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Thinking of opting out of Medicare?


Do it carefully or face serious repercussions. Here's what you need to consider.

Jump to:
Choose article section... How to opt out as painlessly as possible Go by the book to avoid sanctions

Do it carefully or face serious repercussions.Here's what you need to consider.

By Dorothy L. Pennachio
Senior Editor

Are you rethinking your Part B participation status? Most physicians aren't ready to quit Medicare—last year, 751,000 providers (91 percent of family practitioners and 89 percent of internists) billed for services, according to the Centers for Medicare & Medicaid Services. But an increasing number, fed up with murky regulations, and nonstop paperwork, are opting out. Some of them are basing their decision on the new round of pay cuts—4.2 percent—forecast for 2004. If you're one of those physicians who are fed up, consider the experiences of two of your colleagues:

Robert G. Schwartz, a physical medicine and rehabilitation specialist in Greenville, SC, opted out of Medicare after he was hit with a "Correct Coding Initiative" audit a few years ago. "The audit was so arbitrary that I filed suit and won. And I stopped taking Medicare patients," he says.

Opting out didn't have a large financial impact, recalls Schwartz. "In fact, I have more time to see higher-paying patients. If I want to discount a fee, I can. If I don't want to bill a patient at all, I don't have to. Without the overhead I spend on red tape, I figure I'm ahead."

Mary Jo Curran, an interventional pain medicine specialist in Chicago, also opted out after her office manager analyzed the books and found the practice was losing money on its Medicare patients. "Those patients are expensive, and they comprised 40 percent of my practice," she explains. "It just wasn't worth it." Curran says the decision was also based on the way physicians are treated by the Medicare program. "Fraud and abuse charges for not following upward of 132,000 pages of Medicare rules and regulations are a threat to every physician who participates."

Although only a handful of her Medicare patients stayed with Curran, "our profits didn't go down, because we cut our overhead," she says. "No question I did the right thing. My only regret is that I didn't do it sooner. I'll never join the program again."

One practice management consultant confirms the fact that, over the long haul, a physician's revenue may not go down substantially following an opt-out. Doing the math, John M. Bennett, vice president of The Medical Management Institute in Alpharetta, GA, notes that if patients pay double the Medicare rates, a doctor can lose 50 percent of his Medicare population before losing any revenue. If the remaining Medicare patients pay even close to the practice's normal fees, the doctor will still have extra time to see more patients. But still, Bennett says, physicians need to anticipate a short-term drop.

"Before opting out, the practice should be at capacity or have significant financial reserves to get past that hump," says Greenville's Schwartz.

But for himself, Schwartz says, opting out was never an economic issue—it had to do with practice philosophy. "I wouldn't be able to live with myself providing care that satisfied the payer at the expense of the patient," he says. "And I like going to bed at night not having to worry about what Medicare might do next."

"Doctors don't opt out in the hope of making more money," says Andrew Schlafly, a New York attorney who's been helping doctors opt out since the choice became available in 1998. "They do it to regain control over their practices and to increase their job satisfaction."

Some doctors opt out because they have very few Medicare patients to begin with, says Bennett. "For others, it's because of a focus on alternative therapies—services not paid for by Medicare anyway—or a desire for a boutique-type practice," he adds. "Others are just burned out—they don't want to keep up with the rules."

How to opt out as painlessly as possible

The Balanced Budget Act of 1997 gives you and your Medicare patients the freedom to privately contract outside the Medicare system. If you quit Medicare, you agree to bill patients directly and forgo any payments from the Feds. Once out, you can't submit claims to Medicare for any Medicare patients for a two-year period.

Financial considerations will figure prominently in your decision, but you also have to look at your contractual arrangements with hospitals, health plans, or other entities. Many require you to be a Medicare participating physician. "If credentialing hinges on Medicare participation, opting out would be like knocking down a house of cards," warns Jayme Matchinski, a health care attorney in Chicago.

If you decide to take the leap, two steps are necessary: filing an affidavit stating that you agree to forgo payment from Medicare for two years, and entering into private contracts with any Medicare patients willing to do so.

You can download a sample affidavit from any of various Internet sites. We have a sample affidavit that you can download here. Or ask your Medicare carrier for a sample. But check with a lawyer, too, because there may be specific requirements for your state, says Matchinski.

Sign and file the affidavit with each carrier that has jurisdiction over claims you've filed. Carriers must receive these affidavits at least 30 days before the first day of the calendar quarter (they begin on Jan. 1, Apr. 1, July 1, and Oct. 1) following your opt-out date and within 10 days of entering into your first private contract. You have 90 days after the effective date to change your mind and return to Medicare as if you'd never opted out. Just notify your carriers and refund any money you received via private contract.

Next, download a sample physician-patient contract, and have all your patients who are Medicare beneficiaries sign one before you treat them. The contracts should be written in large, legible type. Keep them in your files, and give a copy to each patient who's signed.

Don't ask patients to sign contracts when they're facing an emergency or an urgent health problem. And if a patient with whom you don't have a private contract has a medical emergency, you can treat the person and bill Medicare on his behalf as if you hadn't opted out. Append HCPCS modifier GJ to the HCPCS code to indicate that the service was provided by an opt-out practitioner providing emergency care.

Robert G. Schwartz in Greenville, SC, suggests preparing a patient information sheet explaining your decision and its impact on beneficiaries. (See this issue's Clip and Copyfor a sample "Dear patient" letter.) Let patients know they always have the right to go elsewhere, although that's part of the contract they sign.

Go by the book to avoid sanctions

The opt-out can be renewed every two years, but it has to be done correctly—by submitting an other affidavit. If you don't, in effect you're entering into private arrangements with patients without the Feds' blessing. In that case, "all of the private contracts . . . for the two-year period covered by the attempted opt-out are deemed null and void," according to the CMS Carriers Manual. As if that's not sufficient reason to follow the rules, you then have to submit claims for all those visits retroactively.

Your opt out doesn't affect other physicians in your practice. You will have to create a system for differentiating their patients from yours, though. And you'll have to make sure your staff doesn't inadvertently submit a claim for your patients to Medicare—the repercussions could be serious. "In essence, you'd be violating federal laws, the Social Security Act, and Medicare billing guidelines," says consultant Bennett. "That's tantamount to fraud."

If, after having opted-out for two years, you choose to re-enroll, you need to complete Medicare's CMS 855 form.


Other forms and patient handouts are available in the Clip and Copy section of our Web site at www.memag.com .


Dorothy Pennachio. Thinking of opting out of Medicare?. Medical Economics Jun. 20, 2003;80:62.

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