Medicare Advantage HMO vs. PPO: Which Is Best for You?

When selecting your Medicare plan, you are likely to have three main options: Original Medicare, Medicare Advantage HMO plans, and Medicare Advantage PPO plans. 

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Unlike Original Medicare, both Medicare Advantage HMO and PPO are private insurance plans, sometimes called Medicare Part C. There are some important differences between these two choices, so let’s break down the key details you need to know. 

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What Is Medicare Advantage HMO?

A common question from people exploring their healthcare options is, “what do HMO and PPO stand for?” In this case, HMO stands for health maintenance organization. 

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A Medicare Advantage HMO plan is a type of Medicare Advantage plan. HMO plans must cover the standard Medicare Advantage services—Medicare Part A (hospital insurance), Medicare Part B (medical insurance), and Medicare Part D (prescription drug coverage). In some cases, HMO plans also offer extras, like coverage for transportation to medical appointments or hearing aids.

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These plans typically offer lower premiums—or $0 premiums—and potentially lower out-of-pocket costs than PPO plans. You will have an out-of-pocket limit for in-network care as required by law. In 2023, the maximum out-of-pocket limit (MOOP) will be $8,300, an increase from the 2021 and 2022 limit. However, many plans set limits below the legally required maximum, keeping your costs even lower. 

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If you opt for an HMO plan, you’ll need to choose an in-network primary care provider. You will usually need a referral to see a specialist, too. Other than emergency cases, you won’t be able to use out-of-network providers under an HMO plan, unless the plan is specifically an HMO-POS, where you may be able to access some benefits out of network. 

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What Is Medicare Advantage PPO?

Your other option for Medicare Advantage is a preferred provider organization, or PPO plan. These plans are generally more flexible than HMO options. Though PPO plans have provider networks, they also allow you to see out-of-network providers. Keep in mind that you may need to pay higher fees if you see a doctor outside your network. 

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Under a PPO plan, you don’t need to choose a primary care provider, and you won’t usually need a referral to see a specialist. 

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In terms of costs, Medicare Advantage PPO plans may have a premium, deductible, copay, and coinsurance that you will need to pay. You may also owe additional fees for receiving services from a provider outside your PPO network. Like HMO plans, PPO plans are subject to an out-of-pocket maximum for in-network services. This limit varies by plan but is still subject to federally mandated caps. Like Medicare Advantage HMO plans, the in-network MOOP for 2023 will be $8,300, while the combined maximum for in-network and out-of-network care is $12,450. 

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What’s Better: HMO or PPO Plans?

There are a lot of similarities between Medicare Advantage HMO and PPO plans, so it can be hard to choose between them. 

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There’s no simple answer as to which plan is better—the right plan for you will depend on your financial situation and medical needs. You should compare Medicare Advantage PPO and HMO plans based on key factors including:

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• Availability: Ask a Medicare advisor which plans are available in your area. You can only enroll in Medicare Advantage plans offered in the county where you reside, so this may limit your options. Sometimes, health insurance providers in your state only offer either HMO or PPO plans.

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• Provider Options: Medicare Advantage HMO plans restrict you to in-network providers except in emergencies. If you want the flexibility to be able to visit out-of-network providers, a PPO plan is probably the right choice for you. 

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• Pricing: Though PPO plans tend to have higher out-of-pocket costs, prices for both HMO and PPO plans can vary by location and selected coverage. Have your Medicare advisor compare plans in your county directly to see which is a better fit for your budget and needs. 

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• Coverage: Generally, coverage options between Medicare Advantage HMO and PPO plans are very similar. Your advisor can walk you through the specifics of each plan to be sure the coverage aligns with your needs. 

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• Geography: If you plan to travel extensively or adopt a snowbird lifestyle, a PPO plan gives you the ability to see doctors in your location at any time. By contrast, an HMO only offers this flexibility in emergencies. 

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The majority of Medicare Advantage plans offered in 2021 were Medicare Advantage HMO plans. Medicare Advantage PPO plans were still widely available, however. 

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Choosing between Medicare Advantage HMO and PPO plans is a very personal process. Understanding the major differences between these two options should make picking the right plan for your needs much easier. 

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To get more information about the Medicare Advantage plans available in your area, reach out to a local licensed Medicare Advisor from Keen’s directory or call (888) 443-5336 (TTY: 711).