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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.”

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  1. Good Evening

  2. Medicare: Opting Out “I’m From The Government and I’m Here to Help You”

  3. 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]

  4. 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”

  5. 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

  6. 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

  7. 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

  8. 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 Trillionwith 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!”

  9. Medicare: Opting Out Costs rapidly increased The late 70’s and early 80’s: Double-digit inflation throughout the economy Loans cost 18%, Credit Cards 24% Overhead costs (including salaries) rose at 12-14%

  10. 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 1982-1984

  11. 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

  12. 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

  13. 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

  14. 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 “take-home” part of the fee is 10-20% at the most

  15. 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

  16. 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

  17. 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

  18. 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)

  19. 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

  20. 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

  21. Medicare Fraud and Abuse Law The Fraud Enforcement and Recovery Act (FERA 2009) and the Affordable Care Act (ACA2010) 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

  22. 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.”

  23. 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” toutedby A.G. Eric Holder Compare: IRS audits < 1% of all taxpayers

  24. 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)

  25. 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

  26. 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

  27. 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)

  28. 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

  29. Medicare: Opting Out • The Usual Practice: • An audit shows a percentage over-billing or mis-billing, 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]

  30. 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

  31. 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 investigatedSee American Medical News “Medicare touts audit plan success as doctors decry ‘bounty hunters’” Vol 49:47 (December 18, 2006)

  32. Medicare: Opting Out A New Career? New Yorker, January 2001

  33. 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 4-week period that the accused fights the charges.” Alan Cates, Chief, Medi-Cal Fraud Prevention Bureau, Medicare Compliance Alert 5/15/00

  34. 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

  35. Medicare: Opting Out How Can You Protect Yourself? • Two Choices: • Full compliance and the purchase of an Errors and Omissions Policy • Opting Out

  36. 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

  37. 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

  38. 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

  39. 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?

  40. 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]

  41. 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

  42. 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

  43. Medicare: Opting Out • Who will care for the elderly in the United States, now that the “social contract” has been broken?

  44. 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”?

  45. 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”

  46. 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

  47. 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

  48. 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?

  49. Sample Personal Service Contract with Approved Language

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