Medicare Advantage: HMO vs. PPO

Kat Casna
Licensed Insurance Agent and Medicare Expert Writer
December 13, 2019

The most common types of Medicare Advantage plans are Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). 1

You might recognize these plans from employer-sponsored health insurance you may have had in the past, but if not, don’t worry. Here, we'll help you understand HMOs and PPOs and who might choose which. We’ll also discuss a few other types of Medicare Advantage plans you may not recognize, like Private Fee-for-Service (PFFS).

If you’re curious about other kinds of Medicare coverage like Part D prescription drug coverage or Medicare Supplement (Medigap), check out our Medicare Guide. Otherwise, read on.

What’s the difference between a Medicare Advantage HMO and PPO?

Medicare Advantage HMOs and PPOs are provided by private insurers, not the federal Medicare program itself. The main difference between an HMO and PPO is your level of freedom to go outside a network of health care providers to receive care. With an HMO, you must stay in the network if you want the insurance company to help you cover health care costs. With a PPO, you can go outside the network, but you’ll probably pay more.

Who might want an HMO?

  • People who live in large cities: With a higher concentration of health care providers nearby, you may have more in-network choices.
  • People who can change doctors: If your physician isn’t in the network, you’ll have to switch.
  • People willing to see certain providers to save money: In 2019, HMOs had the lowest annual out-of-pocket costs, at $4,706 on average.2
  • People who want a primary doctor: Having a single doctor who monitors all your health needs could streamline treatment and ensure more comprehensive health care.

In HMO Advantage plans, you’ll have to stick to a network, but the tradeoff might be lower plan costs overall. Generally, an insurer negotiates lower prices with HMO network providers, and you could see some of those savings in your medical bills, premium payments, or deductibles.

Most HMOs require members to designate a primary care physician (PCP) through which most of your treatment will originate. If you want to see a specialist, you'll first need a referral from your PCP. This requirement allows the insurer to keep costs down by ensuring you see a specialist only if you need to, and it will enable your PCP to monitor your overall health when you see a different doctor.

Who might want a PPO?

  • People who don’t live near lots of providers: If you live in a rural area or somewhere your network doesn't have a lot of providers, you may have more choices with a PPO.
  • People who have a favorite doctor: You can still see a doctor who isn’t in the network—and avoid starting all over with a different physician.
  • People willing to pay more for more choices: Regional PPOs have some of the highest annual out-of-pocket costs, at $6,471 for in-network expenses. Local PPOs are slightly less expensive at $5,652, but typically have a smaller network. Out of network limits are about the same at around $8,800–$8,900.3
  • People who just want to see a specialist: You won't have to see a primary care physician or obtain a referral to see a specialist.

In PPO Advantage plans, insurers still negotiate lower prices with a network of providers and pass some of those savings onto Medicare beneficiaries. But if you don’t mind paying more, you can choose out-of-network providers. With many PPOs, you don’t need a referral from a primary care physician to see a specialist.

There are two types of PPOs: local and regional. The main difference is the size of the network. Local PPOs typically include providers in your city or county, while regional PPOs may consist of providers from around your state.

Other types of Medicare Advantage plans

While not as common as HMOs and PPOs, there are several other types of Advantage plans that may meet your needs, including the following.

Private Fee-for-Service (PFFS)

PFFS Advantage plans function much like Original Medicare in that you can see providers who agree to accept your insurance. Since providers aren’t obligated to accept this insurance, however, you’ll need to obtain written acceptance before each service or risk getting stuck with the bill.

PFFS plans are the third most common Medicare Advantage plans, with 44 available in 2019.4

HMO Point-of-Service (HMO-POS)

An HMO-POS has a lot in common with a regular HMO: you’ll have access to a network of providers and will need a referral from your primary care physician to see a specialist. Unlike a regular HMO, however, HMO-POS plans give you the option to go out of network to see a provider who accepts Medicare, if you’d like.

Special Needs Plans (SNPs)

Special Needs Plans (SNPs) aim to optimize health for people in specific situations. These plans cater to three types of people:

  • Dual eligible (people eligible for both Medicare and Medicaid) can enroll in a D-SNP.
  • People with chronic conditions, such as diabetes or end-stage renal disease (ESRD), can enroll in a C-SNP.
  • People who live in an institution, such as a nursing home or mental institution, can enroll in an I-SNP.

The number of people in SNP plans has steadily increase for over a decade. in 2019, SNPs had 2.95 million enrollees, and most (2,49 million) of those were enrolled in a D-SNP.5

Medical Savings Account (MSA)

MSAs are similar to the Health Savings Accounts (HSAs) many employers sponsor. Often paired with a high-deductible plan, these accounts have the added benefit of a tax-sheltered savings account you can use for medical expenses.

Cost plans

Although rare, Cost plans are versatile. They include a network, but if you receive treatment outside that network, you’ll still be covered under Original Medicare as long as the provider accepts Medicare.

How to choose the right Medicare Advantage plan

When deciding between plans, consider what your Medicare costs might be with each plan type and whether or not you’d prefer to use a network of providers.

Keep in mind that even among plans of the same type, each one may offer different coverage in addition to what Parts A and B (Original Medicare) cover. Many plans include Medicare prescription drug coverage, for example.

A full 78% of Medicare Advantage plans cover eye exams or glasses, and 72% have a fitness benefit such as SilverSneakers. But you may find a plan that offers less commonly covered services, such as alternative medicine.6

Finally, in addition to Medicare eligibility requirements, you may be subject to additional plan rules. You probably won’t be able to enroll in a Medicare Advantage plan if you have end-stage renal disease, for instance, unless you choose a special needs plan that caters to your condition.

The bottom line: The right plan depends on your needs

No one can tell you what the best Medicare Advantage plan is for you, but we can help you understand your coverage options, find plans in your area, and help you start enrolling.

Call to speak to a licensed agent today.


  1. Kaiser Family Foundation, “Medicare Advantage 2019 Spotlight: First Look
  2. Kaiser Family Foundation, “A Dozen Facts About Medicare Advantage in 2019
  3. Kaiser Family Foundation, “A Dozen Facts About Medicare Advantage in 2019
  4. Kaiser Family Foundation, “Medicare Advantage 2019 Spotlight: First Look
  5. Kaiser Family Foundation, "Medicare Advantage"
  6. Kaiser Family Foundation, “A Dozen Facts About Medicare Advantage in 2019

Content on this site has not been reviewed or endorsed by the Centers for Medicare & Medicaid Services, the United States Government, any state Medicare agency, or any private insurance agency (collectively "Medicare System Providers"). is a DBA of Clear Link Technologies, LLC and is not affiliated with any Medicare System Providers.

Kat Casna
Written by
Kat Casna
Kathryn is a Medicare and geriatric specialist who has appeared on Baby Boomers, OppLoans, and Best Company. Her readers don’t need a degree in government-speak to get the right coverage because Kathryn sifts through Medicare’s parts, plans, and premiums to distill only the most useful information. Her favorite place in the world is a hammock that swings peacefully between two crabapple trees somewhere in New Mexico’s Gila National Forest.
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