Should You Opt Out of Medicare? Pros and Cons

Leigh Page


November 13, 2018

In This Article

Why Drop Medicare? To Avoid Oppressive Investigations

Pro: A Possible Compelling Reason

When you opt out of Medicare, "you no longer have to worry about that knock on the door," Huntoon says. That knock may come from a variety of agencies looking for improper billing, including Medicare Administrative Contractors, Recovery Audit Contractors, or Zone Program Integrity Contractors.

Investigations may be initiated by tips from whistleblowers, who are generously paid under Medicare. And violations can involve a whole slew of Medicare regulations, including the Stark Law, which prevents referrals to a facility in which the doctor has a financial interest, and the federal anti-kickback statute, which prevents payments in exchange for referrals and other services.

Participating Medicare physicians face audits that are the toughest in the business. "Private payers are basically looking for improper payments; they just want their money back," says Kathryn Moghadas, a practice management consultant in Winter Springs, Florida. "The government, however, wants to add fines and fraud charges."

Cohen says he represents 40-50 providers a year who face audits from all kinds of payers, but the biggest cases are with Medicare.

"Participating in Medicare is like being in a toxic marriage where you decide you'll just have to tolerate it," he says. "No matter how good a job you do, you're violating some Medicare rule."

Medicare auditors often carry out "extrapolation audits," Cohen says. "They calculate how much you would owe them over many years for that particular service," he says. In addition, they can levy punitive damages up to $11,000 per claim.

La Penna says the threat falls heaviest on busy Medicare doctors. "They are the successful doctors, but they also are more likely to be audited," he says.

Pro: Dump Low Medicare Reimbursements

Another reason to opt out of Medicare is low reimbursements. Medicare typically pays 13%-25% less than private payers, says La Penna, on the basis of his most recent analysis.

To stay in Medicare, "you have to make sure you are at least breaking even on it," Cohen says. He and many other experts recommend making a relative value unit (RVU) analysis before deciding whether to opt out. This involves determining the average cost per RVU to treat your Medicare patients, and comparing that with other reimbursements.

Medicare reimbursements have been almost stagnant for many years. According to a 2017 study, Medicare payment rates rose only 2.9% from 2001 to 2014, whereas general inflation increased by 33.4% and physician practice expenses increased 60.6%.[7]

Medicare reimbursements have stalled, but so have commercial reimbursements.

However, Zetter says that many commercial insurers have followed Medicare's lead by tying their rates to a percentage of Medicare reimbursement. "Yes, Medicare reimbursements have stalled, but so have commercial reimbursements," he says.

On the plus side, the Medicare payment process is often better than that of private insurance. Cohen says Medicare has lower denial rates, does not require prior authorization, has a more transparent fee schedule, and pays more quickly than private insurers. "Medicare's mandate is to pay providers within 14 days," he says.


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