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MEDICARE: Are Private Fee-For-Service Plans Worth It?



May 16th, 2007

The Medicare Modernization Act (MMA) has succeeded in providing seniors with more “choice” among Medicare Advantage (MA) private health insurance plans. However, particularly in rural areas, much of the increased choice stems from a proliferation of private fee-for-service (PFFS) plans, which mimic traditional Medicare’s fee-for-service structure but receive reimbursements that exceed spending in the traditional program. PFFS plans are paid at the county level. PFFS plans are paid at the county level. They must provide both Part A and Part B services, and many provide Part D prescription drug coverage as well.

In a Health Affairs Web Exclusive (free access for two weeks) published yesterday, Marsha Gold documents the increase in PFFS plans and questions whether these new plans are worth the cost. Gold, a nationally recognized expert on MA who has been analyzing the program and its predecessor, Medicare+Choice, for more than a decade, is a senior fellow at Mathematica Policy Research.

“Perspectives on current MA trends are largely in the eye — and orientation — of the beholder,” Gold observes. “If one believes that all choice is good and competition brings prices down, MMA has clearly been successful in expanding choice and competition.” On the other hand, “the current expansion is fueled by MA payment rates that exceed what traditional Medicare now pays.” Gold says that “the fiscal burden on Medicare is especially high for PFFS plans” because they are offered disproportionately, and enrollment in them is highest, in “floor” counties, where the gap between traditional Medicare and MA rates is highest.

Gold also notes the reports of aggressive and deceptive practices sometimes used to sell PFFS and other MA plans, and the fact that seniors are sometimes surprised to find that their physician does not participate in the PFFS plan they have been enrolled in. The New York Times (subscription required), Washington Post and the Wall Street Journal Health Blog have recently reported on these issues, and the Senate Special Committee on Aging is scheduled to hold a hearing today on abusive sales tactics.

Proponents of the Medicare Advantage program often point to the disease management and care coordination offered by its HMOs, and to a lesser extent its PPOs. However, PFFS plans offer little if any care coordination.

The question the Health Affairs Blog offers for our readers, then, is this: Are Medicare PFFS plans worth it? What benefits, if any, do they offer that make up for the higher payments they receive and the potential for consumer confusion that they raise?

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3 Trackbacks for “MEDICARE: Are Private Fee-For-Service Plans Worth It?”

  1. HealthBlawg
    June 18th, 2007 at 11:31 am
  2. Health Affairs Blog
    June 4th, 2007 at 5:37 pm
  3. Health Care BS » Blog Archive » Medicare PFFS: A Good Program Despite Marketing Abuses
    May 17th, 2007 at 11:34 am

3 Responses to “MEDICARE: Are Private Fee-For-Service Plans Worth It?”

  1. cbrownjr Says:

    How have providers been in terms of working with patients to understand Medicare FFS arrangements? This is a growing business but does it truly make sound sense in terms of the communication and verification that has to be done with the physicians about accepting coverage rather than openly knowing whether certain physicians are contracted?

  2. alan lazaroff Says:

    I would like to offer a ground level view of these plans from a provider perspective. I am a practicing geriatrician caring for a population of complex and frail elderly who live in the community, as a primary care physician in an office/clinic setting.

    The economics of primary care geriatric medicine are very difficult. Medicare FFS reimbursement does not support the practice.

    One solution we have used is risk contracting. We have been very successful in the Medicare HMO environment. When looked at from the perspective of risk-adjusted capitation payment, we are a very efficient provider. We have turned this into a business model. Not only can we stay in business this way, but we can create an environment which emphasizes care coordination and embodies the principles of geriatrics. We have social workers, an on-site pharmacist, case managers, and trained geriatricians who can spend somewhat more time than your average primary care doctor seeing our high complexity patients. We share risk with another 150 primary care docs, but our aggregate HCC scores are about 40% higher than the rest of our IPA.

    Now come the Medicare private FFS plans. We have had numerous patients switch. Most of them have little or no idea what they have done. The patient is told “this is a great deal for you, no problem seeing any doc you want, no restrictions, and it will be cheaper. In fact, if they are hospitalized, it will not be cheaper as the plans in our (major urban) area have higher hospital copayments by far than the Medicare HMO’s. We often do not learn that they have changed until our claims are rejected. The plans pay us at 100%of RBRVS, far less than our experience with risk. We have created an extensive support system for managing our patients, and now there is no financial structure to support it.

    As far as I can see, these plans have done nothing whatsoever to serve our patients. They accept a very high risk adjusted capitation every month, significantly higher than traditional Medicare, for which they do what? And they are driving out the Medicare HMO products, which at least have the potential to manage chronically ill people better, and actually do it I believe at least in our case.

    This appears to be an amazingly abusive situation, nothing less than an outright gift to the insurance industry.

  3. Matthew Holt Says:

    Chris. You’re kidding right? Although I’m looking forward to seeing if Karen Ignagni makes a comment.

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