Paying a Visit to the Doctor: Current Financial Protections for Medicare Patients When Receiving Physician Services

With the recent decision to enact a 17th short-term “fix” to avert deep cuts in Medicare payments to physicians, Congress will likely return within the year to the question of whether and how to replace the widely-criticized formula that Medicare uses to calculate payments for physician services, called the Sustainable Growth Rate (SGR) system.1  For the most part, recent proposals on reforming the physician payment system leave intact current financial protections that shield beneficiaries from unexpected and confusing charges when they see physicians and practitioners.  These protections include the participating provider program, limitations on balance billing, and conditions on private contracting.  This issue brief describes these three protections, explains why they were enacted, and analyzes the implications of modifying them for beneficiaries, providers, and the Medicare program. Main Findings The participating provider program was enacted in 1984 for two purposes: (1) to assist Medicare patients with identifying and choosing providers who charge Medicare-approved rates; and (2) to encourage providers to accept these rates.  Given this program’s strong provider incentives, the number of participating providers grew rapidly across all states and today, the vast majority (96%) of eligible physicians and practitioners are “participating providers”—agreeing to charge Medicare’s standard fees when they see...

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