Legal Intelligencer / Law.com article by Lamb McErlane Health Law Attorneys Vasilios J. Kalogredis, Esq. and Sonal Parekh, Esq.

Participation in Medicare ordinarily requires physicians and practitioners to submit claims on behalf of beneficiaries and comply with statutory charge limits. However, Section 1802 of the Social Security Act, as amended by the Balanced Budget Act of 1997 and the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), permits certain practitioners to opt out of Medicare. This election allows eligible providers to contract privately with beneficiaries and bypass Medicare’s reimbursement system. While opting out provides autonomy and flexibility, it imposes exacting compliance obligations. This article analyzes the statutory and regulatory framework governing opt-out status, summarizes compliance requirements, and highlights the consequences of failure to adhere to them.

Medicare Opt-Out Provisions.

The Centers for Medicare & Medicaid Services (CMS) provides guidance relative to its opt-out provisions in Chapter 15, Section 40 of the Medicare Benefit Policy Manual. Pursuant to these rules, physicians (MDs, DOs, dentists, podiatrists, and optometrists) and certain non-physician practitioners (including nurse practitioners, physician assistants, CRNAs, midwives, clinical psychologists, clinical social workers, and dietitians) may elect to opt out. Chiropractors, physical therapists, and occupational therapists in independent practice are expressly excluded from eligibility of opting out of Medicare. However, proposed bipartisan legislation, the Medicare Patient Choice Act (H.R. 4204), was introduced to the House of Representatives in June 2025, which (if passed) would allow certain healthcare providers, such as physical therapists, occupational therapists, speech-language pathologists, audiologists, and chiropractors, to opt out of the Medicare program.

An opt-out election applies globally: a physician cannot opt out for some patients or some services while continuing to bill Medicare for others. For the duration of the opt-out period, no Medicare payments may be made either to the provider or to beneficiaries for services furnished by that provider, subject to limited exceptions for emergency and urgent care.

Requirements to Opt-Out

1. Opt-Out Affidavit: Providers must file an affidavit with all applicable Medicare Administrative Contractors (MACs) declaring that, for the two-year opt-out period, they will provide covered services to, and accept payment from, Medicare beneficiaries only through private contracts, except in emergency or urgent care situations. The affidavit must contain detailed identifying information and explicit acknowledgments of Medicare payment restrictions. For affidavits filed on or after June 16, 2015, opt-out status automatically renews every two years unless the provider affirmatively cancels at least 30 days before the renewal date.
2. Private Contracts: Providers must enter into a written private contract with each Medicare beneficiary they treat. These contracts must: (i) be signed prior to furnishing services, (ii) clearly state that the patient accepts full financial responsibility and waives Medicare reimbursement, (iii) affirm the patient’s right to seek care from non-opt-out providers, and (iv) disclose that Medigap and other supplemental insurance will likely not cover such services. Copies must be retained for the entire two-year period and furnished to CMS upon request.
3. Emergency and Urgent Care Exception: Opt-out providers are not required to use private contracts in emergency or urgent care situations. If an opt-out provider furnishes emergency or urgent care items or services to a Medicare beneficiary that has not signed a private contract, the provider must submit the claim to Medicare on behalf of the beneficiary relative to such services and may collect no more than the Medicare limiting charge.[1] However, if the beneficiary had previously entered into a private contract (before the onset of the emergency or urgent medical condition), then the emergency or urgent care services are to be furnished pursuant to the terms of the private contract.[2]

Maintaining Opt-Out Status

Maintaining opt-out requires strict and ongoing compliance. Key obligations include: (i) furnishing all Medicare-covered services exclusively under valid private contracts (except emergencies/urgent care); (ii) prohibiting claim submission to Medicare, directly or indirectly; (iii) retaining copies of all private contracts for audit purposes; and (iv) ensuring internal compliance systems prevent accidental billing of Medicare.

Failure to comply—even inadvertently—can nullify opt-out status. Examples include submitting a claim to Medicare, accepting Medicare payments, failing to execute compliant private contracts, or neglecting recordkeeping obligations.

Consequences of Noncompliance

A physician or practitioner who fails to properly opt out (e.g., by not filing affidavits correctly or using non-compliant private contracts) will have their attempted opt-out nullified. All private contracts entered into during the defective opt-out period are void, and the provider reverts to Medicare participation, subject to statutory charge limits.

A provider who fails to maintain opt-out (e.g., by knowingly submitting claims, failing to use valid contracts, or not complying with emergency care billing rules) faces similarly severe consequences. Fortunately, if a Medicare beneficiary subject to a valid private contract with an opt-out provider nonetheless submits a claim to Medicare, the submission does not automatically constitute a violation by the provider and does not invalidate the private contract.

If a violation is discovered by the MAC, the provider is given 45 days to explain the circumstances surrounding the claim submission, provide additional information, and/or demonstrate good-faith remediation, such as refunding improper payments or correcting the clerical or administrative error that caused the claim submission. Absent correction, all private contracts are voided, opt-out status is nullified for the remainder of the two-year period, and the provider must resume Medicare billing. Providers cannot reattempt opt-out until the current term expires. In the event the claim was submitted by the Medicare beneficiary subject to a private contract: (i) CMS will deny the claim; (ii) the beneficiary will remain fully responsible for payment under the terms of the private contract; and (iii) the provider will not likely face consequences relative to failing to maintain his/her opt-out status.

Practical Implications for Attorneys and Providers

For attorneys advising physicians, dentists, and other practitioners, it is critical to underscore that Medicare opt-out obligations are continuous and unforgiving. Common pitfalls include:

• Late or incomplete filing of affidavits with all relevant MACs.
• Use of non-compliant or boilerplate contracts that fail to meet CMS’s detailed requirements.
• Inadvertent Medicare billing by staff or billing vendors.
• Failure to maintain records of private contracts.

During the opening, sale, or closure of a practice, attorneys must ensure that opt-out status is properly addressed to avoid jeopardizing compliance. Providers should implement robust compliance systems, educate staff, and consult counsel before executing contracts or billing practices that might affect opt-out status.

Opting out of Medicare offers providers autonomy in setting fees and contracting directly with patients, but it also imposes complex regulatory obligations. Missteps can expose providers to financial liability, loss of opt-out status, and unanticipated reentry into Medicare’s reimbursement system. Attorneys play an essential role in guiding practitioners through this process, ensuring strict compliance with statutory and regulatory requirements, and safeguarding both provider practices and patient interests.

If you have any questions or if we may be of further assistance regarding compliance or health law matters, please feel free to contact Bill Kalogredis, Esq. or Sonal Parekh, Esq.

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Vasilios J. (Bill) Kalogredis, Esq. has been advising physicians, dentists, and other healthcare professionals and their businesses as to contractual, regulatory and transactional matters for over 50 years. He is Chairman of Lamb McErlane PC’s Health Law Department. Bill can be reached by email at bkalogredis@lambmcerlane.com or by phone at 610-701-4402.

Sonal Parekh, Esq., is an associate at Lamb McErlane PC who focuses on healthcare transactional matters and a broad range of healthcare regulatory-related issues on behalf of healthcare systems, physicians, dentists, and other healthcare providers, and is a pharmacist by education and training. Sonal can be reached by email at sparekh@lambmcerlane.com or by phone at 610-701-4416.

*This article is for educational purposes only and is not intended to be legal advice. Should you require legal advice on this topic, any health care matter, or have any questions or concerns, please contact Vasilios J. (Bill) Kalogredis, Esq. or Sonal Parekh, Esq.

[1] See 42 C.F.R. § 405.440(b).

[2] See 42 C.F.R. § 405.440(c). It is important to note that a private contract may not be entered into during a time when the Medicare beneficiary is in need of emergency or urgent care services.