Medicare Advantage HMO vs. PPO – Not all Medicare Advantage plans are equal. There are about seven different kinds of Medicare Advantage plans and then many iterations of each kind within those categories. HMO and PPO plans are two of the most popular options.
What do HMO and PPO plans have in common?
Before we begin to unravel the differences between HMO and PPO plans, let’s talk bout how they are the same.
First, they are both managed care plans. “Managed care” is any health care plan that is focused on reducing medical costs while still keeping the quality of care high. Managed care plans do this by using provider networks, provider oversight, drug tiers, etc.
HMOs and PPOs, as well as all other Medicare Advantage plans, are offered by private insurance companies that are contracted with the federal Medicare program. (The government pays private insurance carriers to offer Medicare Advantage plans.) They replace the benefits found in Parts A and B, except for one aspect. All hospice benefits still come directly through the Medicare program (Part A) instead of the plan itself.
Both HMO and PPO plans use facility and provider networks, though even that varies slightly, which we’ll discuss later. Both plans usually include prescription drug coverage. If they don’t include drug coverage, members are not allowed to enroll in a separate Part D plan and will simply not have prescription drug coverage.
Lastly, anyone who wants to enroll in a Medicare Advantage plan must already be enrolled in Medicare Part A and Part B. Plus, they must live within the plan’s service area to enroll.
Next, we’ll discuss the specifics of HMO and PPO plans.
What is a Medicare Advantage HMO plan?
We said that both HMO and PPO plans have provider networks. The difference, though, is that the HMO network is much smaller than other networks. Not as many providers accept HMO plans because their reimbursement is lower than the PPO counterpart.
HMO members must choose a primary care physician or PCP. That physician will coordinate all of their care and maintain contact with any other providers involved in their healthcare. Coordination also includes specialty providers. Individuals who enroll in an HMO plan must get a referral to see any specialist. Skipping this step will mean the entire bill will land on the member.
HMOs, do not allow their members to get care outside of the plan’s network. If they do, the plan will not pay anything for services, even if they would have typically been covered. Emergencies are the exception to this, but even in that situation, the member will pay more out-of-pocket than they would if they had seen an in-network provider.
Lastly, HMO plans often have certain limitations. Members might have to try alternative forms of treatment or prescriptions before the one their provider initially recommended. (Alternative forms will be cheaper than what might have been recommended.)
What is a Medicare Advantage PPO plan?
PPO networks are larger than HMO networks. More providers choose to participate in these plans because their reimbursement rates are higher, and they have fewer requirements and limitations.
PPO enrollees do not have to choose one primary care physician, nor do they have to get a referral to see a specialist. In addition, PPO plans allow for benefits outside of their networks. Members can see a non-PPO provider and still have some coverage. The difference is that the member will pay more than they would have for a PPO provider.
For example, let’s say the inpatient hospital copay is $275 dollars per day at an in-network facility. At an outpatient facility, it might be $375. Still, that is better than the alternative of no coverage at all.
Medicare Advantage HMO-POS: A Combination
There is an alternative to HMO and PPO plans that uses a combination of both plans. An HMO Point-of-Service plan combines the best aspects of the HMO and PPO options.
POS members do not have to choose a primary care physician or get a specialist referral for care. In addition, they offer out-of-network coverage as PPO plans do. Again, you’ll just pay a little more to use a non-HMO provider.
So far, these plans mostly mimic the PPO option. There is one main difference, however. POS plans often have two deductibles and two out-of-pocket maximums – one for in-network care and one for out-of-network care.
To learn more about HMO, PPO, and other Medicare Advantage plan types, chat with one of our Medicare advisors. We can take a look at the plans available in your area and then help you decide which one is right for you.