care. In addition, their medical conditions are often diagnosed in later stages,
and even after diagnosis, they receive less care and have higher rates of mortality than the insured population (Kaiser Commission on Medicaid and
the Uninsured, 2003).
Uninsured people often end up obtaining health care in emergency rooms, which ultimately increases costs for the health care system and may be
the inappropriate place to receive care (Herrick, 2006).
Occupational therapists have a moral responsibility to be aware of and consider ways to serve patients who do not have insurance. The profession's
code of ethics encourages therapists to “Make every effort to advocate for recipients to obtain needed services through available means”
(Commission on Standards and Ethics & Peloquin, 2005, p. 639). On a clinical level, charging reasonable fees for services and providing some pro
bono service are ways to help uninsured clients. However, ultimately, the problem is a larger societal issue that will need to be solved with
legislation. To date, the United States has been unsuccessful in designing a universal health care system, in spite of many efforts (Raffel &

Barsukiewicz, 2002).
P.961
COBRA AND HIPAA

As was just discussed, one group that is at risk for being uninsured is people who have changed employment or have been laid off from their jobs.
As a result of this major issue, the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) was passed. COBRA allows employees 18 months
of continued insurance coverage after leaving a place of employment. However, COBRA is very costly, as individuals pay more than their group rate
to obtain this insurance. High costs limit some people who cannot afford COBRA and may ultimately contribute to the number of uninsured
Americans. As a result, only 7% of unemployed people get this insurance (Dalrymple, 2003, October 9).
Therapists should be familiar with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) because of the privacy regulations. HIPAA
also helps people who have preexisting conditions by preventing denials of insurance coverage with a new plan. HIPAA can provide continued
insurance beyond the coverage of COBRA (Shi & Singh, 2004).
ADVOCACY FOR PAYMENT

Now let's return to the scenario about Susan that was presented at the beginning of the chapter. You will recall that Susan faced a number of
challenges resulting from lack of coverage for the patients she was treating. As a result of experiencing these problems, Susan might become aware
of her many chances to advocate for payment for her patients directly, as well as through efforts coordinated on the state level with her state
occupational therapy association and even on a national level (Sandstrom et al., 2003). At the clinical level, Susan could communicate with a case
manager of the patient's managed care organization to consider reversing the decision to deny coverage because of the mistake Susan had made
when she failed to obtain preauthorization. If necessary, Susan could find out the process for appealing a denied claim and then help her patient to
work within the managed care organization's system or possibly contact the state insurance board.
As this discussion illustrates, every time practitioners experience problems getting payment in their daily practice, they should critically consider
how best to get reimbursed. Sometimes, effective communication with case managers or other key people in an insurance system make it possible
to obtain payment (Sandstrom et al., 2003). Other times, simply following through with the processes in place, such as an appeals system, can work.
Sometimes, going beyond the traditional system to get funds through charitable organizations might be an option. For example, therapists might
consider contacting an association that specializes in a patient condition, such as the Multiple Sclerosis Association, or might find that a client's
friends, family, or faith group may donate needed funds.
The second issue that Susan encountered, that of occupational therapy not being a required Medicaid benefit in her state, demonstrates an
opportunity for advocacy through the state occupational therapy association's legislative committee. Susan could choose to become involved with
the legislative committee. Members of the legislative committee could methodically work through an advocacy plan to obtain occupational therapy
as a required Medicaid benefit in their state. There are many resources for support with such advocacy efforts through the Public Affairs Division of
the American Occupational Therapy Association. This division includes a State Affairs Group, a Federal Affairs Group, and a Reimbursement and
Regulatory Affairs Group. Depending on the need for advocacy support, an occupational therapist might access one or all of the groups (AOTA, n.d.).
Finally, Susan could advocate on a federal level for legislation that affects payment for her practice. For example, she could advocate for possible
changes in Medicaid reimbursement. Simple efforts, such as writing letters, can make a difference.
PRACTICE DILEMMA

ADVOCATING FOR SERVICE PAYMENT

Local practitioners as well as state occupational therapy associations are likely to be aware of problems related to payment
for occupational therapy services. Additional issues may be posted on the AOTA Website or on the Websites of other
professional and consumer groups. Take some time to find out what these concerns are, and then select one to work on to
change. Then, keeping in mind the information discussed in this chapter, consider the following questions:
Questions
1. What kind of reimbursement system is related to the issue, and who controls the rules for payment?
2. What efforts have occurred over the past several years to improve the payment situation?
3. What advocacy approaches are likely to be most successful in this situation?
4. What will you do?
P.962
CONCLUSION
As the case examples and practice dilemmas in this chapter have illustrated, dealing with payment issues is a regular part of
therapy practice. Practitioners may work with a variety of payment systems. On the surface, knowledge about payment
systems might seem overwhelming, as the financial system in the United States is very complex. Yet it is every practitioner's
professional duty to learn about these systems in order to be able to provide the right intervention and to advocate for
payment when needed (Commission on Standards and Ethics & Peloquin, 2005). Payment systems change, and these
changes often occur because of new or amended legislation. Keeping current with legislation that affects payment for one's
area of practice is essential for successful practice.
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RESOURCES
The Center for Medicare & Medicaid Services: http://www.cms.hhs.gov/
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The Kaiser Family Foundation: http://www.kff.org/

The Kaiser Family Foundation provides a large amount of information related to health care public policy, health insurance, and the uninsured.
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This is a helpful site, especially for educators. Tutorials can be obtained from http://www.kaiseredu.org/tutorials_index.asp

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INTRODUCTION: OVERVIEW OF PAYMENT

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HISTORY OF HEALTH INSURANCE

Shifting from Fee for Service to Managed Care

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CONSUMER-DRIVEN HEALTH CARE

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Grants (Community Agencies)

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Costs Embedded in Larger Structures

Government Payment in the United States

CASE STUDY: Jeff: Paying for Services in a Homeless Shelter

How the Medicare System Works

TABLE 69.1 HISTORICAL HIGHLIGHTS OF CHANGES IN THE MEDICARE LAW INFLUENCING

Year Amendment/Change Impact on Occupational Therapy

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The Balanced Budget Refinement Act called for the

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Another two-year moratorium was placed on the cap

PPS in Skilled Nursing Facilities

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PPS in Home Health Settings

PPS in Inpatient Rehabilitation Facilities

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STATE CHILDREN'S HEALTH INSURANCE PROGRAM

TABLE 69.2 MEDICAID SERVICES*

Examples of Required Medicaid Services Examples of Optional Medicaid Services

♦ Physician, midwife, and certified nurse practitioner services ♦ Clinic services

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services ♦ Nursing facility services for those under

♦ Laboratory and X-ray services ♦ Intermediate care facility/services for the

♦ Inpatient hospital services disabled

♦ Outpatient hospital services ♦ Prescription drugs

services for individuals under age 21 years ♦ Dental services

♦ Home health services ♦ Personal care services

♦ Family planning and supplies ♦ Rehabilitation services

♦ Rural health clinic/federally qualified health center services ♦ Occupational therapy

♦ Emergency hospital services

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♦ Case management services

♦ Respiratory care services

♦ Home and community-based services for

*The lists are not all-inclusive.

INDIVIDUALS WITH DISABILITIES EDUCATION ACT

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A select panel of providers

Comprehensive health services

TABLE 69.3 TYPES OF MANAGED CARE

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Source: Raffel and Barsukiewicz (2002); Sandstrom et al. (2003).

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COBRA AND HIPAA

ADVOCACY FOR PAYMENT

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ADVOCATING FOR SERVICE PAYMENT

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Caring. (1999, September). Medicare: Past, present, and future. 16-19.

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