They may register with Medicare as (1) a participating provider, (2) a non-participating provider, or (3) an opt-out provider who privately contracts with each of his or her Medicare patients for payment (Figure 1).This issue brief describes these three options and then examines three current provisions in Medicare that provide financial protections for Medicare beneficiaries.
Congress established the participating provider program in the 1984 Deficit Reduction Act (DEFRA) to address two main concerns: confusion among beneficiaries about the fees they were being charged when they saw a doctor and escalating rates of balance billing from charges that exceeded Medicare’s established “usual, customary, and reasonable” rates for their area.
At that time, aside from Medicaid-eligible beneficiaries, Medicare had no limits on the amount that physicians and practitioners could balance bill for their services.
These provider options have direct implications on the charges and out-of-pocket liabilities that beneficiaries face when they receive physician services (Figure 2).
They also play a major role in several financial protections in current law—namely, the physician participation program, limitations on balance billing, and conditions for private contracting—which help beneficiaries understand the financial implications of their provider choices and encourage providers to accept Medicare’s standard fees.
Medicare does not provide any reimbursement—either to the provider or the Medicare patient—for services provided by these providers under private contracts.
Accordingly, Medicare patients are liable for the entire cost of any services they receive from physicians and practitioners who have opted out of Medicare.Non-participating providers must submit claims to Medicare on behalf of their Medicare patients, but Medicare reimburses the patient, rather than the nonparticipating provider, for its portion of the covered charges.A small share (4%) of providers who provide Medicare-covered services are non-participating providers.Under current law, Medicare has several financial protections in place that are designed to safeguard Medicare beneficiaries—seniors and people with permanent disabilities—from unexpected and confusing charges when they seek care from doctors and other practitioners.These protections include the participating provider program, limitations on balance billing, and conditions on private contracting.This arrangement is called “balance billing” and means that the Medicare patient is financially responsible for the portion of the provider’s charge that is in excess of Medicare’s assigned rate, in addition to standard applicable coinsurance and deductibles for Medicare services.When non-participating providers do not accept assignment, they may not collect reimbursement from Medicare; rather, they bill the Medicare patient directly, typically up front at the time of service.Surveys conducted by the Physician Payment Review Commission (PPRC), a congressional advisory body and predecessor of the Medicare Payment Advisory Commission (Med PAC), revealed that prior to the participating provider program, beneficiaries often did not know from one physician to the next whether they would face extra out-of-pocket charges due to balance billing and how much those amounts might be.The establishment of the participating provider program in Medicare instituted multiple incentives to encourage providers to accept assignment for all their patients and become participating providers.For example, Medicare payment rates for participating providers are 5 percent higher than the rates paid to non-participating providers.Also, participating providers may collect Medicare’s reimbursement amount directly from Medicare, in contrast to non-participating providers who may not collect payment from Medicare and typically bill their Medicare patients upfront for their charges.