The $74,973 question about Medicare

By Monte Butler

Bob (not his real name) was diagnosed with trigeminal neuralgia, an excruciatingly painful condition caused by damage to the 5th cranial nerve. After all non-surgical treatments failed to relieve his agony, Bob located a neurosurgeon who specialized in the treatment of trigeminal neuralgia. Bob’s surgery was a success, but then he received a surprise bill for $74,973.

The problem was that Bob’s surgeon was an “opt-out provider.”  According to Medicare rules, his surgeon was allowed to set up a private payment contract with Bob. In the contract Bob agreed that, “if your insurance company does not cover all billed charges for services such as consult and/or surgery, you will be balance billed.”  The contract also included a hand-written note that Bob’s “Out-of-pocket & Deductible Payment” was be “$2,315.” Was Bob only obligated to pay the $2,315 or did he have to pay the additional $74,973?

We are talking about Medicare rules here, so you won’t be surprised when I tell you that the answer is a little bit complicated.  Bob’s surgeon was an opt-out provider in Medicare. Opt-out providers are different from participating and non-participating providers in three very important ways.  First, opt-out providers are required to have special signed private-pay contracts with patients before providing any services.  Second, the patient is responsible for 100% of the bill from an opt-out provider.  Medicare pays nothing (0%) – unless the care was provided in an emergency situation.  Third, there is no limit on what the opt-out provider can charge.  You are likely used to Medicare placing limits on what providers can charge you (“limiting charge”), but there are no such limits for opt-out providers (see “Types…” box for more detail).  So, what did this mean for Bob?  Did he have to pay the additional $79,973 or only $2,315?

Well, in Bob’s case, the answer was that he only had to pay $2,315 to his surgeon.  Why?  The contract used by the surgeon did not follow Medicare rules designed to help Bob understand the financial obligation he was taking on. Under Medicare rules, this nullified the contract.  Also, the surgeon broke several other opt-out provider rules.  After these rule violations were pointed out, the surgeon gave Bob a clean financial bill of health – “$0.00” due.

So, what does this mean for you?  First, if you decide you want the services of an opt-out provider, remember that you are responsible for the entire bill – 100 percent.  No help from Medicare.  No help from your Medigap policy.  Second, Medicare does not limit what the opt-out provider can charge you.  You need to make sure that the cost of the service is within your budget and you should ask that the cost of the service be included on your signed contract.  Third, if you get a surprise, contact your State Health Insurance Assistance Program (; 877-839-2675) or the Senior Medicare Patrol Program (; 877-808-2468) for help.


Monte Butler is a professor of social work and social ecology at Loma Linda University in San Bernardino, Calif. This article is adapted from an original piece he wrote for the Journal of Gerontological Social Work.