Good Evening
Medicare: Opting Out
“I’m From The Government and I’m
Here to Help You”
Medicare: Opting Out
“Reform begets scandal begets
reform. It is a lucrative cycle, if your
business is reform or headlines.”
Sen. Mitch McConnell, R-Ky, USA Today February 26,
2002 [in reference to proposed campaign reform
legislation]
Scandal and Reform over the years
have changed Medicare and
Medicaid Law…
How bad can it be?
“On the other hand, it’s not the end of the world”
Medicare: Opting Out
“There is no way to rule innocent men. The
only power any government has is the power to
crack down on criminals. Well, when there
aren’t enough criminals, one makes them. One
declares so many things to be a crime that is
becomes impossible to live without breaking
the laws.”
Ayn Rand, Atlas Shrugged
Goals of This Brief Presentation
• Review Medicare Law
• Discuss the Current Influence of Medicare
Law on Medical Practice
• Review the Provisions of the Law that allow
a physician to “Opt Out”
• Discuss the Personal Financial and Local
Community Impact of Opting Out
Medicare: Opting Out
• A Brief History of Medicare:
– Original “Deal” Passed by Congress in 1964:
• Private Contractors as Fiscal Intermediaries and
carriers
• Separate Hospital and Professional Components
• Payment based on Usual and Customary Fee (actual rates in
the community)
– Non-interference with physician decision-making
Medicare: Opting Out
• Original Cost: Projected to be $500 Million by the
year 2000 (Estimated 2013 cost: $900 Billion
without a drug benefit, $1500 Billion or $1.5
Trillion with a drug benefit = 30,000 times more
expensive than estimated!)
• LBJ commenting on the AMA position and
requirements: “Is that all they want? Do it!
Move the damn bill now before we lose it!”
Medicare: Opting Out
Costs rapidly increased
The late 70’s and early 80’s: Doubledigit inflation throughout the economy
Loans cost 18%, Credit Cards 24%
Overhead costs (including salaries) rose
at 12-14%
Medicare: Opting Out
Despite Inflation, the AMA called for a
voluntary freeze on physician fees in
1982
94% of physicians voluntarily froze
their fees for all services from 19821984
Medicare: Opting Out
In 1984, Congress changed Medicare law
to establish reimbursement levels at 1982
prices…
And mandated reimbursements…the
first, then novel step toward managed care
and socialization of medicine
Medicare: Opting Out
Aetna managed Medicare
From the experience gained, Aetna
became the leading company in
tracking (and changing) physician
behavior
“Usual and Customary” became what
Medicare (and Aetna) said it was
Medicare: Opting Out
An Industry was born:
•Compliance Seminars ($32.00 per claim; 25-50% of
practice time) with cost-shifting to physicians, part of
the political claim of low MC administrative costs
•Coding Books/DRGs/Service Codes
•Computer Software and Hardware
•Employees/Compliance/Services/Building Space
•Bureaucracy and the legal system, which is far most costly
to physicians and hospitals than malpractice
Medicare: Opting Out
Physicians are now receiving 75-80% less (in
inflation adjusted dollars per patient) than they
did in 1982…for 3 times the service
(examples: Colonoscospy; Surgery for Laryngeal
Cancer; fluvax; oncology drugs; Outpatient Visits)
In an average Internal Medicine practice, over 75%
of costs are administrative and service…the “takehome” part of the fee is 10-20% at the most
Medicare: Opting Out
BUT… Per capita Medicare expenditures are
rising dramatically, due to increasing technology
and a healthier, longer-lived elderly population
and less “give” in the system…in short, due to
successful health intervention, quality medical
care, and past physician and hospital sacrifice…
only in the last two years has inflation in medical
care begun to slow
Medicare: Opting Out
The Problem: 87% of Medicare revenues
come from current taxpayers, 13% from
past contributions and premiums
Into “Red Ink” by 2018 (2024 ACA)… and
Medicare, Social Security and Medicaid = 75%
of the federal budget by 2030
Medicare Fraud and Abuse Law
Into this environment steps the HIPAA with
new Medicare Fraud and Abuse Law, greatly
expanded in scope and power in the last three
years
…designed first and foremost to save Medicare
dollars HCFA and Congress believe they do not
have to pay
Medicare Fraud and Abuse Law
“The original terms of Medicare’s political bargain
have long since been abrogated, and the fragmented,
fee-for-service world of unimpeded professional
discretion and uncapped government reimbursement
that fraud and abuse law was [originally] intended to
restrain has passed into legend. But the investigative
and prosecutorial apparatus that was put into place in
the 1970’s continues to expand.”
William Sage, MD, JD, JAMA 282, 1179 (September 22/29
(1999)
Medicare Fraud and Abuse Law
Health Care Providers have been prosecuted
under at least 30 different federal statutes,
the most important of which are the: Federal
Conspiracy Statutes, Medicare Anti-Kickback
Act, False Claims Act, Racketeer Influenced
and Corrupt Organizations Act (RICO), Mail
Fraud Statutes, and Federal Theft and
Conversion Statutes … the most often used
statute is the False Claims Act
Medicare Fraud and Abuse Law
The Original Federal False Claims Act of 1863
“Any person who knowingly presents a false claim for
payment is liable …for 10 years in jail and civil
penalties of not less than $50 and not more than $100
(per offense) plus 3 times the amount of damages. ”
Now: $5000-$12,000 per offense
Medicare Fraud and Abuse Law
The Fraud Enforcement and Recovery Act (FERA
2009) and the Affordable Care Act (ACA 2010)
removed the “scienter requirement” for Medicare
Fraud, making the “intent to be paid” enough to
prosecute civil and criminal acts
It is no longer necessary to prove any intent to
defraud the government, nor that you received any
monies… mere submission of a claim Medicare
considers to be “false” is enough to prove fraud
Medicare: Opting Out
• Allison Engine Co. Inc vs United States (July
2008), the Supreme Court in a 9-0 decision
ruled, absent an actual intent to defraud:
• the False Claims Act is “…boundless and
tantamount to an all-purpose antifraud statute.”
Medicare: Opting Out
In 1996, Congress committed over $500 Million per
year, to inform Medicare and Medicaid patients and
the public at large of Medicare Fraud and Abuse
…and to audit every physician every year …the 2012
budget is now >$1.7 Billion, with a recent “Medicare
Fraud Strike Center” touted by A.G. Eric Holder
Compare: IRS audits < 1% of all taxpayers
Medicare: Opting Out
•HIPAA(Health Insurance Portability and Accountability Act):
A complex Act, with many parts, still being phased into law
•One worrisome component: As of October 16, 2003,
Medicare requires certification of compliance with the
“confidentiality” laws to submit a claim
•If we somehow violate a confidentiality provision of HIPAA,
will all our claims be “fraudulent”? YES! (See Thompson vs
Columbia HCA (5th Circuit, 1997; See also D.C, 2nd, 3rd, 9th and 10th Circuits)
Medicare: Opting Out
• Fraud: 10,063 actions were filed under the FCA between
1986-2008, of which 62% were “whistleblower” or qui
tam relators, recovering $22 Billion
• 40% of the cases involved the healthcare industry, but $14
Billion (2/3) came from these cases
• Whistle-Blowers received an average of $550,000 and
were most commonly health care executives or
physicians, accusing hospitals or larger physician groups
Medicare: Opting Out
• Important to Note: Fraud has been prosecuted as
“any claim for services that is false” under the False
Claims Act (FCA), including medication pricing
(average wholesale price), non-standardized
pulmonary function testing as “worthless,” and
“piggybacking” on non-compliance with HIPAA
Privacy Claims…but
• “Abuse” is anything Medicare says it is
Medicare: Opting Out
“[Physicians] believe they already comply
with the law and that [further effort] is not
warranted because they delegate tasks or don’t
understand the regulatory environment. They
have a false sense of security about their level
of compliance.”
Amy Woodhall, Attorney at Law, Physician Practice Options
(April 15,2001)
Medicare: Opting Out
In 2001, 29 practices a day were fined or expelled
from Medicare (1 per 500 physicians)
This figure was projected to be more than 150 per day
by 2013 (1 per 70 physicians)…but has already
reached that number
Compare: IRS fines 1 per 10,000 taxpayers
Medicare: Opting Out
The Usual Practice:
•An audit shows a percentage over-billing or misbilling, a calculation is made on that basis for the
last 5 years, fines and penalties are attached and an
administrative notice is sent for monies due
•Objections are treated as a reason for referral for
investigation for civil or criminal charges
Note: “Hummingbird” [a Canadian firm’s software monitoring]
Medicare: Opting Out
In 1999, Medicare established the
Senior Medicare Patrol, which…
•Has 52 branches that teach senior volunteers to detect
and report fraud and abuse…
•Has received $28 million, has trained 31,173 seniors, who
in turn have educated 869,472 beneficiaries, which…
•Has generated 19,342 complaints “saving” $79.6 million
for Medicare and other carriers
•Major offenses: Waiving co-payments; advertising free
screening or testing to entice Medicare patients
Medicare: Opting Out
• False Claims Act enforcement has been highly
profitable, with a return of $18 for every dollar spent
• Recent expansion has included a “successful” Medicare
Recovery Audit Contractors (RAC), employing
independent firms to comb through claims to identify
“overpayments” with a “bounty” offered for finding an
overpayment. In the first year: $290 million recovered,
of which $18 million was related to physician services,
between $135 -$215 per physician investigated See
American Medical News “Medicare touts audit plan success as doctors decry
‘bounty hunters’” Vol 49:47 (December 18, 2006)
Medicare: Opting Out
A New
Career?
New Yorker,
January 2001
Medicare: Opting Out
“We have never lost a case; every
[suspect] has pled.” We “…threaten to
add 6 months in prison for every 2- to 4week period that the accused fights the
charges.”
Alan Cates, Chief, Medi-Cal Fraud Prevention
Bureau, Medicare Compliance Alert 5/15/00
Medicare: Opting Out
For major corporations and insurance companies,
such as Aetna, Cigna and HCA, fines for Fraud and
Abuse are a cost of doing business
“The government is more aggressive and inflexible with
individuals who have less resources to defend themselves.
Physicians are particularly vulnerable…” because they can
be sent to jail and “are more readily excluded from federal
health care programs without greatly affecting patient access
to care.” Kathleen McDermott, JD, American Health Law
Association Annual Meeting, June 2000
Medicare: Opting Out
How Can You Protect Yourself?
Two Choices:
•Full compliance and the purchase of an
Errors and Omissions Policy
•Opting Out
Medicare Fraud and Abuse Law
“The U.S. Justice Department’s guidelines
for determination of wrongdoing weigh
heavily on whether a medical practice has
a compliance plan in place.”
James Bickett, U.S. Attorney General, Akron, Ohio
Medicare: Opting Out
“Those who seek reimbursement under existing,
complex guidelines face the very real risks of an
honest mistake being cast by prosecutors as an
intentional act of criminal fraud..”
Paul Ramsey, Dean University of Washington School of
Medicine, commenting on the criminal investigation of UW
Medicare Fraud and Abuse Law
•“The risk [of criminal prosecution] is driving
physicians across the country…to retire early,
refuse all insurance and accept only direct
payment, or restrict the number of Medicare and
Medicaid patients they serve” Paul Ramsey, Dean
University of Washington School of Medicine
Medicare: Opting Out
• But not just fear of civil and criminal liability drives
physicians to Opt-Out
• Medicare fees do not cover overhead costs today
• The “Doctor Fix” (29% cut in fees without it) is “on the
chopping block”
• Obama in the October 3, 2012 debates reiterated again the
role of “Fraud, waste and abuse” in savings to Medicare
• I have a simple question: Where do you think $500 Billion
of savings in reduced fees and “fraud, waste and abuse”
proposed in the Affordable Care Act will come from?
Medicare Fraud and Abuse Law
“In virtually every community I encounter one
or two internists who say I’ve had it…I’m not
going to see Medicare patients anymore.”
•Dr. Richard Corlin, President AMA 2003, in testimony before the House
Ways and Means Committee, March 17, 2001 (AP “Physicians Grow
Weary, Leave Medicare” ) [Commenting on the unreasonable complexity
of coding and reporting now required by Medicare]
Medicare Fraud and Abuse Law
Washington State Medical Association Membership Poll:
•In early 2010, 77% were either taking no new Medicare
patients (55%) or dropping all Medicare patients (22%)
•80% of physicians over 50 years of age have either retired
“early” or intend to retire “early”…the group of physicians
who view Medicare as a social/ethical obligation
•According to CMS, in 2009 23% of new Medicare patients
could not find a local physician to care for them
Medicare: Opting Out
• A survey in April 2012 by The Physicians Foundation of young
physicians (less than 40) in practice showed 57% were highly or
somewhat pessimistic about the future of medicine, 21% neutral, 18%
somewhat optimistic and 4% highly optimistic, with “government
regulations” being the primary reason given for concern Amednews.com
4/3/12
• A more recent survey (9/26/12) by The Physicians Foundation found
that 6 in 10 physicians of all ages would quit medical practice today
“if given an opportunity,” with 47% of physicians less than 40
agreeing
• 2/3 of employed physicians thought employment was a negative factor
in their career, but those who opted for employment did so “for
economic security and relief from an extreme regulatory
environment.”
• The survey also found physicians working fewer hours, 52% have
limited Medicare access, 26% have closed access
Medicare: Opting Out
• Who will care for the elderly in the
United States, now that the “social
contract” has been broken?
Medicare: Opting Out
•“Opting Out” of Medicare
How common is it for physicians to “opt out”?
What benefits and problems do they face
when they do?
Is it ethical and/or moral to “opt out”?
Medicare: Opting Out
The 1989 Budget Reconciliation Act, the1997
Balanced Budget Act and HIPAA(1996) have had
major implications for Medicare Providers
By 1990, Medicare was fully socialized: fees and
benefits were set, subject to federal law and
enforcement, and neither physicians nor patients could
“Opt Out” of the system
Options were “Participating” and “Non-Participating”
Medicare: Opting Out
• However, HIPAA created an third option, written into law in 1997:
Social Security Act, Sections 1128, 1156, and 1892
• A physician could “Opt Out” of Medicare
• As to his or her fees and office based services, the physician could
sign a Private Service Contract with Medicare or Medicare Eligible
patients, and charge fee for service
• All other services (lab, radiology, hospitalization) could still be
ordered by an “Opted-Out” physician without changing the patient’s
eligibility under Part A or B, now D
• Limitations included non-emergency notice to the patient, a formal
written document renewable every 2 years, a 6 month grace period to
reenter by the physician, approval of the contract written by the
physician by the area Medicare Office
Medicare: Opting Out
• A physician who Opts-Out is not subject to
any aspect of the False Claims Act or
HIPAA, including any and all privacy and
EHR requirements
• Overhead costs (personnel, hardware,
software, insurance costs, legal costs and
compliance measures) fall dramatically
• Fees can fall dramatically
Medicare: Opting-Out
Is It “Ethical” to Opt-Out?
•The Original “deal” has been unilaterally broken
by the Federal Government
•Patients can no longer find physicians willing
to provide full medical care…or the kind of care
the same physicians provide others…due to
Medicare restrictions and laws
•Is it ethical not to Opt Out?
Sample
Personal
Service
Contract with
Approved
Language
Is it ethical to stay in Medicare?
The Challenge: To Provide Competent,
Compassionate and Affordable Health Care…
Fair to all of your patients, to your staff and to
you and your family…not to avoid caring for
Medicare patients or to provide them with
“minimal” care
Medicare: Opting Out
•
•
•
•
•
•
•
My Experience in 1998…
The Steps I Took…
Publish your “Special Medicare” fees
Not Concierge Care, but rather “Simple Care”
The Deal I made…one I could live with…
The Backlash…did not materialize
Costs to the Patient (notice that the MC deductible is
$140 and the co-pay is 20%, since MC pays 80%)
• Talk to your patients…
Medicare Fraud and Abuse Law
•“…do what is best for your patients, think twice
before accepting free money, and don’t sign
anything you don’t understand. …[A]nd take
comfort from the existence of another form of
professional judgment: prosecutorial discretion.”
•William Sage, MD, JD JAMA 282 1179-81 (September
22/29) 2000
Thank You