2025 Medicare Mental Health Therapy Reimbursement Rates by State

Medicare | Revenue Cycle Management

As we enter 2025, Medicare reimbursement for mental health therapy services is experiencing a nationwide reduction, with an average decrease of approximately 14% from 2024 rates. This downward trend varies by state and region, with rural areas absorbing some of the most significant cuts. While higher-cost regions like Alaska and parts of California still offer relatively elevated payments, they too are seeing declines, albeit smaller.

Large urban centers such as Chicago, Miami, and Houston are among the hardest hit, with reimbursement drops exceeding 16% in some areas.

Before reviewing the state-by-state breakdown, here’s a look at the key factors driving these 2025 rate adjustments.

Key Drivers of Medicare Rate Reductions for Mental Health Services in 2025

1. Conversion Factor Cuts

The 2025 Medicare conversion factor has been reduced by 2.83%, bringing it down to $32.3465. This marks the fifth straight year of cuts, largely due to the expiration of prior temporary boosts and lack of inflation adjustments.

2. Legislative Uncertainty

Without direct Congressional intervention, Medicare payment systems continue to experience instability. As of now, no legislative fixes have been implemented to halt these reductions, putting continued financial pressure on behavioral health providers.

3. Economic Conditions

The Medicare Economic Index (MEI) projects a 3.5% rise in practice costs for 2025. However, budget neutrality rules prevent this from translating into higher reimbursements, creating a disconnect between operating expenses and income.

4. Shift to Medicare Advantage (MA)

While traditional Medicare sees cuts, Medicare Advantage (MA) plans are receiving a 3.7% increase in reimbursements. This discrepancy underscores the ongoing pivot from fee-for-service models to value-based managed care systems.

5. Quality Payment Program (QPP) Incentives

Providers participating in Advanced Alternative Payment Models (APMs) under the QPP may qualify for bonus payments. Those outside of these models, especially smaller therapy practices, face reduced compensation and greater reporting burdens.

6. Lack of Inflation Protection

The absence of inflation-based updates in Medicare’s physician fee schedule continues to challenge mental health professionals, particularly amid rising staffing and operational costs.

7. Other Contributing Variables

Additional influences include regional cost variations, CPT code groupings, and practice-specific factors. However, the primary drivers in 2025 remain systemic and policy-driven.

2025 Reimbursement Rates for CPT Code 90791 (Psychiatric Diagnostic Evaluation)

The table below highlights state-level reimbursement trends for CPT Code 90791, a commonly used code for initial mental health assessments. Here's a summary of national findings:

• National average reimbursement drops from $195.46 in 2024 to $166.91 in 2025, a 14.63% decrease.

• Urban areas typically have higher baseline rates, but often experience steeper percentage cuts.

• Some California counties and Alaska still report higher-than-average dollar amounts, but not without reductions.

Examples of State-Specific Rate Changes

Note: A full downloadable table with 2025 CPT 90791 rates by region is available on the CloudRCM Solutions website (contact us to access state-specific billing data).

What This Means for Behavioral Health Providers

These cuts highlight the importance of strategic revenue cycle management in 2025. At CloudRCM Solutions, we help mental health clinics, therapists, and behavioral health organizations navigate these financial challenges by:

• Optimizing coding accuracy

• Appealing underpayments

• Enhancing documentation workflows

• Monitoring payer trends (Medicare vs MA)

Need Help Managing Mental Health Billing in 2025?

CloudRCM Solutions offers specialized billing and credentialing services for behavioral health providers across the United States. Whether you’re a solo practitioner or a multi-location therapy group, we’ll help you protect your reimbursements and stay compliant with evolving CMS guidelines.