CMS Opt-Out Regulations and Guidelines

by  Christine Woolstenhulme, QCC, QMCS, CPC, CMRS
February 15th, 2015

40-Effect of Beneficiary Agreements Not to Use Medicare Coverage

(Rev. 160, Issued: 10-26-12, Effective: 01-28-13, Implementation: 01-28-13)

(Rev. 194, 09-03-14)


Normally physicians and practitioners are required to submit claims on behalf of beneficiaries for all items and services they provide for which Medicare payment may be made under Part B. Also, they are not allowed to charge beneficiaries in excess of the limits on charges that apply to the item or service being furnished. However, a physician or practitioner (as defined in §40.4) may opt out of Medicare.

A physician or practitioner who opts out is not required to submit claims on behalf of beneficiaries and also is excluded from limits on charges for Medicare covered services. Only physicians and practitioners that are listed in §40.4 may opt out.

 • The only situation in which non-opt-out physicians or practitioners, or other suppliers, are not required to submit claims to Medicare for covered services is where a beneficiary or the beneficiary’s legal representative refuses, of his/her own free will, to authorize the submission of a bill to Medicare. However, the limits on what the physician, practitioner, or other supplier may collect from the beneficiary continue to apply to charges for the covered service, notwithstanding the absence of a claim to Medicare.

 • In some circumstances, a non-opt-out physician/practitioner, or other supplier, is required to provide an Advance Beneficiary Notice of Non-coverage (ABN) to the beneficiary prior to rendering an item or service that is usually covered by Medicare but may not be covered in this particular case. (See the Medicare Claims Processing Manual, chapter 30 for ABN policy and§40.24 of this chapter for a description of the difference between an ABN and a private contract.) The ABN notifies the beneficiary that Medicare will likely deny the claim and prompts the beneficiary to choose whether or not he/she will accept liability for the full cost of the services if Medicare does not pay. The beneficiary also indicates on the ABN whether or not a claim should be submitted to Medicare.

Providers and suppliers must follow the beneficiary’s directive for claim submission as indicated on the ABN. Providers and suppliers will not violate the mandatory claim submission rules of §1848(g)(4) of the Social Security Act when a claim is not submitted per a beneficiary’s written request on an ABN. Where a valid ABN is given and a claim is submitted, subsequent denial of the claim relieves the non - opt-out physician/practitioner, or other supplier, of the limitations on charges that would apply if the services were covered.

Opt-out physicians and practitioners must not use ABNs, because they use private contracts for any item or service that is, or may be, covered by Medicare (except for emergency or urgent care services (see§40.28).

Where a physician/practitioner, or other supplier, fails to submit a claim to Medicare on behalf of a beneficiary for a covered Part B service within 1 year of providing the service, or knowingly and willfully charges a beneficiary more than the applicable charge limits on a repeated basis, he/she/it may be subject to civil monetary penalties under §§1848(g) (1) and/or 1848(g)(3) of the Act. Congress enacted these requirements for the protection of all Part B beneficiaries.

Application of these requirements cannot be negotiated between a physician/practitioner or other supplier and the beneficiary except where a physician/practitioner is eligible to opt out of Medicare under §40.4 and the remaining requirements of §§40.1-40.38 are met. Agreements with Medicare beneficiaries that are not authorized as described in these manual sections and that purport to waive the claims filing or charge limitations requirements, or other Medicare requirements, have no legal force and effect. For example, an agreement between a physician/practitioner, or other supplier and a beneficiary to exclude services from Medicare coverage, or to excuse mandatory assignment requirements applicable to certain practitioners, is ineffective.

The contractor will refer such cases to the OIG. This subsection does not apply to non-covered charges.

40.1-Private Contracts Between Beneficiaries and Physicians/Practitioners (Rev. 1, 10 -01-03)B3-044.1

Section1802 of the Act, as amended by §4507 of the BBA of 1997, permits a physician/practitioner to opt out of Medicare and enter into private contracts with Medicare beneficiaries if specific requirements of this instruction are met.

40.2-General Rules of Private Contracts (Rev. 1, 10-01-03) B3-3044.2

The following rules apply to physicians/practitioners who opt out of Medicare:

 • A physician/practitioner may enter into one or more private contracts with Medicare beneficiaries for the purpose of furnishing items or services that would otherwise be covered by Medicare (provided the conditions in §40.1 are met).

 • A physician/practitioner who enters into at least one private contract with a Medicare beneficiary (under the conditions of §40.1) and who submits one or more affidavits in accordance with §40.9, opts out of Medicare for a 2-year period unless the opt-out is terminated early according to §40.35 or unless the physician/practitioner fails to maintain opt-out. (See§40.11.) The physician’s or practitioner’s opt out may be renewed for subsequent 2-year periods.

 • Both the private contracts described in the first paragraph of this section and the physician’s or practitioner’s opt out described in the second paragraph of this section are null and void if the physician/practitioner fails to properly opt out in accordance with the conditions of these instructions.

 • Both the private contracts described in the first paragraph of this section and the physician’s or practitioner’s opt out described in the second paragraph of this section are null and void for the remainder of the opt-out period if the physician/practitioner fails to remain in compliance with the conditions of these instructions during the opt-out period.

 • Services furnished under private contracts meeting the requirements of these instructions are not covered services under Medicare, and no Medicare payment will be made for such services either directly or indirectly.

CMS.Gov Regulations and Guideance


CMS Opt-Out Regulations and Guidelines. (2015, February 15). Find-A-Code Articles. Retrieved from

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