Medicare Private Fee-for-Service Plans

Medicare Private Fee-for-Service (PFFS) plans are similar to the Original Medicare Fee-for-Service Plan, except that they are offered by private companies. They allow beneficiaries to receive care from any Medicare-approved provider that is willing to accept the terms of the plan’s payment schedule. The private company, rather than Medicare, negotiates with providers to determine how much the plan will pay and what enrollees must pay for the services they receive.

Enrollees generally have to pay a premium to join the plan and may have to pay other costs, such as co-payments, for some services. These costs may be different from the costs under the Original Medicare Plan. In exchange, however, enrollees often get extra benefits that are not provided under the Original Medicare Plan, such as extra days in the hospital.

Medicare Preferred Provider Organizations

Medicare Preferred Provider Organizations (PPOs) are similar to Medicare Managed Care Plans but have the following differences.

  • Enrollees generally aren’t required to name a primary care physician and can see any doctor or provider that accepts Medicare, but they may pay more if they use providers who aren’t part of the plan’s network.
  • Enrollees don’t need referrals to see a specialist, although they may need plan approval for certain services. A Medicare PPO plan follows many of the same rules as Medicare Managed Care Plans. However, in a PPO, beneficiaries don’t need referrals to see a specialist provider out of network, although they may need plan approval before seeking certain services. Beneficiaries also can see any doctor or provider that accepts Medicare, but again, the services of such out-of-network providers most likely will cost more. Every PPO plan is different in terms of what is covered out of network and the cost of such services.

Medicare Managed Care Plans

A Medicare Managed Care Plan consists of a network of approved hospitals, doctors, and other health care professionals who agree to provide services to Medicare beneficiaries for a set monthly payment from Medicare. The health care providers receive the same fee every month, regardless of the actual services provided. As a result of this arrangement, health care providers try to manage care in such a way that they achieve a balance between budgetary and health care concerns.

Medicare Managed Care Plans often take the form of Medicare HMOs. In these HMOs, enrollees usually are limited to using network providers except for emergencies and usually are required to choose a primary care physician (PCP). Enrollees who want to see a specialist typically must obtain a referral from their primary care physician. If a primary care physician leaves the plan, enrollees must choose another doctor from within the network.

n most Medicare Managed Care HMOs, enrollees who go outside the plan for nonemergency services must pay the entire bill out of their own pockets. Some Medicare Managed Care Plans offer a POS option, which allows enrollees to use out-of-network providers but requires them to pay a greater portion of the provider’s charges if they do.

Medicare HMOs generally charge enrollees a monthly premium, which must be paid in addition to the usual Medicare Part B premium. They often charge a small co-payment each time an enrollee uses a service, such as $10 for a doctor’s visit, but there are usually no additional charges. Enrollees do not have to pay the Medicare deductibles and coinsurance amounts, and they often receive coverage for services the Original Medicare Fee-for-Service Plan doesn’t cover, such as routine physical exams and dental care.

Types of Medicare Advantage Plans

There are Medicare Advantage Plans available at no additional monthly premium to Original Medicare and all plans have a limit on how much a beneficiary can pay out-of-pocket, excluding the cost of prescription drugs. The maximum allowed in Medicare Advantage plans by health reform is $6,700. It should be noted that Original Medicare does not have an out-of-pocket limit. Also, the premiums, co-pays, and deductibles in many Medicare Advantage plans are lower than they are in a Medigap policy.

Medicare Advantage plans are Medicare Part C. They include the following types of plans.

  • Health maintenance organizations (HMOs)—beneficiaries must get care from doctors or hospitals in the plan’s network, except in emergencies, and beneficiaries must get referrals to see specialists.
  • Preferred provider organizations (PPOs)—although beneficiaries can see other health care providers, they pay less if they use providers in the plan’s network.
  • Private fee-for-service (PFFS) plans—beneficiaries can see any health care provider who accepts the terms of the plan’s payment.

Less common options include special needs plans (SNPs), HMO point-of-service (POS) plans, and medical savings accounts (MSAs). SNPs are usually HMOs and are available only to Medicare beneficiaries who have a need for institutional care, a specific type of chronic medical condition, or dual eligibility for Medicare and, due to low income or limited resources, Medicaid. The most common plan is for Medicare beneficiaries who also qualify for Medicaid.

Like Medigap insurance policies, Medicare Advantage plans are provided by private insurance companies. In many cases, however, the premiums, co-pays, and deductibles in Medicare Advantage plans are lower than they are in a Medigap policy. Nevertheless, an individual considering a Medicare Advantage Plan must carefully review each plan’s Summary of Benefits before joining the plan. These plans have varying co-pays for things like a visit to a primary care physician, a visit to a specialist’s office, or a hospital stay.

All Medicare Advantage plans must provide the same coverage as Original Medicare, and most plans offer additional benefits, including Medicare Part D prescription drug coverage. Additional benefits include routine vision and dental care, audiology services, and even fitness classes. Most Medicare beneficiaries will have access to 10 different Medicare Advantage plans.

Note that before enrolling in a Part C plan, a person must first be enrolled in Original Medicare—both Part A and Part B. Then, if a person decides to enroll in a Medicare Advantage plan, the person chooses the plan and enrolls with the private insurer. About one in four recipients of Medicare chooses a Medicare Advantage plan.

Types of Medigap or Medicare Supplement Plans

If an x appears in a column of the following chart, the Medigap policy covers 100% of the described benefit. If a row lists a percentage, the policy covers that percentage of the described benefit. If a row is blank, the policy doesn’t cover that benefit. Note that the Medigap policy covers coinsurance only after participants have paid the deductible (unless the Medigap policy also covers the deductible).

Medigap Plans
Medigap Benefits A B C D F* G K** L** M N
Part A coinsurance and hospital costs up to an additional 365 days after Medicare benefits are used up x x x x x x x x x x
Part B coinsurance or  co-payment x x x x x x 50% 75% x x***
Blood (first three pints) x x x x x x 50% 75% x x
Part A hospice care coinsurance or co-payment x x x x x x 50% 75% x x
Skilled nursing facility care coinsurance x x x x 50% 75% x x
Part A deductible x x x x x 50% 75% 50% x
Part B deductible x x
Part B excess charges x x
Foreign Travel Emergency (up to plan limits) x x x x x x

*Plan F also offers a high-deductible plan. If a person chooses this option, it means the person must pay for Medicare-covered costs up to the deductible amount ($2,000 in 2012) before the Medigap plan pays anything.

**The 2012 out-of-pocket limit for Plan K is $4,660 and for Plan L is $2,330. After a person meets the out-of-pocket yearly limit and the yearly Part B deductible ($140 in 2012), the Medigap plan pays 100% of covered services for the rest of the calendar year.

***Plan N pays 100% of the Part B coinsurance, except for a co-payment of up to $20 for some office visits and up to $50 co-payment for emergency room visits that don’t result in an inpatient admission.

Considerations Choosing a Medigap Plan

Choosing a Medigap policy is an important decision, and to make an informed decision, your clients must make a thorough comparison of plans and pick the one most suitable to their health care needs and their financial ability to pay for the policy.

Key questions to ask your clients include the following.

Health

  • “How is your health?”
  • “Do you have major health problems?”

A client in good health may find Medigap Plan D or N sufficient coverage.

Financial

  • “Can you afford the premiums, co-pays, and so forth?”

Personal Preference

  • “Are you willing or comfortable paying a small co-pay or deductible?”

Individuals who are willing should consider Plan N. Those who don’t want to be bothered with co-pay or deductibles may prefer Plan F.