Dear Mr. Colombo:
Thank you for contacting me regarding Medicare private contracting, the provisions of Section 4507 of the Balanced Budget Act of 1997 (Public Law 105- 33) and S. 1194, the Medicare Beneficiary Freedom To Contract Act of 1997.
Under the provisions of Section 4507 of the Balanced Budget Act (BBA) of 1997, physicians are allowed to enter into "private contracts" with Medicare enrollees - an option not previously granted under the law. The BBA allows physicians to contract with Medicare enrollees and set their own fees for services covered by Medicare. These private contracts, which must be signed before any services can be furnished, must state explicitly that the patient must pay the entire fee charged by the physician for these services, the physician may not bill Medicare and the contracts may not be signed in emergencies.
Physicians who want to privately contract with Medicare enrollees for services covered by Medicare must declare that they will not bill Medicare for any services for two years. This ensures that all Medicare enrollees are trated equitably and are informed in advance whether a doctor accepts Medicare or will expect the patient to pay the entire bill. It also prevents private contracts from creating a new opportunity for fraud by disreputable physicians who could attempt to double bill both Medicare and the patient.
Under the BBA, Medicare enrollees can still buy services not covered by Medicare. This does not change under the law. When Medicare covers a service, Medicare pays the bill. When Medicare does not cover a service, such as routine annual physicals, cosmetic surgery or hearing aids, Medicare enrollees can pay the bill out of their own pockets. No private contract is needed. When Medicare coverage is uncertain in a particular case, a physican may provide the service, submit the bill to Medicare, and notify the enrollee in writing that if it is denied, the enrollee will pay the bill.
S. 1194, the Medicare Beneficiary Freedom To Contract Act of 1997, was introduced by Senator Jon Kyl on September 18, 1997, and referred to the Senate Committee on Finance, where hearings were held on February 26, 1998. S. 1194 would eliminate the BBA provisions regarding Medicare provate contracting which: require physicians entering private contracting to file an affidavit with the Secretary of Health and Human Services; prohibit physicians with private contracts from billing Medicare (or receive Medicare payments) during the two-year period. In addition, S. 1194 would allow Medicare to collect only the minimum information necessary from physicians to assure that the Medicare does not pay for services that have already been paid for by the Medicare enrollee under a private contract.
I am opposed to Senator Kyl's bill because it would allow physicians to decide on a service-by-service and patient-by-patient basis whether or not to accept Medicare payment or to enter into a private contract with a patient. It is likely that private contracts will lead to higher costs for Medicare beneficiaries and to increased fraud and abuse by physicians who could bill both patients and Medicare for the same services.
I appreciate hearing from you regarding this important issue of mutual concern. Please feel free to contact me if I may be of further assistance.
Best Regards.
John Glenn
United States Senator
JG:kco
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