MCBS Highlights: Barriers to Physician Care for Medicare Beneficiaries

The 1989 Omnibus Budget Reconciliation Act (OBRA 89) included physician payment reform, part of which was a limit on balanced billing. The provision limiting charges was implemented in 1991. Under this reform, physicians who did not accept Medicare assignment were prohibited from billing Medicare beneficiaries more than 140 percent of the prevailing charge for evaluation and management services, and 125 percent of the prevailing charge for all other services. With the implementation of the physician fee schedule in 1992, the limits on balanced billing became more stringent. Physicians who did not participate in Medicare were allowed 95 percent of the physician fee schedule amount for covered services from Medicare and could charge beneficiaries up to 120 percent of the fee schedule amount in 1992 and 115 percent of the fee schedule amount in 1993. In 1993, then, the actual amount that physicians could charge Medicare beneficiaries for covered services equaled 115 percent of the 95 percent allowed fee schedule amount—or 9.25 percent over the fee schedule rate. This limit has been in effect since 1993. Before the OBRA 89 reforms, limits on the amount physicians could charge beneficiaries for Medicare covered services were much higher. At the time these limits were implemented there was speculation from special interest groups that many physicians would stop treating Medicare patients, causing beneficiaries to have difficulty receiving medical care, even though at the time roughly 80 percent of physicians accepted assignment. Proposed legislation in the Senate (S 1194) and the House of Representatives (HR 2497) would allow physicians to enter into private contracts with Medicare beneficiaries for covered services that effectively circumvent the balanced billing limits. The proposed legislation would allow physicians to accept Medicare payment for covered services from some patients while entering into private contracts for the same services with other patients. The physician, then, would determine the amount charged to the beneficiary for services provided under private contracts and Medicare would pay for no portion of those services. The legislation is designed to allow better access to care for Medicare beneficiaries in response to anecdotal reports from beneficiaries that their physicians are unwilling to take them as Medicare patients.