Private Fee-For-Service Plans

By Nancy DellaVecchia
eMedicareSupplements Contributor

Private fee-for-service plans are part of an effort by the federal government to privatize Medicare services. They are considered Medicare Advantage Plans and were once the fastest growing segment of the Medicare Advantage market. While many PFFS plans offer benefits not covered by Medicare, there may be additional hidden costs to seniors who opt for this healthcare coverage.

As with other Medicare Advantage Plans, the government pays a monthly fee to PFFS providers. Unlike some Advantage Plans that are similar to HMOs and PPOs, PFFS members are not limited in their choice of medical providers and can choose from any doctor, hospital or nursing facility approved by the Medicare program. Seniors may be required to pay an additional monthly premium for PFFS plans, and Medicare does not regulate the premiums or co-payments seniors are required to pay under these plans.

In addition to co-payments, PFFS providers can charge up to 15 percent over the plan's approved fee-for-services, and seniors are responsible for the additional cost. Some of these plans offer dental and vision coverage, but the percentage used to determine co-payments is usually higher for these services than for other medical services. While the additional benefits may appear attractive, seniors should look closely at PFFS plans before deciding to select one.

The Medicare Rights Center has found that PFFS plans may have disadvantages compared to Traditional Medicare, especially for seniors who have Medigap insurance and indigent seniors who are eligible for Medicaid benefits. Since medical providers can charge up to 15 percent over approved fees, co-payments may be significantly higher than Medicare with a Medigap plan. Premiums charged for PFFS plans may be nearly as much as those charged for Medigap plans. Not all doctors may be willing to accept the payment terms of a particular PFFS plan, which may limit the choice of providers.

If a PFFS plan offers prescription drug coverage, seniors must use that coverage and cannot enroll in a different drug plan.

As with other Medicare Advantage plans, switching to a PFFS or back to regular Medicare benefits can only be done during the annual enrollment period between November 15 and December 31 or during the open enrollment period between January 1 and February 14 each year. If the PFFS plan has drug coverage and the senior is switching to a plan without drug coverage, the switch can only be made during the annual enrollment period.

Recent changes in Medicare law require PFFS plans to contract with medical providers and supply a network of providers to PFFS plan subscribers. The change in regulations has caused a number of PFFS plans to opt out of the Medicare program, and surviving plans have experienced increases in premiums.