Medicare - Private Fee-for-Service Plans - Coverage and Cost

Some Medicare enrollees choose to receive their services through private fee-for-service plans offered by private insurance companies. Although these plans differ from the Original Medicare Plan, enrollees are still part of the Medicare system. This article discusses how private fee-for-service plans work, what costs are involved for enrollees, and what services are covered.

How Private Fee-for-Service Plans Work

In a private fee-for-service plan, enrollees can receive services either inside or outside their service areas from any medical provider. All of the Medicare services under Part A and B must be provided, but the private insurance company sets the terms of payment rather than the Medicare system, including the patient's deductibles and coinsurance amounts. Private fee-for-service plans sometimes offer additional services, as well, but an additional premium is typically charged for those services. Additionally, unlike the Original Medicare Plan, private fee-for-service providers may allow balance billing, a process by which medical providers can charge patients up to 15 percent over the plan's payment amount. No Medigap policy is needed if a patient chooses a private fee-for-service plan because it is a Medicare Advantage plan.

What Costs Are Involved

Although the monthly Medicare Part B premium is the same for Original Medicare Plan enrollees and private fee-for-service enrollees, other charges may vary considerably. For instance, the private plan may choose to charge an additional premium over and above the monthly Part B premium, and it may charge an additional premium for any extra benefits it provides outside of Part A and Part B coverage. A private fee-for-service patient also pays any deductible, coinsurance, or copayment amounts that the private plan sets.

In choosing a private fee-for-service plan, patients should consider how their out-of-pocket costs would be affected by factors such as additional monthly premiums for Medicare and extra benefits, copayments set for office visits, and balance billing. Other factors may include the type of health care patients receive and the frequency of that care, as well as the extra benefits provided by the fee-for-service plan. Additionally, while some fee-for-service plans pay medical providers directly, others require patients to pay the providers and later be reimbursed.

What Services Are Covered

By law, private fee-for-service plans must cover all services that are covered under Medicare Parts A and B. Part A provides coverage for inpatient hospital care, skilled nursing care, home health care, and hospice care. Part B provides coverage for outpatient hospital care, physician's services, ambulance services, and many other services not covered by Part A. They must also cover all services that Medicare considers to be medically necessary. Medicare's coverage rules are used to determine whether services are medically necessary, and patients may appeal unfavorable determinations on this issue. Depending upon the particular plan at issue, private fee-for-service plans may also cover items and services that are not covered under Medicare Parts A and B.

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