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 Association of American Physicians and Surgeons, Inc.
A Voice for Private Physicians Since 1943
Omnia pro aegroto

Ms. Marjorie Finnigan
Director Beneficiaries & Providers
HCFA Region II Office
Federal Bldg.
26 Federal Plaza
New York, NY 10278

Dear Ms. Finnigan:

I have reviewed your letter dated February 18, 1999. Despite your statement that your office has investigated my complaint (to HCFA Region II Representative Scott Levine dated 01/26/99) and that "the appropriate response was given," the fact remains that both the HCFA Region II Office and your "supervised" Medicare contractor (Upstate Medicare) continue to give out WRONG information. The information provided by you and Upstate Medicare with respect to HCFA's policy on the submission of claims for patients enrolled in Medicare managed care when the physician providing services is a non- participant in both Medicare and managed care is totally contradictory to information provided by your boss, Ms. Nancy-Ann Min DeParle, and information the central HCFA Office has conveyed to a Congressman.

In a letter dated February 16, 1999 from Ms. Pat Samson (Upstate Medicare, "A HCFA Contracted Carrier") she states:

"My research shows that the Upstate Medicare Division was given a directive from the Health Care Financing Administration (HCFA) that "whenever a patient prepays more than the patient responsibility and there is no Medicare payment to the benericiary... the system should notify the provider to refund the benefi&iary."

"As to your concerns about claim submission for patients with HMOs, please remember that the patient has the right to have a claim filed for him. Medicare is Medicare, whether it is through a managed care plan or original Medicare."

In testimony provided by HCFA Administrator, Ms. Nancy-Ann Min DeParle, before the Senate Finance Committee "On Private Contracting In Medicare" given on February 26, 1998 Ms. DeParle states the following:

"There has been substantial misunderstanding about what section 4507 of the Balance Budget Act (of 1997) does, so I would like to clarify several major points. The confusion rests predominantly on four issues: who Is affected by Medicare rules; when Medicare beneficiaries can pay out-of-pocket for services not covered by Medicare; what advance beneficiary notices are; and other beneficiary choice issues. I will also address the situation with respect to Medicare managed care." (see testimony under subtitle: "Misconceptions About Private Contracts").

I would now call your attention to Ms. DeParle's testimony regarding "Who is Affected by Medicare Rules?"

"Medicare rules apply only to individuals enrolled in Medicare. Part B of Medicare, which covers physician services, is a voluntary program and beneficiaries choose to enroll and they can disenroll at any point. Medicare Part B rules do not apply to individuals or disabled persons who are eligible for Medicare, but not enrolled in Part B. Medicare rules do not apply to physicians' or practioners' treatment of patients who are not enrolled in Medicare. Therefore, a private contract is not necessary for a physician to provide services to an individual who is Medicare-eligible, but who is not enrolled in Part B of the program." (see testimony under subtitle: "Who is Affected by Medicare Rules?")

Ms. DeParle's testimony goes on to make it clear that Medicare fee-for-service rules (traditional Part B Medicare) do not apply to Medicare beneficiaries who have enrolled in managed care. In her own words, Medicare's relationship with a beneficiary enrolled in managed care is significantly different from Medicare's relationship with a beneficiary in traditional Part B fee-for-service Medicare. Contrary to what Ms. Samson (Upstate Medicare) tells us in her letter of February 16, 1999, Medicare is not Medicare whether it is through a managed care plan or original Medicare. Ms. DeParle testifies as follows:

"There has been confusion about whether the private contracting provision applies to a beneficiary who is enrolled in a Medicare risk-based managed plan and goes out of plan to acquire a service. In general, Medicare's relationship with a beneficiary enrolled in a managed care plan is significantly different from Medicare's relationship with a beneficiary in Medicare fee-for-service. My previous discussion (see above) of private contracting pertained to Medicare fee-for-service. Beneficiaries enrolling in managed care plans agree to obtain all of their services through the plan which is the only entity authorized to receive Medicare payment for services provided to these enrollees. Thus, these beneficiaries receive services only from physicians affiliated with that plan. In contrast, in Medicare fee-for-service, beneficiaries can receive covered services from any qualified provider who meets minimum program requirements and renders such services." (see testimony under subtitle: "Manged Care Plans").

It is clear from Ms. Deparle's testimony, that Medicare Part B rules apply mynl to traditional Part B Medicare, not to Medicare managed care. Part B rules include a physician claim submission requirement within one year of service provided to the patient. For physicians who do not participate in either Medicare or managed care, there is no claim submission requirement either to Medicare or to the HMO. Medicare Part B rules also include federal, and where applicable, state limiting charges. Limiting charges do not A)ajli to Medicare managed care patients who go out of network to receive services. Ms. Deparle testifies as fol lows:

"If a beneficiary who is enrolled in a managed care plan receives a service from a physician who does not have a contract with the plan, and the service is not authorized by the plan, then the service is not a "covered service." In that case, neither the managed care plan nor Medicare pays the physician or reimburses the beneficiary. The service can be provided at the fee agreed upon between the physician and the beneficiary and a private contract is not necessary to provide the service. The physician does not have to opt-out of Medicare for two years under the private contract provision in order to provide this service." (see testimony under subtitle: "Managed Care Plans").

I further contacted Congressman Ron Paul from Texas who confirms that physicians who do not have contracts with HMOs, and who do not take assignment are under no legal obligation to file any claim with Medicare and Medicare's limiting charges do not apply. In a letter to me dated December 10, 1999 Congressman Paul states:

"Thank you for contacting my office regarding the legal obligations a physician incurs when he treats Medicare managed care patients. My -staff has researched this question and has been assured by the Health Care Financing Administration (HCFA) that a physician who does not take assignment and is not part of a Medicare HMO network incurs no legal obligation to file with Medicare when treating a patient enrolled in a Medicare HMO. Furthermore, the physician does not have to abide by Medicare's price controls."

As per your own letter to me dated February 4, 1999, you made it clear that physicians who do not participate in Medicare or HMOs have no legal obligation to file any claim with an HMO.

In conclusion, it has been proven that you, the HCFA Region II Office and your Medicare contractor, Upstate Medicare, have been disseminating WRONG information with respect to the issue at hand. The policy that you put forth as "official Medicare policy" on this issue is totally contrary to what your HCFA Administrator has told Congress in testimony and is contrary to what your central HCFA Office has confirmed with Congresman Ron Paul's Office. I must insist that you immediately correct your error and publish the correct policy in the Medicare Bulletin so that physicians will know what the actual situation is with respect to out-of-network claims as outlined above.

Also, as your contractor's decision to put the MA59 code on these claims in question is based upon a wrongful interpretation of Medicare policy, I must insist that you cease and desist using this code in this situation. (MA59 code states: "The beneficiary overpaid you for these services. You must issue the beneficiary a refund within 30 days for the difference between his/her payment and the total amount shown as patient responsibility on this notice.") The Medicare "allowed amount" for these claims is always 0.00. Medicare thus demands that the physician refund any amount more than zero which he collects for his services in this situation. This error is compounded when the Medicare contractor writes to the patient and informs the patient that they have overpaid the physician and are due a refund. The patient-physician relationship is thus harmed each and every time your Medicare contractor fails to act in accordance with official policy as promulgated by your central HCFA office. The physician's professional reputation is likewise harmed by your failure to assure that your contractor is following the correct policy. I must, therefore, demand that you immediately correct any and all such claims for refunds from me based upon your wrongful interpretation of Medicare policy as referenced above, and that you write to each and every one of my patients whom Medicare has written to and committed libel against me by wrongfully informing the patient that they were overcharged and due a refund from me. I also want to receive copies of the letters written to my patients so that I can confirm that you have taken the appropriate action.

Dr. Lawrence Huntoon