How Many Physicians Have Opted Out of the Medicare Program?

Medicare provides health insurance coverage to 65 million adults–nearly 20% of the U.S population—and is a major source of revenue for providers, including physicians and other clinicians. In 2022, Medicare spending on Part B services (including physician services, outpatient services, and physician-administered drugs) accounted for nearly half (48%) of total Medicare benefit spending, and this share is expected to grow to more than half (52%) by 2032. Physicians are not required to participate in Medicare, though the vast majority of them choose to do so.

Every year, the Centers for Medicare and Medicaid Services (CMS) updates Medicare payments to physicians under the physician fee schedule through rulemaking, as required under law. Over the years, some have raised concerns that physicians would opt out of Medicare because Medicare payments for physician services are lower, on average, than payments from private insurers, potentially leading to a shortage of physicians willing to treat people with Medicare.

This brief builds on previous KFF analyses by providing the most recent data on the extent to which non-pediatric physicians are opting out of Medicare, by specialty and by state, in 2023, based on data published by CMS as of June 2023. (See Methods box for details).

Highlights:

• One percent of all non-pediatric physicians have formally opted-out of the Medicare program in 2023, with the share varying somewhat by specialty type, and highest for psychiatrists (7.7%).
• Psychiatrists account for the largest share (40.2%) of all non-pediatric physicians who have opted out of Medicare in 2023.
• Less than two percent of physicians have opted-out of Medicare in all but four states and the District of Columbia, where the rate is slightly higher: Alaska (3.1%), Colorado (2.3%), Wyoming (2.3%), Idaho (2.1%), and the District of Columbia (2.0%).
  

Three options for physicians

Currently, physicians and other practitioners choosing to treat patients with Medicare and receive payments from Medicare for these services must enroll in Medicare as a Medicare provider. Physicians may either agree to be a participating provider or non-participating provider. Providers who do not want to enroll in Medicare, treat patients with Medicare, or receive Medicare payments are required to sign an “opt out” agreement with their patients.

• Participating providers agree to accept “assignment” on all Medicare claims for alltheir Medicare patients, which means that they have signed a participation agreement with Medicare, agreeing to accept Medicare’s fee schedule amounts as payment-in-full for all Medicare covered services. Medicare beneficiaries seeing a participating provider can only be liable for the cost sharing required by Medicare. Providers have several incentives to be participating providers, such as being paid higher rates (5% higher) than the rates paid to non-participating providers. The vast majority (98%) of physicians and practitioners billing Medicare are participating providers.

• Non-participating providers accept Medicare patients, but can choose whether to take assignment (i.e., Medicare’s approved amount) on a claim-by-claim basis. Unlike participating providers, who are paid the full Medicare-allowed payment amount, non-participating physicians who take assignment are limited to 95% of the Medicare approved amount. In 2021, 7% of fee schedule claims by non-participating providers were paid on assignment. Physicians who choose to not accept assignment can charge beneficiaries more than the Medicare-approved amount, (“balance bill”) but not exceeding 15% of the fee-schedule allowed amount. Medicare patients are financially liable for this additional amount plus applicable deductibles and coinsurance amounts.
• Opt-out physicians and other practitioners must sign an affidavit to “opt-out” of the Medicare program entirely. These providers enter into private contracts with their Medicare patients, allowing them to bill any amount they determine is appropriate. Providers who have opted-out of the Medicare program must opt-out for all of their Medicare patients. Medicare patients seeing a provider who has opted out of the Medicare program must sign this agreement and agree to be financially responsible for the entire cost of any services received. Neither the provider nor the patient can submit a bill to Medicare for reimbursement.Opt-out agreements last for two consecutive years and are automatically renewed every two years. According to CMS, physicians and other practitioners are not allowed to opt-out of Medicare if they are a Medicare Advantage provider or furnish services covered by traditional Medicare Part B. Providers who have opted-out of the Medicare program must enter a private contract with each of their Medicare patients that states that neither party is allowed to receive payment from Medicare for the services performed.

What Share of Physicians Have Opted Out of Medicare?

1.1 percent of non-pediatric physicians have formally opted-out of the Medicare program. As of June 2023, 11,039 non-pediatric physicians have opted out of Medicare, representing a very small share (1.1%) of the total number active physicians, similar to the shares reported in 2013 and 2022.

While the overall opt-out rate is 1.1 percent, opt-out rates are somewhat higher for certain specialties, such as psychiatry and plastic and reconstructive surgery.  In 2023, 7.7 percent of psychiatrists opted out of Medicare, followed by 4.2 percent of physicians specializing in plastic and reconstructive surgery and 2.8 percent of physicians specializing in neurology (Figure 2).

Psychiatrists are disproportionately represented among the 1.1 percent of active physicians who have opted out of Medicare. Psychiatrists account for the largest share (40%) of opt-out physicians, followed by physicians in family medicine (21%), internal medicine (12.6%), and obstetrics/gynecology (6%) (Figure 3).

In addition to physicians, another 4,229 select clinical professionals with doctorate degrees (i.e. oral surgeons, podiatrists, and optometrists) have also opted-out of the Medicare program, with oral surgeons accounting for the vast majority (94%) of this group (Table 1).

Less than two percent of physicians have opted-out of Medicare in all but four states and the District of Columbia. As of June 2023, Alaska (3.1%), Colorado (2.3%), Wyoming (2.3%), Idaho (2.1%), and the District of Columbia (2.0%) have the highest rates of non-pediatric physicians who have opted out of Medicare, though in each case the share is below 4% (Figure 4). Nine states (Wisconsin, Ohio, Mississippi, Iowa, Minnesota, Nebraska, South Dakota, West Virginia, and North Dakota) have less than 0.5% of non-pediatric physicians opting out of Medicare.

Discussion

This analysis shows that a very small share of non-pediatric physicians are opting-out of Medicare, similar to prior analyses dating back to 2013. Notably, psychiatrists have the highest opt-out rates and are disproportionately represented among physicians who have opted out of Medicare in 2023. This is consistent with previous analyses that found that psychiatrists are less likely than other physician specialties to accept new patients with Medicare or private insurance, suggesting that psychiatrists may prefer to be paid directly from patients rather than insurers, to avoid the administrative burden and have the flexibility to charge higher fees.

This analysis also finds little state-level variation in the percent of physicians opting-out, with virtually all states having opt out rates below 2%. Despite questions about whether lower fees in Medicare relative to private insurance may discourage physicians from seeing Medicare patients, very few physicians are choosing to opt out of Medicare, which could be explained by several factors. The aging of the U.S population, and consequently, the increase in number of Medicare beneficiaries, means that for many physicians, older adults with Medicare coverage account for a relatively large share of their patient population and revenues. For these physicians, the loss of revenue resulting from opting out of Medicare would be substantial, notwithstanding the difference in payment rates between Medicare and private insurance or self-pay. Other factors, such as physician-level characteristics (e.g., years of practice and age), practice-level characteristics (e.g., solo versus group practices), and patient-level factors (e.g., average income of individuals in an area) may also play a role in physician decision-making.

Methods

This analysis uses Medicare opt-out affidavit data from the Centers for Medicare & Medicaid Services (CMS), as of June 2023 (https://data.cms.gov/Medicare-Enrollment/Opt-Out-Affidavits/7yuw-754z). The scope of this analysis was limited to non-pediatric physicians, given its Medicare focus, as well as a select group of other clinicians with doctorates: optometrists, oral surgery, and podiatrists. Therefore, pediatricians and other non-physician specialists, such as certified nurse midwives, clinical social workers, and physician assistants, were excluded from the total number of opt-out physicians. Of note, while some clinicians under the oral surgery specialty group may also hold a medical degree (MD or DO), for the purpose of our analysis, this analysis grouped these physicians in accordance with the primary specialty (oral surgery) associated with their National Provider Identifier (NPI) in CMS’ opt-out file. This analysis obtained data on the number of active allopathic and osteopathic physicians by specialty and state from Redi-data, Inc, which utilizes data from the American Medical Association (AMA) Physician Masterfile. One limitation of this analysis is that due to data source limitations, it was not possible to exclude active physicians in professional activity other than patient care, such as research and administration. The specific physician specialty groups identified in this analysis were selected if they were included in the list of opt-out providers provided by CMS.  In order to gain a more complete picture of the distribution of opt-out providers in each specialty category, this analysis grouped some subspecialties under a broader specialty category, consistent with the specialty cross-walk provided by Redi-Data, Inc. Specifically, anesthesiology includes pain management as a subspecialty, obstetrics/gynecology includes reproductive endocrinology, and preventive medicine includes occupational medicine. The specialty group of internal medicine includes the following subspecialties: internal medicine (not otherwise specified), critical care medicine, gastroenterology, hematology, hospice & palliative medicine, infectious disease, nephrology, pulmonary disease, and rheumatology. The “surgery” specialty consists of the following surgical subspecialties: cardiac surgery, colorectal surgery, general surgery, hand surgery, micrographic dermatologic surgery, thoracic surgery, and vascular surgery. The following subspecialties are included in the “other” specialty:  addiction medicine, cosmetic surgery anesthetic medicine, Doctor of Medicine, hospitalist, integrative medicine, phlebology, undefined physicians, sleep medicine, osteopathic manipulative medicine, medical toxicology.

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