Medicare reform spurs growth in different managed care options

Medicare private fee-for-service plans are offering more patients and doctors an alternative to regular HMOs.

By David Glendinning, AMNews staff. Oct. 11, 2004.

Washington -- Most physicians have not yet encountered a patient who is a member of a Medicare private fee-for-service plan, but that may soon change as insurers seek to boost enrollment in the product.

Last year's Medicare reforms ushered in higher federal payments to managed care companies and sparked a renewed interest in types of plans that thus far have maintained a low profile. Private fee-for-service, which more closely mimics the traditional program, is one of several alternatives to HMOs that are becoming more prominent as the insurance industry prepares to contend with a modernized Medicare fee-for-service system starting in 2006.

Medicare private fee-for-service plans were authorized under the Balanced Budget Act of 1997, but the products experienced years of slow growth. That already has begun to change. For example, a recent move by Humana to double the number of states in which it offers its Gold Choice plan has extended the option to an additional 3 million seniors and people with disabilities.

Under such plans, beneficiaries can visit any physician who will accept standard Medicare rates on a fee-for-service basis. In exchange for an additional monthly premium that is typically less than $100, seniors also receive some level of added benefits, such as coverage for prescription drugs or routine annual physicals.

Physicians who accept private fee-for-service patients are not required to negotiate and maintain contracts with managed care firms and do not need to become members of a provider network. Filing reimbursement claims directly with the insurer also eliminates the need to go through secondary Medicare payers.