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Opting Out of Medicare: Private Contracts Between Beneficiaries and Physicians/Practitioners

Amendment 4507 of the Balanced Budget Act of 1997 permits a physician or practitioner to “opt-out” of Medicare and enter into private contracts with Medicare beneficiaries if specific requirements are met.

When a physician or practitioner opts 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. Under the statute, the physician or practitioner cannot choose to opt-out of Medicare for some Medicare beneficiaries but not others; or for some services but not others.

A private contract, as provided in section 4507, 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 he or she furnishes to Medicare beneficiaries. 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.

List of Opt-Out Providers

Requirements of a Private Contract – MCM Section 3044.8

Under §1802(3)(B) of the Social Security Act, a valid private contract 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 or practitioner is excluded from Medicare.
  • State that the beneficiary or his or her legal representative accepts full responsibility for payment for the physician’s or practitioner’s charge for all services furnished by the physician or practitioner.
  • State that the beneficiary or his or her legal representative understands that Medicare limits do not apply to what the physician or practitioner may charge for items or services furnished by the physician or practitioner.
  • State that the beneficiary or his or her legal representative agrees not to submit a claim to Medicare or to ask the physician or practitioner to submit a claim to Medicare.
  • State that the beneficiary or his or her legal representative understands that Medicare payment will not be made for any items or services furnished by the physician or 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 his or her legal representative enters into the contract with the knowledge that he or 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 or 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 or her legal representative and by the physician or practitioner.

NOTE:

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.

Medicare will make payment for covered, medically necessary services provided by a physician or practitioner who has opted out, in emergency or urgent care situations. The physician or practitioner cannot charge more than a nonparticipating physician would be permitted to charge, and must submit a claim on the beneficiary’s behalf.

Medicare will also make payment on covered, medically necessary services ordered by a physician or practitioner who has opted out, as long as he or she has a Unique Physician Identification Number (UPIN) and the physician or practitioner providing the services has not opted out of Medicare.

Requirements of the Opt-out Affidavit – MCM Section 3044.9

The physician or practitioner must file an affidavit with the Medicare Carrier servicing his/her area no later than ten days after the first private contract is entered into. The Carrier will ensure that the affidavit is valid and will keep it on file. Under Section 1802 (3)(B) of the Social Security Act, a valid affidavit must:

  • Be in writing and be signed by the physician or 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), Unique Physician 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 (as specified in Section 3044.28), during the opt-out period the physician or practitioner will provide services to Medicare beneficiaries only through private contracts that meet the criteria of Section 3044.8 for services that, but for their provision under a private contract, would have been Medicare-covered services.
  • State that the physician or 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 or practitioner permit any entity acting on his or her behalf to submit a claim to Medicare for services furnished to a Medicare beneficiary, except as specified in Section 3044.28.
  • State that, during the opt-out period, the physician or practitioner understands that he or she may receive no direct or indirect Medicare payment for services that he or she furnishes to Medicare beneficiaries with whom he or 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 or practitioner who opts out of Medicare acknowledges that, during the opt-out period, his or her services are not covered under Medicare and that no Medicare payment may be made to any entity for his or her services, directly or on a capitated basis.
  • State a promise by the physician or practitioner to the effect that, during the opt-out period, the physician or practitioner agrees to be bound by the terms of both the affidavit and the private contracts that he or she has entered into.
  • Acknowledge that the physician or practitioner recognizes that the terms of the affidavit apply to all Medicare-covered items and services furnished to Medicare beneficiaries by the physician or practitioner during the opt-out period (except for emergency or urgent care services furnished to the beneficiaries with whom he or she has not previously privately contracted) without regard to any payment arrangements the physician or practitioner may make.
  • With respect to a physician or 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 or 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 Section 3044.28 apply if the physician or practitioner furnishes such services.
  • 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 UPIN, if one has bee assigned. If the physician or 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 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;

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

Other Things for the Provider to Remember about Private Contracts

Private contracts must:

  • Be provided (a photocopy is permissible) to the beneficiary or to his or 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 or practitioner for the duration of the opt-out period.
  • Be made available to CMS upon request but only with permission of the beneficiary or his/her legal representative.
  • Be entered into for each opt-out period

Please note:

  • You are responsible for filing a new opt-out affidavit every two years before the current affidavit expires. You are also required to have your patients sign new contracts.
  • A private contract is only needed for services that are covered by Medicare and where Medicare might make payment if a claim were submitted.

Page last updated: October 24, 2012.