Medicare HMO and PPO plans: understanding your options

We discuss the differences between HMO vs PPO plans and how you can pick the one that best suits your needs.

By Devoted Health Team
March 29, 2024

Navigating your Medicare options can feel like sorting through a bowl of alphabet soup. But don’t worry, it can be as simple as comparing apples to oranges. You've probably heard terms like “HMO” and "PPO" getting tossed around, and it’s essential to know the difference, as it can affect your healthcare and your wallet. We’re here to help clear things up and help you understand the main differences between these plan options.

What do these terms mean?

Imagine you're at a restaurant. An HMO (Health Maintenance Organization) is like a set menu where your choices are limited to what's on that menu, but the cost is usually less. A PPO (Preferred Provider Organization), meanwhile, is like an a la carte menu; you have more options to choose from, but it might cost you a bit more. In the healthcare world, HMOs and PPOs are two different types of plans you can pick when you're deciding on Medicare coverage. Each has its own rules for how you get services, like seeing a doctor or filling a prescription.

HMO and PPO: what are the main differences?

Let's break down the key differences between Medicare HMO and PPO plans into bite-size chunks:

Provider Selection: who’s my doctor?

HMO: Stick to the “menu”--generally, you work with your PCP to coordinate your healthcare. You’ll have to choose doctors and hospitals within the plan's network; you may need a referral from a PCP to see a specialist. You may have lower overall costs for doctor’s visits.
PPO: “A la carte”--this one gives you more freedom to choose doctors and hospitals, and you can see specialists without a referral from a PCP. You can also see providers out-of-network (as long as the provider accepts Medicare), but there may be a higher cost to you for this greater freedom.
Tip: Health plans can usually help you find PCPs.

Premiums: how much will these plans cost me?

HMO: Usually lower monthly premiums compared to PPO plans.
PPO: Might be higher, but remember, this could mean more flexibility.
Tip: While some PPOs may cost more than HMOs, some PPOs are $0. Along with monthly premium costs, be sure to check the additional costs like copays that will add up to the total amount you pay for medical care.

Copays and out-of-pocket costs: how much do I pay for medical costs?

HMO: Lower copays but you must stick to your network; there's usually an out-of-pocket maximum.
PPO: Copays and costs might be higher, especially if you go out-of-network, but this plan could have a higher out-of-pocket maximum.
Tip: Whether or not your doctor is in-network is a big factor when it comes to cost.

Drug Coverage: what about my medication costs?

The good news is that both HMO and PPO plans offer the same coverage for outpatient, part D medications (the prescriptions you fill at a walk-in pharmacy). You can double check if yours are covered on Devoted’s drug list.

However, there are differences when it comes to receiving drugs that require administration by a medical professional (such as home infusions or injections at a hospital). In these situations:

HMO: Will typically only cover in-network services.
PPO: Offers you more flexibility to choose a provider. However, there may be higher out-of-pocket costs if you have a non-preferred provider.
Tip: Check your plan’s drug list to make sure that your medication is included.

What's right for me?

Choosing between an HMO plan or a PPO plan boils down to what matters most to you.

As a first step, check whether your doctors are in network. If they are, then choosing an HMO plan could save you more money. However, if they are not, then a PPO could offer you more flexibility in choice.

Still not sure? We found a few examples of real-life situations that might help your decision:

Consider Ben, who often has to see different doctors to manage his COPD (Chronic obstructive Pulmonary Disease). He has a PCP, but they spend very little time together each year, and Ben doesn’t feel like his PCP understands his full health situation. He has disagreed with his PCP’s specialist referrals and recommendations in the past, and he wants the freedom to be able to see the specialists of his choosing, even if they are out-of-network for his plan (but still accept Medicare). When looking at Medicare plans, Ben notices that a HMO plan would require him to stay within the network of providers and limit his freedom to choose any doctor. Because Ben values the ability to choose where he receives care, and doesn’t want to wait for referrals every time he makes an appointment with a specialist, Ben decides to go for a Medicare PPO plan because it offers him greater flexibility and freedom. To him, this is worth paying more out-of-pocket for his medical care.
Alex, who has diabetes, has been with his PCP for over 20 years. He and his wife both share the same PCP, who knows each of their children and grandchildren by name. Alex’s PCP is even a frequent guest at their holiday gatherings and potlucks that they host in their home. Alex really looks forward to his visits with his PCP, because he knows that his PCP takes the time to review his options and help him take the right steps to manage his health. Their appointments never feel rushed, and he feels listened to by his PCP. He trusts his PCP’s specialist referrals, and has had good experiences with providers that his PCP has referred him to. Alex looks at all his Medicare options, and decides to go with an HMO, because he trusts his PCP to manage his healthcare for him and tell him who he needs to see and where he needs to go. He’s happy with the role his PCP plays in his healthcare and has never felt limited by his plan’s network.
Mary, who lives in the Phoenix area, rarely travels or even leaves her home state of Arizona, except once a year during the holidays. She knows that she gets most of her medical care in her home city, within the HMO network. She sees her PCP for her check-ups and has gone to a few in-network specialists in the past to manage her heart condition. Mary has generally been satisfied with the doctors that her PCP has referred her to. Mary decides that she does not need the additional flexibility in provider choice that a PPO offers, and believes that her HMO plan will cost her less overall out-of-pocket for her doctor’s visits. She also did some comparison and found that she also gets slightly better benefits with her HMO plan, so she decides to stick with her HMO plan for another year.

Remember, there's no one-size-fits-all answer to which Medicare plan is right for you. Both HMO and PPO plans offer unique benefits, and your health, your budget, and your peace of mind are all important factors in the decision.

How Devoted can help

We have licensed representatives available to help you with your questions or answer more questions about Devoted Health Medicare Advantage plans. Call us at 1-800-483-8066 (TTY 711) for personalized assistance.

You can also learn more about your Medicare options in this free Medicare Comparison Guide.