Diagnosis for Democracy
Insights into the State of Our Union
A Blog by Rob Tenery, MD

January 10, 2012: Thinking About Getting Out of Medicare? Think Again

By Rob Tenery, MD on January 10, 2012

So, we were granted a two-month reprieve. Then what? With the annual year-end hassle over the continuing threats of cuts in Medicare reimbursement I decided that my best choice might be to get out of the program. I had read where, in increasing numbers, doctors were leaving. So, why shouldn’t I? The reason for the discontent goes back to a flaw in the Sustainable Growth Rate Formula (SGR) that increases in volume mandate decreases in individual reimbursements to order to maintain budget neutrality.

In 1997, Congress passed the Balanced Budget Act (BBA). In an attempt to control the growth rate of expenditures to doctors, the sustainable growth rate (SGR) was established. Using a fee schedule determined by relative value units (RVUs), the intended goal was to limit the total pay for doctors to not exceed the growth rate of the rest of the country. RVU units were derived using three factors: Relative time and intensity of the service, practice expenses and malpractice costs. Each of these RVU units was adjusted by the appropriate geographic practice cost index--- variations in practice costs in different areas of the country. The RVU unit was then multiplied by a dollar conversation factor (CF) which was equated to the Medicare Economic Index (MEI) that was adjusted up or down based on how actual expenditures compare to a target rate set forth by the SGR. The flaw in the SGR calculations is that it does not take a realistic approach to increases in patient volume and the complexity of the science.  (1) (2)

When the 1997 law first went into effect in 2002, the SGR formula called for a cut in doctors’ fees of 4.8 percent for over 7000 physician services. Congress overrode the enactment of the BBA, but claimed it was too costly to eliminate the SGR on a permanent basis. Every year since, Congress has blocked the reductions called for under the SGR. They have accomplished this by using two methods: The ‘clawback’ legislation that temporarily prevents the proposed SGR reductions, but allows for this additional funding to be taken out in future years. The other is labeled ‘cliff’ legislation that prevents the scheduled SGR fee reductions, but overrides the law that says that rate reduction cannot be more than seven percent in any year. Simply put, if the SGR is allowed to go forward, there will be a 29.4 percent reduction in payments for physician service under Medicare Part B starting in 2012. (2)

Feeling I could not afford the proposed 29.4 cut in my Medicare reimbursements, and with the growing frustration of fighting this same battle each year, I decided to look at my options. There were three: Continue to accept the fees the Congress decides to dole out to me.  Become a non-participating provider. Or opt-out of Medicare altogether. Each of these latter two options has very different consequences for the physician.

Those physicians who choose to become non-participating providers must abide by very strict stipulations: They can elect to accept assignment or not accept assignment on a claim-by-claim basis. If elective surgery costing more than $500 is performed, the patient (beneficiary) must be notified in writing of the expected financial responsibility. Patients cannot be billed more than the limiting charge (set by the Centers for Medicare and Medicaid Services) on non-assigned claims, and the approved amount is 5 percent less than the approved amount for participating physicians. The beneficiary receives the payment on non-assigned claims.  Mandatory claims submissions still apply. (3)

Section 1802 of the Social Security Act, amended by Section 4507 of the BBA of 1997, allows physicians to opt-out of Medicare and enter into private contracts with their patients if specific requirements are met. In this situation, no services provided by an ‘opt-out’ physician are covered and no payments are made to that physician directly or on a capitated basis. The beneficiaries or their representatives must not submit a claim for these services either to Medicare and Medigap plans, but can submit these claims to any other carriers. The patients must also agree to be responsible for the payment of these services and acknowledge that the physician is not constrained in the amount of the charges for their services. Additionally, no payments will be made to the beneficiaries for these services by any Federally funded program.

Emergency and urgent care are exceptions. Under these situations ‘opt-out’ physicians may render charges for their care, but they may not charge the patient “more than what a non-participating physician would be permitted to charge and must submit a claim to Medicare on the patient’s behalf.” (3)

For physicians not staying in the Medicare program, but deciding to leave, they “must write to each Medicare contractor to which they submit claims, advising of their termination effective January 1, 2012.” (4) This written notice (affidavit) can only be submitted during the annual enrollment period, “which generally runs from mid-November through December 31 each year…(Because of this years delay in enactment, the date has recently been extended until February 14.) The notice, preferably on the physician’s office letterhead, must be postmarked prior to January 1, 2012.” (4) For those who are already non-participants no action is necessary. CMS has extended the opt out periods to also include April 1, July 1, and October 1, and must give the carrier “a 30-days’ notice prior notice prior to sending in the affidavit with an effective date of the beginning of the next quarter.” This step must be repeated every two years to maintain the ‘opt-out’ status. (A copy of the affidavit can be obtained online @ TrailBlazer Health Enterprises) (4)

At some point there has to be a realization that the $300 billion funded for physicians’ services over and above the amount dictated in the BBA of 1997 will never be recovered without draconian cuts in physicians’ reimbursements. Those severe cuts and without a more realistic methodology in determining the future MEI will only drive more physicians out of the Medicare program and leave a growing number of our senior citizens stranded. (5)

Except for beneficiaries who are employed and allowed to continue their coverage under the umbrella health insurance of their company, there are no other options, except ‘going without’ or one of the federal subsidy plans---Medicare, Medicaid or a Medicare Advantage Plan through one of the private insurance companies. The former leaves the patient in severe financial jeopardy, while the latter will not reimburse the physicians who have opted out. And, except for urgent or emergency care, will not reimburse the patients for the costs of their care. (6) (7)

So, what happens if Physicians, in even larger numbers, drop out because they can no longer afford to be part of the Medicare program? What happens when the patients cannot afford to go without it? What happens if such a large sector of our population goes ‘uncovered’ that it is considered a threat to public health? One only has to look at the proposed legislation in Massachusetts that links state licensure to participation in The Massachusetts Health Care Insurance Reform Law of 2006 (RomneyCare) to understand how close this country has come to a total government take-over of the medical profession.

Maybe the leadership in our nation’s capitol knew it could come to this all the time.


(1)         http://www.aapsonline.org/medicare/admin01.htm

(2)         http://www.bankruptingamerica.org/2011/12/the-sustainable-growth-rate-formula-medicares-payment-to-doctors/

(3)         TrailBlazer Health Enterprises, October 2011

(4)         http://www.aapsonline.org/medicare/optout.htm

(5)         Communication with J. James Rohack, MD

(6)         www.health-insurance-carriers.com/senior-intro.html

(7)         Communication with an insurance agent in Dallas, Texas

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