With PFFS Americans May Pay More For Less Medicare
About a month ago I was discussing a medical bill with a local hospital billing office and noted that the statement could not be correct since, even under original Medicare, the program available to those over age 65, the deductible would be less than the hospital’s charges. My client was clearly over age 65 at the time that service was rendered so the hospital bill must have been incorrect. At that point the bookkeeper exclaimed, “Oh, your client didn’t have Medicare.” She went on to clarify that my client’s coverage was “under one of those other ‘things’ that are not Medicare.”
Over a year ago I wrote about changes to the Medicare program that raise concern. See “Medicare Insurance Plans Under Attack,” Daily Local News, 5/28/ 2007 at www.collitonlaw.com. In particular, plans called Medicare Advantage and a specific type of Medicare Advantage coverage called Medicare Private Fee For Service (PFFS) offered by several private insurers is allowed so much flexibility in the benefits it provides that the terms of original Medicare may be rewritten for its policyholders. It was one of these PFFS plans that caused my client to have to pay more than with basic Medicare. In other words, she paid a premium to an insurance company to get less coverage than she would have had if she stayed with basic Medicare.
My May, 2007 column coincided with hearings by the U.S. House Ways and Means Health Subcommittee investigating PFFS plans which ultimately resulted in promises from the health insurance industry that they would refrain from aggressive marketing of PFFS plans and the question slipped from center stage.
Recently, before Congress adjourned for the Fourth of July 2008 recess, the issue again came to a head.
To understand why this issue is so important it would be helpful to know the background and history of Medicare. Medicare was initiated along with Medicaid in 1965 to deal with the problem that the health insurance industry was unwilling or at least not strongly motivated to provide insurance to certain groups, namely the elderly, or the poor and disabled at reasonable rates. This was understandable since private insurers, motivated by profit, were not favorably disposed to absorb the added risk.
In a compromise among several groups that in retrospect seems almost miraculous, Medicare Parts “A” and “B” came into existence and effectively became the only government plan outside of welfare that guarantees a basic benefit. Each year, the Center for Medicare and Medicaid Services, known as CMS, publishes deductibles, co-pays, and schedules of benefits including guarantees, for instance, that, after three consecutive days of hospitalization, if rehabilitation is needed, the first twenty days of rehabilitation require no co-pay or deductible. Federal rules provide that certain notices must be given before discharge and other rights. PFFS plans, on the other hand, are not subject to supervision by CMS or many of these requirements. In other words, they again become just insurance and, even as insurance, they are remarkably inefficient, less efficient, in fact than government operated Medicare.
The basic question before the U.S. Senate before its Fourth of July recess is whether the federal government would reduce its subsidies to Medicare Advantage plans in order to prevent a 10.6% reduction in Medicare physician payments. The House already approved the legislation in a bi-partisan vote of 355 to 59. The Senate failed by one vote but implementation is being delayed until this week. The question should be a “no-brainer.”
First, although PFFS plans receive the highest payments from Medicare, an average of 13 percent more to provide the same services or less as original Medicare, they do not have to pay Medicare standard rates to providers such as physicians and hospitals. Medicare participating providers including doctors and hospitals can refuse PFFS patients. This means that, although policyholders do not have a restricted list of doctors or hospitals to use, the physician or hospital they chose to use might not accept PFFS.
PFFS plans can charge policyholders deductibles and co-insurances that are different from those under Medicare such as daily hospital copayments, daily copayments for home health visits and daily copayments for the first several days in a skilled nursing facility which, under traditional Medicare would be covered at 100%. They can charge extra for or fail to offer prescription drug coverage.
One Pennsylvania Senator voted “yes” to reduce the bloated insurance payments and not to reduce payments to physicians and one voted “no.” It is not too late for readers to let their voices be heard.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.