Practice Management - Should You Waive Copays?

By Susan Frager, LCSW

Copays are ever-increasing. It’s become a matter of routine now that the copay is 50% or more, assuming you are a participating provider. If you are not participating, deductibles in the four figures are common. Sometimes all 20 visits allowed in the calendar year go to the deductible if your patient has no other medical condition.

So…what do you tell the patient who has insurance – and wants to submit – but says s/he can’t afford his/her share of the fee? If you haven’t run into this problem yet…you’re lucky! Most of us run into it often, and will encounter it more frequently as insurance benefits become leaner.

As mental health professionals, we are by inclination and training predisposed to cut the patient a break. We see tragic cases often, and we are helpers. Isn’t that why we entered this profession? The tradition in mental health has always been to provide service despite the ability to pay. So we think, “it’s my money, I can write it off if I want to.” End of story right?

Well, yes, it is your money…but no, writing it off is not necessarily the right thing to do. In the world of insurance reimbursement, routinely waiving copayments, coinsurance (when the patient pays a percent rather than a fixed dollar amount), or deductibles (referred to by me as “patient portion”) is considered an abusive if not outright fraudulent practice.

Why? Consider what the Medicare provider manual has to say. The online provider manual at the Missouri Medicare site, http://www.momedicare.com/, states:

“The purpose of requiring the patient to pay a part of the cost of medical care is to encourage the patient to cooperate in limiting costs by not incurring unnecessary expenses and to take an interest in the reasonableness and necessity of all services received. The routine and consistent waiving of the collection of coinsurance and/or deductible amounts defeats this purpose.”

Commercial insurance companies also view this practice as fraudulent because if the patient portion is waived, then the provider has over-stated his/her charge. If you are willing to accept $40 per visit instead of $60 by waiving a $20 copay, then an insurer would want to pay you $20 and expect you to collect $20 from the patient. This isn’t just the view of greedy insurance companies. The courts have made it part of case law. In 1991 the U.S. Court of Appeals in Kennedy v. Connecticut General Life Insurance (CIGNA) ruled in favor of Cigna when the insurer stopped making payments to a provider who had routinely waived copayments. John Outlaw, Chief Compliance Officer of Pathology Service Associates, LLC, stated (HBMA listserve email 5/2/06):

“CIGNA successfully argued that its agreement to pay for medical expenses incurred by the patient was contingent on the patient having an obligation to pay for the services in the first place, and that to the extent that the patient was released from his obligation to pay the coinsurance, the payor was likewise released from its obligation to make any payment to the provider on the patient's behalf.”

In the most basic terms, what this means is that if you tell a patient he or she doesn’t have to pay, but you tell the insurance company (via a submitted claim form) that it has to pay…that’s fraud.

None of us would knowingly commit fraud…so here are a few options to consider if the patient says s/he cannot afford his/her portion:

Accept credit cards .Taking credit cards is becoming more economical. In the age of the Internet, it is no longer required to lease/purchase an expensive terminal for the purpose of running credit cards. While there may be some treatment considerations against using credit cards for patients with severe debt or certain kinds of addictions, consider also that your services are valuable. If patients are invested in treatment, they will be willing to pay. And if that means there’s no cash in the bank available to write a check…you can take plastic. Also, too, many people like the incentive rewards points offered by the credit card companies, making credit cards their preferred method of payment. Younger patients today may be so used to paying everything online or with a credit card that they don’t even carry a checkbook. To not take credit cards may mean you lose out on money you have rightfully earned.

Draw up a budget . Following from the premise that if patients are invested in treatment, they will be willing to pay, what can patients temporarily give up or cut back on such that they can afford their portion? Cutting back on expensive addictive habits such as smoking or drinking might not only free up cash but also serve to further treatment goals. How about not buying those expensive tech toys this month? Or going out to eat less? It’s all about choices...and our job as therapists is to “market” to our clients the importance of our services such that patients are willing to fork over their discretionary income for treatment. Some people who say they “can’t afford” their share might, in fact, be able to if they drew up a budget and planned accordingly.

Draw up a payment plan (no interest of course). Assuming your patient is trustworthy and that building up a balance won’t increase anxiety to the point where it is counter-therapeutic, this could be a good solution. One therapist I bill for has a long-term patient of several years whose insurance plan has a $500 deductible, then pays 90%. The patient simply pays $20 per visit. Early in the year, her balance builds up while the claims go to the deductible, but then late in the year, when insurance is paying 90%, the patient is overpaying. It all evens out to zero by the end of the year, and this patient then continues to pay $20 per visit to be credited against the next year’s deductible. A note of caution: if you do draw up a payment plan, be sure to enforce it and communicate about it. I recommend even putting the agreement to writing, having the patient sign it, and place a copy in the chart. Don’t let the balance become the white elephant in the therapy room that no one ever talks about. If you act as if the patient’s balance is not important, that’s a signal to the patient that it’s ok not to pay.

Consider not using insurance at all and sliding the fee to a level that is affordable. Many patients believe that “I pay enough for my insurance, I might as well get something out of it.” And when you participate with the patient’s health plan, that’s true. But in an out-of-network situation, remember that the patient not only has to pay what the insurance says is their coinsurance and deductible, the patient has to also pay whatever portion of your fee is over and above “usual & customary.” Some math might illustrate:

Say your total charge is $125, and the patient can afford to pay $60 per visit. You are out of network. The patient has a $1000 deductible and then the plan pays 50% of “usual & customary.” After submitting claims, you discover that the insurer only allows $100 as “usual & customary.” While meeting the deductible, the patient must pay you the full $125. That’s what you’ve stated is your fee on the claim form…a legal document. After meeting the deductible, the insurance will pay $50 (50% of the “usual & customary” $100.) But because your fee is $125, the patient owes not only the other $50, s/he also owes the $25 over and above “usual & customary,” making the patient’s portion $75.

Might it perhaps not be better to simply take $60 per visit cash and avoid insurance altogether? In addition to everything else, the client gets the benefit of fully confidential treatment, and you don’t have to worry about the hassle of submitting and following up on claims.

But be careful not to slide TOO low…Medicare and Medicaid expect (if you participate) that they be the lowest of any fee customarily offered.

If the patient still cannot give up the idea of submitting to insurance, you can certainly lower the fee…provided you lower the fee to the insurance company as well as to the patient.

Don’t waive the patient portion entirely. Waive only some of it. Surely your patient can afford $5?

Refer the patient to community mental health or United Way agency. Obviously, therapeutic considerations are primary, and you can’t abandon the patient. The community/agency system is overloaded, and there might be a long waiting list.

So because you can’t abandon the patient, what do you do if you’ve considered all the above, and there’s no possibility the patient can pay, and a referral either doesn’t exist or you’re at a point in treatment where to refer might be construed as “abandonment?”

The key words in all of this are ROUTINE, CONSISTENT and CUSTOMARY. From the Missour Medicare online manual:

Note:  This policy is not designed to prevent the waiving of collection of coinsurance and/or deductible amounts in a situation where a particular patient's financial condition prevents payment. Rather, the policy is designed to cover those situations where a provider routinely and consistently waives this collection on assigned claims.

In other words, says Medicare, act on a case-by-case basis. But to protect yourself, you should apply a consistent method of determining financial need. The best way to do that is to draw up for yourself a financial hardship form for your practice, to be applied whenever a patient claims financial need as a basis for waiving their portion. It is something on the order of what a United Way or community agency does in every case when setting fees, only it doesn’t have to be nearly as detailed. The hardship form should consider sources of income, amount of debt, monthly obligations, number of family members, special circumstances (e.g. just lost job, paying child support, etc.). Once the patient signs it, a copy should be retained in the chart.

While it may seem very legalistic and “agency-like” to have such a form, having a consistent basis for determining whether a copayment/ coinsurance/ deductible should be waived is a way to protect yourself against allegations of misconduct. It’s also a way to fairly determine financial need, because all patients claiming need are then treated the same.

Furthermore, because the standards state that routine waiver of patient portion is what is problematic, you should be careful not to waive the patient portion too often. For example, if you absolutely have to waive a patient portion, better to waive Mr. Smith’s $50 copayment for January 16, 2007 (one time only), than to do it at every visit. Or, better to waive a portion of his $50 every time than to waive it all. The problem is, neither Medicare or commercial insurance is very clear on what “routine” is. To be safe, I would say 10% of the time or less is a patient portion waived. And ALWAYS, even if you don’t use a financial hardship form, document in the chart the specific reason the copayment/ coinsurance/ deductible has been waived.

At this juncture I am usually asked “well, what if the patient just doesn’t pay? I can’t keep billing someone forever.” No, of course not. Some patients simply don’t make good on their obligations. No one can fault you for fraud or abuse if you’ve tried to collect. In other words, you can’t tell the patient with a wink, “well, I have to send you two statements, but you can just ignore them.” Talk about modeling unethical behavior to clients – but I’ve seen it done, and by clinicians I otherwise respected. The Medicare manual has this to say:

Prior advertisement of an intention to waive collection of Medicare coinsurance amounts, or other evidence that such waiver is an established business policy, or failure generally to make reasonable collection efforts (similar to those customarily made to collect comparable amounts from non-Medicare patients), constitutes prima facie evidence that the provider has reduced his actual charges.

When all else fails, a final option: See the patient “pro bono.” In our business, some “pro bono” work is expected. Only you can determine how much “pro bono” work you are able or willing to undertake, and who is the neediest and most deserving of free care. But if the patient is that truly needy, and you can’t refer, and you are willing to work for free, then expecting an insurance company to pay when the patient can’t is a potential road to professional disaster. Is it really worth your license and professional good name (not to mention fines and possible jail time) to risk it?

Susan Frager, LCSW, is a nationally recognized managed care expert. To access the Billing Hotline or to suggest future newsletter column topics, call Susan at 636-464-8422, or email: susan(at)psychadminpartners.com. © Psych Administrative Partners 2007.