How Do PFFS Medicare Plans Work? Are They Good?

How Do PFFS Medicare Plans Work? Are They Good?

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A Medicare Private Fee-For-Service (PFFS) plan is a type of Medicare Advantage plan that's more expensive and less popular than HMOs or PPOs. However, with PFFS plans, you usually don't need referrals or prior authorization for treatment.

The high cost of PFFS plans rarely makes them worth it, and most Medicare Advantage shoppers opt for an HMO or PPO plan.

What is a PFFS plan?

With a PFFS Medicare Advantage plan, a private insurance company agrees to pay set amounts for each type of medical treatment. This is called a fee-for-service model.

For example, a PFFS plan could set the price of an X-ray at $125, with the plan paying $100 and the policyholder paying a $25 copay, assuming the deductible has already been met.

Most PFFS plans have a network of providers who will always treat policyholders at the rates set by the plan. Other doctors who are outside of this network can decide whether or not they want to provide medical care at the plan's specified rates. For example, if you went to an out-of-network provider, they could look up the PFFS plan's procedure rates and terms. Then they could decide whether or not to provide the service using the PFFS coverage.

Importantly, PFFS plans don't require a referral to see a specialist or require prior approval from the insurance company before certain procedures. This differs from managed-care plans like an HMO or PPO that have these utilization management protocols.

A PFFS operates similarly to Original Medicare (Parts A and B), which is a fee-for-service plan that's provided directly through the government, rather than a private insurance company. However, it's important to remember that a PFFS Medicare Advantage plan isn't the same as Original Medicare or Medigap. The PFFS plan sets its own rates, has specific policy guidelines and determines its network of medical providers.

PFFS plans are not commonly offered. Only 1% of Medicare Advantage plans are PFFS plans, and enrollment is at a similar rate of about 1%.

What should you watch out for?

The biggest issue before enrolling in a PFFS plan is knowing which doctors and medical providers the plan will cover.

Most PFFS plans, except those in rural areas, have a network of providers, and it's important to check this network because these are the only medical professionals where your access to non-emergency health care is guaranteed.

PFFS plans often highlight that it offers access to any medical provider who agrees to the terms of the plan and its payment rate. This can make it seem like a PFFS plan would give you good flexibility for medical providers. However, historically, PFFS policyholders faced difficulty in getting consistent health care access through out-of-network providers who would accept the PFFS plan.

Moreover, out-of-network providers agree to the plan's terms on a case-by-be-case basis, so a doctor could provide treatment in one instance and then decline it for another.

Other options to consider:

  • If you plan to keep your medical treatment within the plan's network of providers, consider a Medicare Advantage HMO plan, which is usually a cheaper way to get in-network coverage.
  • If you are looking for a plan that provides flexibility about which doctors you can use, consider a Medicare Advantage PPO plan, which gives you out-of-network coverage. Or you can enroll in Original Medicare and Medigap, which offer coverage for 99% of medical providers.

How does a PFFS plan compare to other types of Medicare?

Even though PFFS plans are a type of Medicare Advantage plan, coverage may work differently than what you are familiar with, and plans can be more expensive than other options.

Cost of PFFS vs. PPO and HMO

PFFS Medicare Advantage plans are some of the most expensive options available.

It costs an average of $80 per month for a PFFS Medicare Advantage plan with prescription drug coverage. Compared to other options that include prescription drug coverage, a PFFS plan typically costs twice as much as a PPO and three times as much as an HMO.

Medicare Advantage plan
Cost including drug coverage
Cost without drug coverage
HMO$24$10
PPO$40$25
PFFS$80$29

Average monthly rates

The cost of a PFFS plan without prescription coverage is more reasonable, at $29 per month. We recommend that Medicare enrollees carry some form of prescription benefits, and PFFS plans are one of the few cases where you can add a Medicare Part D prescription plan to a Medicare Advantage plan. The typical cost of Medicare Part D is currently $42 per month.

Even though a PFFS plan usually costs more than an HMO or PPO, the copayments for medical care are usually similar to that of an HMO or PPO. So, generally speaking, paying for a more expensive PFFS plan won't help you save on health care costs.

Also, PFFS plans can allow balance billing practices where a medical provider is allowed to charge you up to an extra 15% on top of the cost of the procedure. The balance billing limits vary by plan, and any of these costs would be in addition to your copayments.

Coverage comparison

For PFFS policyholders, the extra effort of having a PFFS plan is typically on the front-end of receiving health care, before you've seen a medical professional.

If you choose to go to a medical provider that's not in the plan's network, the work usually falls to the policyholder to confirm that the medical provider will accept the PFFS plan coverage and payment amount. And in locations where PFFS plans aren't common, you may even need to explain what a PFFS plan is.

However, a PFFS plan doesn't have the hurdles for accessing further treatment, such as prior authorizations and referrals, that an HMO or PPO plan often requires.

Medicare plan
Which doctors are included?
Are referrals needed to see a specialist?
Do treatments need prior authorization from the insurer?
PFFS Medicare AdvantageCan go to in-network providers, and can also go to any provider who will accept the plan and its payment amountsNoNo
HMO Medicare AdvantageCan go to in-network providersOftenUsually
PPO Medicare AdvantageCan go to any doctor, but you'll pay more if you go out of networkOftenUsually
Original Medicare (fee-for service)Can go to 99% of providersNoNo

Pros and cons of PFFS plans

Pros

  • No referrals needed for specialized care
  • No pre-approvals needed from the insurance company
  • No primary care provider needed
  • Can add prescription coverage through Medicare Part D

Cons

  • PFFS plans are expensive
  • Out-of-network medical providers can sometimes refuse to treat you
  • Balance billing can sometimes be a risk

Similarities between PFFS plans and other types of Medicare

  • Your coverage is bundled: Like all other Medicare Advantage plans, PFFS plans bundle your coverage to include hospitalization and medical care, and plans may also cover prescriptions, dental, vision and more.
  • Emergency care is guaranteed: During an emergency, hospitals and doctors across the country must treat you no matter what type of Medicare plan you have.
  • Plans still have deductibles and out-of-pocket maximums: The structure of a PFFS plan is similar to other types of health insurance. There could be a deductible, which is the amount of medical care that you must pay for in full before your plan's benefits kick in. There is also an out-of-pocket maximum, which is the cap on how much you could have to spend on covered health services in a year.
  • You'll still have copayments for medical care: With all Medicare plans except Medigap, you'll have to pay a portion of the cost, called a coinsurance or copayment. These copay costs are defined in the plan benefits details, and you could have costs like $25 for a specialist appointment or 15% of the cost of blood tests.
  • Only medically-necessary treatment is covered: Similar to both Original Medicare and other Medicare Advantage plans, a PFFS plan only covers medically necessary procedures. This typically means excluding elective procedures like LASIK or cosmetic procedures.

Which company has the best PFFS Medicare Advantage plan?

There are currently four companies offering PFFS plans. The cheapest PFFS providers are Arkansas Blue Medicare and AARP/UnitedHealthcare. However, the best-rated providers are Humana and Wellcare.

Insurer
Avg. monthly cost
Avg. drug deductible
Avg. star rating
Arkansas Blue Medicare$70$4803.5
AARP/UnitedHealthcare$74$2953.5
Humana$79$2894.0
Wellcare$106$04.0

PFFS plans that include prescription coverage

Keep in mind that not all PFFS plans are this expensive. The best deal is the Humana Gold Choice PFFS, which costs about $7 per month in select counties of Georgia, Kentucky, Pennsylvania and West Virginia. However, the benefits are still not as good as what you can get with a Humana HMO or PPO.

If this $7 option is not available in your area, the next most affordable PFFS plan typically costs between $40 and $60 per month for a plan that includes prescription drug coverage.

How PFFS plans have changed

In 2011, the Medicare Improvements for Patients and Providers Act (MIPPA) began requiring most PFFS plans to provide a network of medical providers and begin reporting quality measures, similar to other Medicare Advantage plans.

As one exception, PFFS plans are not required to have provider networks if they operate in an area where there are less than two other network-based plans that have current enrollment.

Following this legislative change, PFFS Medicare Advantage options were eliminated by Aetna, Cigna and Blue Cross Blue Shield of Michigan, and many consumers transitioned to HMO or PPO plans.

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Frequently asked questions

What is a PFFS Medicare plan?

A Private Fee-For-Service (PFFS) Medicare Advantage plan agrees to pay medical providers set rates for different health care services. PFFS plans are unlike an HMO or PPO managed-care plan because PFFS plans do not use cost-controlling measures, such as requiring referrals or prior authorization. As a result, coverage is usually more expensive.

Is PFFS the same as Original Medicare?

No, they're not the same. Both options use a fee-for-service insurance model, but they are different types of coverage. PFFS is a type of Medicare Advantage plan provided by a private insurance company where medical coverage is often bundled with prescription drug benefits and extras like dental. Original Medicare, also called Parts A and B, is provided directly through the government.

What is the difference between original fee-for-service Medicare and private fee-for-service plans?

Private fee-for-service (PFFS) plans are a type of Medicare Advantage plan sold by a private insurance company, and they have a limited network of providers. In contrast, Original Medicare also uses a fee-for-service billing model, but it's administered by the federal government and is widely accepted by most doctors.

Do PFFS plans have drug coverage?

Sometimes. A PFFS Medicare Advantage plan can be sold with or without prescription coverage. If drug benefits are not included, you can add a standalone drug plan through Medicare Part D, an option that's not allowed with HMO or PPO plans.

Methodology and sources

Medicare Advantage cost and rating data was sourced from the Centers for Medicare & Medicaid Services (CMS) public use files. Our analysis excludes employer-sponsored plans, Special Needs Plans (SNPs), Medicare-Medicaid plans and Medical Savings Account (MSA) plans.

Additional information was sourced from Medicare.gov and the Kaiser Family Foundation.

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