Understanding Medicare Private Fee-for-Service Plans

Private fee-for-service (PFFS) plans are a way to give private insurance companies access to the vast Medicare market and are part of an effort to further privatize Medicare. PFFS plans are the fastest-growing Medicare Advantage plans on the market. While the additional benefits these plans often offer may look attractive, Medicare beneficiaries should look carefully before they leap into one.

In a PFFS, Medicare pays a set amount each month to a private insurer to provide health coverage on a fee-for-service basis to Medicare beneficiaries. Unlike a health maintenance organization (HMO) or preferred provider organization (PPO), PFFS members can choose from any Medicare-approved provider as long as the provider is willing to accept the plan's payment terms. PFFS plans differ from original Medicare in that there is no limit to the premiums or co-payments a PFFS can charge. PFFS plans may offer additional benefits, such as vision or dental, but members may have to share some of the costs with Medicare. PFFS plans may let providers charge up to 15 percent above the plan's payment amount for services.

Although the additional benefits offered through a PFFS plan may seem advantageous, a report by the Medicare Rights Center finds that private Medicare plans actually offer many disadvantages compared to original Medicare. For example, care can be more expensive because co-payments may be higher. In addition, it may be more difficult to find a doctor who will accept the plan's payment terms. PFFS plans have also come under scrutiny for their aggressive marketing practices. Sales agents have been accused of fraud for signing up seniors who were not aware how PFFS plans differed from original Medicare. For more information, click here.

Before you enroll in a PFFS plan, look closely at the monthly premium, co-payments, and the cost of extra benefits to make sure that this is a plan you can afford. You can call 1-800-MEDICARE or go to www.medicare.gov to compare plans.

Prescription drug coverage
Some PFFS plans offer prescription drug coverage. If the plan you choose has drug coverage, you must use the coverage offered by that plan. You may not enroll in a separate drug plan. If your PFFS plan does not offer prescription drug coverage, you can either switch to another plan that has drug coverage or add this coverage separately.

Switching plans
You can only switch to a different PFFS plans or back to original Medicare at certain times of the year. You can switch during the election period from November 15-December 31 or during the open enrollment period from January 1-March 31 of each year. Note that if you are switching from a PFFS plan with drug coverage to one without, the only time you can add drug coverage is during the election period from November 15-December 31.

For more information on how PFFS plans work, visit this page on the Medicare website.

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