Final answer:
A Private Fee-for-Service (PFFS) plan is a Medicare Advantage Plan that differs from Original Medicare and Medigap by allowing members to receive care from any provider that accepts the plan's terms. Unlike HMOs or PPOs, members do not need to choose a primary care doctor or get referrals for specialists. These plans are susceptible to issues like moral hazard and adverse selection, which impact insurance costs and coverage.
Step-by-step explanation:
A Private Fee-for-Service (PFFS) plan is a type of Medicare Advantage Plan (Part C) that allows members to receive care from any doctor or hospital that accepts the plan's payment terms and agrees to treat the patient.
Unlike Original Medicare, which is a government-run fee-for-service program where beneficiaries can see any doctor or provider that accepts Medicare, a PFFS plan is offered by private insurance companies. However, it's different from a Medigap supplement plan, which is a separate policy designed to complement Original Medicare by covering out-of-pocket costs like deductibles and co-insurances.
With a PFFS plan, the insurance company decides how much it will pay to the healthcare providers and how much the patient must pay when they get care. It's important to note that healthcare providers are not required to accept PFFS plans, so it's crucial for members to ensure that their providers agree to the plan's terms before receiving services.
Unlike HMO or PPO plans, PFFS plans do not typically have a network of doctors, and members are not required to choose a primary care physician or get referrals for specialists.
The concept of moral hazard and adverse selection are important in the context of insurance.
Moral hazard refers to the tendency for insured individuals to take greater risks because they don't bear the full cost of their actions, while adverse selection describes a situation where insurance buyers with higher risk are more likely to purchase insurance, potentially leading to losses for the insurer. Both factors can impact the costs and sustainability of insurance plans.
The U.S. government created programs like Medicare and Medicaid to provide insurance coverage to certain populations that private insurance markets may not adequately serve—Medicare for those over age 65 and Medicaid for those with low incomes.
The Patient Protection and Affordable Care Act (ACA or Obamacare) further aimed to reduce the number of uninsured and make healthcare more accessible and affordable.