FFS & Medicare

According to Medicare, a Fee for Service (FFS) plan is "(a) type of Medicare Health Plan in which you may go to any Medicare-approved doctor or hospital that accepts the plan's payment. The insurance plan, rather than the Medicare Program, decides how much it will pay and what you pay for the services you get. You may pay more or less for Medicare-covered benefits. You may have extra benefits the Original Medicare Plan doesn't cover."

In other words, a FFS plan stands in for Medicare and Medigap (aka MedSup or Medicare Supplement) plans. It takes one's Medicare reimbursement and liability "offline," and makes it more of a one-on-one arrangement with your provider, rather than the traditional third-party arrangement we've all come to know and (ahem) love.

With FFS plans, Medicare pays a private insurer (e.g. Blue Cross) so many dollars per month on your behalf, and the carrier pays any claims out of that stipend. If they miscalculate, or your health declines, they may end up paying out more than they got from the gummint; likewise, if you're relatively healthy and have few claims, they get to keep the difference.

Not exactly rocket science.

In fact, if you're so inclined, the folks at Medicare have made available a handy booklet that explains all about how these plans work, and can help you decide whether or not one is "right for you."

Once one has decided to give the FFS system a whirl, one needs to sign up (enroll) in whichever plan is currently offered and available. There may be more than one, or none at all. What's different is how companies that offer FFS's "incentivize" folks to choose theirs. For example, many (most?) folks find that the traditional Medicare system leaves a lot of gaps in their coverage, so they buy Medicare Supplement policies, often sold by insurance agents. Of course, these agents (such as yours truly) are paid a (very modest) commission for each sale. These commissions are paid by the insurance carrier with whom the policy was placed.

Until recently, Medicare Advantage plans (of which FFS's are a subset) were sold directly by the carrier, not through an agent. But FFS plans may be sold by agents, who are paid a fee (similar to a commission) for the sale. So far, so good.

Unfortunately, my industry has a long history of shooting itself in the foot (cf: Single Premium Life), and the FFS biz is no different:

"Humana Inc., UnitedHealth Group Inc. and five other U.S. health insurance companies agreed to stop selling a type of government-funded plan for the elderly in response to complaints that sales agents forged signatures and enrolled dead people."

Gotta love that last: I thought dead folks only voted in Chicago; who knew they also bought health insurance in Peoria? And it's a non-trivial amount of money, in that FFS plans "account for about 20 percent of the $60 billion Medicare Advantage program." Ouch.

In the event, Medicare is working with the carriers involved in this little kerfluffle to determine guidelines, and they've temporarily stopped pushing these plans until there's sufficient oversight and enforcement in play.

I was particularly pleased to see Bloomberg quote fellow medblogger Bob Laszewski, who opined that "(i)t's a positive development in that they are doing something, but it's somewhat hollow...Someone came up with a fantastic public relations marketing, failing to tell people that 99 percent of all sales occur during the open enrollment.''

Bob's referring to the fact that, perhaps not coincidentally, the aforementioned carriers have ceased their marketing efforts at the same time that the Medicare Open Enrollment Period is in hiatus.

Not that we're cynical or anything.

So what's the bottom line: are FFS plans a good thing or not?

Well, that depends, really, on what one expects from one's insurance. I've always been of the opinion that there are trade-offs in such plans: cost vs availability, exposure vs access. If one saves a bunch of money, but can no longer see one's trusted family physician, is the trade-off worthwhile? Seeems to me that that's a personal decision, pne not to be taken lightly or without some serious contemplation. On the other hand, no one's claiming that the plans themselves are defective in some way. If one knows ahead of time that certain provicers aren't going to be available, but that one's monthly premiums are going to decrease substantially, then perhaps it's a worthwhile trade-off.

Food for thought.