We have received the following questions and answers on
private contracts between beneficiaries and
physicians/practitioners, as referenced in section 4507 of the
Balanced Budget Act of 1997, by the Health Care Financing
Administration. Due to recent policy decisions, these questions
and answers differ and replace those published in The Medicare
News Brief, 97-13, December 1997.
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What is a “private contract” and
what does it mean to a Medicare beneficiary who signs
it?
As provided in section 4507 of the Balanced Budget Act
(BBA) 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
give up Medicare payment for services furnished by the
physician or practitioner and to pay the physician or
practitioner without regard to any limits that would
otherwise apply to what the physician or practitioner could
charge.
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What has to be in a private contract and when must it
be signed?
The private contract must be signed by both parties before
services can be furnished under its terms and 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 for items or services
furnished by that physician or practitioner;
- 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 towards the
services and that other supplemental insurers may not pay
either; and
- Acknowledges that he or she has the right to receive
items or services from physicians and practitioners for
whom Medicare coverage and payment would be available.
The contract must also indicate whether the physician or
practitioner has been excluded from Medicare.
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.
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Who can “opt out” of Medicare under
this provision?
Certain physicians and practitioners can “opt
out” of Medicare. For purposes of this provision,
physicians include doctors of medicine and of osteopathy.
Practitioners permitted to opt out are physician assistants,
nurse practitioners, clinical nurse specialists, certified
registered nurse anesthetists, certified nurse midwives,
clinical social workers, and clinical psychologists.
The “opt out” law does not define
“physician” to include optometrists,
chiropractors, podiatrists, dentists, and doctors of oral
surgery; therefore, they 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 “opt out”
law’s definition of either a
“physician” or
“practitioner.”
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Can physicians or practitioners who are suppliers of
durable medical equipment (DMEPOS), independent diagnostic
testing facilities, clinical laboratories, etc., opt out of
Medicare for only these services?
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. Physicians and
practitioners cannot have private contracts that apply to
some covered services they furnish but not to others. For
example, if a physician or practitioner provides laboratory
tests or durable medical equipment incident to his or her
professional services and chooses to opt out of Medicare,
then he or she has opted out of Medicare for payment of lab
services and DMEPOS as well as for professional services. If
a physician who has opted out refers a beneficiary for
medically necessary services, such as laboratory, DMEPOS or
inpatient hospitalization, those services would be covered
(see question 18). In addition, because suppliers of DMEPOS,
independent diagnostic testing facilities, clinical
laboratories, etc., cannot opt out, the physician or
practitioner owner of such suppliers cannot opt out as such a
supplier.
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How can participating physicians and practitioners
opt out of Medicare?
Participating physicians and practitioners may opt out if
they file an affidavit that meets the criteria and which is
received by the carrier at least 30 days before the first day
of the next calendar quarter showing an effective date of the
first day in that quarter (i.e., 1/1, 4/1, 7/1,10/1). They
may not provide services under private contracts with
beneficiaries earlier than the effective date of the
affidavit.
Non-participating physicians and practitioners may opt out
at any time.
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What happens if a physician or practitioner who opts
out is a member of a group practice or otherwise reassigns
his or her Medicare benefits to an organization?
Where a physician or practitioner opts out and is a member
of a group practice or otherwise reassigns his or her rights
to Medicare payment to an organization, the organization may
no longer bill Medicare or be paid by Medicare for the
services that physician or practitioner furnishes to Medicare
beneficiaries. However, if the physician or practitioner
continues to grant the organization with the right to bill
and be paid for the services he or she furnishes to patients,
the organization may bill and be paid by the beneficiary for
the services that are provided under the private
contract.
The decision of a physician or practitioner to opt out of
Medicare does not affect the ability of the group practice or
organization to bill Medicare for the services of physicians
and practitioners who have not opted out of Medicare.
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Can organizations that furnish physician or
practitioner services opt out?
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-payment rules cannot opt out since they are
neither physicians nor practitioners. Of course, if every
physician and practitioner within a corporation, partnership
or other organization opted out, then such corporation,
partnership, or other organization would have in effect,
opted out.
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Can a physician or practitioner have
“private contracts” with some beneficiaries
but not others?
No, the physician or practitioner who chooses to opt out
of Medicare may provide covered care to Medicare
beneficiaries only through private agreements.
To have a “private contract” with a
beneficiary, the physician or practitioner has to opt out of
Medicare and file an affidavit with all Medicare carriers to
which he or she would submit claims, advising that he or she
has opted out of Medicare. The affidavit must be filed within
10 days of entering into the first “private
contract” with a Medicare beneficiary. Once the
physician or practitioner has opted out, such physician or
practitioner must enter into a private contract with each
Medicare beneficiary to whom he or she furnishes covered
services (even where Medicare payment would be on a capitated
basis or where Medicare would pay an organization for the
physician’s or practitioner’s services to
the Medicare beneficiary), with the exception of a Medicare
beneficiary needing emergency or urgent care.
Physicians who provide services to Medicare beneficiaries
enrolled in the new Medical Savings Account (MSA)
demonstration created by the BBA of 1997 are not required to
enter into a private contract with those beneficiaries and to
opt out of Medicare under section 4507.
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What has to be in the “opt out”
affidavit?
To be valid, the affidavit must:
Provide that the physician or practitioner will not submit
any claim to Medicare for any item or service provided to any
Medicare beneficiary during the 2 year period beginning on
the date the affidavit is signed;
Provide that the physician or practitioner will not
receive any Medicare payment for any items or services
provided to Medicare beneficiaries;
Identify the physician or practitioner sufficiently that
the carrier can ensure that no payment is made to the
physician or practitioner during the opt out period. If the
physician has already enrolled in Medicare, this would
include the physician or practitioner’s Medicare
uniform provider identification number (UPIN), if one has
been assigned. If the physician has not enrolled in Medicare,
this would include the information necessary to be assigned a
UPIN;
Be filed with all carriers who have jurisdiction over
claims the physician or practitioner would otherwise file
with Medicare and be filed no later than 10 days after the
first private contract to which the affidavit applies is
entered into; and
Be in writing and be signed by the physician or
practitioner.
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Where and when must the “opt out”
affidavit be filed?
An “opt out” affidavit must be filed
with each carrier that has jurisdiction over the claims that
the physician or practitioner would otherwise file with
Medicare and must be filed within 10 days after the first
private contract to which the affidavit applies is entered
into.
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How often can a physician or practitioner
“opt out” or return to Medicare?
Pursuant to the statute, once a physician or practitioner
files an affidavit notifying the Medicare carrier that he or
she has opted out of Medicare, he or she is out of Medicare
for 2 years from the date the affidavit is signed. After
those 2 years are over, a physician or practitioner could
elect to return to Medicare or to “opt out”
again.
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Can a physician or practitioner “opt
out” for some carrier jurisdictions but not
others?
No, the opt out applies to all items or services the
physician or practitioner furnishes to Medicare
beneficiaries, regardless of the location where such items or
services are furnished.
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What is the effective date of the “opt
out” provision?
A physician or practitioner may enter into a private
contract with a beneficiary for services furnished on or
after January 1, 1998.
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Does the statute preclude physicians from treating
Medicare beneficiaries if they treat private pay
patients?
No, Medicare does not preclude physicians from treating
Medicare beneficiaries if they treat private pay patients,
whether such private pay patients are persons not eligible
for Medicare under age 65 or are individuals who are entitled
to Medicare benefits but have chosen not to enroll in Part
B.
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Do Medicare rules apply for services not covered by
Medicare?
If a service is one of a type that Medicare categorically
excludes from coverage, Medicare rules, including opt-out
rules, do not apply to the furnishing of the noncovered
service. For example Medicare does not cover hearing aids;
therefore, there are no limits on charges for hearing aids,
and beneficiaries pay completely out of their own pocket if
they want hearing aids.
If a service is one that is not covered because, under
Medicare rules, the service is never found to be medically
necessary to treat illness or injury, no claim need be
submitted, but the physician or practitioner who has not
opted out may charge the beneficiary for the noncovered
service only if he or she gives the beneficiary an advance
beneficiary notice of non-coverage.
If a service is one which Medicare has determined is
medically necessary where certain clinical criteria are met,
but is not medically necessary where these criteria are not
met, a claim must be submitted since it is possible that the
carrier may determine that the service is covered in the
individual beneficiary’s case, even where the
physician or practitioner who has not opted out believes that
it will not be covered and has given an advance beneficiary
notice to that effect. In this case, if Medicare denies the
claim on the basis that the service was not medically
necessary, the physician or practitioner who has given the
advance beneficiary notice may bill the beneficiary.
Where a physician or practitioner has opted out of
Medicare and agreed to provide covered services only through
private contracts with beneficiaries that meet the criteria
specified in the law, the physician or practitioner who has
opted out is prohibited from submitting claims for covered
services.
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Is a private contract needed for services not covered
by Medicare?
No, since Medicare rules do not apply for services not
covered by Medicare, a private contract is not needed. A
private contact is needed only for services that are covered
by Medicare and where Medicare might make payment if a claim
were submitted.
A physician or practitioner may furnish a service that
Medicare covers under some circumstances but which the
physician anticipates would not be deemed
“reasonable and necessary” by Medicare in
the particular case (e.g., multiple nursing home visits, some
concurrent care services, two mammograms within a twelve
month period, etc.). If the physician or practitioner gives
the beneficiary an “Advance Beneficiary
Notice” that the service may not be covered by
Medicare and that the beneficiary will have to pay for the
service if it is denied by Medicare, a private contract is
not necessary to permit the physician or practitioner to bill
the beneficiary if the claim is denied.
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What rules apply to urgent or emergency
treatment?
The law precludes a physician or practitioner from having
a beneficiary enter into a private contract when the
beneficiary is facing an urgent or emergency health care
situation.
Where a physician or a practitioner who has opted out of
Medicare treats a beneficiary with whom he does not have a
private contract in an emergency or urgent situation, the
physician or practitioner may not charge the beneficiary more
than the Medicare limiting charge for the service and must
submit the claim to Medicare on behalf of the beneficiary for
the emergency or urgent care. Medicare payment may be made to
the beneficiary for the Medicare covered services furnished
to the beneficiary.
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Will Medicare make payment for services that are
ordered by a physician or practitioner who has opted out of
Medicare?
Yes, provided the “opt out” physician or
practitioner ordering the service has acquired a unique
provider identification number (UPIN) and the services are
not furnished by a physician or practitioner who has also
opted out.
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Clinical psychologists and clinical social workers
are currently not recognized by and enrolled in Medicare
unless they meet certain criteria specified by the Health
Care Financing Administration, some of which are voluntary.
Are the requirements for opting out of Medicare different for
these practitioners?
No, a clinical psychologist or clinical social worker must
meet the affidavit and private contracting rules to opt out
of Medicare.
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What is the relationship between an Advanced
Beneficiary Notice and a private contract?
There is no relationship between these instruments. A
physician or practitioner may furnish a service that Medicare
covers under some circumstances but which the physician
anticipates would not be deemed “reasonable and
necessary” under Medicare program standards in the
particular case. If the beneficiary receives an
“Advance Beneficiary Notice” that the
service may not be covered by Medicare and that the
beneficiary will have to pay for the service if it is denied
by Medicare, and payment for the service is denied as a
“medical necessity denial,” a private
contract is not necessary to bill the beneficiary if the
claim is denied.
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Are there any situations where a physician or
practitioner who has not opted out of Medicare does not have
to submit a claim for a covered service provided to a
Medicare beneficiary?
Yes, a physician who has not opted out of Medicare must
submit a claim to Medicare for services that may be covered
by Medicare unless the beneficiary, for reasons of his or her
own, declines to authorize the physician or practitioner to
submit a claim or to furnish confidential medical information
to Medicare that is needed to submit a proper claim. Examples
would be where the beneficiary does not want information
about mental illness or HIV/AIDS to be disclosed to anyone.
Moreover, if the beneficiary or the legal representative
later decides to authorize the submission of a claim for the
service and asks the physician or practitioner to submit the
claim, the physician or practitioner must do so.
The Health Care Financing Administration does not seek to
limit or interfere in the right of a beneficiary to obtain
medical care from the physician or practitioner of his or her
choice. However, once a physician or practitioner who has not
opted out of Medicare has furnished a covered item or service
to a beneficiary who is enrolled in Part B of Medicare, the
law requires that the physician or practitioner submit a
claim to Medicare for the covered services.
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How do the private contracting rules work when
Medicare is the secondary payer?
When Medicare is the secondary payer, and the physician
has opted out of Medicare, the physician has agreed to treat
Medicare beneficiaries only through private contract. The
physician or practitioner must therefore have a private
contract with the Medicare beneficiary, notwithstanding that
Medicare is the secondary payer. Under this circumstance, no
Medicare secondary payments will be made for items and
services furnished by the physician or practitioner under the
private contract.
