New private contracting law prompts interest
HCFA Q&A answers some unresolved questions
As part of the Balanced Budget Act of 1997, Congress authorized Medicare patients to enter into private contracts with their physicians outside of normal Medicare payment provisions a very controversial act. Advocates of private contracting are now pushing for additional legislation that would make private contracting more attractive to physicians.
Meanwhile, many questions remain about what patients and their physicians can and can’t do under current law, and what impact this could have on a practice with Medicare patients. The following Q&A, pulled from public documents published by HCFA, is a good guide to the government’s position on private Medicare contracting.
Q: What is a private contract and what does it mean to a Medicare beneficiary who signs it?
A: Under 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 pay physicians directly for medical services, rather than accept coverage by the government. The provider could theoretically charge more to these direct contract patients than the standard Medicare reimbursement rates.
Q: What has to be in a private contract and when must it be signed?
A: The private contract must be signed by both parties before services can be furnished under its terms. It 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 toward 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 would be available. The contract must also indicate whether the physician or practitioner has been excluded from Medicare before.
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.
Q: Who can "opt out" of Medicare under this provision?
A: Physicians and practitioners can "opt out" of Medicare. For purposes of this provision, physicians include doctors of medicine and 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, these providers 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 "physician" or "practitioner."
Q: Can physicians or practitioners who are suppliers of durable medical equipment (DME), independent diagnostic testing facilities, clinical laboratories, or other services opt out of Medicare for only these services?
A: 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 others.
For example, if a physician or practitioner provides laboratory tests or durable medical equipment (DME) and chooses to opt out of Medicare, then he or she has opted out of Medicare reimbursement for professional services as well. However, if a physician who has opted out refers a beneficiary to another physician for medically necessary services, such as laboratory, DME, or inpatient hospitalization, those services would be covered.
Q: What happens if a physician who is a member of a group practice opts out?
A: A member of a group practice may enter into a private contract 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.
However, 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 opted out.
Q: Can organizations that furnish physician or practitioner services opt out?
A: 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 because they are neither physicians nor practitioners.
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