Opting Out of Medicare

Many people simply assume that all persons over the age of 65 are covered by Medicare and that a physician must treat these patients in exchange for whatever reimbursement CMS will pay, while writing off the balance.  Originally, physicians charged a fee for service, which the patient was required to pay. Then, Medicare paid the beneficiary. As costs rose, physicians began waiting until Medicare paid the bill, before attempting to collect the balance.  If a physician wished to speed up the process, they could participate in a program whereby Medicare paid the physician directly, but with the limiting provision– the physician could not balance bill the patient.  

The law designed to protect patients from balance billing also had another consequence.  The law interfered with the ability of a Medicare patient to contract directly with a physician for top-level care.  Beginning in 1992, CMS began replacing fee-for-service with a Medicare Fee Schedule (MFS,) which was simply the foot in the door to a plan to slashing reimbursement rates, while continuing to enforce the prohibition on balance billing.  (The government  euphemistically terms the pay cuts, “negative overall updates” to the MFS due to the link between the sustainable growth rate factor and growth in the GDP.)  

Congress provided a way for physicians to opt out of participation in Medicare  with the Balanced Budget Amendment of 1997 for most providers, and added more with the Medicare Prescription Drug Improvement Act of 2003.  According to a recent survey by the Texas Medical Association, the number of Texas Physicians accepting Medicare Patients dropped from 78 percent in 2000, to 58 percent in 2012.  Texas is one of the few states that keeps Medicare opt-out information. The U.S. Department of Health Human Services' Office of Inspector General in January reported it couldn't pin down the extent of the problem nationally because Medicare and its contractors don't keep adequate data on physicians who opt out. 

Mechanically, opting out involves three things: (1) Informing Medicare that you are “opting- out” at the appropriate deadline, (and by following opt-out procedure,) (2)  contracting with a beneficiary, and (3) following the rules in order that you do not lose your opt-out status.

In the words of CMS, "Participating physicians and practitioners may opt out if they file an affidavit that meets the criteria and which is received by the carrier at least 30 days before the first day of the next calendar quarter showing an effective date of the first day in that quarter (i.e., January 1, April 1, July 1,October 1)." [From CMS Benefit Policy Manual (Rev. 147, 08-26-11) Sec. 40.17] Note that a participating physician must give his or her carrier 30-days' prior notice by sending in the opt-out affidavit with an effective date of the beginning of the next quarter.

You will need a patient contract specifically tailored to Medicare Part B Beneficiaries, which should clearly state patient agrees to be responsible, whether through insurance or otherwise, to make payment in full for the Services, and acknowledges that Physician will not submit a Medicare claim for the Services and that no Medicare reimbursement will be provided. Additionally, you should install procedures to ensure that your office never files a Medicare claim, and never provides information to a patient that enables him to file a Medicare claim.  Mark your calendar to send in a new "opt out" affidavit every two years to maintain your status.

Finally,  process getting out from under Medicare’s immensely convoluted bureaucracy could never be complete without a complex set of rules published in a CMS manual defining what it means to “Fail to Maintain” opt-out status.

Martin Merritt maintains a current understanding of Medicare Opt Out rules and regulations. 

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