Outpatient Therapy Under Part B
Medicare Part B covers outpatient physical therapy (PT), occupational therapy (OT), and speech-language pathology (SLP) services when they are medically necessary and ordered by a physician or other qualified healthcare provider. "Medically necessary" means your condition requires skilled therapy services that can reasonably be expected to improve or maintain your functional abilities, or to prevent further decline. Medicare does not cover therapy services for maintenance alone (continuing a program you could do independently), though the rules here have evolved over the years.
You may receive outpatient therapy in a variety of settings: outpatient hospital departments, private therapy clinics, your home (under certain circumstances), or through a physician's office. The therapy must be provided by or supervised by a licensed therapist. Medicare pays 80% of the approved amount after you meet your Part B deductible. You owe the remaining 20% coinsurance, which Medigap Plan G covers entirely.
The Therapy Threshold: What Happens After $2,230
Although Medicare eliminated hard dollar caps on outpatient therapy in 2018 (previously known as the therapy cap), a threshold amount still exists. In 2025, once your outpatient PT and SLP services combined exceed $2,230 (or $2,230 for OT separately), Medicare implements a medical review process. Claims above this threshold may be subject to targeted or manual medical review by Medicare contractors to confirm ongoing medical necessity.
This does not mean your therapy stops or that you are automatically denied. It means Medicare will scrutinize claims more closely. Your therapist must document the medical necessity of continued treatment thoroughly. As long as the therapy is genuinely medically necessary and properly documented, Medicare will continue to cover it above the threshold. However, some providers may become more conservative in their billing once the threshold is reached, so it is worth understanding this process if you are receiving extended therapy.
Inpatient Rehabilitation: Skilled Nursing Facility Coverage Under Part A
When rehabilitation is needed after a qualifying hospitalization, Medicare Part A may cover inpatient care in a Skilled Nursing Facility (SNF). Coverage requires several conditions to be met:
- Three-day qualifying hospital stay: You must have been admitted as an inpatient (not under "observation status") to a Medicare-certified hospital for at least three consecutive days, not counting the day of discharge.
- Medical necessity: The SNF admission must be for the same condition (or a condition that developed during your hospital stay) that required the hospitalization.
- Skilled care requirement: Your condition must require the daily services of a skilled nurse or therapist. SNF coverage is not for custodial or personal care alone.
- Medicare-certified facility: The SNF must be Medicare-certified and have a Medicare-covered bed available.
SNF Coverage Days and Cost Structure
Once you qualify for SNF coverage, Medicare Part A covers your stay on a day-based schedule for up to 100 days per benefit period:
- Days 1-20: Medicare covers 100% of the approved amount. You pay nothing (after meeting your Part A deductible for the associated hospital stay).
- Days 21-100: You pay $209.50 per day in 2025 as coinsurance. Medicare covers the remainder. Medigap Plan G covers this daily coinsurance entirely.
- Day 101 and beyond: Medicare coverage ends. You are responsible for the full cost, which can be substantial. At this point, Medicaid (for those who qualify) or long-term care insurance would apply.
Observation Status: A Critical Warning
One of the most important pitfalls in SNF coverage is observation status. If your hospital stay is classified as "outpatient observation" rather than inpatient admission, it does not count toward the three-day qualifying stay required for SNF coverage under Part A. Patients can spend multiple nights in a hospital under observation status without accumulating the days needed to qualify for SNF coverage. If you are hospitalized and expect to need rehabilitation afterward, ask your care team specifically whether your stay has been documented as an inpatient admission.
What About Home Health Therapy?
Medicare Part A (and Part B) covers home health services, including physical therapy, occupational therapy, and speech therapy, when you are homebound and the care is medically necessary. Home health is provided by a Medicare-certified home health agency and requires a physician's order and a care plan. Coverage includes part-time or intermittent skilled nursing and therapy with no copay or coinsurance under Original Medicare. Call Insurance Innovators LLC at (530) 395-5309 if you have questions about how your plan covers therapy services.