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Is there any “Advantage” to Medicare private fee for service?
By Margie Ware
Q. You have told us about Medicare A, B and D. What happened to Medicare C?
Q. I dutifully read my “Medicare and You 2007” Handbook. When I got to Section 13, “Local Plan and Rate Information” it seemed like Berkshire County had dropped off the map! What gives?
Q. I noticed an ad in the paper for a Humana seminar on health insurance coverage. Should I attend?
The answers to these three questions are actually interrelated, but, as usual, it takes a combination of a law degree and a Ph.D. in pharmacology to understand the implications. Let’s try to see if we can simplify these issues.
Almost all Medicare beneficiaries have Part A (Hospital Coverage) and Part B (Medical Coverage). If one wants to cover the “gaps” in Parts A & B, one can purchase supplemental insurance, often termed “Medigap” coverage, because it covers the gaps in Parts A and B. In addition, elders are now urged to purchase Part D prescription drug coverage.
A number of years ago, Medicare introduced what were termed “Medicare Advantage” plans, and those were the plans that were designated as Medicare C. It was an effort to have consumers deal directly with insurers, and the insurers would be in charge of cost control. To encourage consumers to give up some freedom of choice, the Medicare C insurers offered packages of services designed to meet all of a person’s healthcare needs at a cost lower than what would be experienced with a combination of Original Medicare, a supplemental policy and a drug plan.
In other parts of the country, and even in other parts of Massachusetts, these Medicare Advantage plans have flourished. However, in Berkshire County, the reimbursement system for rural hospitals made the continuation of HMO’s and other Medicare C plans financially disadvantageous for providers. The last HMO left Berkshire County in 1999, and since then only “Original Medicare” has been offered. Beneficiaries reading the “Medicare and You” booklets are often confused because the service areas of the “local plans” never include Berkshire County. The implication seems to be that you can’t go to the doctor or have a drug plan if you live here! Not so! But what it does mean is that we pretty much only have one flavor of Medicare, vanilla, and you can maybe add some chocolate sauce if you can afford a supplemental policy. Drug coverage must be purchased separately, and that’s the cherry on top.
In 2007, Humana Insurance decided to market what is called a “Private Fee for Service Plan” (PFFS) in all of Massachusetts. It is a concept which is new to this area, and so many questions still remain about which consumers should be considering this option. It is not for everyone. It appears primarily to appeal to “healthy seniors” who use the healthcare system infrequently and want a safety net against catastrophic costs.
The PFFS plans are like nothing we have ever experienced before. Unlike with HMOs and Preferred Provider Organizations, healthcare providers do not “belong” to a PFFS. Each provider may, on an individual basis, decide to accept the insurance on a case-by-case basis. Companies who market these products say that in other parts of the country, where these plans have been available, they are generally accepted once the providers understand the benefits. In essence, the providers are contracting with a private organization, rather than with Medicare and possibly a supplemental plan, to be paid directly (as with an HMO) without waiting for longer processing times.
So for the providers, there are potential benefits. What about the consumer? That is a more complicated question. The PFFS plans offered in Berkshire County tend to combine supplemental Medicare A & B coverage with drug coverage and sometimes include additional benefits like health clubs. Currently, no eligible health clubs are located in Berkshire County. The total price of the package is approximately what a consumer would pay for the least expensive supplemental insurance, known as “Core.”
“Core” insurance covers the 20% of doctor’s bills and co-pays for tests not covered by Medicare. So, on the one hand, receiving extra hospital coverage, drug coverage, and maybe a health club for the same price sounds like a good deal. This works as long as you’re healthy. What PFFS plans do not emphasize is that there are co-pays for therapy visits, hospitalizations, etc. that one would not experience with a traditional Medigap. A round of chemotherapy or rehab for a hip replacement could end up costing you more than you expected. And if your health status changes, you may have to wait six to 12 months to switch plans to something more cost-effective.
Of course, for “healthy seniors,” particularly those newer Medicare beneficiaries between 65 and 70, the chances of a hip replacement or a course of radiation can be lower so it makes economic sense for PFFS plans to market to those who don’t intend to be heavy users of the healthcare system because the companies hope they will collect insurance premiums and not have to pay for too many doctor visits or hospital stays.
Medicare beneficiaries will begin to notice seminars advertising these Private Fee for Service plans as well as information from insurance agents licensed to sell these products. For some individuals, they could provide comprehensive coverage for a relatively reasonable price. But buyers should be sure they understand the structure of the plans before they make a commitment to something which is complex at best, and potentially confusing.
As always, a call to the SHINE program at Elder Services of Berkshire County at 499-0524 or 1-800-544-5242 can at least give you a “second opinion” about your choices for a Medicare supplement.
Margie Ware is the Regional SHINE Director at Elder Services.