Understanding Reimbursements: Medicare, CPT Codes, and Insurance Payments

If you’re billing insurance as an occupational therapist, wrapping your head around reimbursement rates, Medicare payments, and private insurance differences can feel like learning a second language (and it is!) so here’s a guide to help you through it!

Let’s start with the basics: CPT codes and what Medicare currently pays for them.

Common OT CPT Codes and 2024 Medicare Reimbursement Rates

Here are some frequently used occupational therapy CPT codes (like the ones you posted) along with Medicare’s 2024 national average reimbursement for one unit (1 unit = typically 15 minutes). Note that local rates can vary slightly based on geographic adjustments.

Medicare reimbursement rates are not one-size-fits-all—they vary slightly based on geographic location due to differences in local costs of living and doing business. This is known as the Geographic Practice Cost Index (GPCI). For example, a CPT code in New York City may be reimbursed at a higher rate than the same code in rural Kansas. These adjustments ensure fair compensation across regions. If you’d like to check the rates for your area use the lookup tool.

🔎 How to Use the Tool:

1. Visit the link above and accept the terms.
2. Enter a CPT code (e.g.,97530) into the HCPCS code box.
3. Choose Mac Option > Specific Locality.
4. In the Specific Mac Locality box > type your city or state
5. Click Search Fees

Choosing your per unit rate

As a provider, the fee you charge per unit (also known as your billed amount) may be higher than Medicare's allowed amount—and that's completely normal and strategic. Medicare’s reimbursement rates are set by federal guidelines and are typically lower than market value for therapy services. By setting your billed rate higher (e.g., $100 for a 15-minute CPT code versus Medicare’s $40.19), you maintain flexibility for working with private pay clients, out-of-network reimbursement, and negotiating with commercial insurers, who may reimburse closer to your billed rate.

Additionally, your higher fee reflects the true value of your expertise, overhead costs, and the time you spend on documentation, planning, and care beyond the session itself. Just remember: when you're a Medicare participating provider, you agree to accept the Medicare allowed amount as full payment—but your billed rate still serves a purpose in your business strategy.

Allowed Amount vs. Billed Amount

• Billed Amount = What you charge (e.g., $100)
• Allowed Amount = What Medicare or insurance agrees to pay (e.g., $40.19)
• You agree to accept the allowed amount as payment in full if you're a Medicare-participating provider.
• Copay/Coinsurance = What the patient owes (usually 20% unless they have secondary coverage)

How Medicare Reimburses: 80/20 Rule

Medicare Part B

If you’re billing traditional Medicare (Part B), here’s how reimbursement typically works:

1. You bill your full fee (e.g., $100 for a unit of 97530).
2. Medicare has an allowed amount (e.g., $40.19 for 97530).
3. You get 80% of the allowed amount from Medicare ($32.15).
4. The remaining 20% ($8.04) is billed to the patient's secondary insurance (like a Medigap plan) or directly to the patient if they have no secondary.

Secondary Insurance and Copays

• If a patient has secondary insurance, it will typically cover the remaining 20% of the allowed amount.
• If not, the patient is responsible for that portion—this is their copay or coinsurance.
• You can’t bill them more than the 20% if you’re participating with Medicare.

In-Network vs. Out-of-Network with Private Insurance

In-Network Providers:

• You contract with the insurer and agree to their allowed rates.
• You submit claims directly and are paid directly.
• Patients usually pay a copay or coinsurance, and you collect it.
• You can’t bill above the contracted rate.

Out-of-Network Providers:

• You don’t contract with the insurance.
• You can charge your full fee, but reimbursement is not guaranteed.
• Some policies (especially PPOs) may cover a portion of your services but the client will be responsible for a great amount out of pocket than if they chose and in-network provider.
• You could have out of network clients pay upfront, then provide them a superbill that they submit to try to get reimbursement from the insurance

Medicare Advantage Plans: More Like Private Insurance

Though these are Medicare replacement plans, Medicare Advantage (Part C) plans act like private insurance:

• You must contract with the specific plan to be in-network.
• Reimbursement rates vary and may differ from traditional Medicare.
• Some require prior authorizations, visit limits, or different billing portals.
• You bill them directly, not Medicare.

So while the patient may think they “have Medicare,” from your perspective as a provider, it’s more like working with Aetna, Humana, or UnitedHealthcare.

The Takeaways

⭐️ Knowing your CPT codes and allowed amounts helps you plan your pricing and expectations.

⭐️ Medicare pays 80% of the allowed rate; secondary insurance or the patient pays the rest.

⭐️ Being in-network means you accept lower rates but have easier billing and faster payments.

⭐️ Medicare Advantage plans act like private insurance—verify eligibility and authorization before treating.