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Government Study Finds Costly Private Medicare Practices

December 16, 2008

A government watchdog agency said people who enroll in popular Medicare options like private fee-for-services plans may be stuck with thousands of dollars in medical costs.

The U.S. Government Accountability Office (GAO) report said that the agency who oversees the Medicare health program for the elderly needs to examine the unexpected costs faced by people enrolled in these fee-for-service plans.

The GAO suggested that potential enrollees need to be informed about the drop-out rates for the plans.

Experts say lucrative fee-for-service plans are the fastest-growing segment for private companies contracting with Medicare.

The GAO report said Medicare beneficiaries in the fee-for-service plans drop out at a greater rate than those using other private Medicare Advantage plans.

“Beneficiaries need to be warned about the dangers of enrolling in these plans. Clearly these plans don’t work if you actually get sick and need health care,” House Ways and Means Committee Chairman Charles Rangel, a New York Democrat, said in a statement. He was one of five congressional Democrats requesting the GAO study.

The report found beneficiaries may not always be told by service providers that something is not covered, and then they are forced to pay for the services.

“Furthermore, some beneficiaries likely experienced higher out-of-pocket costs for covered services if they did not contact their plan before obtaining the services,” the study said.

The GAO found that cost-sharing expenses are higher in these private fee-for-services plans.

Enrollment in private Medicare Advantage plans has grown very quickly in recent years. The GAO said 45 percent of that growth has been in fee-for-service plans.

The new findings point out that privately operated Medicare plans get bigger subsidies than traditional government-run Medicare, so they have a bigger impact on the U.S. budget.

Democrats have said they want to cut back on subsidies for private Medicare plans as they look to overhaul the U.S. healthcare system.

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