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Medicare Advantage – What’s the difference between HMO and PPO?

If you’ve ever had to pick an employer sponsored health plan chances are you’ve had to choose between a Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) plan. You will have to make a similar decision if you decide to enroll in a Medicare Advantage plan.

If you’re currently enrolled in a Medicare Advantage plan, you should receive your Annual Notice of Changes ahead of the Medicare Annual Enrollment Period (AEP). AEP runs from October 15th – December 7th and is your chance to change your Medicare Advantage plan to better meets your needs or preferences.

So, what is the difference between HMO and PPO plans? Understanding this can help you make an informed decision on what plan is best for you.

Medicare HMO Insurance Plan

An HMO is a type of Medicare Advantage plan managed by a private insurance company where a network comprised of healthcare providers, hospitals, and clinics have agreed to provide their services and care at a lower cost while still adhering to standards for quality of care set forth by Medicare. With HMO plans, there are usually copays and there may be some deductibles that must be paid. Premiums tend to be lower for HMO plans, however there are typically more restrictions for coverage than with other plans. In addition, Medicare HMO plans tend to include prescription drug coverage, but you will want to check to ensure your specific medications are included.

To keep costs low, many HMO plans require individuals to select a primary care physician (PCP) who will coordinate patient care and make referrals for specialist care and tests. If your PCP leaves the plan’s network of providers, you will be notified so you can select another doctor from the plan’s network.

For many HMO plans, you need a referral to see a specialist. With the exception of emergencies, HMO plans will only cover care when you see a provider within the HMO network, which means that if you get care from a provider outside your network, you’ll likely have to pay for the cost of care out of pocket.

HMO plans are generally less expensive than PPO plans and are ideal for people who receive care close to home and whose preferred provider is in the HMO network they’re considering.

Medicare PPO Insurance Plan

There are many similarities between Medicare HMO plans and Medicare PPO plans, but there are some key differences between these options. Like HMO plans, PPO plans also feature a network of providers, but they provide greater flexibility when choosing a provider or hospital. PPO plans don’t require individuals to choose a PCP. You can see a specialist without having to see a PCP first, and PPO insurance will pay if you see an out-of-network provider, though it may be at a lower rate. Benefits will usually be better if you get care within your network. You can get drug coverage through your PPO plan, though not every PPO plan includes prescription drug coverage. If the PPO plan does not include prescription coverage you will need to enroll in a Medicare Advantage Prescription Drug plan.

PPOs offer greater flexibility, but premiums tend to be higher, and it’s common for there to be a deductible. If you travel a lot and need to receive care away from home, a PPO might be a good option. Additionally, if you prefer getting specialist care directly and without a referral from a PCP, a PPO might be a good option for you.

How do these plans compare side by side?

While both Medicare HMO plans and Medicare PPO plans are considered Medicare Part C, it is important to understand the differences. Here is side by side comparison of the key similarities and differences between these offerings:

Use a network of healthcare service providers that have agreed to deliver quality care at a lower costYesYes
Managed by private insurance companies contracted with MedicareYesYes
Typically include prescription drug coverage. If not, individuals can sign up for a stand-alone Medicare Part D plan.YesYes
Require individuals to pay a monthly Part B premium in addition to the plan premium.YesYes
Beneficiaries should get services within the plan’s network of providers and facilities to ensure they are covered at the maximum amountYesYes
Require a Primary Care Provider (PCP)YesNo
Require a referral to see a specialistYesNo
Network sizeSmallerLarger
Coverage when seeing an out of network providerNo (except in case of an emergency)Yes

Which Plan Is Right for You?

There are a lot of variables to consider when choosing between Medicare HMO and Medicare PPO plans. Here are some questions to ask yourself when making a decision:

  • Would I prefer a lower monthly premium?
  • Will I be traveling a lot this year?
  • Do I want to stay with my current provider? Are they in the plan(s) network that I’m considering?
  • Do I want to rely on a referral for specialist care?

It is clear that both options have advantages and disadvantages. If you’re unsure about which plan would be best for you, speak with a Guided Medicare agent today.


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