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

According to a recent Government Accounting Office (GAO) report on Medicare Private Fee For Service (PFFS) plans, in April 2007, beneficiaries in PFFS plans tended to be healthier and generally younger than beneficiaries in other Medicare Advantage plans and fee-for-service Medicare. Specifically, projected health care expenditures for PFFS beneficiaries were 7% less than the projected average for beneficiaries in other MA plans and 10% less than the projected average for beneficiaries in fee-for-service Medicare. Beneficiaries in PFFS plans also generally were more likely than beneficiaries in other MA plans and fee-for-service Medicare to reside in rural areas where fewer other MA plans were available. In addition, about 81% of beneficiaries who were new enrollees in PFFS plans were in fee-for-service Medicare before enrolling in their plan, compared to 65% in other MA 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.
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Karen Joy Fletcher

Our blogger Karen Joy Fletcher is CHA’s Communications Director. With a Masters in Public Health from UC Berkeley, she is the online “public face” of the organization, provides technical expertise, writing and research on Medicare and other health care issues. She is responsible for digital content creation, management of CHA’s editorial calendar, and managing all aspects of CHA’s social media presence. She loves being a “communicator” and enjoys networking and collaborating with the passionate people and agencies in the health advocacy field. See her current articles.