Today, just as 50 years ago, when President Johnson signed Medicare into law, traditional Medicare is a fee-for-service program that allows older adults and people with disabilities to use almost any doctor or hospital in America knowing that Medicare will cover their care. Medicare Advantage Plans, including private Medicare fee-for-service plans, are newer Medicare health insurance options. All of these private Medicare Advantage plans are required to offer all the benefits that traditional Medicare offers. But, even the private fee-for-service plans work very differently from traditional Medicare.
Of note, people with complex and costly conditions rate traditional Medicare substantially higher than the private Medicare plans on access and quality. Not surprisingly, the overwhelming majority of people newly eligible for Medicare enroll in traditional Medicare. Here are three big differences between traditional Medicare and private Medicare fee-for-service plans that help explain the higher ratings and overwhelming preference for traditional Medicare:
- Many doctors and hospitals, which take traditional Medicare, may refuse to accept your private fee-for-service coverage. So, while private fee-for-service plans must pay for care from any doctor or hospital you choose to see, you may find that your doctors and hospitals do not accept the private fee-for-service plan’s rates. To make sure your providers will accept the plan’s rates and to avoid huge doctor bills, you should either use network providers or ask your plan for an “advance coverage determination” before seeing the doctor.
- Each Medicare private fee-for-service plan may have different approved doctor and hospital rates. Whereas traditional Medicare’s rates are transparent and identical within a geographic area, private fee-for-service plans are not. It is therefore near impossible to know what your out-of-pocket costs will be or to budget for your health care if you’re in a private fee-for-service plan and need to use out-of-network providers.
- Unlike traditional Medicare, you cannot buy supplemental coverage to fill gaps in a private fee-for-service plan. Private Medicare fee-for-service plans require you to pay annual deductibles and coinsurance (or copays) out-of-pocket, exposing you to financial risk if you need a lot of costly services. The plan must have a yearly limit on out-of-pocket costs, but it can be very high.
Note that just because private fee-for-service plans must cover the same benefits as traditional Medicare does not mean that they will always cover the same services. Private fee-for-service plans will apply their own rules for deciding whether a service is medically reasonable and necessary from traditional Medicare. For example, they might decide that a different number of trips to the doctor for a particular service is appropriate. That said, private fee-for-service plans might offer additional benefits such as eyeglasses or a vision test, benefits that traditional Medicare does not cover.
For more information on the differences between traditional Medicare and private Medicare Advantage plans more generally, click here.