GAO Publishes Report on Private Fee For Service (PFFS) Plans

This high percentage of beneficiaries (81%) who were new enrollees in PFFS plans and had previously been in Original fee-for-service Medicare precisely points out a short fall in the Center for Medicare and Medicaid Services’ (CMS) compensation limit rules for agents selling Medicare Advantage and Part D prescription drug plans. While the rules do help eliminate incentives for agents or brokers to move beneficiaries from plan to plan, a practice known in the industry as “churning,” they still allow agents to receive almost double compensation for enrolling people new to MA plans, as opposed to the much lower ‘renewal’ compensation they receive for beneficiaries they previously enrolled in an MA plan who stay in their MA plan or switch to a similar plan for the coming year. This means it is financially more profitable for agents to focus their marketing efforts more exclusively on people new to Medicare or in fee-for-service Medicare. And this is exactly what is happening as is demonstrated in the GAO report findings.

The GAO report also discusses how many people who enroll in PFFS plans are unaware of the payment structure and that these plans currently have no preset network of providers. This means that if a beneficiary’s doctor doesn’t accept the terms of the PFFS plan’s payment, the beneficiary may be responsible for the costs of care.

For more information see:

• the full GAO report,
• our Medicare Advantage section, and
• our recent policy brief Dual Eligibles & Medicare Advantage Plans: Do New Rules Make Them a Better Fit?