MNB-NJ-99-4, September 1999

The Balanced Budget Act of 1997 permits a physician or practitioner to enter private contracts with Medicare beneficiaries to provide covered services. Recent clarification has been received from HCFA for this provision. Please note the following:

Definition Of A Private Contract

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/she furnishes to Medicare beneficiaries. In a private contract, the Medicare beneficiary agrees to give up Medicare payment for services furnished by the physician/practitioner and to pay the physician/practitioner without regard to any limits that would otherwise apply to what the physician/practitioner could charge. Once a physician/practitioner files an affidavit notifying the Medicare carrier that he/she has opted out of Medicare, he/she is out of Medicare for two years from the date the affidavit is signed (unless the opt out is terminated early or the physician/practitioner fails to maintain opt out.) After those two years are over, a physician/practitioner can elect to return to Medicare or to opt out again. Please note that a beneficiary who signs a private contract with a physician/practitioner is not precluded from receiving services from other physicians and practitioners who have not opted out of Medicare.

Physicians or practitioners 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.

Requirements Of A Private Contract

A private contract under this section must:

• Be in writing and in print sufficiently large to ensure that the beneficiary is able to read the contract.

• Clearly state whether the physician/practitioner is excluded from Medicare.

• State that the beneficiary or his/her legal representative accepts full responsibility for payment of the physician’s or practitioner’s charge for all services furnished by the physician/practitioner.

• State that the beneficiary or his/her legal representative understands that Medicare limits do not apply to what the physician/practitioner may charge for items or services furnished by the physician/practitioner.

• State that the beneficiary or his/her legal representative agrees not to submit a claim to Medicare or to ask the physician/practitioner to submit a claim to Medicare.

• State that the beneficiary or his/her legal representative understands that Medicare payment will not be made for any items or services furnished by the physician/practitioner that would have otherwise been covered by Medicare if there were no private contract and a proper Medicare claim had been submitted.

• State that the beneficiary or his/her legal representative enters into the contract with the knowledge that he/she has the right to obtain Medicare-covered items and services from physicians and practitioners who have not opted out of Medicare, and that the beneficiary is not compelled to enter into private contracts that apply to other Medicare covered services furnished by other physicians or practitioners who have not opted out.

• State the expected or known effective date and expected or known expiration date of the opt out period.

• State that the beneficiary or his/her legal representative understands that Medigap plans do not, and that other supplemental plans may elect not to, make payments for items and services not paid for by Medicare.

• Be signed by the beneficiary or his/her legal representative and by the physician/practitioner.

• Not be entered into by the beneficiary or by the beneficiary’s legal representative during a time when the beneficiary requires emergency care services or urgent care services.

• Be provided (a photocopy is permissible) to the beneficiary or to his/her legal representative before items or services are furnished to the beneficiary under the terms of the contract.

• • Be retained (original signatures of both parties required) by the physician/practitioner for the duration of the opt out period.

  • Be made available to HCFA upon request.

  • Be entered into for each opt out period.

In order for a private contract with a beneficiary to be effective, the physician/practitioner must file an affidavit with all Medicare carriers to which he/she would submit claims, advising that he/she has opted out of Medicare. The affidavit must be filed within ten days of entering into the first private contract with a Medicare beneficiary. Once the physician/practitioner has opted out, such physician/practitioner must enter into a private contract with each Medicare beneficiary to whom he/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.

If a physician/practitioner has opted out of Medicare, he/she must use a private contract for items and services that are, or may be, covered by Medicare (except for emergency or urgent care services.) An opt out physician/practitioner is not required to use a private contract for an item or service that is definitely excluded from coverage by Medicare.

A non-opt out physician/practitioner, or other supplier, is required to submit a claim for any item or service that is, or may be, covered by Medicare. When an item or service may be covered in some circumstances, but not in others, the physician/practitioner, or other supplier, may provide an Advance Beneficiary Notice to the beneficiary, which informs the beneficiary that Medicare may not pay for the item or service, and that if Medicare does not do so, the beneficiary is liable for the full charge.

General Rules Of Private Contracts

The following rules apply to physicians/practitioners who opt out of Medicare:

• A physician/practitioner may enter into one or more private contracts with Medicare beneficiaries for the purpose of furnishing items or services that would otherwise be covered by Medicare.

• A physician/practitioner who enters into at least one private contract with a Medicare beneficiary and who submits one or more affidavits opts out of Medicare for a two-year period unless the opt-out is terminated early or unless the physician/practitioner fails to maintain opt out. The physician’s or practitioner’s opt out may be renewed for subsequent two-year periods.

• Private contracts and the physician’s or practitioner’s opt out are null and void if the physician/practitioner fails to properly opt out.

• Private contracts and the physician’s or practitioner’s opt out are null and void for the remainder of the opt out period if the physician/practitioner fails to remain in compliance with the opting out conditions during the opt out period.

• Services furnished under private contracts meeting the requirements of these instructions are not covered services under Medicare, and no Medicare payment will be made for such services either directly or indirectly.

Requirements Of The Opt Out Affidavit

A valid affidavit must:

• Be in writing and be signed by the physician/practitioner.

• Contain the physician’s or practitioner’s full name, address, telephone number, national provider identifier (NPI) or billing number (if one has been assigned), uniform provider identification number (UPIN) if one has been assigned, or, if neither an NPI nor a UPIN has been assigned, the physician’s or practitioner’s tax identification number (TIN).

• State that, except for emergency or urgent care services, during the opt out period the physician/practitioner will provide services to Medicare beneficiaries only through private contracts for services that would have been Medicare-covered services.

• State that the physician/practitioner will not submit a claim to Medicare for any service furnished to a Medicare beneficiary during the opt out period, nor will the physician/practitioner permit any entity acting on his/her behalf to submit a claim to Medicare for services furnished to a Medicare beneficiary.

• State that, during the opt out period, the physician/practitioner understands that he/she may receive no direct or indirect Medicare payment for services that he/she furnishes to Medicare beneficiaries with whom he/she has privately contracted, whether as an individual, an employee of an organization, a partner in a partnership, under a reassignment of benefits, or as payment for a service furnished to a Medicare beneficiary under a Medicare+Choice plan.

• State that a physician/practitioner who opts out of Medicare acknowledges that, during the opt out period, his/her services are not covered under Medicare and that no Medicare payment may be made to any entity for his/her services, directly or on a capitated basis.

• State on acknowledgment by the physician/practitioner to the effect that, during the opt out period, the physician/practitioner agrees to be bound by the terms of both the affidavit and the private contracts that he/she has entered into.

• Acknowledge that the physician/practitioner recognizes that the terms of the affidavit apply to all Medicare-covered items and services furnished to Medicare beneficiaries by the physician/practitioner during the opt out period (except for emergency or urgent care services furnished to the beneficiaries with whom he/she has not previously privately contracted) without regard to any payment arrangements the physician/practitioner may make.

• With respect to a physician/practitioner who has signed a Part B participation agreement, acknowledge that such agreement terminates on the effective date of the affidavit.

• Acknowledge that the physician/practitioner understands that a beneficiary who has not entered into a private contract and who requires emergency or urgent care services may not be asked to enter into a private contract with respect to receiving such services.

• Identify the physician/practitioner sufficiently so that the carrier can ensure that no payment is made to the physician/practitioner during the opt out period. If the physician has already enrolled in Medicare, this would include the physician/practitioner’s Medicare uniform provider identification number (UPIN), if one has been assigned. If the physician/practitioner 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/practitioner would otherwise file with Medicare and be filed no later than ten days after the first private contract to which the affidavit applies is entered into.

When A Physician Or Practitioner Opts Out Of Medicare

• When a physician/practitioner opts of out of Medicare no services provided by that individual are covered by Medicare and no Medicare payment can be made to that physician or practitioner directly or on a capitated basis. Additionally, no Medicare payment may be made to a beneficiary for items or services provided directly by a physician or practitioner who has opted out of the program.

EXCEPTION:
In an emergency or urgent care situation, a physician/practitioner who opts out may treat a Medicare beneficiary with whom he/she does not have a private contract and bill for such treatment. In such a situation, the physician/practitioner may not charge the beneficiary more than what a non-participating physician/practitioner would be permitted to charge and must submit a claim to Medicare on the beneficiary’s behalf. Payment will be made for Medicare covered items or services furnished in emergency or urgent situations when the beneficiary has not signed a private contract with that physician/practitioner.

• The physician/practitioner cannot choose to opt out of Medicare for some Medicare beneficiaries but not others; or for some services but not others. The physician/practitioner who chooses to opt out of Medicare may provide covered care to Medicare beneficiaries only through private agreements.

• Medicare will make payment for covered, medically necessary services that are ordered by a physician/practitioner who has opted out of Medicare if the ordering physician/practitioner has acquired a unique provider identification number (UPIN) from Medicare and provided that the services are not furnished by another physician/practitioner who has also opted out. For example, if an opt out physician/practitioner admits a beneficiary to a hospital, Medicare will reimburse the hospital for medically necessary care.

Failure To Properly Opt Out

A physician/practitioner fails to properly opt out for any of the following reasons:

• Any private contract between the physician/practitioner and a Medicare beneficiary, was entered into before the affidavit was filed.

• He/she fails to submit the affidavit(s) properly.

If a physician/practitioner fails to properly opt out the following will result:

• The physician’s or practitioner’s attempt to opt out of Medicare is nullified, and all of the private contracts between the physician/practitioner and Medicare beneficiaries for the two-year period covered by the attempted opt out are deemed null and void.

• The physician/practitioner must submit claims to Medicare for all Medicare-covered items and services furnished to Medicare beneficiaries, including the items and services furnished under the nullified contracts. A nonparticipating physician/practitioner is subject to the limiting charge provision. For items or services paid under the physician fee schedule, the limiting charge is 115 percent of the approved amount for non-participating physicians or practitioners. A participating physician/practitioner is subject to the limitations on charges of the participation agreement he/she signed.

• The practitioner may not reassign any claim.

• The practitioner may neither bill nor collect an amount from the beneficiary except for applicable deductible and coinsurance amounts.

• The physician/practitioner may make another attempt to properly opt out at any time.

Failure To Maintain OPT Out

A physician/practitioner fails to maintain opt out under this section if during the opt out period one of the following occurs:

• He/she has filed an affidavit and has signed private contracts but,

• He/she knowingly and willfully submits a claim for Medicare payment; or

• Receives Medicare payment directly or indirectly for Medicare-covered services furnished to a Medicare beneficiary.

• He/she fails to enter into private contracts with Medicare beneficiaries for the purpose of furnishing items and services that would otherwise be covered by Medicare, or enters into private contracts that fail to meet the specifications; or

• He/she fails to comply with billing for emergency care services or urgent care services; or

• He or she fails to retain a copy of each private contract that he or she has entered into for the duration of the opt out period for which the contracts are applicable or fails to permit HCFA to inspect them upon request.

If a physician/practitioner fails to maintain opt out in accordance with the above, and fails to demonstrate within 45 days of a notice from the carrier of a violation, that he/she has taken good faith efforts to maintain opt out (including by refunding amounts in excess of the charge limits to the beneficiaries with whom he/she did not sign a private contract), the following will result effective 46 days after the date of the notice, but only for the remainder of the opt out period (However, if the physician/practitioner did not privately contract and refunds coverage, he/she may still maintain the opt out):

• All of the private contracts between the physician/practitioner and Medicare beneficiaries are deemed null and void.

• The physician’s or practitioner’s opt out of Medicare is nullified.

• The physician or practitioner must submit claims to Medicare for all Medicare-covered items and services furnished to Medicare beneficiaries.

• The physician or practitioner or beneficiary will not receive Medicare payment on Medicare claims for the remainder of the opt out period, except as stated above.

• The physician or practitioner is subject to the limiting charge provisions.

• The practitioner may not reassign any claim

• The practitioner may neither bill nor collect any amount from the beneficiary except for applicable deductible and coinsurance amounts.

• The physician or practitioner may not attempt to once more meet the criteria for properly opting out until the two-year opt out period expires.

Non-Participating Physicians Or Practitioners Who Opt Out Of Medicare

A nonparticipating physician or practitioner may opt out of Medicare at any time in accordance with the following:

• The two-year opt out period begins the date the affidavit meeting the requirements is signed, provided the affidavit is filed within ten days after he/she signs his/her first private contract with a Medicare beneficiary.

• If the physician or practitioner does not file any required affidavit on time, the two-year opt out period begins when the last such affidavit is filed. Any private contract entered into before the last required affidavit is filed becomes effective upon the filing of the last required affidavit and the furnishing of any items or services to a Medicare beneficiary under such contract before the last required affidavit is filed is subject to standard Medicare rules.

Participating Physicians Or Practitioners Who Opt Out Of Medicare

Participating physicians and practitioners may opt out by filing an affidavit 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). Their participation agreements will terminate at that time. They may not provide services under private contracts with beneficiaries earlier than the effective date of the affidavit.

Participating physicians or practitioners may sign private contracts only after the effective date of affidavits. It is necessary to treat nonparticipating physicians or practitioners differently from participating physicians or practitioners in order to assure that participating physicians or practitioners are paid properly for the services they furnish before the effective date of the affidavit.

Non-Covered Services

Because Medicare’s rules do not apply to items or services that are categorically not covered by Medicare, a private contract is not needed to furnish such items or services to Medicare beneficiaries, and Medicare’s claims filing rules and limits on charges do not apply to such items or services. For example, because Medicare does not cover hearing aids, a physician or practitioner, or other supplier, may furnish a hearing aid to a Medicare beneficiary and would not be required to file a claim with Medicare; further, the physician, practitioner, or other supplier would not be subject to any Medicare limit on the amount he/she could collect for the hearing aid.

If the item or service is one that is not categorically excluded from coverage by Medicare, but may be noncovered in a given case (for example, it is covered only where certain clinical criteria are met and there is a question as to whether the criteria are met), a non-opt out physician/practitioner, or other supplier is not relieved of his/her obligation to file a claim with Medicare. If the physician/ practitioner or other supplier has given a proper Advance Beneficiary Notice (ABN) he/she may collect from the beneficiary the full charge if Medicare does deny the claim.

Where a physician or practitioner has opted out of Medicare, he or she must provide covered services only through private contracts (including items and services that are not categorically excluded from coverage but may be excluded in a given case). An opt out physician or practitioner is prohibited from submitting claims to Medicare (except for emergency or urgent care services furnished to a beneficiary with whom the physician or practitioner did not have a private contract).

Organizations That Furnish Physician Or Practitioner Services

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.

When a physician/practitioner opts out and is a member of a group practice or otherwise reassigns his/her rights to Medicare payment to an organization, the organization may no longer bill Medicare or be paid by Medicare for services that the physician or practitioner furnishes to Medicare beneficiaries. However, if the physician or practitioner continues to grant the organization 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/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.

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 because they are neither physicians nor practitioners. Of course, if every physician and practitioner within a corporation, partnership, or other organization opts out, then such corporation, partnership, or other organization would have in effect, opted out.

Private Contracting Rules When Medicare Is The Secondary Payer

The opt out physician/practitioner must have a private contract with a Medicare beneficiary for all Medicare-covered services, not withstanding that Medicare would be the secondary payer in a given situation. No Medicare primary or secondary payments will be made for items and services furnished by a physician/practitioner under the private contract.

Emergency And Urgent Care Situations

Payment may be made for services furnished by an opt out physician/practitioner who has not signed a private contract with a Medicare beneficiary for emergency or urgent care items and services furnished to, or ordered or prescribed for, such beneficiary on or after the date the physician opted out.

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/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.

Therefore, the physician/practitioner must submit a completed Medicare claim on behalf of the beneficiary with the appropriate HCPCS code and HCPCS modifier which indicates the services furnished to the Medicare beneficiary were emergency or urgent and the beneficiary does not have a private agreement with him/her. Please use the following modifier when billing for emergency and urgent care situations:

GJ = Opt Out Physician/practitioner EMERGENCY OR URGENT SERVICES

This modifier must be used on claims for services rendered by an opt out physician/practitioner for an emergency/urgent service. The use of this modifier indicates that the service was furnished by an opt out physician/practitioner who has not signed a private contract with a Medicare beneficiary for emergency or urgent care items and services furnished to, or ordered or prescribed for, such beneficiary on or after the date the physician/practitioner opted out.

Renewal Of Opt Out

A physician/practitioner may renew an opt out without interruption by filing an affidavit with each carrier to which an affidavit was submitted for the first opt out period and to each carrier to which a claim was submitted during the previous opt out period, provided the affidavits are filed within 30 days after the current opt out period expires.

Early Termination Of Opt Out

If a physician/practitioner changes his/her mind once the affidavit has been approved by the carrier, the opt out may be terminated within 90 days of the effective date of the affidavit. To properly terminate an opt out a physician or practitioner must:

• Not have previously opted out of Medicare.

• Notify all Medicare carriers, with which he/she filed an affidavit, of the termination of the opt out no later than 90 days after the effective date of the opt out period.

• Refund to each beneficiary with whom he or she has privately contracted all payment collected in excess of:

• • The Medicare limiting charge (in the case of physicians/practitioners); or

  • The deductible and coinsurance (in the case of practitioners).

• Notify all beneficiaries with whom the physician or practitioner entered into private contracts of the physician’s or practitioner’s decision to terminate opt out and of the beneficiaries’ right to have claims filed on their behalf with Medicare for services furnished during the period between the effective date of the opt out and the effective date of the termination of the opt out period.

When the physician or practitioner properly terminates opt out, he/she will be reinstated in Medicare as if there had been no opt out.

Effect Of Beneficiary Agreement Not To Use Medicare Coverage

Physicians and practitioners may be released from the submission of claims and limits on charges for Medicare covered services, only if they opt out of Medicare in accordance with the following sections. Physicians and practitioners who do not meet the definition of these terms for the purposes of opting out of Medicare, and other suppliers of services covered by Medicare, are required to submit claims "on behalf of" beneficiaries for all items and services for which Medicare payment may be made on a reasonable charge or fee schedule basis and to abide by the limits on charges to beneficiaries that apply to the item or service being furnished.

• The only situation in which non-opt out physicians or practitioners, or other suppliers, are not required to submit claims to Medicare for covered services is where a beneficiary or his/her legal representative refuses, of his/her own free will, to authorize the submission of a bill to Medicare. In this situation, the bill would not be submitted "on behalf of" the beneficiary. However, the limits on what the physician, practitioner or other supplier may collect from the beneficiary continue to apply to charges for the covered service, not withstanding the absence of a claim to Medicare.

• If an item or service is one that Medicare may cover in some circumstances but not in others, a non-opt out physician/practitioner, or other supplier, must still submit a claim to Medicare. However, he/she may choose to provide the beneficiary, prior to the rendering of the item or service, an advance beneficiary notice (ABN). An ABN notifies the beneficiary that Medicare is likely to deny the claim and that if Medicare does deny the claim, the beneficiary will be liable for the full cost of the services. Where a valid ABN is given, subsequent denial of the claim does in fact relieve the non-opt out physician/practitioner, or other supplier, of the limitations on charges that would apply if the services were covered.

NOTE: Opt-out physicians and practitioners should not use ABNs, because they should use private contracts for any item or service that is, or may be, covered by Medicare (except for emergency or urgent care services).