December 1999 Bulletin

HHS still bars private contracts

Court ruling doesn't apply to services covered by Medicare

By Richard A. Hurd Jr., MD

Private contracting (PC), in the present context, refers to a fee-for-service arrangement between a physician and a Medicare enrollee that exists outside of the Medicare system. The recent Frontline headlines (October 1999 Bulletin), that "clarifications free private contracting," and "physicians don't have to leave Medicare to give care" are misleading in that this ruling addresses only the narrow issue of services not covered by Medicare. For the much more significant area of services that are covered by Medicare, section 4507 still requires physicians to "opt out" of Medicare entirely for two years as a precondition to PC.

Moreover, by declining to address the constitutionality of section 4507, the ruling is also a disappointment. Those interested in more details on PC, including a copy of the Opt Out affidavit, can find them at the home page of the Association of American Physicians and Surgeons at under the heading 1997 Balanced Budget. Scroll down the left frame to "issues." Below that you will find the 1997 Balanced Budget heading.

The ability to enter into contracts, and freely spend one's money for goods and services are fundamental features of American society, unless you happen to be a Medicare enrollee. That has been Health and Human Services' (HHS) position until challenged on legal and legislative fronts. For reasons of public policy, HHS opposes allowing doctors or Medicare enrollees to opt out of the system, preferring to keep everyone trapped in a company-store environment.

Begrudgingly, HHS consented to allow PC, as enunciated in section 4507 of the Balanced Budget Act of 1997. While legally allowing PC, section 4507 contains an onerous poison pill-the opt out provision-that most physicians will find impractical and unacceptable. Hence, for most physicians, patients, and services, PC remains de facto illegal. As HHS surely anticipated, until the opt out provision is dropped, PC will never be widely adopted.

What are the benefits of PC? For physicians, caught in the vise of impossible documentation requirements and below overhead reimbursement, the benefit is obvious.

Ease and convenience in choosing a physician, the desire to maintain confidentiality of medical records, or the desire to see a physician who does not accept Medicare insurance are some of the benefits for patients.We are told that when the current generation of seniors dies, the greatest intergenerational transfer of wealth in American history will occur. Presumably, not all seniors need depend on publicly funded welfare for their health care.

Why is the fight for PC important? First, the denial of this right to a selected class of individuals is discriminatory, and inconsistent with American principles. Second, PC, along with Medical Savings Accounts (MSA), are two of the last bastions of fee-for-service medicine as we knew it.

For those who think the battle is not yet lost, and who think we should not roll over meekly before the federal bureaucrats and the managed care juggernaut, PC is a tool to sustain an old and honorable profession, and to try to preserve what is left of the doctor-patient relationship.

Since January 1, 1998, I have not accepted Medicare insurance, and now that the regulations seem final, I have opted out of Medicare entirely, freeing myself for PC should patients desire.

If the federal government nurtured PC and MSAs as it did HMOs, and changed tax law as pertains to the deductibility of health insurance premiums, enormous power would be returned to the patient. Much can be done to restore our profession's health if third parties are eliminated from the decision making process, and their role as payers reduced or eliminated.

Richard A. Hurd Jr., MD, is a private practitioner in general orthopaedics.

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