Rapid rise of PFFS Medicare plans raises concerns

April 1, 2007

Washington, D.C.-While members of the Medicare Payment Advisory Commission (MedPAC) may be willing to go slow on proposals to reduce rates for Medicare Advantage (MA) plans overall, they are leery about the fast growth and high cost of private fee-for-service plans. MedPAC members generally believe that payments to MA plans should be comparable with the cost of the traditional Medicare FFS program and that it is inequitable for seniors to receive better benefits from MA plans. They are unhappy over analysis that shows that Medicare pays MA plans 16% on average more than the cost of care under FFS. This breaks out to 15% excess payment to local HMOs, but 22% higher rates for private FFS plans, a newer type of private plan that is growing fast: PFFS plans have attracted 66% more seniors since last August to serve more than 1.3 million Medicare beneficiaries as of February.

WASHINGTON, D.C.-While members of the Medicare Payment Advisory Commission (MedPAC) may be willing to go slow on proposals to reduce rates for Medicare Advantage (MA) plans overall, they are leery about the fast growth and high cost of private fee-for-service plans. MedPAC members generally believe that payments to MA plans should be comparable with the cost of the traditional Medicare FFS program and that it is inequitable for seniors to receive better benefits from MA plans. They are unhappy over analysis that shows that Medicare pays MA plans 16% on average more than the cost of care under FFS. This breaks out to 15% excess payment to local HMOs, but 22% higher rates for private FFS plans, a newer type of private plan that is growing fast: PFFS plans have attracted 66% more seniors since last August to serve more than 1.3 million Medicare beneficiaries as of February.