Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) plans are Medicare Advantage plans. They differ in their flexibility around seeking medical care.
Medicare provides healthcare coverage for individuals ages 65 years and above. Some private health insurers offer a bundled plan called Medicare Advantage, or Medicare Part C, that often combines coverage for hospital, medical, and prescription drugs.
Most Medicare Advantage plans also include benefits that Original Medicare does not offer.
Understanding the different Medicare Advantage plans available can make managing one’s healthcare needs easier.
Glossary of Medicare terms
We may use a few terms in this article that can be helpful to understand when selecting the best insurance plan:
- Out-of-pocket costs: An out-of-pocket cost is the amount a person must pay for medical care when Medicare does not pay the total cost or offer coverage. These costs can include deductibles, coinsurance, copayments, and premiums.
- Deductible: This is an annual amount a person must spend out of pocket within a certain period before an insurer starts to fund their treatments.
- Coinsurance: This is the percentage of treatment costs that a person must self-fund. For Medicare Part B, this is 20%.
- Copayment: This is a fixed dollar amount a person with insurance pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
An HMO plan is a type of Medicare Advantage plan. It has a network of clinics, hospitals, and doctors providing standards of care at lower costs.
A person
Usually, HMO plans require an individual to select a primary care physician (PCP) who will coordinate their care. The plans also generally require the PCP to make specialist referrals.
PPO plans share many features with HMO plans. However, PPO plans offer greater flexibility.
A person with a PPO plan does not need to choose a PCP, and they can request services from any in- or out-of-network healthcare professional without getting a referral from their doctor.
As with HMO plans, there is a network of Medicare-preferred healthcare service professionals and facility providers that offer lower cost options, but individuals are free to choose a doctor, specialist, or hospital that is not part of the network. However, this may cost more.
Learn more about the different types of Medicare plans.
Both plan types use a network of healthcare services. The main difference between them is the way the insured person can use those networks. View the table below for a comparison of HMO and PPO plans.
| HMO | PPO | |
|---|---|---|
| network of healthcare service professionals and facility providers | yes | yes |
| nonemergency out-of-network benefits | no | yes |
| requires PCP | yes | no |
| requires referral to see a specialist | yes | no |
| out-of-network coverage | no | yes, but at a higher cost |
| includes Plan D prescription drug coverage | usually | usually |
| emergency coverage | yes | yes |
| in-network benefits | yes | yes |
Each plan may have advantages and disadvantages based on a person’s individual requirements. A person can use Medicare’s plan finder tool to compare the pros and cons of HMO and PPO plans in their area.
Private insurance companies administer HMO and PPO plans, which means that the costs can vary among different providers, plan types, and insured individuals.
A person must usually pay for all out-of-network services they receive if they have an HMO plan. Although PPO plans offer more freedom, out-of-network costs may be higher.
The insured person usually pays a monthly premium for either the HMO or the PPO plan. Some plans are zero-premium, but a person will usually have higher deductibles, coinsurance, or copayments in these cases. In 2025, the average monthly premium for Medicare Advantage plans is likely to be $17.00, which is a decrease from $18.32 in 2024.
A person will also need to pay the Medicare Part B monthly premium, which will be $185 in 2024.
The plans have different thresholds for out-of-pocket expenses before they cover healthcare services. In 2025, the government set the maximum out-of-pocket limit for all Medicare Advantage plans at $9,350. However, individual plans could set lower limits.
Out-of-pocket expenses, such as coinsurance or deductibles, will usually apply to both plan types. If an individual chooses to receive out-of-network services, they will generally pay more.
People who are considering an HMO or PPO plan should read all documentation carefully to confirm their healthcare insurance costs. Depending on where they live, some may find that Medicare Advantage HMO and PPO plans are more cost-effective than Original Medicare.
Learn more about how out-of-pocket costs work with Medicare.
Using in-network services is the lowest cost option on both plans.
HMO
HMO plans offer coordinated care with full coverage inside the network. If a person wants to use a service outside of their network, they will have to pay higher costs. The plan benefits will not usually apply.
For example, if a person has an HMO plan and wants to see a dermatologist, their doctor must write them a referral to see an in-network dermatologist, and the insurance covers the visit. Any copayments, deductibles, or coinsurance will apply.
If the same person chooses an out-of-network dermatologist, they must self-fund the fees for the visit.
PPO
If a person needs to see several specialists and wants the freedom of using any healthcare service professional and facility provider they choose, a PPO plan offers this option.
However, out-of-network healthcare professionals and facility providers can still cost more than in-network professionals and facilities on a PPO plan.
For example, if a person had a PPO plan, they could visit a dermatologist without first seeing their PCP. If the dermatologist is an in-network specialist, the insurance plan will cover the cost.
However, if the dermatologist is out of network, an individual will usually pay for the service upfront and then submit a claim. Reimbursement will usually be up to the Medicare-approved amount. Deductibles, copayments, and coinsurance will apply.
HMO plans require a person to choose a PCP to coordinate their care and refer them to in-network specialist services when needed.
Without a referral, a specialist could charge more than the Medicare-approved amount that a person would have to pay out of pocket.
Some routine health services, such as yearly screening mammograms, do not need a referral.
PPO plans do not require a person to choose a PCP.
Learn about finding a doctor who accepts Medicare.
Out-of-network coverage may be limited or more costly in both HMO and PPO plans.
Both plans will typically cover out-of-network emergency care.
An individual can enter their ZIP code into Medicare’s plan finder to find HMO and PPO plans in their area and learn about the out-of-network costs.
An HMO Point-of-Service (HMO-POS) plan is a type of HMO plan.
With an HMO-POS plan, an individual must choose a PCP, but they can use out-of-network services at a higher cost, similar to a PPO plan.
The plan may require prior authorization for some healthcare services, meaning that a person must confirm coverage of intended treatment ahead of time. Medicare then produces a document stating that it will cover the services in line with the plan benefits and limits.
The POS portion and HMO parts of the plan have separate deductibles.
Medicare resources
For more resources to help guide you through the complex world of medical insurance, visit our Medicare hub.
Medicare Advantage plans include Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) plans. They are an alternative to Original Medicare, and policies can provide services that Original Medicare does not cover.
HMO plans require a person to select a primary care physician (PCP), but they do not need to do so with a PPO plan. HMO plans also require a referral to see a specialist, but PPO plans do not.
HMO plans do not usually offer out-of-network coverage. PPO plans may provide out-of-network coverage but at a higher cost.
Each type of plan has advantages and disadvantages. It is important that a person consider which plan type would be best for their needs, location, and budget when looking for an HMO or PPO plan.
