CMS Updates Policies on Medicare Coverage for Skilled Care and Therapy

CMS has revised portions of the Medicare Benefit Policy Manual to implement the settlement agreement reached earlier this year in Jimmo v Sebelius. The changes clarify that coverage of skilled nursing and skilled therapy services do not “turn on the presence or absence of a beneficiary’s potential for improvement, but rather on the beneficiary’s need for skilled care.”


Before the settlement between CMS and a class of Medicare beneficiaries was reached in October 2012, a long-standing Medicare coverage policy required that beneficiaries show medical or functional improvement or restoration to receive reimbursement for skilled nursing facilities (SNFs), home health (HH), and outpatient therapy (OPT) services. The proposed settlement arose out of a class action suit filed by Medicare beneficiaries seeking declaratory, injunctive and mandamus relief against the HHS Secretary.

The settlement agreement required CMS to revise the relevant portions of the Medicare Benefit Policy Manual to clarify the coverage standards for SNF, HH, and OPT benefits when a patient has no restoration or improvement potential but when the patient needs those services. The settlement agreement did not modify, contract or expand the existing eligibility requirements for receiving Medicare coverage for post-hospital SNF care, home health services, outpatient therapy services and inpatient rehabilitative services services.

In April 2013, CMS released its plan to implement the settlement agreement, including updating the Manual  and beginning an educational outreach campaign for beneficiaries and providers.

Manual updates

The changes to the Manual were implemented by Transmittal 176, issued December 13, 2013, and effective January 7, 2014. The Manual changes emphasize that (1) no “improvement standard” is to be applied in determining Medicare coverage for maintenance claims that require skilled care; (2) better guidance is available on the role of appropriate documentation in facilitating accurate coverage determinations for claims involving skilled care; and (3) the revised Manual sections do not represent an expansion of coverage, but provide “clarifications that are intended to help ensure that claims are adjudicated accurately and appropriately in accordance with existing policy.”

In effect, whether a beneficiary gets skilled nursing care or therapy services depends upon an individualized assessment of the beneficiary’s medical condition and the reasonableness and necessity of the care, treatment, care or services in question. If an assessment demonstrates that skilled care is necessary “to safely and effectively maintain the beneficiary at his or her maximum practicable level of function,” that skilled care will be covered by Medicare. If the beneficiary’s maintenance care can be fulfilled by nonskilled personnel, then skilled care would not be covered by Medicare.