American College of Physicians: Internal Medicine — Doctors for Adults ®

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Prospects dimming for expanded private contracting

From the June 1998 ACP Observer, copyright 1998 by the American College of Physicians.

By Kathleen Haddad

Prospects are dimming for passage this year of new legislation allowing physicians to privately contract with their Medicare patients.

At a meeting of the Heritage Foundation last month, Sen. Jon Kyl (R-Ariz.), architect of a bill that would expand private contracting, said that the measure lacked support from the Senate Finance Committee, including two key moderate Republican committee members—Sens. James Jeffords (Vt.) and John Chafee (R.I.). Sen. Kyl also said that opposition by the American Association of Retired Persons and the threat of a presidential veto contributed to the lackluster support.

Sen. Kyl's bill, the Medicare Freedom to Contract Act, would allow physicians to bill patients directly for Medicare-covered services, as long as the services are not also paid for by Medicare or supplemental insurance.

The Balanced Budget Act of 1997 already allows private contracting, but only if physicians "opt out" of Medicare for two years, a provision that effectively restricts the use of private contracting. The Kyl bill would eliminate the two-year opt-out requirement, allowing physicians to privately contract with Medicare patients for certain services while continuing to bill Medicare for other services for those same patients.

In testimony before the Senate Finance Committee earlier this year, ACP officials tested that the Kyl bill would create administrative problems and increase the potential for billing errors. The College also testified that the bill could decrease access and increase costs for Medicare patients if too many physicians in a given community turned exclusively to private contracting.

Committee Chair William Roth (R-Del.), who has not planned any further action on the Kyl bill, agreed with ACP's position that the issue was not ready for legislation and that it should be considered by the National Bipartisan Commission on the Future of Medicare. The full commission has held two meetings and plans at least one a month until it reports to Congress in March of next year.

To address issues of physician compensation by Medicare, ACP has proposed other approaches, including the ability to set charges for higher-income beneficiaries above the current limits on balance billing.

Sen. Kyl was expected to try to attach the private contracting bill as an amendment to the other legislation, but analysts say that this approach is risky because his measure does not have the 60 votes required to stave off a filibuster.

Kathleen Haddad is ACP's Senior Associate for Policy and Communications.

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