HMO vs. PPO vs. PFFS: Comparing Medicare Advantage Plans

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HMO vs. PPO vs. PFFS: What’s The Difference Between the Medicare Advantage Plans?

Choosing a Medicare Advantage Plan isn’t always a walk in the park. Because you buy these policies through private insurance companies that are approved by Medicare, you will run into many options, including different plan types. When you see the acronyms HMO, PPO, and PFFS describing the plans, you may be a little confused. But don’t worry; we’re here to help explain.

HMO, PPO, and PFFS are three of the most common types of Advantage Plans. Though they may look like a jumble of letters, these plan types distinguish the plan rules for getting coverage for medical services. More specifically, these plan types outline how much the insurance company will pay for doctors, hospitals, and other providers and how much you are responsible to pay when you receive treatment.

HMO vs PPO vs PFFS

Plan Type PCP Required PCP Required for Specialist Avg. Deductible Cost Office Copay Overall Cost
HMO Yes Yes Low Flat Rate $
PPO No No Med Variable $$
PFFS No No High Variable $$$

Let’s take a look at what Medicare Advantage HMO, PPO, and PFFS Plans are and how they differ from each other. When you understand these differences better, you should be on a clearer path to choosing the right Advantage Plan for you. After all, the last thing you want to find out when you’re getting medical help is that your plan doesn’t cover your treatment.

What is HMO Insurance?

Medicare Advantage Health Maintenance Organization (HMO) Plans tend to be more restrictive and less expensive than other plan types. What makes Medicare HMO insurance plans unique is that you usually have to choose a primary care doctor, and you may need to get a referral from your primary care doctor to see a specialist. If you get treated by doctors, hospitals, or other providers outside of your network, you are generally not covered unless you’re in an emergency. If you don’t follow your HMO plan’s rules, you may have to pay the full cost of your service.
With all of these rules and restrictions, why would you want an Advantage HMO Plan? Well, these plans tend to cost less than other plan types because of their stricter boundaries. If your favorite local doctor and hospital fall under an HMO plan’s network or you want to stretch your dollar, Advantage HMO may be a good option for you.

What PPO Insurance?

Medicare Advantage Preferred Provider Organization (PPO) Plans tend to offer more flexibility than HMO plans. Unlike HMO plans, you don’t have to choose a primary care doctor in a Medicare PPO insurance plan. You can use doctors, hospitals, and other providers that are outside of your plan and still get covered. However, you will pay more to see those outside of your network than those in your network. You also don’t need to get a referral to see a specialist in most cases.

As you can see, Advantage PPO Plans offer more freedom than HMO insurance plans. However, that freedom may come at a higher premium and with higher out-of-pocket costs. If you want more flexibility to choose doctors, hospitals, and providers while keeping costs predictable, then Advantage PPO may be the right option for you.

What is PFFS Plans?

Medicare Advantage Private Fee-For-Service (PFFS) Plans can offer even more freedom when choosing a doctor, hospital, or other provider. Like PPO plans, PFFS plans don’t require you to choose a primary care doctor or to get a referral to see a specialist. You can go to any doctor, hospital, or other provider that is approved by Medicare and accepts your plan’s payment terms. One significant difference between PFFS and PPO, however, is that the insurance company, not Medicare, decides how much it will pay the provider and how much the beneficiary will pay.
Some PFFS plans allow you to get care from any in-network provider who agrees to treat your plan’s members, even if you’ve never seen that provider before. If you get treated by an out-of-network provider who accepts your plan, you may have to pay more.

Out-of-network providers may decide that they don’t want to treat you, even if you’ve received treatment from them in the past. That’s why it’s important to always make sure that your doctor, hospital, or other provider agrees to treat you under the plan’s payment terms each time you see them.

Some advantages of choosing a PFFS over an HMO or PPO plan include more doctor, hospital, and provider options, and the ability to add a Medicare Part D Prescription Drug Plan.

If you still have questions about whether an Advantage Plan is right for you, check out our FAQ page.

Costs of HMO vs. PPO vs. PFFS

As noted above, the costs of each plan can vary and depend on circumstance. Generally, copayments for HMO and PPO insurance are handled differently.

With HMO insurance, instead of deductibles, you are charged a copayment for office visits, tests, prescriptions, etc. This amount varies, but it will oftentimes be $5, $10, or $20.

PPO copayments typically amount to 10 percent of charges for care inside the PPO network (with 90 percent reimbursement) and 30 to 40 percent for treatment outside the network (with 60 or 70 percent reimbursement).

In addition to copayments, PPO insurance may require that you pay an annual deductible. Once the costs of your care exceed your deductible, your insurance then kicks in. Deductibles for individuals can average from $200 for care within the network to $250 for non-network care. Deductibles for more than one individual can generally average $500, regardless of whether you use in-network or non-network care.

As noted above, one main differentiator between PFFS and other Advantage Plans is that with PFFS, the insurance company, not Medicare, decides how much it will pay the provider. With a PFFS plan, not only do you pay premium costs, but you are also responsible for any copayments or coinsurance set by your plan at the time you receive service. After that, the provider bills your plan for the remaining amount.

There are a few other types of Medicare Advantage Plans that aren’t discussed in this article, including Special Needs Plans (SNPs), HMO Point of Service (HMOPOS) Plans, and Medicare Savings Account (MSA) Plans. Nearly one-third of all Medicare beneficiaries were enrolled in Advantage Plans in 2016, and the same plans are expected to be available in 2017.  If you need help choosing a plan, try our Suggest a Plan Tool.

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