Comparing Medicare Advantage Plans: HMO vs PPO

Written by Ari Parker — Updated: Thursday, August 29, 2024

Understanding the nuances of Medicare Advantage plans is an important part of taking care of your health as an older adult. You may have heard of the terms “HMO” and “PPO” before. In this post, we’ll break down Medicare Advantage plans, the pros and cons of an HMO vs a PPO, and how to choose between them. 

Key takeaways:

  • Medicare Advantage plans offer an alternative to Original Medicare.

  • Medicare Advantage plans can be HMO plans or PPO plans. The best plan type for you depends on your unique health and financial needs.

  • The main difference between HMOs and PPOs is that HMOs offer better cost savings while PPOs offer more flexibility in choosing your doctors.

What is Medicare Advantage?

Also called Medicare Part C, Medicare Advantage plans offer an alternative to Original Medicare (Part A and Part B). This option for health insurance combines Part A (inpatient hospital coverage) and Part B (outpatient medical coverage). 

Because private insurance companies offer Medicare Advantage plans, they are able to provide additional benefits (like vision, dental, and hearing services) and bundle prescription drug coverage (Medicare Part D). You can also choose to purchase a separate Medicare drug plan alongside Medicare Advantage.

While these plans often cover more services than Original Medicare, they can be restrictive in a lot of ways. Original Medicare and Medicare Advantage each have their pros and cons—learn them so you know what’s best for you.

What are HMOs and PPOs?

HMOs and PPOs are different health insurance plan types that you will find when exploring Medicare Advantage plans. Both HMOs and PPOs operate within a provider network, and while PPOs offer more flexibility, HMOs often come with lower out-of-pocket costs.

Health maintenance organizations (HMO)

A health maintenance organization, or HMO, is a plan that has a network of healthcare facilities and providers. Those enrolled in an HMO are restricted to the network of providers that the plan provides. Although you’ll likely see lower out-of-pocket costs and premiums low, HMOs limit which medical professionals you can see.

Preferred provider organizations (PPO)

In comparison to HMOs, a preferred provider organization, or PPO, offers more flexibility in choosing healthcare providers. PPO plans have a network of doctors and health facilities where your costs will be lower, but members can receive care outside the network. Because they provide more flexibility, PPOs can be more expensive and have higher monthly premiums. 

Pros of Medicare Advantage HMOs

  • HMOs generally have lower premiums and out-of-pocket costs.

  • It’s unlikely you’ll need to file any claims since HMO plans pay providers directly.

Cons of Medicare Advantage HMOs

  • There is no coverage for care from out-of-network providers, so you only have access to a limited network of doctors, hospitals, and services.

  • You must make an appointment with your primary care doctor to get a referral to see an in-network specialist. 

Pros of Medicare Advantage PPOs

  • You have greater flexibility in choosing a provider and can go out-of-network.

  • You don’t need to use a primary care provider, and you don’t need a referral for any specialists.

Cons of Medicare Advantage PPOs

  • PPOs have higher premiums. They also often have higher out-of-pocket costs.

  • In some cases, out-of-network providers can result in higher out-of-pocket costs and a separate deductible.

  • You may have to file a claim to get certain services reimbursed. This is more likely if you visit out-of-network providers.

When can you switch out of your Medicare Advantage plan?

If you’re not happy with your HMO or PPO Medicare Advantage plan, you have options to switch back to Original Medicare or pick a different Medicare Advantage plan. You have two different opportunities to do this in the year: the annual Open Enrollment Period and the Medicare Advantage Open Enrollment Period.

Annual Open Enrollment Period

The Medicare annual Open Enrollment Period, which happens every year from October 15th to December 7th, is a time when you can join, switch, or drop Medicare Advantage plans and Part D prescription drug plans.

Medicare Advantage Open Enrollment Period

The Medicare Advantage Open Enrollment Period occurs from January 1st to March 31st of every year. You can switch your Medicare Advantage plan or return to Original Medicare if you find that your current coverage doesn’t meet your needs.

If you qualify for a Special Needs Plan (SNP), you may have more opportunities to switch your Medicare plan. For Dual-Eligible Special Needs Plans, you can usually join, switch, or drop a plan once per quarter. You can also make changes to any SNP during both open enrollment periods.

Medicare Advantage plans HMO vs PPO: Which one is right for you?

Choosing the right plan involves a careful consideration of your unique healthcare needs, preferences, and financial circumstances. It’s crucial to weigh the pros and cons of each plan to see what’s best for you. For example, you’ll want to ask yourself what’s more important for your situation — lower premiums and out-of-pocket costs or flexibility in choosing your providers?

Talk to one of our licensed Medicare Advisors for personalized advice about Medicare Advantage HMO vs PPO plans. Our licensed Advisors can provide valuable consultation, ensuring you make an informed decision that suits your health and financial well-being. Schedule a free consultation or call us at (855) 900-2427 to get started.

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