Understanding the differences between Medicare Advantage HMOs and PPOs

Tamera Jackson by Tamera Jackson | Licensed since 2007
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This article was updated on: 07/06/2018

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Medicare Advantage: an alternative way to receive your Medicare benefits

The Medicare Advantage (Part C) program offers you a different way to receive your Original Medicare Part A (hospital insurance) and Part B (medical insurance) benefits. (However, Part A still covers hospice care benefits directly.) You may find that you have choices where you live among several Medicare-approved private insurance companies offering Medicare Advantage plans.  You may also have choices in the type of Medicare Advantage plans available to you.  Two common types are Medicare Advantage Health Maintenance Organizations (HMOs) and Medicare Advantage Preferred Provider Organizations (PPOs)*.  It’s important to understand how each type of plan works when you are considering your Medicare coverage options.

How are Medicare Advantage HMOs and PPOs similar?

  • Single source of coverage. As is true of all Medicare Advantage plans, Medicare Advantage HMOs and PPOs combine coverage for hospital care, physician care, and other medical services in a single plan. Most Medicare Advantage HMOs and PPOs also offer Medicare Part D prescription drug coverage. Some plans offer routine vision and hearing coverage, dental benefits and/or fitness benefits not covered by Original Medicare Part A and Part B.
  • Network of participating health-care providers. Both Medicare Advantage HMO and PPO plans have networks of participating health-care providers. These provider networks of hospitals, doctors, and other health-care professionals and suppliers are core to how the plans provide coverage and access to care.

When Medicare Advantage HMO and PPO plans establish networks, they typically enter into contract arrangements with hospitals, doctors and other medical professionals to provide coordinated care to plan members at a cost that may be lower than the providers’ standard fees. To enjoy the full benefits of your Medicare Advantage HMO or PPO plan, you usually have to choose doctors and hospitals that participate in the plan’s network.  Similarly, if you choose to enroll in a Medicare Advantage HMO or PPO plan that includes Medicare prescription drug coverage, you will use the plan’s network of participating retail pharmacies and mail order pharmacy.

  • Defined service areas. Medicare Advantage HMOs and PPOs have specified service areas, which may vary in size from counties to states or geographic regions in the U.S.  Generally, the Medicare HMO or PPO plan’s service area is defined by the locations of its participating providers to ensure that plan members have reasonable access to health-care services and in-network benefit coverage.  Medicare Advantage HMO and PPO plans can offer their benefits only to people who reside within their service area and these service areas differ from plan to plan, just as their provider networks may differ.  Consequently, you may want to be sure that you are looking at Medicare Advantage HMO and PPO plans available where you live. You can do this by clicking on the Find Plans button on this page and entering your home zip code.
  • Benefit coverage and cost-share. All types of Medicare Advantage plans must provide at least the same benefit coverage as Original Medicare (with the exception of hospice care, which continues to be covered under Medicare Part A).  HMO and PPO plans have cost-sharing features that may include deductible, copayment, and/or coinsurance amounts. Medicare HMO and PPO plans, as with all other types of Medicare Advantage plans, limit plan members’ out-of-pocket expenses for covered services each year—a financial protection that Original Medicare does not have.

How are Medicare Advantage HMOs and PPOs different?

  • Care Coordination. Coordinated care refers to doctors, hospitals, and other health care professionals and suppliers working together to provide Medicare Advantage plan members care, and communicating closely with the plan to verify insurance coverage is available for prescribed treatments.

Medicare Advantage HMOs are designed with relatively strong care coordination features.  If you enroll in a Medicare Advantage HMO, you typically have to choose a primary care physician (PCP) in the plan’s network to coordinate your care.  Your PCP provides your routine medical care and coordinates special care you may need by referring you to specialists participating in the network; arranging for your admission to plan-participating hospitals, rehabilitation or skilled nursing facilities;, and using participating pharmacies, outpatient labs, and medical suppliers, as needed.

Medicare Advantage PPOs also contain care coordination features, but they provide more flexibility in your health-care provider selection.  If you enroll in a Medicare Advantage PPO plan, you typically do not have to select a PCP to coordinate your health care.  And you typically don’t have to go through a PCP in order to receive insurance benefits when you see a specialist.  You can usually see any health-care provider; however, typically your coverage is higher and your out-of-pocket expenses for medical services are lower when you see providers who participate in the plan’s network.

In contrast to a Medicare Advantage HMO plan, you may have to take a more active role in care coordination in a PPO plan.  For example, if you see providers outside the Medicare Advantage PPO plan’s network, you may have to call the plan to verify that pre-authorization for hospital care has occurred according to the plan’s rules.  You may have to give information about the medical care you have received and your prescription drugs to doctors who treat you.

  • Benefit coverage and cost-share. In a Medicare Advantage HMO plan, generally you must receive your health care and services from doctors, hospital, and other health-care providers who participate in the plan’s network in order to receive benefits for covered services.  There are some exceptions when the Medicare Advantage HMO plan will provide coverage from non-participating providers:
  • Emergency care
  • Out-of-area urgent care while traveling outside the plan’s service area
  • Out-of-area dialysis treatment while traveling outside the plan’s service area
  • Out-of-network services that have been pre-approved by the Medicare Advantage HMO plan.

Except in these limited circumstances, if you are enrolled in a Medicare Advantage HMO plan and you see health-care providers outside the plan’s network, you typically have to pay the entire cost of the care or service you receive.

On the other hand, Medicare Advantage PPO plans generally have an “in-network” level of benefit coverage and an “out-of-network” benefit level.  You can move between the two levels of benefit coverage as you choose health-care providers during the benefit year. If you enroll in a Medicare Advantage PPO plan, you typically receive benefits for covered services when you use hospitals, doctors, or other medical professionals and suppliers outside the Medicare Advantage PPO network.  However, you usually pay a larger share of the cost for care or services you receive from them.  With some Medicare Advantage PPO plans, you may need to pay at the time of service for care you receive from a health-care provider who doesn’t participate in the plan’s network.

I can help you if you would like to learn more about Medicare Advantage HMOs and PPOs, or other types of plans that provide Medicare coverage. You can schedule a telephone appointment or have information provided by email using the link below.  You can explore the Medicare Advantage plans available where you live by clicking on the Find Plans button on this page and typing in your zip code.

*Out-of-network/non-contracted providers are under no obligation to treat Preferred Provider Organization (PPO) plan members, except in emergency situations. For a decision about whether we will cover an out-of-network service, we encourage you or your provider to ask us for a pre-service organization determination before you receive the service. Please call our customer service number or see your Evidence of Coverage for more information, including the cost-sharing that applies to out-of-network services.

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