Can You Afford to Opt Out of Medicare?

Growing numbers of health care professionals (HCPs) are opting out of Medicare, but what about dermatologists? A recently published research letter answers this question. The article, “Practice patterns of dermatologists who have opted out of Medicare,” published in the Journal of the American Academy of Dermatology, states that 162 dermatologists in the United States have opted out of Medicare since 2010.¹

What does opting out of Medicare mean? In simple terms, it means you don’t bill Medicare for your services and instead you ask your Medicare patients to pay out of pocket. Patients will need to sign a private contract which details the financial agreement between you and them. Your decision to opt out is made public on the CMS Opt-Out Dataset website.²

WHY WOULD YOU WANT TO CONSIDER OPTING OUT OF MEDICARE?

There are a number of reasons a dermatologist or other HCP would want to opt out of Medicare, but the most common are financial issues. As described by George Hruza, MD, MBA, a dermatologist practicing in Missouri and past president of the American Academy of Dermatology, “I think we will be seeing a lot more physicians opting out because of the way that reimbursement has been going. Physician payment has been frozen, and there has been no adjustment for inflation. Plus, salaries for your staff keep going up, as does the entire cost of doing business. I think we are reaching a tipping point.”

Doris Day, MD, a dermatologist practicing in New York City, agrees. “I opted out of Medicare because the amount that they covered kept going down and the amount that it cost me to recover and get paid kept going up. It was getting to a point where it was costing me more to stay in and collect what they owed than I was making from what they paid. There were too many hoops to jump through, too many requirements and too many opportunities for them to deny and even retract payments after the fact.”

Indeed, according to that same research letter, “the inflation-adjusted dermatologic Medicare reimbursement decreased by 4.8% from 2007 to 2021. Thus, health care changes may be one of the multiple factors that affect opt-out rates.”¹

HOW TO DECIDE IF YOU CAN AFFORD TO OPT OUT

In most cases, deciding if you can afford to opt out depends on 4 factors: how long you have been in practice, how large your practice is, what procedures you perform, and where in the country you practice.

According to Dr. Hruza, “being able to afford to opt out of Medicare usually applies to HCPs who have a long-term, established patient practice. Also, if you have a busy practice with a waiting list, with patients waiting 3 to 4 months to see you, you likely can afford to make the change. But I don’t think it’s something that’s viable for someone who is coming right out of residency unless they want to focus on cosmetic surgery and procedures for which patients are willing to pay out of pocket.”

He adds, “I have not opted out of Medicare at this time, because I specialize in Mohs surgery, which is more expensive per visit than a general dermatology visit. Most patients in the Midwest are not willing to spend out of pocket for such more expensive procedures. In areas of the country with a concentration of affluent patients such as New York City, San Francisco, Los Angeles, Miami, or Washington DC, even Mohs surgeons may be able to opt out of Medicare and other insurance plans and be successful.”

HOW TO START THE PROCESS TO OPT OUT

Dr. Day reports how she started thinking about the opting out process: “My biller and I reviewed which insurances had the lowest reimbursement and were the most work to process. I just kept going down the line and dropping those one by one. Then I started looking at Medicare payments more closely, by this time I was almost completely opted out of everything else. Medicare warned me that if I opted out, I would have to drop any insurance that has any Medicare coverage and I wouldn’t be able to get back in for two years. I thought about it and decided I still wanted to do it.”

Dr. Hruza agrees that physicians should start by dropping out of the lowest-paying insurance companies. Moreover, there is an intermediate step you can take with Medicare—instead of opting out, you can be a non-participating provider. Here are the differences as per the CMS web site:³

Non-participating Provider

• Medicare pays 5% less than the Medicare Physician Fee Schedule allowed amount
• You can’t charge the patient more than the limiting charge, 115% of the Medicare Physician Fee Schedule amount
• You may accept assignment on a case-by-case basis
• You have limited appeal rights

Participating Provider

• Medicare pays the full Medicare Physician Fee Schedule allowed amount
• Medicare pays you directly
• Medicare forwards claim information to Medigap (Medicare supplement coverage) insurers

HOW TO OPT OUT

Once you make the decision to opt out of Medicare, go to the Provider Enrollment, Chain, and Ownership System (PECOS) website, which is the same platform as for initial Medicare enrollment.^4,5 Your specialty must be eligible for opting out, and there is a list on the PECOS site detailing which specialties are eligible.

Once you are opted out, you need to enter into a private contract with each of your Medicare patients. The contract reflects the agreement that they will pay out of pocket for services, and that neither you nor they will submit the bill to Medicare for reimbursement. Medicare suggests that you contact your Medicare Administrative Contractor to see what information you should include in your private contracts with patients.

FROM THE PATIENT POINT OF VIEW

According to Dr. Hruza, “Unfortunately, opting out of Medicare does not solve the problem of taking care of our seniors. This is really a concern. How do patients feel about that? For individual physicians, opting out of Medicare makes sense, but for the healthcare system, it is not a good thing. We have to change how the whole system operates. Unfortunately it is political, and I go to Washington, DC on a regular basis several times a year, trying to advocate for patients and physicians. But the politicians say there’s no money. And I get it, but they have just spent trillions of dollars on something else. So it is not a matter of no money, it is a matter of deciding priorities. And I think the priority should be to take care of the health of our senior citizens.”

Dr. Day adds, “Some patients were super upset with me when I opted out because they had been seeing me for 10 to 15 years, were older, and couldn’t afford to pay out of pocket. So I continued to see them for free, and did not even charge them a copay. Other patients I referred to younger, local colleagues who take Medicare and are looking to grow their practice. Other patients stayed with my practice and were happy to pay and were grateful that it was easier to get an appointment. They just wanted good care and could afford to pay for it. My practice grew, the staff was less stressed, and I felt like I was back to being the doctor I went into medical school to become.”

OPTING OPTIONS

Your decision whether to opt out of Medicare is a personal one, and there is no one right answer. If you have a busy practice in a large metropolitan area, it might make sense financially for you to opt out. If you are just starting your practice or are in a rural area, it might not be the right approach. If you do decide to opt out, you can always opt back in again if it is not working out for you.

1. Kodumudi V, Grant-Kels JM, Feng H. Practice patterns of dermatologists who have opted out of Medicare. J Am Acad Derm. September, 5 2022. Accessed February 11, 2023. https://www.jaad.org/article/S0190-9622(22)02636-6/fulltext

2. Data.cms.gov. Opt out affidavits a list of practitioners who are currently opted out of Medicare. Accessed February 11, 2023. https://data.cms.gov/provider-characteristics/medicare-provider-supplier-enrollment/opt-out-affidavits

3. CMS.gov. Annual Medicare participation announcement. Accessed February 10, 2023. https://www.cms.gov/medicare-participation

4. Medicare Provider Enrollment, Chain, and Ownership System (PECOS). Accessed February 10, 2023. https://pecos.cms.hhs.gov/pecos/login.do#headingLv1

5. CMS.gov. Provider medicare enrollment management (including opting out). Accessed February 9, 2023. https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/Manage-Your-Enrollment