When choosing a Medicare Advantage plan, you might have come across terms like HMO and PPO. What do they mean? And more importantly, how do you decide which Medicare plan is best for you?

We’ll walk you through the nitty-gritty of Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) Medicare plans and explain how to choose a plan that fits you best. Spoiler alert — there’s no one-size-fits-all answer.

Is Original Medicare a PPO or an HMO?

To kick off, Original Medicare isn’t classified as either. It’s a fee-for-service plan managed by the federal government.

Original Medicare beneficiaries have the right to enroll in Medicare Advantage, which operates more like the private health insurance you may have had during your working years. And this is where HMO and PPO come into play. 

Medicare Advantage (HMO and PPO) plans explained

Predominantly, Medicare Advantage plans are offered by private insurance companies approved by Medicare. Here’s a simplified approach to understanding two of its popular forms – HMO and PPO:

Medicare Advantage PPO Plan	Medicare Advantage HMO Plan
Offers flexibility in choosing your healthcare provider	Typically requires you to use doctors in its network
No need for a referral to see a specialist	Requires a referral to see a specialist
Higher out-of-pocket costs can occur if you see out-of-network doctors	Generally, lower out-of-pocket costs
Generally have a network of doctors and hospitals, but often offer some coverage for out-of-network providers, albeit at a higher cost.	Limited to a network of doctors, hospitals, and other healthcare providers. Out-of-network coverage is usually not available, except in emergencies, urgent care, or out-of-area dialysis.

It’s important to carefully consider your healthcare needs and budget when choosing between an HMO and a PPO plan.

If you prefer lower monthly premiums and don’t mind staying within a network of providers, an HMO plan may be a more cost-effective option.

On the other hand, if you value the flexibility to see specialists without a referral and have the ability to access out-of-network providers, a PPO plan might be a better fit for you.

Medicare HMO vs. PPO: the cost factor

Price can be a decisive factor when choosing between Medicare HMO and PPO.

Usually, HMOs tend to be the more affordable option with lower premiums (the price tag for your plan) and lower out-of-pocket costs.

However, it’s crucial to dissect the numbers. An HMO might be cheaper upfront, but if your preferred doctor isn’t in-network, those visits could end up costing you more. If you’re signed up for an HMO, you usually foot the whole bill for any care you get outside their network (except for emergency, urgent care, or out-of-area dialysis).

Conversely, PPOs are often pricier with higher premiums.

But the flexibility they offer, allowing you to see any doctor you choose — whether they’re in-network or not — could offset the additional costs, particularly if you have ongoing healthcare needs.

Medical Advantage Type	MA-PD premiums /month	Average out-of-pocket (in-network)	Average out-of-pocket (out-of-network)
PPO	$17 per month for local PPOs and $46 per month for regional PPOs	Local PPOs: $5,561	Local PPOs: $3,044
		Regional PPOs: $6,842	Regional PPOs: $2,801
HMO	$14	$4,033	Paid 100% by the enrollees*

*except in emergencies, urgent care, or out-of-area dialysis.

What is better: HMO or PPO?

Now you’re probably wondering which plan is the best fit. But the reality is, the best plan is different for everyone. 

For instance, an HMO could be a great fit if: 

– You’re generally healthy with only routine medical needs.

– You don’t mind sticking to a specified list of doctors.

– You’d like the easiest route to managing costs.

A PPO plan may be your best bet if: 

– You frequently visit specialists or have serious health concerns.

– Your preferred doctors are out-of-network.

– You can afford higher premiums in exchange for greater flexibility.

To put things in perspective, almost 6 out of 10 people on Medicare Advantage roll with HMOs (that’s 58%), around 40% go for local PPOs, and there’s a tiny 2% repping regional PPOs in 2023.

Additional considerations when choosing your Medicare Advantage plan

Choosing the right healthcare coverage can be confusing, but it doesn’t have to be. Here are some questions you can ask yourself to guide your decision:

– How often do I visit the doctor?

– Do I frequently need specialist care?

– Can I afford higher monthly premiums for more flexible coverage?

– Are my current healthcare providers in-network for my preferred plan?

– How much could out-of-network costs add up for me on each plan?

– Do I travel very frequently or have a second home?

– Am I comfortable obtaining referrals from a primary care physician (PCP) before seeing a specialist?

Your health, your choice

Ultimately, understanding Medicare Advantage PPO vs. HMO can feel a bit like navigating a labyrinth, but it’s a crucial process. Your health in retirement hinges on the decisions you make today. 

So whether the HMO’s cost-effectiveness attracts you, or the PPO’s flexibility feels like a better fit, remember the choice is deeply personal. 

You’ve spent your life working hard; now it’s time to make your health insurance work hard for you. So go out there, armed with these insights, and pick the plan that meets your needs. You can put technology to work for you by using a digital tool to help you summarize all your needs and filter for plans in your location that fit your criteria with this friendly plan finder. The first day of the worry-free rest of your life starts here.