When a Medicare patient sees his or her physician, they are only responsible for paying the standard co-pay that their policy requires. Thanks to longstanding laws and regulations, Medicare patients are not bombarded with unexpected and confusing out-of-pocket charges. Physicians are paid by Medicare under a fee schedule, and there are limits to the amount a doctor can bill a patient per service. However, if the physician decides to opt out of the Medicare system and enter into private contracts with patients, he or she can charge higher fees than are allowed under Medicare. New legislation will make it easier for physicians to privately contract with patients if they so choose. Although this presents significant financial incentives for physicians, it could lead to higher costs for Medicare beneficiaries. These changes can have a significant impact on Medicare patients, the Medicare system, and how physicians manage the financial side of their practice. A seasoned lawyer experienced in physician employment law can explain the impact these changes will have and address any questions or concerns that may arise.
What Were the Provider Options Prior to the Changes in Legislation?
Before the proposal to broaden private contracting in Medicare, physicians could bill Medicare patients in three different ways, depending on whether they were registered as a participating provider, non-participating provider, or an opt-out provider. The following is a brief description of each:
- Participating providers: Over 95 percent of physicians and practitioners who are registered with Medicare are participating providers. With this payment option, physicians agree to accept Medicare’s fee-schedule amount as payment-in-full for the covered service. Patients pay the standard co-pay, which is no higher than 20 percent of the fee for the service. Physicians are paid the balance of their fees directly from Medicare.
- Non-participating providers: Some providers may choose to charge Medicare patients higher fees, up to a maximum limit, for certain services. The patients are responsible for paying the higher fee, as well as the applicable coinsurance. The physician bills the patient directly for the full charge, and the patient can seek reimbursement from Medicare. Only about four percent of physicians are registered as non-participating providers.
- Opt-out providers with private contracts: This option allows physicians to charge Medicare patients any amount they deem appropriate, if it is agreed on in their contract. Because the physician has outed out of Medicare, the patient is responsible for the entire cost of the services provided. Less than one percent of physicians who are in clinical practice choose this option.
How Does Private Contracting Affect Medicare Patients’ Out-Of-Pocket Costs?
If a Medicare patient is scheduled for a routine colonoscopy with biopsy, the fee is approximately $500. Medicare pays 80 percent of the fee schedule amount, which is $400, and the patient pays the remaining $100. If the physician is a non-participating provider, he or she may bill the Medicare patient up to 115 percent of the reduced fee schedule amount, which means that the patient would be responsible for paying $166 instead of $100. However, if the physician has opted out of Medicare and enters into a private contract with the patient, the physician can charge whatever he or she thinks is reasonable, and the patient will be responsible for paying that amount. For example, if the same physician opted out of Medicare and charged the average out-of-network fee for the colonoscopy and biopsy, which is approximately $1,200, the patient would be responsible for that full amount, which is significantly higher than $100 or $160.
After the Balanced Budget Act (BBA) of 1997 was passed, physicians who opted out of Medicare were required to notify their patients in writing before they could provide any type of service to the patient. By signing this document, this signified that the patient understands that Medicare is not going to reimburse him or her for the services provided. Physicians may not enter into a private contract with a patient who is experiencing an extreme health issue, or who qualifies for Medicaid, as these are generally people who earn low incomes or who are disabled. Physicians must also understand that if they choose to opt out of Medicare, the decision will apply to all his or her Medicare patients. This requirement was put into place in an effort to prevent confusion among patients in terms of what services were covered by Medicare, potential out-of-pocket costs, and concerns about fraudulent billing practices.
How Do the Latest Policy Changes Affect Private Contracting?
There are two main changes that were proposed by Congress and physician organizations such as the American Medical Association. First, physicians would be allowed to contract on a patient-by-patient or service-by-service basis with Medicare patients, whereas they were previously required to privately contract with all of their Medicare patients for all services. Second, Medicare patients and physicians would be allowed to seek reimbursement from Medicare for the amount that Medicare would normally pay for that service using the physician fee schedule. Patients and physicians may also have the option of obtaining coverage from supplemental insurance such as Medigap and employer-sponsored retiree coverage. However, it is not entirely clear if insurers will be required to pay these claims.
How Do the Proposal Changes Impact Physicians and Patients?
There are a number of key arguments that support the proposal changes. For example, by lifting restrictions on private contracting, physicians are eligible to receive higher payments for the services they provide. This is financially beneficial to physicians who have been compensated relatively low fees allowed by Medicare. Many physicians believe that these fees do not keep up with the high cost of running a medical practice. Lifting the restrictions would allow physicians and practitioners more autonomy, which has been compromised through Medicare’s strict fee regulations and coverage rules.
The proposal changes would also increase the number of physicians who may be willing to accept Medicare because they would be able to charge higher fees for certain Medicare patients without having to opt out of Medicare entirely and lose all other current Medicare patients. Psychiatrists and oral surgeons are known for opting out of Medicare at much higher rates than other practitioners, but they may also be more likely to accept more Medicare patients if they are allowed to privately contract with some patients.
The proposal also has the potential to reduce the out-of-pocket expenses that patients are responsible for paying. That is because patients entering into private contracts could seek reimbursement or allow their physician to collect a portion of the fees directly from Medicare. Prior to the proposal changes, Medicare could not reimburse doctors or patients for services provided under a private contract.
What Are the Disadvantages Associated with the Changes to Medicare?
There are a number of concerns about how these changes will impact patients and the entire Medicare program. One of the main issues is that the changes to the private contracting rules will result in higher costs for Medicare beneficiaries, many of whom are already living on incomes of $24,000 a year or less and have little to no savings. The more physicians who opt to privately contract with Medicare patients, the more patients may be expected to pay the higher costs for the services they receive. In addition, physicians are not limited in what they can charge for a Medicare-covered service, so the patient will be responsible for paying that amount if he or she agrees to the charges and signs the private contract with the physician.
There is also concern that some patients could lose access to affordable care if more physicians enter into private contracting, particularly for patients who require the services of a specialist such as an oncologist or a specialized surgeon, or for who live in remote communities where there are fewer doctors. In these situations, patients may believe they have no choice but to agree to the terms of the physician’s contract, even if it is over and above what they can afford. For patients who are looking for a new doctor, or for those who want to stay with their current doctor, another risk that patients face is when their physician makes a judgment call about what they can and cannot afford. Although some believe that physicians have an accurate sense of which patients are able to pay higher fees, others are concerned that this will put patients in the uncomfortable position of having to disclose their personal financial information or look for another doctor that is a participating Medicare provider.
Philadelphia Physician Employment Lawyers at Sidney L. Gold & Associates, P.C. Assist Physicians with Legal Issues Related to Medicare
If you are facing a legal issue involving recent changes to the Medicare system and the impact it has on your practice, do not hesitate to contact the Philadelphia physician employment lawyers at Sidney L. Gold & Associates, P.C. Our experienced legal team is dedicated to helping physicians protect their professional careers and personal assets. Call us today at 215-569-1999 or contact us online for a free consultation. Located in Philadelphia and Pennsauken, New Jersey, we serve clients throughout South Jersey and Southeastern Pennsylvania, including Wilkes-Barre, Scranton, Northeast Philadelphia, Bucks County, Chester County, Delaware County, and Montgomery County.