Recently we have heard several politicians informing us that Medicare’s current reimbursement rates are acceptable as proven by classic economic indicators. They quote statistics that show a gradual increase over the past few years of the number of physicians who participate in the Medicare system. They invoke the traditional economic rule that says there would be a decline in the number of participating physicians if physicians were dissatisfied with the rates, and certainly not an increase in their numbers. In this column I will outline the alternatives for physicians, and as you will see, the usual economic principles governing trade do not apply to Medicare. The options for physicians who treat the elderly are very limited.

Medicare recognizes three categories for physicians:

This category is the most familiar. These physicians accept Medicare’s allowed charges as payment in full for all of their Medicare patients. Medicare pays 80 percent of these charges directly to the physician and the patient (or supplemental insurance) must pay 20 percent. If the patient has supplemental insurance, Medicare automatically forwards medigap claims to the appropriate carrier for payment. Medicare pays participating physicians 5 percent more than nonparticipating physicians. Participating physicians are included in Medicare directories. Medicare carriers process claims of participating physicians more quickly and provide toll-free claims processing lines.

These physicians may decide on a case by case basis whether to accept assignment or to bill their patients more than the Medicare fee schedule. There are federal laws limiting what these physicians may charge. The effect of these laws combined with the 5 percent reduction provided in Medicare regulations have a net effect of allowing these physicians to charge 9.25 percent more than participating physicians. As noted above, these physicians are not in Medicare directories, cannot access the toll-free claims line, and have delayed payments. The payments go to the patient and must be collected from the patient.

These physicians do not participate in the Medicare program at all. They may treat Medicare patients using private contracts with the patients and may charge without the limits imposed by federal law. These physicians may not submit any claims to Medicare for a two-year period. Their patients may not be reimbursed by Medicare, or a supplemental insurance carrier, for any item or service furnished by the physician that would have otherwise been covered by Medicare had the physician been participating. It seems unlikely that any but the most-wealthy Medicare-aged patients would accept this.

Several other principles are worthy of mention. The first is that participating physicians may only change their status to nonparticipating during a short "open enrollment" period. Second, the government has shown its willingness to aggressively prosecute nonparticipating physicians for repeatedly violating the assignment agreement. Third, contracts between patients and opted-out physicians are complex and may require legal review. Finally, rules for treatment of emergencies are completely different, causing confusion.

So it seems that opting out means that you have basically decided not to treat any Medicare patients. Becoming a nonparticipating physician means you can increase your charges by meager 9.25 percent in exchange for significant possible collection problems. The choices suggest that the only recourse we have to the dilemma of falling reimbursement is to fight the political fight to improve reimbursement or to limit access to optimize the expenses-to-cost ratio of running a practice. Once again, we need to stick together.