What Is a Medicare HMO? What Are the Differences Between an HMO and PPO?

Fact Checked

Two of the most popular types of Medicare Advantage Plans available to the consumer are the Medicare HMO (health maintenance organization) and the Medicare PPO (preferred provider organization). Both are effective insurance programs offering comprehensive Medicare plans.

What Is a Medicare HMO?

The acronym HMO stands for health maintenance organization. One of the hallmarks of HMOs is the use of networks of doctors, hospitals, and other healthcare services. These suppliers must agree to accept payment at a predetermined level for any services provided,enabling the HMO to keep costs in check for its members.

Medicare HMOs are a form of Medicare Advantage Plan and must deliver all the services provided by Parts A and B of Original Medicare. Most HMOs offer an abundance of additional health-related services. The plans replace Original Medicare as the primary insurer for the beneficiary. For more information, download this pamphlet Understanding Medicare Advantage Plans.

The two main features that set HMOs apart from PPOs are choice of care and cost of services.

Choice of providers: With an HMO, you must choose a primary care physician (PCP) from a network of local healthcare providers when you join. This doctor will oversee your medical care and will have the best understanding of your health needs. Your PCP will be the provider who will monitor the overall picture of your health and will coordinate any additional care you might need; because of this many beneficiaries find HMOs to be a bit awkward.

If you need the care of a specialist, you must see your PCP first, who will provide a referral for a service or specialist within the HMO’s network.

For example, if you are suffering from abdominal pain, you would first make an appointment with your PCP. Your PCP will then give you a referral for the appropriate care, whether it be for testing or directly to an in-network specialist.

Lower cost: Because of the contracted payment level, an HMO usually offers lower monthly premiums and cost sharing than other types of insurance plans. This makes the HMOs the more affordable option for their members, especially people who only require basic medical care.

For example: You normally see your PCP twice per year or on a quarterly basis for a checkup, relying on him/her to administer routine blood tests, preventive vaccines, and boosters as needed. If you have a $0 premium Medicare Advantage HMO, you may not pay anything above your Part B premium for your yearly healthcare.

For an in-depth understanding of Medicare Advantage Plan HMOs, see our article Medicare Advantage HMO Plans.

And for information on PPO Plans go to Medicare Advantage PPO Plans.

What Is the Difference Between a Medicare HMO and PPO?

Medicare HMO and Medicare PPO are two types of Medicare Advantage plans both offering full coverage. The main difference is in the rules of the plan’s provider networks.

Medicare HMOs are more restrictive with plan members’ ability to see providers and receive services outside the network than Medicare PPOs. As a general rule, HMO members can only see out-of-network providers under emergency and urgent care circumstances; any other use of non-network providers must be paid for by the member.

The differences in network coverage between the two types of plans:

Medicare HMO Medicare PPO
Must Use Provider Network Yes, services are restricted to network affiliates except in the event of emergency or urgent care. No, even though a PPO may have a network, members are allowed to access out-of- network providers.
Primary Care Physician Oversees All Care Yes No
Referrals Required for Specialists It depends on the plan criteria. No
Out-of-Network Care Covered No, except in an emergency or urgent care situation. Yes, usually at an additional cost.

How Much Do Medicare HMO and PPO Plans Cost?

With a Medicare Advantage plan, you will still be responsible for applicable premiums for Medicare Parts A and B. You will pay no premium for Part A if you or your spouse have worked for 40 quarters during your lifetime. The base Part B premium in 2022 is $170.10 per month.

Because you remain responsible for payment of any Medicare Part A or B premiums or surcharges, a Medicare Advantage plan with a $0 premium does not mean your Medicare is free.

When enrolling in an HMO or PPO Medicare Advantage plan, there are multiple things you must calculate:

  • The monthly premium.
  • Deductibles for medical care, and/ or prescription drugs, if drug coverage is included.
  • Copayments, a fixed dollar amount that an insured person pays when receiving certain treatments or prescription drugs.
  • Coinsurance, is a percentage of a treatment or prescription drug cost that youa person will need to self-fund.

Average maximum out-of-pocket cost

The maximum out-of-pocket cost (MOOP) is a cap on the price of services covered under Parts A and B of Medicare. Once this MOOPis reached, the plan will pay 100% of the cost of Parts A and B services for the remainder of the year. The MOOP does not apply to prescription drug coverage or your monthly premium, and most HMOs will not count out-of-network services toward the yearly MOOP.

In 2022, the MOOP in Medicare Advantage plans must not exceed $7,550; however, many plans have a far lower MOOP. For more information, see Costs for Medicare Advantage Plans.

Do PPOs Cost More?

Yes, PPO Plans trade higher costs for flexibility in service. PPOs tend to have higher premiums, copays, and coinsurance to compensate for the ability to go out of network and obtain services without the need of a referral. Many PPOs have two MOOPs: one for in-network services and a higher one for out-of-network services.

It is important that you get educated and if necessary, get help, as your decision will impact you medically, financially, and mentally for the entire year. In most cases, your plan choice cannot be altered until the next Annual Enrollment Period (AEP), which runs from Oct. 15 through Dec. 7, with coverage beginning Jan. 1.

How Do You Know if a Medicare HMO or PPO Is Best for You?

Understanding the key differences between a Medicare HMO plan and a Medicare PPO plan helps determine which type of plan is better for our circumstances. One important consideration is the health care providers and specialists we see. Evaluate how each plan type would work for you and the medical professionals you will be able to see on an HMO versus a PPO.

Also, look at how costs may vary for your providers and services between the two types of plans. You can search for and compare available plans in your area.

Here is a list of factors to consider before making the choice between an HMO and a PPO:

  • Your finances
  • Your health
  • Monthly premiums
  • Out-of-pocket costs
  • Availability of network providers in your local area
  • Availability of HMO plans that serve your locality
  • Whether you will need to see specialists
  • Long-term outlook on your health needs

Either plan is a good option, but finding which is best for you is based on your personal health and financial standing. Ask yourself the following five questions:


How much will this plan cost?

  • HMO: HMO plans typically have a lower monthly premium and lower out-of-pocket costs.
  • PPO: PPOs tend to have higher premiums to offer more flexibility of doctors and referrals.

Do I have to use a PCP?

  • With most HMO plans your PCP is your required gatekeeper.
  • PPO plans do not require a PCP.

Do I have to get referrals to use another doctor?

  • With an HMO plan, you must first see a PCP who will provide referrals for services.
  • PPO plans do not require referrals for services.
  • Will I be able to continue care with my current doctor?
  • If your doctor is not in the HMO network you will have to find another doctor or pay for the services out of pocket.
  • With a PPO, you have the flexibility to visit providers outside of your network. However, visiting an out-of-network provider will include a higher fee and a separate deductible.

Will I need to file claims?

  • Since HMOs only allow you to visit in-network providers, it’s likely you’ll never have to file a claim. This is because your insurance company pays the provider directly.
  • In some cases, you will have to pay a doctor directly for services and then file a claim to get reimbursed. This is most common when you seek services from out-of-network providers.
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Medicare consultant

Ron Elledge is an accomplished Medicare agent, planner, and author. Elledge earned a bachelor’s degree in Bible theology from International Seminary and spent 30 years in pastoral ministry. He began his current career in insurance with a specialty in Medicare in 2008 and has since authored “Medicare Made Easy: What Expats, Frequent Travelers and You Need to Know” and is often a featured speaker at the International Living conferences. Elledge is a contributor to International Living, supporting Medicare beneficiaries with articles, podcasts, and Q&As.

A licensed seniors market insurance agent in Arizona and New Mexico, Elledge has helped thousands decipher the intricacies of Medicare rules and regulations, enabling them to make educated selections for their health care needs. As a world traveler with his wife, Shelli, Elledge specializes in Medicare for expats and frequent travelers. He’s up to date with Medicare regulations, coverage options, and enrollment protocols and is fervent in his resolve to present trustworthy data on this confusing and often maligned program.

“By obtaining dependable details on how to read their Medicare options, recipients can plan for it correctly and make the best choices,” says Elledge. “These choices often make a huge financial and emotional difference in their futures. When Medicare is correctly utilized, it becomes a powerful financial and medical tool for all who qualify.”

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