Medicare provides health insurance coverage to 67 million individuals, accounting for 20% of the U.S. population, and serves as a vital revenue source for healthcare providers. Medicare Part B expenditures—encompassing physician services, outpatient care, and physician-administered drugs—constituted nearly 49% of Medicare’s total benefit spending.
Although Medicare physician participation is optional, the vast majority of healthcare providers choose to enroll due to the program’s significant role in ensuring consistent patient access and revenue flow.
Physician Payment Challenges
Recent concerns have emerged among physician groups and policymakers about potential physician withdrawals from Medicare due to ongoing reductions in payment rates. Medicare payments, on average, are lower than those from private insurers and lack automatic adjustments to align with inflation in medical practice costs. While Congress implemented four temporary payment increases between 2021 and 2024, no such increase was enacted for 2025. Consequently, a 2.93% reduction in average Medicare payments took effect on January 1, 2025.
Despite these payment cuts, 98% of non-pediatric physicians continue to participate in Medicare. Beneficiaries report access to physician services on par with or better than privately insured patients, with similar rates of delays or challenges in securing appointments.
Physician Participation and Opt-Out Trends
The most recent CMS data, as of November 2024, reveals that:
- About 1% of non-pediatric physicians formally opted out of Medicare in 2024.
- Psychiatrists accounted for the highest opt-out rate at 8.1%, followed by plastic surgeons (4.5%) and neurologists (3.2%).
- In 11 specialties, including emergency medicine, oncology, and radiology, opt-out rates were 0.5% or lower.
- Less than 2% of physicians opted out in 47 states, with higher rates in Alaska (2.8%), Colorado (2.3%), Idaho (2.2%), and Washington, D.C. (2.9%).
Psychiatrists represented the largest share (39%) of physicians opting out, followed by family medicine (21.5%) and internal medicine (13%).
Medicare Participation Options for Physicians
Physicians participating in Medicare must enroll as providers under one of three categories:
- Participating Providers:
- Accept Medicare’s fee schedule as full payment for all covered services.
- Patients are liable only for Medicare cost-sharing requirements.
- Receive a 5% higher reimbursement rate than non-participating providers.
- In 2022, 98% of physicians billing Medicare were participating providers.
- Non-Participating Providers:
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- Accept Medicare patients but decide on a case-by-case basis whether to accept Medicare’s approved payment (assignment).
- Receive 95% of the Medicare-approved amount for assigned claims.
- May charge up to 15% above the Medicare-approved amount (balance billing) for unassigned claims.
- In 2022, 7% of fee schedule claims were paid on assignment.
- Opt-Out Providers:
- Formally withdraw from Medicare by signing an affidavit.
- Enter private contracts with patients, billing them directly for services.
- Neither patients nor providers can bill Medicare for any reimbursement.
- Opt-out agreements last two years and renew automatically.
Medicare’s payment structure and participation requirements continue to play a crucial role in shaping access to care and physician engagement within the program.
Why Medicare Physician Participation is Crucial for RCM Companies
Medicare provides health coverage to over 67 million Americans, making it a significant source of revenue for healthcare providers. Medicare physician participation is vital for Revenue Cycle Management (RCM) companies as it directly impacts their ability to manage claims, reimbursements, and overall financial operations effectively.
When physicians choose to participate in Medicare, they agree to accept Medicare-approved rates, which simplifies the billing process. This reduces the likelihood of claim denials, streamlines reimbursement timelines, and ensures compliance with federal regulations. Non-participating physicians, on the other hand, may face delays and additional administrative burdens due to higher patient out-of-pocket costs and complex billing procedures.
For RCM companies, having clients who are Medicare-participating providers enhances their ability to deliver efficient services, including claims submission, denial management, and appeals. Moreover, participating physicians are more likely to attract Medicare beneficiaries, expanding their patient base and revenue potential.
Given the growing reliance on Medicare as the population ages, RCM companies must emphasize the importance of Medicare physician participation. By doing so, they can help healthcare providers maximize revenue while ensuring compliance, ultimately contributing to the financial stability of both practices and the RCM services industry.