Should you opt out of medicare?

In 1945, President Harry Truman sent a message to Congress asking for legislation establishing a national health insurance plan, which created uproar. At the end of Truman’s administration, he’d backed off the idea for universal coverage. Two decades of debate ensued because opponents, like the American Medical Association, warned of the dangers of “socialized medicine.” Yet, administrators in the Social Security system and other leaders remained focused on the idea that such a program would benefit older Americans.

On July 30, 1965, President Lyndon Baines Johnson signed the Medicare and Medicaid programs into law in Independence, Missouri, at the Truman Library. For $3 per month, people 65 and older were told that they could sign up for Medicare Part B. The first to enroll? Former President Truman. So what has happened to a program that was supposed to provide senior citizens with excellent health care from our country’s physicians?

Today, doctors have three choices: accept Medicare payments, be a nonparticipating Medicare physician, or opt out of Medicare entirely. Many physicians are unaware of what being a nonparticipating physician means versus opting out. A nonparticipating physician is enrolled in Medicare, meaning the practice sees Medicare patients, but the physician hasn’t agreed to accept assignment for all Medicare patients. This allows the physician to bill the beneficiary “up front” for services.

The patient then submits the bill and Medicare reimburses the patient rather than the physician for Medicare’s share. Opting out means the physician doesn’t enroll in Medicare at all and doesn’t fill out the forms patients need to submit to Medicare. The patient can’t bill Medicare for anything the doctor charges in the office, though hospital charges would still be covered. In essence, Medicare patients become cash paying.

Hassles and dissatisfaction

Attend a medical meeting or talk to other physicians and quite often there is a troubling discussion focusing on how unhappy doctors are with Medicare, and whether they should become non-participating with Medicare or even opt out of the system entirely. On November 18, 2008, the Physicians’ Foundation, an organization founded in 2003 and focused on funding research aimed at broad-based healthcare improvement, conducted a national study of practicing physicians.

Of the nearly 12,000, the reported reasons for the widespread frustration with the Medicare system among primary care physicians and specialists included increased time dealing with non-clinical paperwork, difficulty receiving reimbursement, and burdensome government regulations. According to the survey, these issues keep them from the most satisfying aspect of their job: “patient relationships.”

Specifically, 94 percent of the physicians who answered the survey indicated nonclinical paperwork has increased in the last three years and 63 percent of the respondents said this has caused them to spend less time per patient. Furthermore, 12 percent have closed their practices to Medicare patients, and 82 percent of the physicians said their practices would be “unsustainable” if proposed cuts to Medicare reimbursement were made.

Today, people on Medicare are facing a serious dilemma. A June 2008 report from the Medicare Payment Advisory Commission, an independent federal panel that advises Congress about Medicare, reported that 29 percent of the Medicare beneficiaries it surveyed who were looking for a primary care doctor had a problem finding one. This is an increase from 24 percent the year before.

Furthermore, a 2008 survey by the Texas Medical Association found that while 58 percent of that state’s doctors took new Medicare patients, only 38 percent of primary care doctors did. Daniel Cosgrove, MD, is an internal medicine physician and the owner of the Wellmax Center, a group practice based in the LaQuinta Resort and Club in La Quinta, California. Cosgrove has been in private practice for 12 years and opted out of Medicare 10 years ago.

The decision has allowed him to take each patient and build a “Personal Health Portfolio,” instead of just asking, “What are you here for today?” Cosgrove says he isn’t concerned about the national healthcare picture but about each patient he sees. Approximately one third of his patients are of Medicare age.

“Government intrusion inhibits quality; it’s scary,” he says. “The government supports second-rate medical care, and I wanted to escape its clutches. When I order a bone density test for a man to see if he has osteoporosis—which 5 percent do—Medicare would question my decision.” Or, if he screened an ovary and found nothing, Medicare wouldn’t pay. If he found a complex cyst on the ovary, then Medicare would pay for repeat pelvic ultrasounds, as well as associated lab tests.

George Watson, DO, owner of the Watson Medical Group in Park City, Kansas, has been practicing medicine for 30 years, and until a few years ago, he always worked within the insurance system. Although he didn’t know it at the time, Watson says that opting out of Medicare in 2003 was the best medical decision he’s ever made. “It now gives me the freedom to give 100 percent of my attention to each patient,” he says. “I didn’t realize how much time I was wasting playing the paperwork game with Medicare.”

When he took Medicare, Watson had three employees doing nothing but filing insurance claims. Without Medicare claims, his office is much more efficient, and he’s opted out of all insurance plans. Administrative work is 50 percent less, because all his Medicare patients pay by cash, check, or credit card. Initially, patients were upset, but now they’re happier because he spends more time with them. Patients are willing to pay for 15 minutes or 30 minutes of his time. What’s more, “I make more money today than when I was working with insurance,” he says.

A second reason Watson opted out was to provide some services not covered under Medicare such as an IV treatment to remove lead from the body. With Medicare, there would have been no reimbursement. Steven Park, MD, an otolaryngologist who focuses on sleep and breathing problems, has been practicing medicine for 11 years in New York City. In 2008, he became a non-participating Medicare physician. Four years ago at his previous location, which was primarily residential, 25 percent of his patients were on Medicare. Since he moved his office, his population is in more of a business district, and that number has dropped to 5 percent.

“I don’t care about the reimbursements,” says Park. “What affects my decision to stay with any carrier is the hassle factor. What tactics are often being used to delay payment, and how much money does it cost my staff and I to get paid that $40 or $100.” What Park calculated was even though he only had 5 percent of his patients on Medicare, they were taking up to 40 to 50 percent of his office’s administrative time. In New York, Medicare has 45 days to pay doctors, but according to Park, Medicare plays by its own rules. It uses tactics such as reviewing medical records and saying a particular claim is under review for no valid reason.

“When Medicare does this, it’s like a mini audit,” he says. Medicare has tens of thousands of pages of rules, regulations, and guidelines that govern the financing and delivery of health care, including physician payments. Congress sets the prices for more than 7,000 medical procedures, and the government specifies under what conditions the reimbursement bill will be paid based on billing codes. Robert Moffit is the director of The Heritage Foundation’s Center for Health Policy Studies, a conservative think tank in Washington, D.C., that researches how to reform Medicare, how to ensure access to prescription drugs, and how to improve access to private healthcare coverage. He says, “Physicians call it the hassle factor because the administrative costs for Medicare are shifted onto doctors, hospitals, and other health professionals.”

Medicare creates an atmosphere of anxiety for physicians due to a fear of being audited and investigated, which can result in fines and penalties, with jail time for true fraud. In fact, “many physicians hate Medicare,” Moffit says. “Yet, 90 percent take Medicare because it’s responsible for about 40 percent of their practices. There is deep concern that the demoralization of the medical profession will spread.” Kent Holtorf, MD, an endocrinologist and the medical director of the Holtorf Medical Group in Torrance, California, wants to help. He is launching a franchise for teaching doctors how to have a cash based practice. This turn-key franchise will provide marketing advice on how doctors can get the insurance companies out of their practices. Even though Holtorf bills less per hour without Medicare, the doctors in his practice make almost twice as much as Medicare-dependent physicians.

The quest for quality

Holtorf opted out of Medicare 10 years ago after deciding against becoming just a nonparticipating physician. He wanted to take a step back and decide what was the best way to work for the patient, not the insurance company. “I was frustrated with the insurance model dictating what medicine I could practice and how I treat each patient,” he says. “If I wanted a certain test on a patient, Medicare would say it’s not medically necessary. Medicare was limiting the amount of tests, medicines, or therapies I could use.” Holtorf treats chronic fatigue syndrome. Certain tests are necessary to adequately treat these patients, but an example of Medicare’s intrusion he offers is that it refused to pay for tests for natural killer cell function, a marker for chronic infections.

“Medicare called it experimental.” He says when checking for thyroid conditions, Medicare will only pay for the typical TSH blood test. “That test misses 80 percent of the people with low thyroid,” he says. Before Park decided to become a nonparticipating physician, he carefully considered the effect it would have on long-time patients and those on fixed incomes. In an attempt to accommodate and keep these patients, he set his follow-up fees lower, allowing patients to see him out-of network. Since Medicare has out-of-network benefits, patients pay the money “up front.” His office prints out the
diagnosis claim so the patient can send it into Medicare and be paid.

Although Park admits it’s a drop in income, he says it’s worth it not to have payment issues every week. Meanwhile, Holtorf says it’s time to let the doctor do what’s necessary for patients to get better so they don’t need to come back. “Currently, doctors are opting out of Medicare because the 30 percent Medicare reimbursements don’t even cover the cost of the service,” he says.

“Doctors are just miserable because they’ve allowed insurance companies to totally take over. The whole reason they went into medicine is just going away.” When Holtorf decided to opt out of Medicare, 25 percent of his patients were Medicare patients. He says 90 percent of these patients stayed with him after he opted out. When necessary, he’ll spend 90 minutes with a patient–whatever time it takes to get that individual better. Cosgrove says that because of Medicare’s rules, a welltrained Medicare doctor learns not to order many tests, to get the patient out quickly and “to dumb down the quality of medicine.”

Instead, his “early detection” clinic uses technology and screens each patient before there are symptoms. For example, bladder cancer is on the rise, but Cosgrove says that Medicare says the test is inappropriate,  doesn’t recommend it, and won’t pay for it.

Where we’re headed

Right now, the federal government claims there is no mass movement by doctors leaving the system, despite doctors’ claims of dissatisfaction with the system. According to Participating Physician Data for 2009 from the Center for Medicare and Medicaid Services, there are 619,978 MDs and DOs practicing medicine in the United States. Currently, 598,245 participate in the Medicare program (95.5 percent). Statistics indicate that 21,733 (3.5 percent) are nonparticipating physicians.

Ellen Griffith, a spokesperson in the Office of External Affairs at the Centers for Medicare and Medicaid Services in Washington D.C. says, “It is a good ballpark estimate to say that fewer than 1.5 percent of the physicians practicing medicine today have opted out of Medicare, while 95.4 percent have elected to accept Medicare payment rates under the Medicare physician fee schedule as payment in full for their services and to bill the beneficiary only for the 20 percent coinsurance.”

Griffith says she hasn’t heard or seen any mass movement of physicians opting out of Medicare and she really doesn’t expect such a trend. Yet, the Medicare picture isn’t as rosy as it seems. According to Moffit, Medicare pays 81 cents on the dollar, which represents private sector payments. “Physicians are leaving Medicare due to reimbursement problems. When doctors take Medicare patients, they lose money,” he says, unless they can make up the loss by shifting the loss to their private sector payers. Annually, cost shifting from Medicare and Medicaid adds $1,800 to each family premium, according to Heritage Foundation data.

A matter of right or wrong?

Some people in the healthcare arena see the issue more globally—as part of an attitude about an American’s right to health care in general. Mark Waymack, PhD, an associate professor of philosophy who focuses on healthcare ethics at Loyola University in Chicago says opting out of Medicare is quite complex. “Part of the issue is an ambivalence in the United States on how we conceive health care and want to have it. Yet, there are two different ways of looking at the same issue.”

Waymack says one model of medicine that many physicians subscribe to is the business model. They consider themselves entrepreneurs or business people and they want to make money. The other side of the spectrum is the business model that looks at health care as a social good. The people that support this model believe that every American has a right to health care—and he says most Americans in general would agree with that statement as
long as they don’t have to pay for it. How else do you explain Medicare, Medicaid, and programs run by the state but funded by the federal government?

The programs are designed to insure health care access for some of the most vulnerable people in our society. In its purest state, health care is a free market commodity. However, according to Waymack, not in a good way. When a person is really sick, he goes to a physician and then follows the physician’s instructions because doing so will resolve the illness. Since the creation of Medicare and other health insurances, Americans are insulated from actual cost because rarely is a check written up front for all the costs. In Waymack’s opinion, “Many patients don’t care how much the test cost because they are not paying for it as long as they have insurance,” he says.

This attitude leads to an overuse of the healthcare system and increased costs. Cosgrove agrees there is a deception regarding cost created by insurance. Although he sees resort patients who need care, he has a large practice with private patients with discretionary income. “Doctors who are looking to practice quality medicine should come work with us,” Cosgrove says.

In his opinion, whatever changes are proposed for Medicare won’t work. “Consumers should keep in mind they’re not really the customer, people put up with Medicare because they think it’s ’free.’ It’s not free. We are all paying for it.” Waymack says proponents of health care as a social model have another factor to battle—the public. “The social model is up against not only physicians wanting to practice as free entrepreneurs but against individual consumers of health care demanding and getting what they want,” he says.  “Should we frown or criticize doctors for opting out…. in a sense we have.”

At press time, the status of healthcare legislation was still uncertain, but Holtorf firmly believes that if the new healthcare bill is passed, the proposed Medicare cuts won’t even cover the cost of each service. He says, “There is a movement across this country that many people don’t realize is occurring. I know more doctors are thinking of opting out. They are just waiting to see what the new health bill will look like. Most likely, doctors will be leaving the system in droves.”

The years ahead

Moffit says the government needs to inject real competition into the healthcare system where healthcare plans and providers—including traditional Medicare and Medicaid— compete directly for consumer dollars. “Doctors would like this better because with more options it will mean they won’t be subjected to the centralized political control this new bill proposes,” he says. “Right now, doctors are working for the federal bureaucracies, not the patient.”

Watson, the current president of the Association of American Physicians and Surgeons, a nationwide organization with MDs and DOs, claims many doctors are fed-up with the entire system. “The current thousands of pages of regulations have doctors in handcuffs,” he says. “What the Senate and House of Representatives are trying to pass right now is a fraud. That’s why I won’t accept another 2,000 pages that are going to put me in a bind.” Holtorf’s advice to young doctors is to keep in mind if they stay with Medicare, as well as other insurance plans, “you’re not practicing medicine anymore, you’re just a billing company.”

Watson recommends doctors opt out of Medicare now. Otherwise, they will automatically participate in the new bill. Moreover, Watson has dropped his membership in the American Osteopathic Association (AOA) due to its support of the new bill. According to Waymack, just as bioethicists are not thrilled with concierge medicine, they don’t approve of doctors opting out of Medicare. He says they believe that practicing medicine is more than just a business—it’s about doctors responding to the suffering of patients who come to them. In that sense, medicine doesn’t work like a regular business. “If
opting out is a political protest that Medicare ought to pay more and this is a way to get public attention, one might think a little differently of this action,” he says. The elderly are at particular risk if more physicians opt out, Waymack says. This is because they are less likely to make major changes in their lives such as finding a new physician if theirs opts out.

“This makes them vulnerable. They are a captive audience.” Whatever the ethical slant, Park says the wheel has been set in motion. “As Medicare gets more complicated and more bureaucratic, doctors will completely opt out,” he says. Three to four years ago, Medicare was one of the better paying carriers.

Now, Park says, it is one of the worst. In order to keep more doctors from dropping out, Medicare will need to streamline the process and follow its own rules, and if reimbursements are cut by 5 to 10 percent to keep costs down, “doctors will leave in droves.” In Park’s opinion, the healthcare system is so broken; he doesn’t have much hope for it even with a new law.

Waymack agrees that there is a problem with how we spend our Medicare dollars, but the problem isn’t unique to Medicare. There is wasted Medicare money on interventions that don’t do much good. For example, doctors are being reimbursed for procedures when it’s questionable whether the procedure will be beneficial or not, but there is an economic incentive to do it, even at the rate they are being paid.

As a healthcare ethicist, Waymack has his own words of advice to those just entering the medical field: “Think about the social good side of medicine as a profession. Medicine isn’t a job like selling automobiles or real estate—it’s a profession. Part of the baggage of that profession is not only certain privileges but also certain obligations. In my mind, the long-term solution rather than opting out is to persuade, argue, or lobby for a more rational Medicare reimbursement system.”