Issue Brief Examines Employers Shift Toward Medicare Private Fee-for-Service Plans

While recent policy discussions have focused on government payments to Medicare Advantage plans that have helped to fuel their rapid enrollment growth, less attention has been given to the emerging role of Medicare Advantage Private Fee-for-Service (PFFS) plans as an option for employers offering retiree health benefits. Under current law, employers may contract with PFFS plans to provide Medicare and supplemental benefits to Medicare-eligible retirees living throughout the country. An issue brief released by the Kaiser Family Foundation examines the recent boom in Medicare Advantage enrollment attributable to employers contracting with PFFS plans (known as “group” plans) to cover their Medicare-eligible retirees. Between 2006 and 2008, the number of Medicare beneficiaries enrolled in Medicare Advantage group plans nearly doubled from 900,000 to nearly 1.7 million as of June 2008; most of this growth is attributable to contracts between employers and PFFS plans. The issue brief, prepared for the Foundation by Avalere Health, highlights changes in regulation, statute and the marketplace that appear to be influencing employers’ interest in PFFS plans as an option for their retirees, drawing on interviews with employers, benefit consultants, insurers and consumer representatives. The report explains how the current payment system may help some employers reduce retiree health costs by contracting with PFFS plans, and describes how that shift can increase Medicare spending. The authors note that prospects for continued enrollment growth in the group PFFS market are uncertain. Recently enacted legislation requires PFFS plans to create provider networks by 2011 which may limit their appeal to employers. Further, future growth in the PFFS group market could be affected by changes in Medicare Advantage payments. The issue brief, The Emerging Role of Group Medicare Private Fee-for-Service Plans, is available online.