Once you are eligible for Medicare and enroll in both Parts A and Parts B, you have the option of remaining with that basic coverage or arranging for additional benefits via either a Medicare Advantage plan that is available in your state or a Medigap plan. Among the Medicare Advantage plans there are several different types and options, all of which are offered by private insurance companies. Medicare Preferred Provider Organizations, or PPO plans, are among the most popular of these options. PPO plans allow beneficiaries the flexibility of using their in-network physicians and hospitals at a lower cost or paying more for the ability to be served by providers outside of the network. Most also bundle additional benefits such as prescription drug plans, for no extra premium.
When you choose a Medicare PPO plan there is no requirement that you select a primary care physician or that you obtain a referral before making an appointment with any out-of-network provider. You will always get the benefit of a reduced cost if you choose in-network physicians or facilities, but you will not be limited to them.
Before opting for a Medicare PPO plan, it’s important that you understand all of its offerings, advantages and disadvantages. We’ve prepared this guide to help you make this important decision.
What is a Medicare PPO Plan?
Medicare PPO plans are one of several types of Medicare Advantage plans available to those who are eligible for original Medicare. Every Medicare PPO plan provides both Medicare Part A and Medicare Part B benefits and caps the out-of-pocket spending that is required, but in doing so it also provides enrollees the freedom to choose what out-of-network physicians, specialists, and facilities they prefer as their healthcare providers, and in doing so to pay higher fees. The plans provide the incentive of lower costs for choosing their in-network providers.
Medicare PPO plans frequently include prescription drug plans, vision plans, reduced prices on gym memberships, and more, but every plan is different. Potential enrollees who want prescription coverage are advised to confirm its availability before signing up for a specific Medicare PPO plan, as PPO beneficiaries are not permitted to purchase a separate Part D drug plan.
Advantages of a Medicare PPO Plan
Medicare PPO plans combine the best attributes of a managed care plan and a fee-for-service plan. The most significant advantage that a Medicare PPO plan offers is the flexibility to choose providers based upon your own preferences rather than being restricted to the plan’s in-network selections. There is no need to select a Primary Care Physician (PCP). These plans also frequently have much larger networks then HMO managed care plans do.
The freedom that the PPO offers comes at a price, as enrollees will be charged higher out-of-pocket fees, but that additional cost means that new beneficiaries can remain with the physicians they’ve been seeing all along and can make their own appointments with specialists of their choosing, without first having to see a primary care physician or seeking a referral. Choosing a Medicare PPO plan also means that if you do choose an in-network physician or hospital for treatment, you will get the benefit of their lower contracted pricing and copays.
Disadvantages of a Medicare PPO Plan
Though there are many advantages to selecting a Medicare PPO plan, it is important to remember that these are, at their heart, managed care plans that have an interest in their enrollees selecting the in-network providers with whom they have contracted. Not only do they charge a higher monthly premium, but you will also pay between 40-50% of the cost for using out-of-network providers, and may also pay a higher copay, coinsurance, and deductibles. It is worth noting that some Medicare PPO plans restrict their beneficiaries’ ability to select out-of-network providers for specific conditions. Additionally, in some cases enrollees choosing to receive care from an out-of-network provider may be required to pay their medical bill in full and then submit a claim to the plan for reimbursement
Who is eligible for a Medicare PPO Plan?
As is true with all Medicare Advantage plans, Medicare PPOs are available to any Medicare beneficiary who has already signed up for Medicare Part A and Part B coverage, as long as they do not have end-stage renal disease (ESRD).
Eligibility for Medicare is linked to being either a U.S. citizen or a legal resident of the United States for a minimum of five years and who have turned 65 years old. Disabled individuals who are under the age of 65 are also eligible for Medicare and can enroll in the program once they have been receiving either Social Security disability benefits or Railroad Retirement Board benefits for at least 24 months. If an individual who is under the age of 65 is diagnosed with Lou Gehrig’s disease (ALS) they can sign up for Medicare as soon as they begin receiving their disability benefits. Though there are some exceptions, in most cases patients who have been diagnosed with End-Stage Renal Disease are not eligible for any Medicare Advantage plan.
How much does a Medicare PPO Plan cost?
Medicare PPO plans charge monthly premiums for the coverage they provide, and those premiums vary based on the plan that you select. Beyond that monthly fee beneficiaries can also expect to incur the following costs:
- Medicare PPO enrollees will continue to be responsible for the monthly premiums for Medicare Part B coverage.
- For every medical service they receive, enrollees will be required to pay a copay, which is usually less for a primary care visit then for an appointment with a specialist. There are also copays for hospital stays and services. Every Medicare PPO publishes a Summary of Benefits that provides details regarding the copay amounts for each of these services.
- Medicare PPO enrollees will pay higher costs for services from out-of-network providers and less for services from those who are in the plan’s network.
- If a Medicare PPO offers a prescription drug plan, then enrollees will pay copays for their prescriptions. Choosing a Medicare PPO that does not offer a prescription drug plan precludes signing up for a Medicare Part D Prescription Plan.
How do I enroll in a Medicare PPO Plan?
Once you are eligible for and have enrolled in Medicare — whether by virtue of having turned 65 or having a qualifying disability — you can sign up for any Medicare Advantage plan. The first step in the process is to investigate the plans that are available where you live and to sign up during one of the available election periods. These election periods are:
- The Annual Enrollment Period (October 15th through December 7th). Every year during this time period, those who wish to are able to join, change or drop a Medicare Advantage plan. The enrollment or change will become effective on January 1st of the following year.
- The Medicare Advantage Open Enrollment Period (January 1st through March 31st). This period is available for one-time changes, including enrolling in another Medicare Advantage plan, or disenrolling from a Medicare Advantage plan and returning to Original Medicare. The effective date for the new election will be the first of the month after the request has been received.
- The Initial Enrollment Period (IEP) and Initial Coverage Election Period (ICEP). When you become eligible for Medicare (by turning 65), there is a 7-month enrollment period that begins three months before you become eligible, includes the month that you become eligible, and ends three months after the month that you become eligible. This is your IEP. For most people, their ICEP occurs at the same time as their IEP. But, if you delay enrollment in Part B, then your ICEP begins the three-month period before your Part B start date and ends the last day of the month before your Part B coverage starts. If you miss this enrollment period, then you’ll have to wait until the annual enrollment period to enroll in a Medicare Advantage plan.
- Special Enrollment Periods. There are special enrollment periods created for unique circumstances including:
- Moving to a different service area while enrolled in another plan
- Losing eligibility for a Special Needs plan
- Losing eligibility for Medicare/Medicaid
- Living in or recently leaving a nursing home
When you are ready and eligible to sign up for a Medicare PPO plan, the best way to do so is online.
Who should get a Medicare PPO Plan?
Choosing which Medicare Advantage plan is best for you requires careful consideration of your financial and medical circumstances, as well as your personal preferences. If you can afford higher out-of-pocket expenses, want to remain with your existing physician, specialists, and providers and value being able to make your own healthcare decisions, then a Medicare PPO plan may be the right answer for you.