As U.S health care spending continues to grow faster than the economy, several health care reform proposals would leverage Medicare’s payment structure in order to help control health care costs while also improving consumers’ access to health coverage. Notably, Democratic presidential nominee Joe Biden has proposed a “public option” that would allow eligible individuals to choose between private insurance or a publicly sponsored plan, similar to Medicare. While Biden has not specified how much health care providers would get paid under the public option, a campaign document says it would be administered by Medicare. His proposal would also lower the age of Medicare eligibility to 60, giving older adults the option to choose coverage under Medicare.

Amidst the debate on health care reform, some have expressed concerns that an approach that adopts Medicare payment rates, or a multiplier of Medicare rates, would jeopardize providers’ financial viability, leading physicians to “opt out” of the Medicare program, potentially leading to a shortage of physicians willing to treat Medicare beneficiaries and compromising patients’ access to care. This issue takes on even greater importance during the coronavirus pandemic, with COVID-19 deaths surpassing 200,000, including a disproportionate share of older adults.

This analysis examines the extent to which non-pediatric physicians are opting out of Medicare, by specialty, and by state, based on data published by the Centers for Medicare & Medicaid Services (CMS) as of September 2020. For the total number of active state-licensed physicians, we use data from  Redi-Data, Inc.

Key Takeaways

  • One percent of all non-pediatric physicians have formally opted-out of the Medicare program in 2020, with the share varying by specialty, and highest for psychiatrists (7.2%).
  • Psychiatrists account for the largest share (42%) of all non-pediatric physicians who have opted out of Medicare in 2020.
  • In all states except for 3 [Alaska, Colorado, Wyoming], less than 2% of physicians in each state have opted-out of the Medicare program.

Background

Currently, physicians and other health care providers may register with traditional Medicare under three options: 1) participating provider, 2) non-participating provider, or 3) an opt-out provider.

  • Participating Providers: Under this option, participating providers agree to accept “assignment” on all Medicare claims for all their Medicare patients, which means that they have signed a participation agreement with Medicare, agreeing to accept Medicare’s fee schedule amounts as payment-in-full for all Medicare covered services. Medicare beneficiaries seeing a participating provider can only be liable for the cost sharing required by Medicare. Providers have several incentives to be participating providers, such as being paid higher rates (5% higher) than the rates paid to non-participating providers. The vast majority (97%) of physicians and practitioners billing Medicare are participating providers.
  • Non-participating providers: Providers in this category accept Medicare patients, but can choose whether to take assignment (i.e., Medicare’s approved amount) on a claim-by-claim basis. Unlike participating providers, who are paid the full Medicare allowed payment amount, nonparticipating physicians who take assignment are limited to 95% of the Medicare approved amount. In 2018, 99.6% of fee schedule claims by non-participating providers were paid on assignment. Physicians who choose to not accept assignment can charge beneficiaries more than the Medicare-approved amount, but not exceeding 15% of the fee-schedule allowed amount. Medicare patients are financially liable for this additional amount (“balance bill”), plus applicable deductibles and coinsurance amounts.
  • Opt-out providers: Physicians and practitioners under this option have signed an affidavit to “opt-out” of the Medicare program entirely. Instead, these providers enter into private contracts with their Medicare patients, allowing them to bill their Medicare patients any amount they determine is appropriate.1 Of note, providers who have opted-out of the Medicare program must opt-out for all of their Medicare patients. Medicare patients seeing a provider who has opted out of the Medicare program must sign this agreement and agree to be financially responsible for the entire cost of any services received. Neither the provider nor the patient can submit a bill to Medicare for reimbursement. Past analyses have found that few (less than 1%) physicians have chosen to opt-out of Medicare.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L.114-10) made it easier for physicians and practitioners to opt-out of the Medicare program by lifting the requirement that physicians file opt-out affidavits every 2 years to renew their status.  Prior to changes in law made in 2015, physicians and practitioners were required to opt-out of Medicare for all of their Medicare patients for a 2-year period and were also required to file a new affidavit to renew their opt-out.

Past proposals, including a 2019 executive order issued by President Trump, have called for policy changes that would make it easier for physicians and other practitioners to enter into private contracts with their Medicare patients and therefore bill patients higher fees than the Medicare allowed amount.

With health care reform proposals—including a “public option” supported by Vice President Biden—potentially on the agenda after the 2020 presidential election, this brief examines the share of non-pediatric physicians opting out of Medicare, by specialty and state in 2020.

Key Findings

Only 1 percent of non-pediatric physicians have formally opted-out of the Medicare program. As of September 2020, 9,541 non-pediatric physicians have opted out of Medicare, representing a very small share (1.0 percent) of the total number active physicians, similar to the share reported in 2013.

Figure 1: Few Physicians Have Formally Opted-Out of Medicare in 2020

While the overall opt-out rate is 1 percent, opt-out rates are somewhat higher for certain specialties, such as psychiatry and plastic and reconstructive surgery.  In 2020, 7.2 percent of psychiatrists opted out of Medicare, followed by 3.6% of physicians specializing in plastic and reconstructive surgery and 2.8 percent of physicians specializing in neurology (Figure 2).


Psychiatrists are disproportionately represented among the 1.0 percent of active physicians who have opted out of Medicare.
As of September 2020, psychiatrists account for the largest share (42%) of opt-out physicians, followed by physicians in family medicine (19%), internal medicine (12%), and obstetrics/gynecology (7%) (Figure 3).

Figure 3: Among all physicians opting-out of Medicare in 2020, psychiatrists account for the largest share of opt-out providers

In addition to physicians, another 4,075 select clinical professionals with doctorate degrees (i.e., chiropractors, oral surgeons, podiatrists, and optometrists) have also opted-out of the Medicare program, with oral surgeons accounting for the vast majority (95%) of this group (Table 1).

In 47 states, less than 2 percent of active non-pediatric physicians in each state have opted out of Medicare.  As of September 2020, Alaska (3.3%), Colorado (2.1%), and Wyoming (2.0%) have the highest rates of non-pediatric physicians who have opted out of Medicare (Table 2). Nine states (Iowa, Michigan, Minnesota, Nebraska, North Dakota, Ohio, South Dakota, West Virginia and Wisconsin) have less than 0.5% of non-pediatric physicians opting out of Medicare.

Discussion

Our analysis shows that relatively few physicians are opting-out of Medicare, similar to prior analyses. Notably, we find that psychiatrists have the highest opt-out rates and are disproportionately represented among physicians who have opted out of Medicare in 2020. This is consistent with previous analyses that found that psychiatrists are less likely than other physician specialties to accept new patients with Medicare or private insurance, suggesting that psychiatrists may prefer to be paid directly from patients rather than insurers, to avoid the administrative burden and have the flexibility to charge higher fees. The relatively high rates of psychiatrists opting of Medicare is a particularly salient concern for older adults during the COVID-19 pandemic and resulting economic recession, with one in four older adults reporting symptoms of anxiety or depressive disorder.

Our analysis also finds little state-level variation in the percent of physicians opting-out, with only 3 states (Alaska, Colorado, Wyoming) having opt-out rates at or above 2.0% in 2020.  Further research is needed to examine the extent to which opt out rates may be higher or lower in certain geographic areas, and whether there is an association between opt-out rates and physician and practice-level characteristics,  and community characteristics.

While our analysis finds that the vast majority of non-pediatric physicians have not “opted-out” of Medicare, past analyses have reported that some physicians are not accepting any new patients, including patients with Medicare and private insurance (i.e., closed practices). Past analysis found that 21% of non-pediatric primary care physicians accept Medicare but are not taking any new Medicare patients, as compared to 14% who are not taking new patients with commercial insurance. Further, according to a recent analysis by MedPAC, Medicare beneficiaries have stable access to care, with the majority reporting having a usual source of care (92% of beneficiaries) and having no trouble finding a new primary care physician (72% of beneficiaries) or specialist (85% of beneficiaries).

With health care reform potentially on the agenda if Biden wins the 2020 presidential election, including proposals that would adopt elements of Medicare in a public option or lower the age of Medicare eligibility, some critics have argued that these proposals would lead to more physicians opting out of Medicare, creating barriers to care for people with Medicare. Our analysis finds that despite changes in law that have made it easier for physicians and practitioners to opt-out of the Medicare program, few physicians are doing so. If a public option moves forward, and if current opt-out rules apply to both Medicare and the public option, physicians may be even less likely to opt out to retain their patients and revenue.  At the same time, if the public option adopts rates linked to Medicare, there is some risk that the number of physicians opting out would increase, although they would have fewer patients available to charge higher prices. The details of a public option – including provider payment rates and how closely tied provider participation is to Medicare – could have big implications for how many physicians participate as well as the potential savings.

This work was supported in part by Arnold Ventures. We value our funders. KFF maintains full editorial control over all of its policy analysis, polling, and journalism activities.

Methods
This analysis uses Medicare opt-out affidavit data from the Centers for Medicare & Medicaid Services (CMS), as of September 2020 ( https://data.cms.gov/Medicare-Enrollment/Opt-Out-Affidavits/7yuw-754z). The scope of our analysis was limited to non-pediatric physicians, given its Medicare focus, as well as a select group of other clinicians with doctorates: chiropractors, optometrists, oral surgery, and podiatrists. Therefore, pediatricians and other non-physician specialists, such as certified nurse midwives, clinical social workers, and physician assistants, were excluded from the total number of opt-out physicians. Of note, while some clinicians under the oral surgery specialty group may also hold a medical degree (MD or DO), for the purpose of our analysis, we grouped these physicians in accordance with the primary specialty (oral surgery) associated with their National Provider Identifier (NPI) in CMS’ opt-out file.

We obtained data on the number of active allopathic and osteopathic physicians by specialty and state from Redi-data, Inc, which utilizes data from the American Medical Association (AMA) Physician Masterfile. One limitation of this analysis is that due to data source limitations, we were unable to exclude active physicians in professional activity other than patient care, such as research and administration.

The specific physician specialty groups identified in this analysis were selected if they were included in the list of opt-out providers provided by CMS.  In order to gain a more complete picture of the distribution of opt-out providers in each specialty category, we grouped some subspecialties under a broader specialty category, consistent with the specialty cross-walk provided by Redi-Data, Inc.

Specifically, anesthesiology includes pain management as a subspecialty, obstetrics/gynecology includes reproductive endocrinology, and preventive medicine includes occupational medicine. The specialty group of internal medicine includes the following subspecialties: internal medicine (not otherwise specified), critical care medicine, gastroenterology, hematology, hospice & palliative medicine, infectious disease, nephrology, pulmonary disease, and rheumatology. The “surgery” specialty consists of the following surgical subspecialties:  cardiac surgery, colorectal surgery, general surgery, hand surgery, thoracic surgery, and vascular surgery. The following subspecialties are included in the “other” specialty:  addiction medicine, cosmetic surgery anesthetic medicine, Doctor of Medicine, hospitalist, integrative medicine, undefined physicians, sleep medicine, osteopathic manipulative medicine.

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