One of the new Medicare Advantage options for seniors is the Private Fee for Service Plan. The insurance company offers a traditional indemnity plan, and the providers have to accept Medicare level reimbursement. The Wall Street Journal reports today that seniors are flocking to these plans. (The link is to a reprint in the Pittsburgh Post Gazette that works.)

The Journal article quotes David Lewis, acting director of the Medicare Advantage Group at the Centers for Medicare and Medicaid Services (Mr. Lewis previously was an FEHBP Contracting Officer), “Enrollment in private fee-for-service plans alone jumped to 802,068 as of Aug. 1 from just 20,000 three years ago.” Wellpoint, Aetna, and Humana are expanding their private FFS offerings.

The illuminating article explains

As with most [Medicare] Advantage plans, premiums are often lower than the combined premiums for government-run Medicare benefits for physician and hospital services and drugs. Advantage members must still pay the Medicare part B premium for physician and outpatient services, which is $88.50 a month. But Advantage plans may wrap in other benefits such as additional days in the hospital and drugs. As insurers expand their private fee-for-service offerings, the plans will see “dramatic growth” next year, says Dan Mendelson, president of Avalere Health. But some wonder how long seniors can take advantage of this program. The Medicare Payment Advisory Commission, which advises the government on Medicare, has warned that the government pays 11 percent more on average to Medicare Advantage plans for physician and hospital services than the traditional ones.

I wonder how many FEHBP eligible annuitants have dropped their FEHBP coverage in favor of a Medicare private FFS plan? Under OPM’s rules, an annuitant can suspend his or her FEHBP coverage to enroll in a Medicare Advantage plan with the option to later reenter the FEHBP. Under the general rule, if an annuitant drops FEHBP coverage, the decision is permanent.