Decision time looming on Medicare participation

About a week remains before the Feb. 15 deadline for physicians who wish to change their current Medicare participation or nonparticipation status for 2008. Physicians usually must make this decision by Dec. 31, but the Centers for Medicare and Medicaid Services extended the deadline for 45 days after Congress passed legislation in December to replace a 10.1 percent cut in Medicare payments with a 0.5 percent increase through June 30. Participation decisions will be retroactive to Jan. 1.

To help ensure that physicians are making informed decisions about their contractual relationships with the Medicare program, the AMA has produced a document that explains the options available to them (PDF, 55KB). In short, physicians can do one of three things: Sign a participation (PAR) agreement and accept Medicare’s allowed charge as payment in full for all of their Medicare patients (“assigned” claims); be a nonparticipating physician, which permits them to make assignment decisions on a case-by-case basis and bill patients up to 9.25 percent above the PAR-approved payments for the services; or become a private contracting physician, agreeing to bill patients directly and forego any payments from Medicare to their patients or themselves.

The AMA does not recommend or endorse any one of these options. Rather, we want to ensure that physicians have the proper information to help them make a participation decision that’s best for them.

The choice is more difficult this year because of the uncertainty surrounding Medicare payments. On July 1, the 0.5 percent increase in payments that Congress approved in December will be replaced by a 10.6 percent cut. The AMA is mounting an aggressive campaign to pass legislation to prevent this cut, as well as an additional pay cut that would occur in 2009. While we continue to press for congressional action, there’s no guarantee that lawmakers will act before July 1. All indications are that participation decisions made for 2008 by the Feb. 15 deadline will be binding for the entire year.

That brings me to a chart from the Medicare Payment Advisory Commission (MedPAC), the agency that advises Congress on issues regarding Medicare, that appeared in MedPAC’s March 2007 report to Congress on Medicare’s payment policy (PDF, 765KB). The chart, which can be found on page 109 (figure 2B-1) of the report, noted trends in Medicare participation rates and assignment rates from 1990-2006 to supplement data on the supply of physicians treating Medicare patients and patients’ access to physician care.

The chart shows that rates of physician participation and assigned claims have remained consistently high during the past several years, with 93.3 percent of physicians participating in Medicare in 2006, and 99.3 percent of claims assigned as of 2005. Of that 99.3 percent, 96.2 percent were for services provided by participating physicians (who must accept assignment for all of their Medicare patients), and 3.1 percent were for services for which nonparticipating physicians chose to accept assignment.

As is clear from the numbers above, only 0.7 percent of total claims were unassigned. It’s likely that the nonparticipating physicians filing these claims used balance billing in these instances to make up the 5 percent difference between payments for participating and nonparticipating physicians. Medicare limits the amount that physicians may balance bill a patient; the total charges for an unassigned claim for a service may not exceed the fee schedule amount by more than 9.25 percent (which is equal to 115 percent of the Medicare-approved amount for nonparticipating physicians, which is 95 percent of the fee schedule amount).

However, for unassigned claims, nonparticipating physicians need to collect the full 9.25 percent roughly 35 percent of the time they provide a given service in order for the revenues to equal those of participating physicians for the same service. And physicians must collect payment for unassigned claims from the patient, even though those claims must be submitted to Medicare. Given all this, I think it’s clear why physicians’ Medicare participation rate is so high.

In its report to Congress, MedPAC stated that, “physicians do not consider the additional payment from balance billing to be worth forgoing the nonmonetary benefits associated with accepting assignment,” especially receiving payments directly from Medicare. Many physicians may be reluctant to become non-PAR and bill patients directly because of the likelihood of incurring bad debt. They also may be concerned that balance billing their patients will confuse or offend some of them, who might then switch physicians. In addition, given the complexity of Medicare billing, physicians may fear that sending bills to Medicare patients might initiate an avalanche of queries to their office, requiring significant staff time to address. Most physicians may see these potential problems as vastly outweighing the benefits of a billing differential of only 9.25 percent.

Thus, when PAR physicians see their involvement in the Medicare program as a losing economic proposition, many of them may believe the best option for change is to reduce the number of new or established Medicare patients in their practice, rather than changing their participation status.

This point is important, because many members of Congress or other key decision-makers may view the MedPAC chart as evidence that physicians are satisfied with the Medicare program and willing to absorb payment cuts and freezes and paltry “increases” year after year. A better and more accurate picture of physicians’ willingness to endure this treatment can be found in the AMA’s most recent Member Connect^® physician payment survey (PDF, 454KB), which shows the likelihood of physicians decreasing the number of Medicare patients they see if projected cuts occur.

Have you made a choice regarding your Medicare participation for 2008? What factors played a role in your decision-making? Have you changed from PAR to non-PAR or private contracting because of payment cuts or freezes or projected cuts? If so, how has this change worked out for you and your practice?

Do you have a compelling story to tell about your personal experiences with the Medicare program? For example, have you been forced to change your practice in some way, such as limiting the number of new Medicare beneficiaries you accept, laying off staff, postponing implementation of an electronic health record system, or having to stop seeing patients at a satellite office serving a rural community?

Please send comments, questions, and replies to amaprez@ama-assn.org.