As you near retirement, you may be considering Medicare Advantage as an option to cover your medical expenses. However, with a variety of plans available, it can be challenging to understand the differences and choose the right one. In this blog, we will explain the difference between two popular types of Medicare Advantage plans: HMO and PPO.
Medicare Advantage Plans
Before diving into the differences between HMO and PPO plans, it’s essential to understand what Medicare Advantage plans are. Medicare Advantage, also known as Medicare Part C, is an alternative to Original Medicare (Parts A and B). It is provided by private insurance companies and includes all the benefits of Original Medicare, along with additional benefits such as prescription drug coverage, dental, vision, and hearing.
Medicare Advantage plans have different types, and the two most popular ones are Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) plans.
HMO Plans
Health Maintenance Organization (HMO) plans typically have lower premiums and out-of-pocket expenses compared to PPO plans. HMO plans work by having a network of healthcare providers you must use to receive coverage. These providers include doctors, hospitals, and specialists.
Under an HMO plan, you will choose a primary care physician (PCP) from the network of healthcare providers. This doctor will be your first point of contact for all your medical needs. If you need to see a specialist, you will need a referral from your PCP. If you see a provider outside of your network, you will not get covered at all, unless you have a medical emergency and you will pay out-of-pocket.
HMO plans also typically have lower deductibles and copayments. However, you will have limited flexibility in choosing healthcare providers. If you have a specific doctor or hospital that is not part of the HMO network, you may need to switch providers or pay for services out of pocket.
PPO Plans
Preferred Provider Organization (PPO) plans to provide more flexibility in choosing healthcare providers than HMO plans. You will have access to a network of healthcare providers, but you can also see providers outside the network.
Under a PPO plan, you will not need a referral from your PCP to see a specialist nor you need to choose a PCP if you don’t want to. However, seeing providers outside the network will typically result in higher out-of-pocket expenses, such as copayments and deductibles.
PPO plans also typically have higher premiums and out-of-pocket expenses than HMO plans. However, you will have more flexibility in choosing healthcare providers, making it easier to see the doctors and specialists you prefer.
Choosing Between HMO and PPO Plans
When choosing between an HMO and PPO plan, you should consider your healthcare needs and preferences. If you have a preferred doctor or hospital that is not part of an HMO network, you may want to choose a PPO plan. If you are looking for lower out-of-pocket expenses and are comfortable using the healthcare providers within an HMO network, an HMO plan may be a better choice.
It’s also essential to consider the premiums and out-of-pocket expenses of each plan. While HMO plans typically have lower costs, they also have less flexibility in choosing healthcare providers. PPO plans may have higher costs, but they offer more flexibility in choosing healthcare providers.
How PPO and HMO Are Similar?
Both plans are available through private insurance companies that have contracts with Medicare. Additionally, both plans provide benefits for Medicare Part A (hospital insurance) and Part B (medical insurance), excluding hospice benefits, which are directly offered through Medicare Part A rather than through the plan.
Both plans generally employ provider networks and may include preferred pharmacy networks. They usually offer prescription drug coverage as well. To enroll in either plan, you must have Medicare Part A and Part B and reside in the plan’s service area.
HMO vs. PPO Cost Comparison
When it comes to comparing the costs of HMO and PPO plans in Medicare Advantage, there are a few key factors to consider. First, PPO plans typically have a plan-specific premium that can range from $0 to an average of $18 per month in 2023. Additionally, there is a Part B premium of $164.90 per month or higher, depending on your income.
In terms of deductibles, PPO plans may have an in-network deductible that ranges from $0 to $505 or more, depending on the plan. There is also a drug deductible that can start at $0 and increase depending on the PPO plan.
When it comes to copayments, fees may differ depending on whether you are seeing a primary care doctor or a specialist and if those services are in-network or out-of-network. There is also a coinsurance fee of generally 20 percent of your Medicare-approved expenses after your deductible is met.
HMO plans have the same baseline costs as PPO plans, including the monthly plan and Part B premiums, deductibles, copayments, and coinsurance. However, HMO plans require that you seek services in-network, which means you generally won’t have to deal with additional fees unless you decide to use out-of-network providers.
Additionally, as required by law, your HMO plan and PPO plan will have a yearly out-of-pocket maximum on costs you owe ($8300 in 2023). When you reach this limit, your plan starts to cover the rest of the expenses for the calendar year.
Overall, both HMO and PPO plans have their own set of costs and benefits, and it’s essential to carefully consider your options before making a decision.
Final Key Points
- Medicare Advantage plans are provided by private insurance companies and include all the benefits of Original Medicare, along with additional benefits such as prescription drug coverage, dental, vision, and hearing.
- The two most popular types of Medicare Advantage plans are Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) plans.
- HMO plans typically have lower premiums and out-of-pocket expenses compared to PPO plans but have limited flexibility in choosing healthcare providers.
- PPO plans provide more flexibility in choosing healthcare providers than HMO plans but typically have higher premiums and out-of-pocket expenses.
- When choosing between an HMO and PPO plan, you should consider your healthcare needs and preferences, as well as the costs and benefits of each plan.
- Both plans generally employ provider networks and may include preferred pharmacy networks, and offer prescription drug coverage.
- Both plans have their own set of costs and benefits, and it’s essential to carefully consider your options before making a decision.
