In the waning hours of the 2007 legislative session, Congress postponed the 10 percent Medicare conversion factor cut and instead provides a 0.5 percent increase for six months. Because Congress acted very late in the session to stop the physician pay cut, the Centers for Medicare & Medicaid Services (CMS) reopened the participation decision period for an additional 45 days. Physicians have until February 15 to make any changes to their participation status for 2008.
Because the reprieve is brief, participation decisions become more complicated. Physicians are still faced with a 10 percent payment reduction on July 1, unless Congress revamps the hopelessly broken formula used to calculate physician pay (or acts again with another last-minute fix). While it is possible that CMS will again reopen the participation decision period, there is no guarantee that CMS will allow physicians to change their participation status in July, should the cut go into effect.
Your Participation Options
Physicians have three choices regarding Medicare: be a participating provider; be a nonparticipating provider; or opt out of Medicare entirely.
A participating physician must accept Medicare allowed charges as payment in full for all Medicare patients.
A nonparticipating physician can choose to accept or not accept assignment on Medicare claims on a claim-by-claim basis. Nonparticipating physician fees are 95 percent of participating physician fees. If you choose not to accept assignment, you can charge the patient 9.25 percent more than the amounts allowed in the participating physician fee schedule.
Physicians who opt out of Medicare are bound only by their private contracts with their patients. Medicare’s limiting charges do not apply to these contracts, but Medicare does specify that these contracts contain certain terms. When a physician enters into a private contract with a Medicare beneficiary, both the physician and patient agree not to bill Medicare for services provided under the contract. Once you opt out, you cannot opt back in for two years.
The chart below will give you an idea of how your participation status will change the way you’re paid for treating Medicare patients.
Example: A service for which Medicare fee schedule amount is $100
Participation Status
Payment Rate
Payment from Medicare
Payment from Patient (or supplemental insurance)
Participating
$100
100% of Medicare
$80 (80%)
$20 (20%)
Nonparticipating,
assigned claim
$95
95% of Medicare
$76 (80%)
$19 (20%)
Nonparticipating,
unassigned claim
$109.25
Limiting charge of 115% of nonparticipating fee
schedule (95% of Medicare),
effectively, 109.25%
$0
$76 (80%) paid by carrier to patient + $19 (20%) paid by patient or supplemental insurance + $14.25 remainder paid by patient
Factors Affecting 2008 Rates
The payment amount for each service under the Medicare fee schedule is the product of three factors: nationally uniform relative-value units (RVUs) for work and practice expenses; a geographic adjustment factor; and a nationally uniform conversion factor, which is used to convert RVUs into payment amounts. The conversion factor change is not the only change affecting 2008 Medicare payment rates. Payment changes will vary by service, specialty and locality based on the following factors:
Practice Expense RVU: This year is the second of a four-year transition to revised practice expense relative value units.
Physician Work RVU: A number of services have revised relative value units for physician work. This change particularly affects anesthesiology, home health, and eye exam services, which increase significantly.
Budget Neutrality: Federal law requires any changes to Medicare payments to be budget neutral. This will decrease payments for most services by about one percent.
Geographic Payments: The geographic adjustment factors have been updated, as they are every three years. Most California counties will see geographic payment reductions (Santa Clara -9.1 percent, San Mateo -4.4 percent, San Francisco -4.4 percent, Alameda/Contra Costa/Berkeley -3.9 percent, Los Angeles +2.3 percent, Ventura +3.4 percent, Orange +2.1 percent, Marin/Napa/Solano -3.6 percent, Rest of California -0.6 percent).
The combined impact of these various payment changes on your practice depends on your specialty, location, and service mix. When all of the changes are averaged out across all physicians, there should be a slightly positive increase in rates, but many physicians will see net payment decreases.
Many other insurers link their rates to the Medicare rates in some way. There is no way to anticipate how other payers will adjust their rates in response to the six-month intervention by Congress.
Contact: CMA's Reimbursement Help Line, 888/401-5911 or drice@cmanet.org.
