Medicare Advantage HMO vs. PPO Plans | Understanding the Differences

• by Christian Worstell
• December 7, 2021
• Reviewed by John Krahnert

There are several different types of Medicare Advantage plans from which to choose, and two of the most popular kinds are Medicare HMO’s and Medicare PPO’s.

Let’s compare these two types of plans to better understand how they are different and help you determine which one might be best for you.

What is a Medicare HMO plan?

HMO stands for “Health Maintenance Organization.”

This type of plan typically utilizes a primary care physician. A primary care physician is a general practice doctor whom you will almost always see first. This doctor can perform a wide range of treatments and may be able to treat the majority of your ailments.

An HMO plan is typically made up of an approved network of health care providers. In most cases, any medical care you receive will only be covered by your plan if you visit a provider from within the plan network.

If you seek medical care outside of your network, you may have to pay the full cost of the services you receive. One exception is in the event of an emergency.

If you need specialized treatment from a specialist, your primary care physician will refer you to the appropriate doctor within the HMO plan’s network and help you set up an appointment.

What is a Medicare PPO plan?

PPO stands for “Preferred Provider Organization.”

With a Medicare PPO, you are free to visit the health care provider of your choice. The PPO plan will have a network of providers (similar to as with an HMO plan), and you will typically have lower out-of-pocket costs if you stay within that network.

Unlike an HMO plan, a PPO plan my cover some of the costs for care you receive outside of the plan network. However, you will likely pay higher out-of-pocket costs for care you receive outside of the network.

You are typically not required to designate a primary care physician when you join a PPO plan. This can give you a little more freedom to choose your providers and to seek the care of a specialist without having to get a referral from a primary care doctor.

Some Medicare PPO plans are local PPO plans, and some are regional PPO plans. These designations have to do with the specific plan coverage area.

HMO vs. PPO: Which is more popular?

HMO plans are the most popular type of Medicare Advantage plan in the U.S. by a fairly large margin.

In 2021, 62 percent of all Medicare Advantage plans offered are Medicare HMO plans. 33 percent of all available Medicare Advantage plans are Medicare PPO plans in 2021.¹

Is a Medicare HMO or a PPO plan more affordable?

According to the Kaiser Family Foundation, members of Medicare Advantage HMO plans that included prescription drug coverage paid an average premium of $23 per month in 2019.²

Members of regional PPO plans with drug coverage paid an average premium of $44 per month in 2020, while members of local PPO plans with drug coverage paid an average premium of $39 per month.

Two things that are worth noting about these costs:

• These costs only reflect Medicare Advantage plans that include prescription drug coverage, which tend to be more expensive than plans without drug benefits.
 
• These are not the average costs of the respective plans, but rather the average amount paid by all members (so a more expensive plan with a lot of members would drive up these averages).

What are the differences between HMO and PPO plans?

There are a few key differences between HMO and PPO plans.

• Primary care physicians
  HMO plans generally require members to utilize a primary care physician (PCP), while PPO plans typically do not.
  
  
• Cost
  On average, HMO members can generally expect to pay lower premiums than members of PPO plans.
  
  
• Referrals
  HMO members typically must obtain a referral from their primary care physician prior to visiting with a specialist. PPO plan members are typically free to seek out specialist care as they wish, without being required to get a referral.
  
  
• Out-of-network coverage
  HMO plans do not offer members any coverage for care received outside of the plan’s network of participating providers, except for in limited circumstances and in emergencies.
  
  Members of PPO plans can typically receive at least partial coverage for care obtained outside of their network, though they typically pay more out-of-pocket for care outside of their network than they would for an in-network provider.

How are HMO and PPO plans similar?

Despite their differences, HMO and PPO Medicare Advantage plans have a lot in common.

Both types of Medicare Advantage plans provide the same basic coverage as Medicare Part A (hospital insurance) and Part B (medical insurance) into one single plan.

Many Medicare HMO and Medicare PPO plans may also include additional benefits not covered by Original Medicare.

Some of these additional benefits can include:

• Prescription drug coverage
• Dental care
• Vision
• Hearing and hearing aids
• Wellness programs like Silver Sneakers

Some Medicare Advantage plans may offer even more additional benefits. These benefits can vary based on your location and the plan provider.

What are some benefits to an HMO plan?

The benefits of an HMO plan may include:

• Lower premiums
  
  
• No need to file claims
  
  
• Having your health care coordinated by a primary care physician

What are some benefits to a PPO plan?

The benefits of a PPO plan may include:

• At least partial coverage for care received outside of the plan’s network
• No need to use a primary care physician or seek out referrals for specialist care

While some people enjoy having their care coordinated by a primary care physician, others prefer the freedom and flexibility of making their own health care decisions. 

Which type of Medicare Advantage plan is right for you?

Each type of Medicare Advantage plan has its own benefits, and choosing between an HMO and a PPO is entirely up to your health care needs and budget.

Some people might enjoy having a primary care physician. This doctor will get to know you and your health, and you can establish a trusting and long-lasting relationship.

Some people also like the coordinated care they experience in an HMO plan, where the providers in the network take more of a team approach to your care.

Other people may enjoy the freedom and flexibility that comes along with a PPO plan.

To learn more about HMO and PPO Medicare Advantage plans, and to find out which options are available where you live, call to speak with a licensed insurance agent. You can also compare plans online for free, with no obligation to enroll.

Or call 1-800-557-6059 (TTY: 711) to speak with a licensed insurance agent. We accept calls 24/7!

¹ Fugelsten Biniek, J. et al. (Oct. 29, 2020). Medicare Advantage 2021 Spotlight: First Look. Retrieved from  https://www.kff.org/issue-brief/medicare-advantage-2021-spotlight-first-look.

² Kaiser Foundation. Medicare Advantage 2017 Spotlight: Enrollment Market Update. Retrieved from https://www.kff.org/medicare/issue-brief/medicare-advantage-2017-spotlight-enrollment-market-update.

About the author

Christian Worstell is a licensed insurance agent and a Senior Staff Writer for MedicareAdvantage.com. He is passionate about helping people navigate the complexities of Medicare and understand their coverage options.

His work has been featured in outlets such as Vox, MSN, and The Washington Post, and he is a frequent contributor to health care and finance blogs.

Christian is a graduate of Shippensburg University with a bachelor’s degree in journalism. He currently lives in Raleigh, NC.

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