HMO vs. PPO: The differences between HMOs and PPOs

Private insurance companies that have contracted with Medicare to provide insurance for eligible seniors operate both HMO and PPO Plans. These plans are included under Medicare Advantage Plans also known as Medicare Part C. A Medicare HMO or PPO replaces federally administered Original Medicare. Medicare reimburses the companies for the coverage that they provide to Medicare members. HMO and PPO Plans have some additional benefits and restrictions that do not exist in Original Medicare.

Choosing between an HMO and PPO Plan.

Both HMO and PPO plans are managed care plans. Both types of plans revolve around a provider network and in both you will generally have a primary care physician. Originally PPOs offered much greater flexibility than HMO Plans but HMO Plans have become more lenient and PPO Plans have become stricter over the years. The rules of each plan will vary so make sure to compare plans side by side to really understand the advantages and disadvantages of both.

Generally speaking an HMO plan will require a primary care physician's referral for a patient to see a specialist. PPOs usually waive this requirement and allow a patient to go straight to a see a specialist on their own. In addition, theoretically the PPO has a preferred provider network. You are encouraged but not required to use the network. If you see an out of network provider the plan will still pay for some portion of care. With an HMO if you want to see an out of network provider often you will be responsible for the entire bill.

Costs of PPO VS an HMO Plan

PPO plans are often have higher premiums than their HMO counterparts. This is because the insurance company has to factor in a cost for unknown future bills with outside providers. Carefully compare the long term cost differences if you are thinking about a Medicare PPO plan VS an HMO Plan. The costs to see a non-PPO provider may be so high that you won't ever use this option.

On the other hand, the added flexibility of a PPO Plan is very important to some Medicare recipients. They don't want to deal with the primary doctor gatekeeper and the extra time and hassle of seeing the primary care doctor just to get a referral. If this sounds like you, then it may pay to enroll in a PPO plan and pay extra for this flexibility.

Auntie Lou says, "Really pay attention to what the PPO Plan will pay for out of network providers. The amount may be so niggardly that you might as well pay for the care yourself with the money you save from choosing an HMO Plan."