Agency blasts Medicare fee-for-services plans

WASHINGTON (Reuters) - People who sign up for popular Medicare options known as private fee-for-services plans may find themselves stuck with thousands of dollars in medical costs, a government watchdog agency said on Monday.

A report by the U.S. Government Accountability Office (GAO) recommended that the agency that oversees the Medicare health program for the elderly take a closer look at the unexpected costs faced by people enrolled in these fee-for-service plans. It also suggested that potential enrollees be informed of the drop-out rates for the plans.

Lucrative fee-for-service plans are the fastest-growing segment for private companies contracting with Medicare, the federal health insurance plan for the 44 million or so Americans who are disabled or over 65. Unlike some private plans, they do not require users to use providers inside networks.

The GAO report said that Medicare beneficiaries enrolled 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 said that beneficiaries may not always be told by service providers that something is not covered. They then have 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.

Cost-sharing expenses also are higher in these private fee-for-services plans, GAO said.

Enrollment in private Medicare Advantage plans has grown substantially in recent years and about 45 percent of that growth has been in fee-for-service plans, GAO said.

The report said growth in these programs has a major impact on the U.S. budget because privately operated Medicare plans get bigger subsidies than traditional government-run Medicare -- about 17 percent more for private fee-for-service plans and 13 percent for other Medicare Advantage programs.

Democrats who won a bigger majority control of Congress in the November elections are expected to try to cut subsidies for private Medicare plans as they look to overhaul the U.S. healthcare system and trim costs.

(Reporting by Donna Smith; Editing by Maggie Fox and Eric Walsh)