Health Care Financing Administration "white paper" on Medicare Private Contracting

1997

 

 

Questions and Answers on Private Contracts

1. What is a "private contract" and what does it mean to a Medicare beneficiary who signs it?

As provided in section 4507 of the Balanced Budget Act of 1997, a "private contract' is a contract between a Medicare beneficiary and a physician or other practitioner who has "opted out" of Medicare for two years for all covered items and services he or she furnishes to Medicare beneficiaries. In a private contract, the Medicare beneficiary agrees to give up Medicare payment for services furnished by the physician or practitioner and to pay the physician or practitioner without regard to any limits that would otherwise apply to what the physician or practitioner could charge.

2. What has to be in a private contract and when must it be signed?

The private contract must be signed by both parties before services can be furnished under its terms and must state plainly and unambiguously that by signing the private contract, the beneficiary or the beneficiary's legal representative:

* Gives up all Medicare coverage of, and payment for, services furnished by the "opt out" physician or practitioner;

* Agrees not to bill Medicare or ask the physician or practitioner to bill Medicare;

* Is liable for all charges of the physician or practitioner, without any limits that would otherwise be imposed by Medicare;

* Acknowledges that Medigap will not pay towards the services and that other supplemental insurers may not pay either;

* Acknowledges that he or she has the right to receive services from physicians and practitioners for whom Medicare coverage and payment would be available.

The contract must also indicate whether the physician or practitioner has been excluded from Medicare.

Also, a contract is not valid if it is entered into by a beneficiary or by the beneficiary's legal representative when the Medicare beneficiary is facing an emergency or urgent health situation.

3. Who can 'opt out" of Medicare under this provision?

Physicians and practitioners can "opt out" of Medicare. For purposes of this provision, physicians include doctors of medicine and of osteopathy. Practitioners include physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, certified nurse midwives, clinical social workers, and clinical psychologists.

The law does not define "physician", for purposes of this provision, to include optometrists, chiropractors, podiatrists, dentists, and doctors of oral surgery; therefore, they may not opt out of Medicare and provide services under private contract. Also, physical therapists in independent practice and occupational therapists in independent practice cannot opt out because they are not within the law's definition of either a "physician" or "practitioner."

4. Can physicians or practitioners who are suppliers of durable medical equipment (DME), independent diagnostic testing facilities, clinical laboratories. etc. opt out of Medicare for only these services?

No. If a physician or practitioner chooses to opt out of Medicare, it means that he or she opts out for all covered items and services he or she furnishes, even if those items or services are covered under a different benefit. Physicians and practitioners cannot have private contracts that apply to some covered services they furnish but not to others. For example, if a physician or practitioner provides laboratory tests or durable medical equipment and chooses to opt out of Medicare, then he or she has opted out of Medicare for payment of lab services and DME as well as for professional services. If a physician who has opted out refers a beneficiary for medically necessary services, such as laboratory, DME, or inpatient hospitalization, those services would be covered. (See #18.)

5. How can participating physicians and practitioners opt out of Medicare?

To opt out of Medicare, a participating physician must first terminate his or her Medicare Part B participation agreement. Practitioners do not have participation agreements since the statute requires that assignment be accepted for all items and services they furnish. At this point, the Part B participation agreement may be terminated only effective with the beginning of the year. Hence, a physician who participates in Part B of Medicare in 1997 would need to terminate the agreement during the Part B participation enrollment period for 1999 to be able to opt out of Medicare at any point in 1998. However, HCFA is exploring whether it would be administratively possible to permit physicians to terminate their participation agreement at times other than the annual enrollment period. A decision on this issue will be made before February 2, 1999, which is the end of the extended enrollment period for 1999.

6. What happens if a physician who is a member of a group practice opts out?

A member of a group practice may enter into a private contract under section 4507 and opt out of .Medicare, without affecting the ability of the other members of the group practice to provide and bill for services they furnish to Medicare beneficiaries. No Medicare payment may be made to the group directly or through an organization paid on a capitated basis for services furnished by the physician or practitioner who has opted out.

7. Can organizations that furnish physician or practitioner services opt out?

No. Corporations, partnerships, or other organizations that bill and are paid by Medicare for the services of physicians or practitioners who are employees, partners or have other arrangements that meet the Medicare reassignment-of-benefits rules cannot opt out since they are neither physicians nor practitioners.

Physicians and practitioners who reassign benefits to organizations that participate in Medicare may not opt out because they are bound by the participation agreement signed by the organization that bills and is paid for their services. If a physician or practitioner has reassigned benefits to an organization that participates in Medicare and wants to opt out, either the organization should terminate its participation agreement or the physician or practitioner should terminate the reassignment of Medicare benefits to the organization.

8. Can a physician or practitioner have "private contract" with some beneficiaries but not others?

No. The physician or practitioner who chooses to opt out of Medicare may provide covered care to Medicare beneficiaries only through private agreements, regardless of who bills and is paid for the services.

To have a "private contract" with a beneficiary, the physician or practitioner has to opt out of Medicare and file an affidavit with all Medicare carriers to which he or she would submit claims, advising that he or she has opted out of Medicare. The affidavit must be filed within 10 days of entering into the first "private contract" with a Medicare beneficiary. Once the physician or practitioner has opted out, such physician or practitioner must enter into a private contract with each Medicare beneficiary to whom he or she furnishes covered services (even where Medicare payment would be on a capitated basis or where Medicare would pay an organization for the physician's or practitioner's services to the Medicare beneficiary), with the exception of a Medicare beneficiary needing emergency or urgent care.

Physicians who provide services to Medicare beneficiaries enrolled in the new Medical Savings Account (MSA) demonstration created by the BBA of 1997 are not required to enter into a private contract with those beneficiaries and opt out of Medicare for two years under section 4507.

9. What has to be in the "opt out" affidavit?

To be valid, the affidavit must:

 

* Provide that the physician or practitioner will not submit any claim to Medicare for any item or service provided to any Medicare beneficiary during the 2 year period beginning on the date the affidavit is signed;

* Provide that the physician or practitioner will not receive any Medicare payment for any items or services provided to Medicare beneficiaries;

* Identify the physician or practitioner sufficiently that the carrier can ensure that no payment is made to the physician or practitioner during the opt out period. If the physician has already enrolled in Medicare, this would include the physician or practitioner's Medicare uniform provider identification number (UPIN) if one has been assigned. If the physician has not enrolled in Medicare, this must include the information necessary to be assigned a UPIN;

* Be filed with all carriers who have jurisdiction over claims the physician or practitioner would otherwise file with Medicare and must be filed no later than 10 days after the first private contract to which the affidavit applies is entered into; and

* Be in writing and be signed by the physician or practitioner.

 

10. Where and when should the "opt out" affidavit be filed?

The "opt out' affidavit must be filed with each carrier that has jurisdiction over the claims that the physician or practitioner would otherwise file with Medicare and must be filed within 10 days after the first private contract to which the affidavit applies is entered into.

11. How often can a physician or practitioner "opt out" or return to Medicare?

Pursuant to the statute, once a physician or practitioner files an affidavit notifying the Medicare carrier that he or she has opted out of Medicare, he or she is out of Medicare for 2 years from the date the affidavit is signed. After those two years are over, a physician or practitioner could elect to return to Medicare or to "opt out" again.

12. Can a physician or practitioner "opt out" for some carrier jurisdictions but not others?

No. The opt out applies to all items or services the physician or practitioner furnishes to Medicare beneficiaries, regardless of the location where such item or service is furnished

13. What is the effective date of the "opt out" provision?

A physician or practitioner may enter into a private contract with a beneficiary for services furnished no earlier than January 1, 1998. The physician or practitioner must submit the affidavit to all pertinent Medicare carriers within 10 days of the date the first private contract is signed by a Medicare beneficiary.

14. Does the statute preclude physicians from treating Medicare beneficiaries if they treat private pay patients?

No. Medicare does not preclude physicians from treating Medicare beneficiaries if they treat private pay patients, whether they are persons under age 65 or seniors who choose not to enroll in Part B.

15. Do Medicare rules apply for services not covered by Medicare?

If Medicare does not cover a service, Medicare rules, including opt-out rules, do not apply to the furnishing of the noncovered service. For example, Medicare does not cover hearing aids; therefore, there are no limits on charges for hearing aids and beneficiaries pay completely out of their own pocket if they want hearing aids.

16. Is a private contract needed for services not covered by Medicare?

No. Since Medicare rules do not apply for services not covered by Medicare, a private contract is not needed. A private contact is needed only for services that are covered by Medicare and where Medicare may make payment if a claim were submitted. A physician or practitioner may furnish a service that Medicare covers under some circumstances but which the physician anticipates would not be deemed "reasonable and necessary" by Medicare in the particular case (e.g., multiple nursing home visits, some concurrent care services, two mammograms within a twelve month period, etc.). If the beneficiary receives an "Advance Beneficiary Notice" that the service may not be covered by Medicare and that the beneficiary will have to pay for the service if it is denied by Medicare, a private contract is not necessary to bill the beneficiary if the claim is denied.

17. What rules apply to urgent or emergency treatment?

The law precludes a physician or practitioner from having a beneficiary sign a private contract when the beneficiary is facing an urgent or emergency health care situation. Where a physician or a practitioner who has opted out of Medicare treats a beneficiary with whom he does not have a private contract in an emergency or urgent situation, the physician or practitioner may not charge the beneficiary more than the Medicare limiting charge for the service, and must submit the claim to Medicare for the emergency or urgent care. Medicare payment may be made to the beneficiary for the Medicare covered services furnished to the beneficiary.

18. Will Medicare make payment for services that are ordered by a physician or practitioner who has opted out of Medicare?

Yes, provided the opt out physician or practitioner ordering the service has acquired a uniform provider identification number (UPIN).

19. Clinical psychologists and clinical social workers are currently not recognized by and enrolled by Medicare unless they meet certain criteria specified by HCFA, some of which are voluntary. Are the requirements for opting out of Medicare different for these practitioners?

No. A clinical psychologist or clinical social worker must meet the affidavit and private contracting rules to opt out of Medicare.

20. What is the relationship between an Advanced Beneficiary Notice and a private contract?

A physician or practitioner may furnish a service that Medicare covers under some circumstances but which the physician anticipates would not be deemed "reasonable and necessary" under Medicare program standards in the particular case (such cases are also referred to as "medical necessity" denials). If the beneficiary receives an "Advance Beneficiary Notice" that the service may not be covered by Medicare and that the beneficiary will have to pay for the service if it is denied by Medicare, a private contract is not necessary to bill the beneficiary if the claim is denied.

21. Are there any situations where a physician or practitioner who has not opted out of Medicare does not have to submit a claim for a covered service provided to a Medicare beneficiary?

Yes. A physician who has not opted out of Medicare must submit a claim to Medicare for services that may be covered by Medicare unless the beneficiary, for reasons of his or her own, declines to authorize the physician or practitioner to submit a claim or to furnish confidential medical information to Medicare that is needed to execute a proper claim. Examples would be where the beneficiary does not want information about mental illness or HIV/AIDS to be disclosed to anyone. The balance billing limits applicable to the physician or practitioner would still apply. Moreover, if the beneficiary or their legal representative later decides to authorize the submission of a claim for the service and asks the physician or practitioner to submit the claim. the physician or practitioner must do so.

22. How do the private contracting rules work when Medicare is the secondary payer?

When Medicare is the secondary payer, and the physician has opted out of Medicare, the physician has agreed to treat Medicare beneficiaries only through private contract. The physician or practitioner must therefore have a private contract with the Medicare beneficiary, notwithstanding that Medicare is the secondary payer. Under this circumstance, no Medicare secondary payments will be made for items and services furnished by the physician or practitioner under the private contract.

 





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