Opting out of Medicare

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Reimbursement cuts to Medicare have become an annual event. Since 2001, Medicare payment to physicians has fallen by 29%, and there’s another 2.8% cut proposed for 2025, according to the American Medical Association. Professional groups have been warning for years that continued cuts will endanger care access to the more than 65 million Americans in the program, because at some point, accepting Medicare no longer becomes financially viable for some practices. There is already a shortage of physicians, so each physician opting out of Medicare results in those patients with Medicare being forced to find a new physician from a shrinking pool of options or to pay out of pocket.

Although no physician ever wants to leave patients, in some cases, there is no choice. With changes in health care regulations, reimbursement rates and increasing administrative burdens, some providers are looking to opt out of Medicare altogether. Although this decision can have significant consequences for both a practice and its patients, it may be the only viable option for some practices to keep their doors open.

If your practice is being hurt by Medicare, here’s how to assess whether opting out is the right choice, what the process of leaving Medicare looks like and what it takes to rejoin Medicare if you need to at a later date.

Is opting out the right decision?

Before making any changes, it’s important to carefully evaluate the pros and cons of leaving Medicare. The first thing to look at is the overall financial contribution that patients with Medicare make to the practice, and that starts with looking at patients with traditional Medicare versus those in Medicare Advantage plans, according to Owen Dahl, a health care consultant who works with practices.

“If you want to get completely out of Medicare, then you lose patients [with] both traditional and Advantage [plans], but if you don’t mind staying in Medicare but don’t like a certain Advantage plan, you can just leave that particular plan,” Dahl says. “The overriding question is, ‘Do I want to stay in Medicare or not?’ And then you go to the Advantage plan options to determine whether or not it’s worthwhile staying in one plan or another.”

The volume of Medicare business at your practice will be a key factor in your decision. If only 5% of your patients have Medicare, then Dahl says it’s probably not a problem. “But if 50% of your business is Medicare, then it makes it pretty tough to leave because you don’t want to lose half of your business.”

Likewise, Medicare Advantage plans have become increasingly popular with patients, with more than half of all patients with Medicare opting for Medicare Advantage over traditional Medicare. If you are in a market that is 70% Medicare Advantage plans, it might not be financially viable to walk away from the Medicare Advantage plans even if you plan on keeping patients with traditional Medicare.

Dahl says that another option is to maintain your current population with Medicare while not taking any new patients with Medicare. This keeps your existing base of patients intact while limiting exposure to future Medicare reimbursement cuts.

Although patient volume is a major factor, it’s also vital to understand your overall costs.

“We’ve always been concerned about how much money we are getting paid for this procedure or that service or whatever, but we haven’t spent a lot of time looking at how much it costs us to provide that,” Dahl says.

If you get reimbursed $70 for an office visit, does it cost you $70 to provide that? What are the staff and supply costs?

“You should be looking at how many minutes it take[s] for [a] medical assistant to be involved with a patient. How many minutes does it take to do this, and then how many various and sundry supplies am I providing with each patient visit?” Dahl says. “Any retail business looks at what it costs to put an item on the shelf and then how much it costs to make the sale. If we understand the cost of doing business, then we can better look at what the reimbursement is and find out what our margin is in terms of what we get from providing that service.”

Once you understand the margin you are making on Medicare, that will help you decide whether it’s worth staying in the program, Dahl says. The same process can then be applied to commercial insurance.

“There are a lot of benefits to really getting a better understanding of what it costs to deliver a particular service,” Dahl says.

How to opt out of Medicare

Opting out of Medicare is a formal process that requires physicians to follow a defined set of steps. The Centers for Medicare & Medicaid Services (CMS) outlines the procedure, and failure to adhere to it can result in penalties or ongoing obligations to Medicare. Opting out means that if you see patients with Medicare, neither you nor the patient can bill Medicare for the service — the patient must pay out of pocket. CMS notes that emergency and urgent care services can still be billed to Medicare. The opting out must be for all patients with traditional Medicare and services; you cannot pick and choose patients or services.

CMS requires physicians who are opting out to submit an affidavit to opt out of Medicare. A standard affidavit form can be obtained from your Medicare administrative contractor (your claims processor). According to CMS, it must be signed and in writing, include the necessary statements to which you agree, identify you so you are not paid by Medicare during the opting out period, and be filed with all Medicare administrative contractors who have jurisdiction over the claims.

If you submit the affidavit at least 30 days prior to the start of the calendar quarter, the opting out will begin on the first day of the following calendar quarter.

This process notifies CMS of your intention to opt out of Medicare, but the agency also requires you to notify your patients and enter into an agreement with them.

“You need to enter into what’s called a private contract with Medicare beneficiaries,” Daniel F. Shay, a health care attorney with Alice G. Gosfield & Associates, says. “The two key components of it are that you can charge a patient whatever you want and that the patient will not be reimbursed by Medicare at all for your services. When you’ve opted out, the patient is not allowed to send the claim in, and if they do so, it can jeopardize your [opting] out.”

The contract only applies if the patient continues to receive treatment by the physician who opted out. The patient is free to find a new physician or receive treatment elsewhere. The physician’s opting out of Medicare will automatically renew every two years. According to CMS, a new private contract must be signed with each patient with Medicare for each two-year period of opting out.

Michael Landrum, D.O., opted out of Medicare and stopped taking private insurance at his single-physician practice in Augusta, Maine, after becoming frustrated in previous positions with how it was negatively affecting his ability to care for patients. He and his wife Kathy Landrum, who serves as office manager for the practice, calculated what they needed to charge for each service and created discounts for students and older patients. “In a small practice, it behooved us to make it as simple and straightforward as possible for our sake and our patient’s sake,” Michael Landrum says. “We have a good system, and we try to make it affordable.”

“The challenge with Medicare, just like any insurance, is they do not have to notify the patient or the physician when they are changing,” Kathy Landrum says. “They have the right to change the way they reimburse, the time frame and how they do it — at will. Patients don’t know how to navigate that.”

The Landrums’ patients who are eligible for Medicare — about half the practice’s patients — have signed the private contract acknowledging their medical bills will not be submitted to Medicare. “Some try to submit it anyway, and we cannot control that,” Kathy Landrum says. “We have received on occasion a notice from Medicare asking if the patient has a contract, and we have to provide that. Medicare then responds to the patient query and states that Dr. Landrum [has] opted out as a provider and cannot receive reimbursement.”

Dahl says that physicians who are thinking of opting out should also talk to their malpractice carrier. “See what your malpractice carrier will advise you to do with regard to telling patients that you are no longer going to see them, because the malpractice issue gets fairly big if you’ve got an ongoing treatment plan [where] you are managing and monitoring a patient versus somebody who just comes in once a year for an annual wellness visit,” Dahl says.

Shay says the contract must be signed by the patient and returned to the practice. Simply sending the form to the patient is not enough. “As a standard practice, I would be asking patients when they arrive, ‘Do you have Medicare?’” he says. “And if they say yes, then I would want them to sign this agreement.”

Shay also notes that opting out is physician specific, so a practice with multiple physicians would require opting out notices to CMS for each physician. Additionally, physicians who are opting out of Medicare should have referrals to physicians who are still accepting it.

“Just to forestall any potential allegations of patient abandonment under state law, I would have referrals ready to go,” Shay says. “Plus, it’s good business and common courtesy to have that ready instead of just saying, ‘I don’t know, I guess you’re on your own.’”

CMS’ Medicare Benefit Policy Manual states that referrals for services not provided by the practice to physicians who have not opted out of Medicare is allowed and that those services would be paid by Medicare. For example, a physician who has opted out of Medicare could refer a patient for laboratory test work to a facility that takes Medicare. Although the original office visit would not be covered by Medicare, the laboratory test work would be.

Opting out does not have to be a permanent decision. There are a few ways to rejoin Medicare, according to CMS:

• The initial opting out agreement may be terminated within 90 days after the effective date of the two-year opting out period. This requires the reverse of the previous instructions — notifying all Medicare administrative contractors about the nullification and notifying all patients that their private contracts with you are no longer valid and that claims will be processed by Medicare.
• The second way is to notify all Medicare administrative contractors that you are rejoining Medicare no later than 30 days before your two-year opting out period ends.

According to CMS, if a physician who has opted out of Medicare purposely files a claim during the opting out period, this can result in the opting out period being terminated and the physician being re-enrolled in Medicare. However, it can also result in inquiries from Medicare administrators and required refunds of charges, so experts say to not use that as a method to rejoin Medicare.

Paperwork or people?

Deciding to stop accepting Medicare is a significant decision that can profoundly affect a medical practice. Physicians must weigh the financial, administrative and patient care implications before making the choice to opt out. Reducing the paperwork burden can often be a big factor in the decision.

“With all the reporting requirements, all the data collection, it can be a lot to deal with just from the federal government, to say nothing about private insurance and their own requirements,” Shay says. “It’s understandable that at least in some respects, physicians are saying, ‘This is too much paperwork; I just want to practice medicine.’ I think that’s also somewhat behind the trend where formerly private practices are bought by private equity or join health systems because doctors are just tired of being practice managers and want to off-load the burden to someone else.”

Reducing that burden and being free to practice medicine in their own way are what ultimately led the Landrums to move their practice away from taking Medicare and private insurance.

“That was kind of the beginning for us. These companies are out to make money and not out to help the doctor or the patient,” Kathy Landrum says.

But there is also the human aspect of the decision that can’t be ignored. Opting out of Medicare can result in hardships for patients that could end a lifelong relationship if they have to find a new physician.

“There’s the relationship part too,” Dahl says. “I’ve had a relationship with these patients for 10 years. I can’t let them go, right? I can’t have that relationship change. So that’s not metric driven, but it certainly is a component that has to be considered when you’re dealing with the decision.”