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Private FFS MA plans may be linked with higher costs for beneficiaries, GAO report shows

Wednesday, January 14 2009 | Comments
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Private fee-for-service (FFS) Medicare Advantage (MA) beneficiaries may experience more financial risks and higher disenrollment rates as compared with traditional Medicare beneficiaries and those in other MA plans, according to a new report.

The Centers for Medicare & Medicaid Services (CMS) asked the Government Accountability Office (GAO) to describe the characteristics of enrollees, potential financial risks and disenrollment patterns in private FFS MA plans compared with traditional Medicare plans and other MA plans.

The GAO used April 2007 Medicare enrollment data to compare the characteristics of private FFS MA beneficiaries with those in other MA plans and Medicare FFS plans. The analysis included approximately 5.8 million enrollees in 1,998 MA plans and 31.7 million enrollees in Medicare FFS plans.

Private FFS MA beneficiaries appeared to be healthier, younger and more likely to live in rural areas where there were few MA plan options relative to those in Medicare FFS plans and other MA plans. Health expenditures for private FFS MA beneficiaries were 7 percent less than the average expenses for beneficiaries in other MA plans and 10 percent lower than the average expenses for Medicare FFS beneficiaries.

Based on relevant laws, regulations, CMS documentation and materials from private FFS plan sponsors, 2008 plan benefit information revealed that private FFS MA plans may be linked with higher out-of-pocket expenditures due to the denial of coverage when they did not obtain an advance coverage determination from their plan.

If these beneficiaries did not contact their plans before obtaining services, they faced financial risks that were not found in other MA and Medicare FFS plans, the GAO found. For example, if private FFS MA participants did not request an advance determination from their plan to ensure coverage, they may have to pay for the entire cost of the service should their coverage be later denied. Those in other MA or Medicare FFS plans were protected against this risk.

This assessment also found that some private FFS MA plans inappropriately used the term "prior authorization" in its informational materials and may have confused beneficiaries and providers.

Using Medicare enrollment data for private FFS and other MA plans from December 2006 and April 2007, the GAO found that private FFS MA beneficiaries left plans at an average rate of 21 percent. In contrast, the average rate of disenrollment for other MA plans was 9 percent.

CMS said it would do further investigation into these issues and would correct certain actions.

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