Medicare Participation Options for Physicians

With Medicare’s 21.2% cut looming, many physicians are frustrated with the whole process. Since 2001, Medicare payments have only increased by 1%, whereas physician costs have risen by 22%!  To help physicians make informed decision on their participation, we have listed the available options about Medicare participation. 

Participation (PAR): PAR physicians agree to take assignment on all Medicare claims, which means they must accept Medicare’s approved amount — 80% paid by the government after the deductible is met, plus a 20% patient co-payment — as payment in full for all covered services for the duration of the calendar year. The deductible for 2010 is $115.50

Medicare provides several incentives for physicians to participate: 

  • The Medicare approved amount for PAR physicians is 5% higher than the Medicare approved amount for non-PAR physicians.
  • Directories of PAR physicians are provided to senior citizen groups and individuals who request them.
  • Carriers provide toll-free claims processing lines to PAR physicians and process their claims more quickly.

Nonparticipation (Non-PAR): Non-PAR physicians can file non-assigned claims for Medicare patients on a case-by case basis in return for fees that are set at 95% of Medicare-approved amounts. But non-PAR physicians can balance-bill patients more than the Medicare approved amount.  Limiting charges for non-PAR physicians are set at 115% of Medicare approved amount for non-PAR physicians.  However, because Medicare approved amounts for non-PAR physicians are 95% of the rates for PAR physicians, the 15% limiting charge is effectively only 9.25% above the PAR-approved amounts for the services. 

Further, Medicare pays the patients directly for services billed by non-PAR physicians. Doctors considering becoming non-PAR for an upcoming calendar year are advised to consider potential collection costs and bad debts when projecting revenue. 

Private contracting: Provisions in the Balanced Budget Act of 1997 give physicians and their Medicare patients the freedom to privately contract to provide health care services outside the Medicare system. Private contracting decisions may not be made on a case-by-case or patient-by-patient basis, however. Once physicians have opted out of Medicare, they cannot submit claims to Medicare for any of their patients for a two-year period. 

To privately contract with a Medicare beneficiary, a physician must enter into a private contract with the patients that meet specific requirements.  In addition to the private contract, the physician must also file an affidavit that meets certain requirements.  To opt out, a physician must file an affidavit that meets the necessary criteria and is received by the carrier at least 30 days before the first day of the next calendar quarter. There is a 90-day period after the effective date of the first opt-out affidavit during which physicians may revoke the opt-out and return to Medicare as if they had never opted out. 

The following is a hypothetical service for which Medicare fee schedule amount is $100:

Payment Arrangement Total Payment Rate Payment Amount from Medicare Payment Amount from Patient
PAR physician  100% Medicare fee schedule = $100  $80 (80%) carrier direct to physician  $20 (20%) paid by patient or supplemental insurance (e.g., Medigap) 
Non-PAR/ assigned claim 95% Medicare fee schedule = $95  $76 (80%) carrier direct to physician  $19 (20%) paid by patient or supplemental insurance (e.g., Medigap) 
Non-PAR/ unassigned claim  Limiting charge/109.25% Medicare fee schedule = $109.25 $0 $76 (80%) paid by carrier to patient+ $19 (20%) paid by patient or supplemental insurance
+ $14.25 balance bill paid by patient
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