Understanding Medicare Part B excess charges
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There are basically three Medicare contractual options for physicians. Physicians may sign a participating (PAR) agreement and accept Medicare's allowed charge as payment in full for all of their Medicare patients. They may elect to be a non-PAR physician, which permits them to make assignment decisions on a case-by-case basis and to bill patients for more than the Medicare allowance for unassigned claims. Or they may become a private contracting physician, agreeing to bill patients directly and forego any payments from Medicare to their patients or themselves.
Physicians who wish to change their status from PAR to non-PAR or vice versa may do so annually. Once made, the decision is generally binding until the next annual contracting cycle, except where the physician's practice situation has changed significantly, such as relocation to a different geographic area or a different group practice. To become a private contractor, physicians must give 30 days' notice before the first day of the quarter the contract takes effect.
Those considering a change in status should first determine that they are not bound by any contractual arrangements with hospitals, health plans or other entities that require them to be PAR physicians. In addition, some states have enacted laws that prohibit physicians from balance-billing their patients.
PAR physicians agree to take assignment on all Medicare claims, which means that they must accept Medicare's approved amount (which is the 80 percent that Medicare pays plus the 20 percent patient co-payment) as payment in full for all covered services for the duration of the calendar year. The patient or the patient's secondary insurer is still responsible for the 20 percent co-payment, but the physician cannot bill the patient for amounts in excess of the Medicare allowance. However, while PAR physicians must accept assignment on all Medicare claims, Medicare participation agreements do not require physician practices to accept every Medicare patient who seeks treatment from them.
Medicare provides a number of incentives for physicians to participate:
- The Medicare payment amount for PAR physicians is 5 percent higher than the rate for non-PAR physicians.
- Directories of PAR physicians are provided to senior citizen groups and individuals who request them.
- Medicare administrative contractors (MAC) provide toll-free claims processing lines to PAR physicians and process their claims more quickly.
Medicare-approved amounts for services provided by non-PAR physicians (including the 80 percent from Medicare plus the 20 percent co-payment) are set at 95 percent of Medicare-approved amounts for PAR physicians, although non-PAR physicians can charge more than the Medicare-approved amount. This extra charge is known as the Part B excess charge.
Limiting charges for non-PAR physicians are set at 115 percent of the Medicare-approved amount for non-PAR physicians. However, because Medicare approved amounts for non-PAR physicians are 95 percent of the rates for PAR physicians, the 15 percent limiting charge is effectively only 9.25 percent above the PAR-approved amounts for the services. Therefore, when considering whether to be non-PAR, physicians must determine whether their total revenues from Medicare, patient co-payments and balance-billing would exceed their total revenues as PAR physicians, particularly in light of collection costs, bad debts and claims for which they do accept assignment. The 95 percent payment rate is not based on whether physicians accept assignment on the claim, but whether they are PAR physicians; when non-PAR physicians accept assignment for their low-income or other patients, their Medicare-approved amounts are still only 95 percent of the approved amounts paid to PAR physicians for the same service.
Non-PAR physicians would need to collect the full limiting charge amount roughly 35 percent of the time they provided a given service in order for the revenues from the service to equal those of PAR physicians for the same service. If they collect the full limiting charge for more than 35 percent of the services that they provide, their Medicare revenues will exceed those of PAR physicians.
Assignment acceptance, for either PAR or non-PAR physicians, also means that the Medicare administrative contractor pays the physician the 80 percent Medicare payment. For unassigned claims, even though the physician is required to submit the claim to Medicare, the program pays the patient, and the physician must then collect the entire amount for the service from the patient.
Example: A service for which the Medicare fee schedule amount is $100.
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.
The number of physicians seeing Medicare patients is growing, with few formally “opting-out” of Medicare.
On a national level, the number of physicians billing Medicare has continued to rise at the same rates as growth in the beneficiary population. From 2009 to 2011, the number of physicians billing Medicare grew from 525,000 to 549,000, maintaining a steady ratio of about 12.3 physicians per 1,000 Medicare beneficiaries. The ratios for primary care physicians and specialists per 1,000 beneficiaries have remained steady at 3.8 and 8.5 respectively over those three years, according to MedPAC analysis. These national counts, however, do not address the geographic distribution of physicians and concerns that physician supply, relative to the population, tends to be lower in communities with higher rates of minority and low-income residents who, on average, have greater medical needs than others.
As has been the case for the past decade, almost all physicians and clinical professionals (96 percent) who have registered with Medicare have signed “participation” agreements with Medicare, which means that they accept Medicare’s fee-schedule rates as payment-in-full for all services they provide to Medicare patients.
“Non-participating” physicians may charge beneficiaries higher fees up to a specified maximum, but there are several incentives in the Medicare program for physicians to sign participation agreements, attributing to its high rate across the country. As of September 2013, among all U.S. physicians in clinical practice, less than 1 percent (4,863) have signed affidavits with Medicare indicating that they have “opted out” of the Medicare program entirely, according to new, unpublished data released by the Center for Medicare and Medicaid Services Physicians. Medicare does not reimburse either the physician or the Medicare patient for any services provided by physicians who have opted out of the Medicare program. Opt-out physicians must tell their Medicare patients that they have opted out of Medicare and provide them with a document stating that Medicare will not reimburse either the physician or the patient for any services furnished by opt-out physicians. Medicare patients must sign this document to signify their understanding of it.
— Current states that have a legislative ban on Part B excess charges include: Connecticut, Massachusetts, Minnesota, New York, Ohio, Pennsylvania, Rhode Island and Vermont.
— Fewer than 1 percent of all physicians have opted out of Medicare.
— Of the 99+ percent of physicians who have not opted out of Medicare, 96 percent of those accept Medicare assignment as payment in full.
— Of the 4 percent of those physicians who are non-participating in Medicare, they often do accept assignment to avoid the reimbursement penalty and the administrative cost of collecting claims from the Medicare beneficiary. They just have the flexibility to decide whether to accept assignment on a case-by-case basis.
End result: There is almost no chance that a Medicare beneficiary will ever receive any Part B excess charge billing.