Provider Opt-Out under Medicare Private Contracting

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PRIVATE CONTRACTING AND OPT-OUT

Physicians and non-physician providers have not always been content with the Medicare Program' s Part B payment policies and administrative procedures. The Medicare fee schedule (MFS) enacted in 1992 has reallocated physicians' income resulting in income reductions for some specialties. More recently, the negative overall updates to the MFS due to the link between the sustainable growth rate factor and growth in the GDP has reduced Part B payments to all specialty groups. Policymakers and advocates feared that providers who faced revenue cuts to changes in Part B payment policies would cut back on services to Medicare beneficiaries by simply telling Medicare beneficiaries that their practices were not accepting new patients. If sufficiently numerous, providers who were discontent with Medicare payment policies and cut back on treating Medicare patients could potentially create access problems for Medicare beneficiaries.

In response to congressional concern regarding reduction in access to Medicare physician services and proposed legislation by Senator Kyl in 1997, the eventual compromise between the Clinton Administration and Congress, represented in section 4507 of the 1997 BBA, allows physicians and other selected providers of Part B services to opt-out of the Medicare Program and establish, in writing, private contracts with Medicare beneficiaries for all covered Part B services except those services provided for emergency and urgent care. Not all providers may opt out. Private contracting was only authorized for physicians, osteopaths, and selected non-physician providers (clinical, psychologists, clinical social workers, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, certified nurse midwives) in the 1997 BBA. The Medicare Prescription Drug Improvement, and Modernization Act of 2003 (MMA) extended private contracting to podiatrists, dentists, and optometrists effective December 2003.

Under these private contracts, beneficiaries are liable for payment of the costs of care provided and could not bill Medicare. Providers sending opt-out affidavits to their Part B claims carriers would be prohibited from billing Medicare for services provided to program beneficiaries or receiving payment linked to Medicare health maintenance organization (HMO) capitation payments for 2 years after the effective date of opt-out on the affidavit. Providers opting-out of Medicare, however, may order services for Medicare patients to be delivered by providers who have not opted-out.

The congressional debate on private contracting was posed in terms of the following issues: beneficiary access, freedom of beneficiaries to choose their physician and supplement payment with personal funds, and patient privacy. The debate surrounding these concerns is described by Hoff (1998). His presentation of these issues with anecdotal illustrations, however, points to a common antecedent, refusal to treat new Medicare patients. He argues that refusal of Medicare patients occurs because of payment inadequacy and the perception of onerous, overzealously enforced administrative requirements. Hoff presents several examples where, he argues, Medicare Part B payment policies may be flawed and misdirected. However, many of the issues he raises date back to the beginning of the Medicare Program. Results of physician surveys by the Physician Payment Review Commission (1997) and the MedPAC (Schoenman and Chang, 1999; Schoenman and Feldman, 2003) indicate that physicians have been displeased with low fees, excessively stringent documentation, coding requirements, and administrative red tape in fee-for-service (FFS) Medicare. However, most physicians have not refused to treat new Medicare patients or limit the percentage of Medicare patients seen. Indeed, physicians indicated far greater displeasure with capitated managed care providers regarding these issues than Medicare (Schoenman and Chang, 1999; Schoenman and Feldman, 2003). …