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Opting out of Medicare: A guide for direct care practices


If you’re feeling burned out, don’t let third-party payer demands drive you out of medicine.

Person getting ahead

As a family physician in Southwest Florida, Medicare patients have traditionally composed a large part of my patient population. But in 2016, faced with burdensome ‘meaningful use’ and merit-based payment requirements through the Medicare Access and CHIP Reauthorization Act (MACRA), I made the radical and somewhat painful decision to opt-out of accepting Medicare payments. It turned out to be the best decision I ever made. I now look forward to my Medicare patients, because the direct care model allows me to focus on their health and wellness, rather than on computer checkboxes.

If you’re feeling burned out, don’t let third-party payer demands drive you out of medicine: instead, consider transitioning to a direct care model, which can include opting out of Medicare. Here’s why you should consider dropping the payer, and how to make it happen.

“Whoever pays the bills, makes the rules”

Medicare pay is constantly under threat, with another 4.3% cut to physician pay planned for 2023. With increasing overhead expenses, these cuts to Medicare threaten the financial livelihood of many practices, especially those with a higher population of Medicare patients.

Further, by accepting payment, practices are beholden to Medicare’s rules, including extensive documentation requirements and the creation of a compliance program for internal monitoring and self-auditing.

Ensuring compliance can be costly. In 2019, physicians paid an average of nearly $13,000 and 200 hours to comply with Medicare’s Merit-Based Incentive Payment System (MIPS).Despite perfect compliance with Medicare rules, 50% of practices will receive financial penalties under MIPS simply because of the way the program was structured under federal law, with failure to earn enough “points” resulting in an automatic 9% penalty.

Should I opt out of Medicare?

Rather than being accountable to a third-party payer, direct care physicians are accountable to their patients—if patients don’t feel that they are receiving value for their fees, they are under no obligation to remain in the practice.Although some physicians question the ethics of charging Medicare patients directly, direct care fees are generally affordable to most patients ($109 per month for seniors in my practice) and provide added value to patients. For example, patients often tell me that they save more than their monthly membership fees on low-cost direct medication dispensing from our office, and we have the time to help our lower-income patients apply for pharmaceutical patient assistance programs for brand-name medications. Doctors who want to charge lower fees to seniors have the option of offering discounts or scholarships to patients in financial need at their discretion in direct care, something that is not allowed in the Medicare system.

For practices with a high volume of Medicare patients, deciding to cut ties with the payer can be a frightening financial decision. Indeed, when converting to direct care, only about 10-20% of a patient panel will typically stay with the practice, which results in a significant decrease in patient volume. However, this lower patient volume does not necessarily translate into a lower salary, as direct practices generally have a more consistent income and lower overhead expenses. I found this to be the case for my practice, which comprised about 75% of Medicare patients before I converted to direct care. Currently, about 25% of my current practice panel is over 65, yet my income is higher than it was when I was dependent on Medicare payments, due to more consistent income and lower overhead. I have fewer staff members, no billing department to pay, and a simple and inexpensive electronic health system (since it doesn’t need to collect third-party data).Additionally, patients

Steps to opting out

If you want to bill Medicare-eligible patients directly for services typically covered by the insurer, you must formally opt out of Medicare, following a specific procedure. Until you have completed this process, you MAY NOT bill patients directly for services that Medicare pays for, like office visits. Charging an administrative or access fee for patients to receive Medicare-billed visits is strictly not allowed, and models that bill Medicare for office visits but also charge patients a membership fee for services like ‘non-covered services’ (special access, phone visits, etc) walk a fine line between what is and is not allowed by Medicare and can lead to audits and fines.

Medicare requires physicians to mail an opt-out affidavit, available from your local Medicare Administrative Contractor. The opt-out takes effect at the beginning of the calendar quarter that starts 30-days after the opt-out affidavit letter is received (the best instructions that I have found (and the ones that I followed) are here). Once you have opted out of Medicare, you cannot re-enroll for two years (other than a one-time initial termination of opt-out status within the first 90 days). During this period, you may not bill Medicare for services in any setting, other than some specific emergency situations. Further, patients are not allowed to submit claims to Medicare for reimbursement.

To bill Medicare-eligible patients directly, you are required to have patients sign a private contract that explains Medicare’s rules. The contract advises the patient that as an opted-out physician, you do not bill Medicare, nor can the patient themselves submit claims to Medicare. Further, the patient is informed that they have the right to seek a physician who accepts Medicare payment. A sample contract is found here, and must be renewed every 2 years.

Physicians who opt-out of accepting Medicare payment are still permitted to order and authorize laboratory tests, imaging, home health, physical therapy, and durable medical equipment for Medicare patients.

Hybrid practices

Because some direct care physicians rely on Medicare billing for moonlighting jobs while they are building their practice, they may consider a hybrid practice—accepting Medicare but no other insurance. Unfortunately, by accepting Medicare, you lose the main benefit of direct care, which is eliminating administrative burdens—you will still need to hire additional staff to ensure proper billing, documentation, and compliance with Medicare rules. Instead, it may be better to keep a waiting list for Medicare-eligible patients to join the practice once you are ready to officially opt-out, or to find a moonlighting job that doesn’t require Medicare billing, such as workman’s compensation, corrections, or hospice direction.

Before you decide to take early retirement or seek a nonclinical career path, consider direct care and opting out of Medicare. You may find that removing these administrative burdens helps to bring meaning back to the practice of medicine. It did for me.

Rebekah Bernard, MD, is a family physician in Fort Myers, FL, and the author of How to Be a Rock Star Doctor and Physician Wellness: The Rock Star Doctor’s Guide.

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