Do You Need to Opt Out of Medicare to Go Cash-Pay?

Yes, if you want to charge a Medicare-eligible patient your cash fee, you have to formally opt out of Medicare first. Simply not billing Medicare is not the same thing and does not protect you. Federal law requires any physician or PMHNP who furnishes a Medicare-covered service to a beneficiary to either submit the claim to Medicare, which requires enrolling, or to have formally opted out beforehand. Charging a Medicare patient your full private-pay rate without opting out is a billing violation that can trigger repayment demands and civil penalties, regardless of whether you intended to defraud anyone.

Opting out is a specific, three-part filing: an affidavit to your Medicare Administrative Contractor, a signed private contract with each Medicare patient, and a two-year commitment that renews automatically unless you cancel it. This post covers the mechanics, the situation that trips up more psychiatrists than any other (a Medicare-billing day job), and a table telling you what to do given your specific setup. If you're still deciding whether to go cash-pay at all, file this under the compliance costs to weigh before you commit.

Why "I just won't bill Medicare" doesn't work

Having an NPI does not enroll you in Medicare, but it doesn't exempt you from the program's rules either. Medicare's mandatory claims-submission requirement covers every physician and practitioner who furnishes a covered service to a beneficiary: the claim must be filed, and only an enrolled provider can file one. Staying unenrolled and refusing to submit claims is not a recognized third path, and it does not give you legal permission to charge a Medicare beneficiary your cash rate instead.

The Centers for Medicare & Medicaid Services distinguishes three enrollment statuses, and the terms below get used loosely on forums in ways that will get a practice in trouble:

Non-participating status still means you are enrolled and still bound by the limiting charge; it is not a backdoor to your cash rate. Only formally opting out removes the fee cap, and only a signed private contract makes that legal per patient. If you've never touched CMS paperwork, you hold none of these statuses, and that is the most restrictive position of all: with no enrollment to bill through and no opt-out on file, there is no legal way to furnish covered services to a Medicare beneficiary for cash until you file one or the other.

This also breaks a habit cash-pay practices lean on everywhere else: the superbill. For a commercial out-of-network patient, you collect your fee and hand over a superbill built around the right CPT codes so the patient can file for reimbursement themselves. Medicare has no equivalent pathway. An enrolled provider who charges a Medicare patient cash and hands them a receipt to submit isn't offering a courtesy superbill. That's the same billing violation as submitting the claim directly, because Medicare doesn't recognize an out-of-network claim path the way commercial plans do.

How do you actually opt out of Medicare?

The filing has three components, and CMS's own opt-out guidance (r926PI.pdf) spells out each one:

1. Submit the opt-out affidavit to your Medicare Administrative Contractor (MAC). Your MAC is determined by your state; contact them directly for the current standard affidavit form and submission address, since the format and channel (mail, fax, or your MAC's electronic portal) vary by contractor. The APA publishes a physician-language affidavit template that PMHNPs use identically, since PMHNPs are recognized Medicare Part B providers under the same rules.
2. Sign a private contract with every Medicare patient you see for cash. Federal regulation (42 CFR 405.415) specifies what the contract must say: that the patient accepts full responsibility for your charge, that Medicare's fee limits don't apply, that neither of you will submit a claim to Medicare, and the contract's effective and expiration dates. Get the contract signed before the visit; a contract signed after the fact does not cover that appointment.
3. Verify your status went through. CMS runs a public opt-out affidavit lookup tool. Your name and opt-out dates should appear once your MAC processes the filing. Don't rely on a third-party directory listing you as "not participating," since that's a different status with different rules.

The opt-out period is two years and renews automatically. If you want to end it, you must cancel in writing to every MAC you filed with at least 30 days before the renewal date. Miss that window and you're opted out for another two years whether you meant to be or not. This trips practices up when they cancel a private practice and return to employed work: the opt-out doesn't expire on its own, and forgetting to cancel it can leave a physician unable to bill Medicare at a new job for up to two years.

What if you have a W-2 job that bills Medicare?

This is the interaction that gets the least accurate coverage, and it's the one most likely to derail a psychiatrist mid-launch. Medicare opt-out is tied to your individual NPI, not to a specific practice, employer, or location. You cannot be opted out at your private practice while your hospital job, moonlighting shift, or per diem work bills Medicare under the same NPI. It is one status, everywhere you practice, for the full two years.

"Opt-out is a household decision, not a practice decision, because it follows your NPI into every job you hold," says David Cohen, CPA, JD, who reviewed this guide. "Map every place you expect to bill Medicare over the next two years before you sign the affidavit, and the trap disappears."

In practice, this means a psychiatrist who keeps a Medicare-billing W-2 job while launching a cash-pay side practice cannot legally opt out yet, and therefore cannot charge Medicare-eligible patients cash in the new practice either. The standard workaround in this situation is to decline new patients over 65 by describing it as a scope decision rather than an insurance decision. Framing it around a specialty distinction you can actually defend, such as limiting your practice to working-age adults, is safer than a blanket refusal based on someone's insurance status, though the exact line between a defensible scope limitation and prohibited discrimination is a fact-specific legal question. Confirm your phrasing with a healthcare attorney before you rely on it, especially if your state has its own age-discrimination provisions layered on top of federal rules.

Once the W-2 job ends, or you renegotiate it so Medicare billing runs through the employer's own group NPI rather than yours personally, you're clear to file the opt-out affidavit and start seeing Medicare-eligible patients privately. If you're winding the job down entirely, the sequencing questions around notice periods and what to tell patients are covered in our guide to transitioning from insurance to cash-pay.

A composite from practices we've watched launch: a psychiatric nurse practitioner took over a colleague's departing panel mid-launch, and one of the inherited patients turned out to be Medicare-eligible. She saw the patient once at her cash rate before realizing she had never filed an opt-out affidavit, because she assumed that simply not billing Medicare was enough. Nothing in her intake process had flagged the patient's coverage as a compliance question rather than a payment-method question. She had to refund the visit, file the affidavit, and hold the patient's care until the private contract was signed. The fix costs an hour of paperwork done early. Left until a patient is already in the waiting room, it costs a refund and a delay in care.

Does Medicare Advantage change any of this?

No. Medicare Advantage plans are administered by private insurers, which leads some practices to assume they function like any other commercial plan and can be billed or declined like one. They can't, for this purpose. Federal opt-out rules apply to Original Medicare and Medicare Advantage identically: if you are enrolled (not opted out), you're bound by the applicable fee limits for an MA patient just as you would be for a traditional Medicare patient. If you're opted out with a signed private contract, an MA patient is covered by that opt-out the same as any other Medicare beneficiary. There is no separate carve-out that lets an enrolled provider charge cash to the Medicare Advantage subset of their Medicare patients.

What about emergencies?

Opting out doesn't let a patient go without care in an emergency. If a Medicare beneficiary who hasn't signed a private contract needs emergency or urgent care, you can treat them without jeopardizing your opt-out status, but you must bill Medicare for that specific encounter under the standard rules, using modifier -GJ, and you're capped at Medicare's limiting charge for it. The exception covers only genuine emergencies; it does not give an opted-out practice a way to bill Medicare selectively for patients it would rather not put on a private contract.

Decision table: what to do given your situation

None of this is legal advice, and Medicare compliance carries real financial exposure if you get it wrong. Confirm your specific situation, especially anything involving a W-2 job, multi-state licensure, or a lapsed opt-out, with a healthcare attorney or your MAC directly.