Providers Opting-Out of Medicare: Private Contracting

Section 1802 of the Social Security Act (the Act), as amended by §4507 of the BBA of 1997, permits certain physicians and practitioners to opt-out of Medicare if certain conditions were met, and to provide through private contracts services that would otherwise be covered by Medicare. Under these private contracts, the mandatory claims submission and limiting charge rules of Section 1848(g) of the Act would not apply.

When a physician/practitioner opts out of Medicare, Medicare covers no services provided by that individual 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 nonparticipating 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 (see §40.28 of the CMS Medicare Benefit Policy Manual).

Under the statute, 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.

For purposes of this provision, the term physician is limited to doctors of medicine, doctors of osteopathy, doctors of dental surgery, doctors of dental medicine, doctors of podiatric medicine and doctors of optometry who are legally authorized to practice dentistry, podiatry, optometry, medicine or surgery by the State in which such function or action is performed.

No other physicians may opt out. Also, for purposes of this provision, the term 'practitioner' means any of the following to the extent that they are legally authorized to practice by the State and otherwise meet Medicare requirements:

• Physician assistant
• Nurse practitioner
• Clinical nurse specialist
• Certified registered nurse anesthetist
• Certified nurse midwife
• Clinical psychologist
• Clinical social worker
• Registered dietitian
• Nutrition Professional

The opt-out law does not define physician to include chiropractors; therefore, they may not opt out of Medicare and provide services under private contract. 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.

General Rules of Private Contracts/Opting-Out

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 (provided the conditions in §40.1 of the CMS Medicare Benefit Policy Manual are met)
• A physician/practitioner who enters into at least one private contract with a Medicare beneficiary (under the conditions of §40.1) and who submits one or more affidavits in accordance with §40.9, opts out of Medicare for a 2-year period unless the opt-out is terminated early according to §40.35 or unless the physician/practitioner fails to maintain opt-out. (See §40.11.) The physician’s or practitioner’s opt out may be renewed for subsequent 2-year periods.
• Both the private contracts described in the first paragraph of this section and the physician’s or practitioner’s opt out described in the second paragraph of this section are null and void if the physician/practitioner fails to properly opt out in accordance with the conditions of these instructions
• Both the private contracts described in the first paragraph of this section and the physician’s or practitioner’s opt out described in the second paragraph of this section are null and void for the remainder of the opt-out period if the physician/practitioner fails to remain in compliance with the conditions of these instructions 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

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 the physician/practitioner 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.

Pursuant to the statute, once a physician/practitioner files an affidavit notifying the Medicare carrier that the he/she has opted out of Medicare, the physician/practitioner is out of Medicare for two years from the date the affidavit is signed unless the opt-out is terminated early according to §40.35 of the CMS Medicare Benefit Policy Manual, or unless the he/she fails to maintain opt-out (see §40.11).

After those two years are over, a physician/practitioner could elect to return to Medicare or to opt out again. 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.

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 under §§1128, 1156 or 1892 of the Act
• State that the beneficiary or the beneficiary’s 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 the beneficiary’s 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 the beneficiary’s 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 the beneficiary’s 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 was no private contract and a proper Medicare claim had been submitted
• State that the beneficiary or the beneficiary’s legal representative enters into the contract with the knowledge that the beneficiary 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 the beneficiary’s 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 the beneficiary’s 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. However, a physician/practitioner may furnish emergency or urgent care services to a Medicare beneficiary in accordance with §40.28 of the CMS Medicare Benefit Policy Manual.
• Be provided (a photocopy is permissible) to the beneficiary or to the beneficiary’s 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 CMS upon request and
• 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 the physician/practitioner would submit claims, advising that the physician/practitioner 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/practitioner has opted out, such physician/practitioner must enter into a private contract with each Medicare beneficiary to whom the physician/practitioner 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, the physician/practitioner must use a private contract for items and services that are, or may be, covered by Medicare except for emergency or urgent care services (see §40.28 of the CMS Medicare Benefit Policy Manual). 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.

Where 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.

A physician/practitioner who has never enrolled in the Medicare program and wishes to opt-out of Medicare must provide Palmetto GBA with a National Provider Identifier (NPI).

Requirements of the Opt-Out Affidavit 
Under 1802(b)(3)(B) of the Act, 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), or if an NPI has not been assigned, the physician’s or practitioner’s tax identification number (TIN)
• State that, except for emergency or urgent care services as specified in §40.28 of the CMS Medicare Benefit Policy Manual, during the opt-out period the physician/practitioner will provide services to Medicare beneficiaries only through private contracts that meet the criteria of §40.8 for services that, but for their provision under a private contract, 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 the physician’s/practitioner’s behalf to submit a claim to Medicare for services furnished to a Medicare beneficiary, except as specified in §40.28
• State that, during the opt-out period, the physician/practitioner understands that the physician/practitioner may receive no direct or indirect Medicare payment for services that the physician/practitioner furnishes to Medicare beneficiaries with whom the physician/practitioner 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 Advantage plan
• State that a physician/practitioner who opts out of Medicare acknowledges that, during the opt-out period, the physician’s/practitioner’s services are not covered under Medicare and that no Medicare payment may be made to any entity for the physician’s/practitioner’s 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 the physician/practitioner 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 the physician/practitioner 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 and that the rules of §40.28 of the CMS Medicare Benefit Policy Manual apply if the physician/practitioner furnishes 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 and
• Be filed with all carriers who have jurisdiction over claims the physician/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

Reference:

• CMS Medicare Benefit Policy Manual (PDF, 1.22 MB), (Pub. 100-02), Chapter 15, Section 40 (in its entirety)