HMO vs PPO Medicare Advantage

Say you need a specialist. One kind of plan sends you to your primary doctor first for a referral. The other lets you book directly. That single difference is most of what separates the two letters, and it costs money either way.

What is the difference between HMO and PPO Medicare Advantage?

The difference between HMO and PPO Medicare Advantage plans is what each demands of you. An HMO generally requires its network and a referral. A PPO requires neither and prices outside care higher. Call the wider set the Five Doors: two network shapes, one eligibility gate, and two money structures.

The Five Doors is our sorting of one government table. Medicare.gov compares five plan types on the same five questions: premium, drug coverage, primary care doctor, providers, and referrals. Read down those columns and the five types stop looking like five versions of one product.

HMO and PPO are network shapes. They differ in what happens at the network edge, and almost nothing else in that table separates them.

A Special Needs Plan is not a third shape. It is an eligibility gate laid over one of the first two, because every SNP is either an HMO or a PPO underneath.

The last two are not network shapes at all. A Medical Savings Account plan is a spending structure with generally no network. A Private Fee-for-Service plan is a payment-terms structure, and its terms are agreed one visit at a time.

Two protections hold across all five. A plan cannot charge more than Original Medicare for certain services like chemotherapy, dialysis, and skilled nursing facility care. And a prior approval must stay valid as long as the treatment is medically necessary, with at least 90 days of protection after a switch to a new plan.

Do I need a referral to see a specialist?

Whether a referral is required depends on the plan type. In most HMO plans a referral is required to use a specialist, though certain services, like yearly mammogram screenings, do not need one. PPO, PFFS and MSA plans require none. Special Needs Plans vary with the shape underneath.

The referral rule usually travels with the primary care rule. In most HMOs you choose a primary care doctor, and in a PPO, a PFFS plan or an MSA plan you do not.

Special Needs Plans split on their underlying shape. If the SNP is an HMO you generally need a referral. If it is a PPO you do not. Some SNPs require a primary care doctor and others do not, which is a plan-level question rather than a national one.

A referral is not the same thing as prior authorization, and neither replaces the other. In a Medicare Advantage plan you typically need prior authorization from the plan before it covers certain services or supplies, whatever the referral rules say.

A referral is not the same thing as prior authorization, and neither replaces the other.

What is an HMO-POS plan?

An HMO-POS plan is a Health Maintenance Organization running Point-of-Service rules. Some HMOs are Point-of-Service plans that may allow certain services out of network for a higher copayment or coinsurance. The plan's other rules still apply, including prior approval where the plan requires it.

The word that carries the weight is may. Medicare.gov does not say which services an HMOPOS plan opens up, because that is set plan by plan.

This matters most to the reader who has been told an HMO is closed and a PPO is open. The point-of-service variant sits between them, and it is easy to miss because it is described inside the HMO page rather than given a door of its own.

What is a PFFS plan?

A Private Fee-for-Service plan, PFFS, is a Medicare Advantage plan that sets its own payment terms. The plan determines how much it will pay doctors, hospitals and other providers, and how much you must pay when you get care. Drug coverage is sometimes included.

One sentence on that page has no equal anywhere else in Medicare Advantage: your provider can choose at every visit whether to accept the plan's terms and conditions of payment. Acceptance is not a standing arrangement. It is a decision, and it is made again each time.

The card rule follows from it. You show the plan membership card at every visit, and you cannot use the red, white and blue Medicare card, because Original Medicare will not pay while you are in a PFFS plan. Keep that card safe in case you return to Original Medicare later.

If the plan has a network, its network providers have agreed to always treat plan members. You can also use an out-of-network provider who accepts the plan's terms, and you may pay more. In an emergency, providers must treat you.

Drug coverage is the one place a PFFS plan is more forgiving than an HMO or a PPO. If the PFFS plan does not offer drug coverage, a separate Medicare drug plan is allowed.

What is a Special Needs Plan?

A Special Needs Plan, SNP, serves people with specific severe and chronic diseases, certain health care needs, or Medicaid as well as Medicare. Every SNP includes care coordination, tailors its benefits, provider choices and drug list to that group, and must offer Medicare drug coverage.

Three gates open an SNP. You need Part A and Part B, you must live in the plan's service area, and you must meet the requirements for one of three types: a Dual Eligible SNP for people with Medicaid, a Chronic Condition SNP, or an Institutional SNP.

The gate stays shut behind you as well as in front. Enrollment continues only while you keep meeting the condition the plan serves, and losing that condition may open a Special Enrollment Period to join another plan.

Drug coverage is the one dimension where SNPs are stricter than every other type. All of them must provide it.

What is a Medicare MSA plan?

A Medicare Medical Savings Account plan, MSA, pairs a high-deductible Medicare Advantage plan with a savings account. The plan deposits money into that account once at the beginning of each calendar year, using an amount Medicare gives it. No separate premium is charged, and drug coverage is never included.

The account is yours to run. You decide whether to pay for care from it or from other money, and anything left at the end of the year stays there for future years.

Two protections sit inside the deductible period. Providers cannot charge more than the Medicare-approved amount while you are paying out of pocket before the deductible is met. And MSA plans generally have no network, so any Medicare-approved provider who agrees to treat you and has not opted out of Medicare is available.

The exclusions are unusually long, and they are worth reading before anything else. Medicare.gov names seven groups who cannot join an MSA plan:

• anyone with health coverage that would cover the plan's deductible, including an employer or union retiree plan
• anyone who has joined another Medicare Advantage plan
• anyone getting benefits from the Department of Defense through TRICARE, or from the Department of Veterans Affairs
• retired federal employees in the Federal Employees Health Benefits Program
• anyone eligible for Medicaid
• anyone currently getting hospice care
• anyone living outside the United States more than 183 total days a year

What happens if I go out of network?

What happens outside the network depends on the plan type. An HMO may leave you paying the full cost. A PPO covers the care and usually charges more. A PFFS provider decides at that visit whether to accept the plan's terms. MSA plans generally have no network at all.

The HMO rule carries three exceptions, and they are the only three: emergency care, out-of-area urgent care, and temporary out-of-area dialysis. Care outside the network beyond those may cost the full price. What happens in an emergency away from home is its own subject, covered in the travel article.

The PPO rule has conditions rather than exceptions. The outside provider must be participating in Medicare or accept assignment, and Medicare.gov's instruction is to contact the plan before the visit to confirm the service is covered and medically necessary.

An HMOPOS plan may open part of that door for a higher copayment or coinsurance, on services the plan names.

Here is what happens at the network edge, plan type by plan type.

Your plan type	Outside the network	The catch
HMO	You may pay the full cost	Three exceptions only: emergency, urgent, dialysis
PPO	Covered, usually at a higher price	The provider must participate or accept assignment
PFFS	The provider decides at that visit	Acceptance is made again each time
MSA	Generally no network at all	Any Medicare-approved provider who has not opted out

The PFFS row has no equal anywhere else in Medicare Advantage. Acceptance is a decision, not a standing arrangement.

What this means for you

The five types answer five different questions, and only two of them are about networks. Sorting them by what they actually control, the network, the eligibility gate, the spending structure and the payment terms, tells you faster which ones can apply to you at all.

Availability narrows it further. Insurance companies decide whether a plan is offered statewide or only in certain counties, may offer several plans in one area, and can decide each year whether to join or leave Medicare.

One warning belongs before any comparison. Joining a Medicare Advantage plan can, in some cases, cost you employer or union coverage, for you and for your spouse and dependents, and you may not get it back. Talk to the benefits administrator first.

For the network question on its own, read the companion article on seeing any doctor. For what the star rating beside each plan name means, read the ratings article. For checking whether your own doctor is actually in a plan, read the network article beside this one.

FAQ

Which Medicare Advantage plan types include drug coverage?

It runs from never to always, and the answer changes what else you are allowed to buy. HMO and PPO plans usually include drug coverage, and the catch is strict: if you want it you have to join an HMO or PPO that offers it, because you cannot add a separate Medicare drug plan alongside one that does not.

A PFFS plan sometimes includes it, and here a separate Medicare drug plan is allowed if the PFFS plan has none. Every Special Needs Plan must provide drug coverage. An MSA plan never does, so drug coverage means joining a separate Medicare drug plan.

The rule to carry into any comparison is that drug coverage and plan type are decided together, not one after the other.

Who cannot join a Medicare MSA plan?

The list is longer than for any other plan type, and it is specific. You cannot join if you have health coverage that would cover the plan's deductible, including benefits under an employer or union retiree plan. You cannot join if you have already joined another Medicare Advantage plan.

You cannot join if you get benefits from the Department of Defense through TRICARE or from the Department of Veterans Affairs. You cannot join if you are a retired federal employee in the Federal Employees Health Benefits Program.

You cannot join if you are eligible for Medicaid, if you are currently getting hospice care, or if you live outside the United States more than 183 total days a year. Checking that list first saves reading the rest of the plan.

What are the three types of Special Needs Plans?

Medicare.gov names a Dual Eligible SNP, a Chronic Condition SNP, and an Institutional SNP, usually shortened to D-SNP, C-SNP and I-SNP. A D-SNP serves people who have both Medicare and Medicaid, and can help coordinate benefits between the two programs.

A C-SNP serves people with chronic conditions, and can limit membership to a single condition or to a group of related ones. An I-SNP serves people living in an institution, and Medicare.gov's practical note is to check that the plan has providers who serve people where you live.

Joining any of the three also requires Part A, Part B, and living in the plan's service area. Staying in one requires continuing to meet the condition the plan serves.

Does joining a Medicare Advantage plan affect my employer coverage?

It can, and the consequence reaches past you. Medicare.gov's instruction is to talk to your employer, union, or other benefits administrator about their rules before you join, because in some cases joining a Medicare Advantage plan might cause you to lose that coverage.

If you drop or lose employer or union coverage for yourself, you may also lose coverage for your spouse and dependents. The sentence that should slow anyone down is the last one: you may not be able to get this coverage back.

That makes it a one-way door in some plans, which is why the conversation with the benefits administrator belongs before the plan comparison rather than after it.

What happens if my plan stops participating in Medicare?

You will have to join another Medicare health plan or return to Original Medicare. Insurance companies decide each year whether to join or leave Medicare, so a plan ending is a normal event in the program rather than a sign of a problem with your coverage.

A plan can also disenroll you for several reasons, including moving outside its service area, losing Medicare or Medicaid eligibility, joining a drug plan in some cases, or the plan's contract with Medicare ending.

In those situations there is a grace period during which you are eligible for a Special Enrollment Period. Medicare.gov's advice for that moment is direct: review your options then, so that health and drug coverage continue without a gap.

Do all Medicare Advantage plans require prior authorization?

Medicare.gov's note on the plan comparison table applies to Medicare Advantage generally: you will typically need prior authorization from your plan before it covers certain services or supplies, and the plan is the place to ask which ones.

Prior authorization is separate from a referral. A referral is your primary care doctor sending you to a specialist, and it is required in most HMO plans and not in PPO, PFFS or MSA plans. Prior authorization is the plan agreeing in advance to cover something.

One protection travels with it: once a plan gives prior approval for a treatment, that approval stays valid as long as the treatment is medically necessary, and the plan cannot ask for repeat approvals for the same treatment.