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Shopping for a New Health Plan?

Private Fee-For-Service Plans Call for Cautious Approach

There's a new type of Medicare health plan now available in some states, but you would do well to take a "wait and see" approach to Private Fee-For-Service (PFFS) plans. The Health Care Financing Administration recently approved Sterling Life Insurance Company as the first insurer to offer the PFFS plans. Although they resemble Original Medicare, they are a private insurance option. The plans pay per visit and allow you to visit any doctor or hospital. They offer the same basic benefits as Medicare Part A and Part B.

There are critical differences that could mean significant out-of-pocket costs. Private Fee-For-Service Plans can charge you deductible and coinsurance amounts that are different than those under Original Medicare. Unlike Original Medicare, which allows you to buy Medigap insurance to cover these costs, it's illegal to sell you Medigap coverage if you are a member of a PFFS.

Here are some important questions to ask when considering a PFFS plan. Be sure to ask about the costs for 2001, which could be very different from the costs for 2000.

  • What is my monthly premium? There is no limit on the premium amount that a PFFS plan can charge. There is a limit on what a Medicare HMO can charge.
  • Does the plan cover more benefits than Medicare Part A and Part B? Possibly, for an additional premium. Some Medicare HMOs offer free additional benefits.
  • What are my deductibles? Remember, you will not be able to purchase Medigap to cover these. You will need to find out what the deductibles are for both doctor and hospital visits and if there is a separate deductible for any extra benefits such as prescription drug coverage.
  • What are my copayments and additional charges? Under "Original" Medicare, Medicare pays 80% of the Medicare approved charge and you pay 20%. Health care providers who do not accept the Medicare approved charge in full may only charge you 15% more. Under Original Medicare there are four Medigap plans that pay these excess charges. All Medigap plans cover the coinsurance for hospital stays. Under a PFFS plan, however, you will have no Medigap to pay these costs. You are responsible for all copayments and the 15% excess charges. In addition, the plans are not required to use the Medicare approved charges. The insurance company, not Medicare, decides what you must pay. Your out-of-pocket costs could be considerable if a hospital stay is involved.

Joe Baker, a spokesman for the Medicare Rights Center, a non-profit organization which provides free counseling services to people with Medicare questions or problems, suggests that Medicare recipients take a "wait and see approach" to these new plans. "Given this benefit package, premium structure and the fact this is a new, untested product, it is unclear what advantages this plan offers Medicare recipients," Baker says. "Most will be well-advised to stick with their Original Medicare with Medigap coverage to make sure this product works before they put their access to healthcare on the line."

For more information, visit the Medicare Rights Center at www.medicarerights.org

This article first appeared in Volume 5, Issue 10 of "The Social Security and Medicare Advisor" newsletter (October/2000).  To receive future editions of "The Advisor" in its special, free e-mail version, please click here.


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