Should You Opt Out of Medicare?

Frustrated physicians are thinking of cutting the cord. Here's a candid look at the pros and cons.

By Samantha Stahl, Assistant Editor

As Yogi Berra might say, it's déjà vu all over again. By next month's end, Medicare reimbursements — vital to so many physicians, but particularly ophthalmologists — are slated to get cut by 23%, as per Congressional action earlier this year. Or perhaps "Congressional inaction" is more accurate. When Medicare's inherently flawed sustainable growth rate (SGR) conversion factor kicked in this spring, lawmakers chose the path of least resistance and delayed the hefty fee cut rather than working toward a comprehensive solution. In a sign of the times, the original legislation for a 19-month delay was a bridge too far for skittish politicians in an election year, and ultimately had to be scaled back to six months.

History does not inspire confidence that physicians can expect firm answers on how or when the SGR will be remedied. Another delay is likely. But the continual postponement of a genuine solution can only go on for so long.

If reimbursement rates do take a colossal hit, even temporarily, will it still be worth accepting Medicare? Some doctors aren't so sure. This ordeal becomes particularly troubling in ophthalmology, where a large percentage of patients rely on government funding to pay for their care. An estimated 60% of ophthalmologists' revenue comes from Medicare, varying slightly depending on the subspecialty. Can a practice survive without accepting Medicare? More importantly, can a practice ultimately survive if it does accept Medicare?

In this feature, we will discuss the pros and cons of either becoming a non-participating provider or opting out of Medicare altogether. From November 15 to December 31, you'll have a chance to reconsider your Medicare participation status. What will you decide?

Weighing the Options

Physicians currently have three Medicare participation options, none of which seem to be an ideal solution to a tumultuously growing problem. You may fully accept Medicare as payment for all patients by signing a PAR agreement. Medicare will pay 80% of the PAR fee claim as usual, while the patient or their secondary insurer covers the remaining 20% co-payment. A physician cannot charge more than the Medicare PAR fee under this agreement.

Alternatively, being a non-PAR provider gives you the freedom to choose on a case-by-case basis whether to accept the lower Medicare non-PAR fee as payment for assigned claims or to bill patients the limiting charge for unassigned claims, a higher rate than Medicare PAR and non-PAR fees.

The final option is to bill patients directly as a private contracting physician, accepting no Medicare payments.

William Rich, MD, medical director of health policy for the AAO, is confident that the intended 23% cut won't go through. "You'll see small cuts and freezes, but a big cut ain't gonna happen — they're too nervous that physicians will say, ‘Well then to hell with Medicare.’" He does, however, foresee an entirely new reimbursement system going into effect around 2015 — crucial if ophthalmologists want to continue providing the same standard of care. Dr. Rich says that, for most ophthalmologists, opting out of Medicare is too challenging to execute: "If you aren't successful, you're toast. It takes a tremendous physician to make it work."

Though physician costs have increased by 22% in the last nine years, Medicare payments have risen a measly 1%. Something doesn't add up. With baby boomers starting to enter retirement, a resolution needs to surface — fast. In the meantime, some doctors are finding that their unique circumstances do allow them to pull out of Medicare entirely.

Shrugging Off Medicare

Political conservatives are notoriously opposed to the Medicare system. As early as 1961, Ronald Reagan speculated that if Medicare went through, it would lead to other large federal programs and ultimately to socialism in America, and "one of these days you and I are going to spend our sunset years telling our children and our children's children what it once was like in America when men were free." Although that alarmist prediction hasn't transpired, widespread physician dismay of health care reform among doctors of all political orientations is an indictment of the government's current handling of medical funding.

While Congress has yet to create a system that works for both patients and practices without sending the national debt into the stratosphere, physicians can decide to privately contract. The Balanced Budget Act of 1997 provisions gave doctors the opportunity to opt out of Medicare. The catch? Once opted out, neither private contractors nor their patients can submit claims to Medicare for two years. However, they have a 90-day grace period after the effective date to revoke their decision and return to Medicare participation. An opted-out physician also must provide patients with Medicare-paid emergency services so long as the physician collects no more than the Medicare limiting charge.

Once a physician has opted out, they must enter into a private contract with each Medicare beneficiary, as well as file an affidavit. Samples of both documents are available on the American Medical Association Web site, though the AMA highly recommends consulting an attorney to create a contract that contains all the required provisions.

Ophthalmologist David Bernitsky, MD, of Albuquerque, will have officially opted out of Medicare as of October 1, 2010. His practice, which focuses primarily on refractive surgery, had around 20% of its patients paying with Medicare. When healthcare reform first passed, he worried that his practice would take a hit. Hesitant to be tied to Medicare's unreliable funding and the increasing administrative costs for complying with mandates, Dr. Bernitsky said he wanted to find a less intrusive system.

"We'd rather not live under the threat of Medicare. I'm not comfortable with an insurer that can send you to jail. I'm not sure anyone would sign up for an insurer like that," Dr. Bernitsky says. After looking over the numbers and speaking with other successful opted-out physicians, he decided that dropping Medicare was a viable option.

For physicians who don't rely on Medicare for a majority of their patients, Dr. Bernitsky says that opting out is a no-brainer. While the switch would be tough for a practice that has 60% Medicare patients, he insists that if there's a way to make it work, you'd be well advised to do it.

In July, Dr. Bernitsky's practice informed all patients that they would no longer be accepting new Medicare patients and that they would soon opt out. As to be expected, many of his Medicare beneficiaries have had to go elsewhere for care, but he has had some stay and pay out of pocket. "The reaction has been overwhelmingly positive, almost no negative response. We've gotten letters and calls from patients saying they completely understand why we're doing it and that they wish there was a better situation for us."

Dr. Bernitsky says that opting out has created a better experience both for his staff and patients. Lower administrative costs, higher reimbursements, an increase in time to spend with patients and, subsequently, better care, are the chief benefits his practice has experienced since changing its participation status. "It's a winner all the way around."

One ophthalmologist who requested anonymity is considering dropping out of Medicare, but will decide only after further fee cuts. The SGR-mandated 23% fee cut would drop reimbursement for cataract surgery to about $500. Unless that's repealed or delayed, it would be the "last straw." He doesn't consider it plausible to maintain his level of care while receiving reimbursements that low. With 30% of his practice's revenue coming from Medicare, he anticipates an initial hit to his volume but an eventual return of revenue. "Once people realize that cataract surgery is one of the most important procedures of their life, they will want the best and happily pay out of pocket for it." Ultimately, he believes, opting out will be worth it. He cites not worrying about audits and getting paid at the time of service as the top advantages.

Non-participating Providers

For ophthalmologists in many subspecialties, opting out is an impractical option. Sacrificing all Medicare funding would put their practice under. Relying on the program, however, is an unattractive choice to a growing number of physicians. Becoming a non-participating provider is one way to strike a balance.

The allowed limiting charge for non-PAR providers is 115% of the non-PAR assigned fee (which is 109.25% of the PAR fee), meaning you may charge more for services than PAR physicians if assignment is not accepted. However, Medicare-approved reimbursement amounts for non-PAR assigned claims are only 95% of the rates for PAR physicians. For a non-participating provider to generate more income than a participating provider, he or she must collect full payment at time of service more than 35% of the time (see Table 2).

Another ophthalmologist who requested anonymity said that his decision to be non-PAR was made after careful consideration of his personal principles, professional relationships and business management. "I became a physician so I could take care of and work for patients, not so I could work for the government," he says. Wanting to achieve a reciprocal patient-physician relationship, he found that the clearest way for a patient to demonstrate dedication was a willingness to make the 9.25% financial commitment in their health care with the physician, and minimizing financial steering by insurance companies.

Approximately 33% to 38% of his payments come from Medicare patients. He finds that in his non-PAR office, cash flow is steady and on time since the entire fee — not just a 20% co-pay — is collected at the time of service. He finds this far better than the situation for participating physicians, whose cash flow is "dependent upon the mercy of the government." He finds it hard to understand why a physician would sacrifice the 9% increase in fees, but drain practice time and resources to obtain data for the 2% PQRI bonus.

One of this doctor's biggest gripes about Medicare? That it allows the government to determine what a service is worth — a number continually shortchanging services at levels well below their free market value. Can this pattern continue on forever? Probably not. This ophthalmologist predicts that further reimbursement reductions will inspire more and more physicians to opt out. If they crunch numbers and find that it costs more to deliver a service than what they receive as pay, there is "no chance" that they'll be able to accept Medicare, he contends. If enough physicians opt out, the US could experience a Medicare provider shortage. "The government may then try to make practicing medicine contingent upon accepting what the government is willing to pay," he says.

This ophthalmologist believes that as more physicians choose to be non-PAR or to opt out, the quality of care will improve. "Patients will have committed financially to their health care and be more likely to comply with treatment instructions. Physicians will be more likely to view their patients as persons instead of as a diagnosis."

Ophthalmologists hesitant to change their participation status often fear losing patients. While this is a valid concern, the anonymous ophthalmologist insists that his experience has been less onerous than expected. He is the only non-PAR provider in a city of about 100,000 people, where the local community hospital staffs over 50 ophthalmologists. While the AAO estimates that it takes a population of approximately 20,000 to support one ophthalmologist, he has experienced no slowing business due to his non-PAR status. "My front desk staff estimates that of the potentially new patients who call for an appointment, fewer than 5% decide not to be seen because they don't want to pay at time of service. The message to those considering changing to non-PAR status is, if I can do it, it is possible for anyone to do it."

Options to Spare But None to Choose

Sure, there are three Medicare options for physicians to choose. But are three enough? As implementation of healthcare reform begins, many practices are searching for a different way out.

Alan Aker, MD, of Boca Raton, Fla. foresees significant changes in the way ophthalmologists will provide care. "There is a tidal wave of baby boomers about to crash upon the Medicare shore. We have been trying to figure out how to survive the inevitable cuts in reimbursement and continue to provide outstanding care in a loving and compassionate setting," says Dr. Aker.

He elaborated that the steady decline in cataract reimbursement that began in the 1980s runs counter to the expenses borne by the practice: as the quality of care increases, the cost to provide these services also grows. Between diagnostic and surgical equipment investments and hiring of additional support personnel, the cost of high-quality care could potentially be impossible to cover if Medicare reimbursements take a large enough hit.

The key to survival of surgical practices, says Dr. Aker, is tied to the premium channel, most notably in cataract surgery. Many technological upgrades that could vastly improve ophthalmic care may go wanting if they lack an associated revenue stream. Dr. Aker emphasizes that if these emerging technologies are linked to Medicare, they won't be able to come to market. He says that if ophthalmologists are only getting reimbursed $600 for a cataract operation (or less if additional fee cuts go through), it isn't feasible to bring in technology with an associated click fee, like the ORange wavefront aberrometer that checks astigmatism and confirms IOL power intraoperatively or the femtosecond laser for capsulorhexis and incisions. "Looking at the numbers and the government's inability to pay more for cataract surgery, we are going to continue operating in the black by increasing the premium side of our practices," he says.

Dr. Aker also suggests that Centers of Excellence could be the ultimate survival strategy in the future. In these facilities, patients would have the option of government-funded surgery, but would have to wait in line with other cataract patients. If they want faster service and better outcomes, they can opt for premium channel products and pay for services.

As the pressures of running a practice increase, Dr. Aker believes many doctors will opt out of surgery — but very few out of Medicare. The resulting perfect storm of high patient demand and declining surgical manpower would be untenable. As a result, Dr. Aker predicts the government will likely accept the two-tiered Centers of Excellence model, even though it has been resisted in the past. "What the government doesn't need is a lot of patients screaming that they have to wait six months or two years for cataract surgery," he says. Dr. Aker references problems across the pond as a warning for what the US should avoid: "The situation got so bad in England that the government had to bring in additional foreign surgeons to reduce the backlog of cataract surgery." If the majority of American senior citizens must rely on Medicare alone to pay for healthcare, the country could run into a similar crunch sooner than anyone would care to think.

When Push Comes to Shove

Cathy Cohen, the AAO's vice president of government affairs, reports that a record high number of doctors sat down with business managers this year to consider their options, including opting out of Medicare. Due to financial limitations, however, many practices cannot afford to opt out or be a non-participating provider, yet feel stifled by the lack of feasible solutions. The AAO fought to re-open the participation status-changing time when the first Medicare cut went into effect earlier this year. However, if a physician changed their status mid-year, they were required to pay all of their prior reimbursement money back, making the switch unrealistic.

Ms. Cohen says, "We need more viable options. The Academy will fight for options. Doctors are trapped." OM