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Comparing Medicare Advantage Plans: Private Fee-for-Service, HMO, and PPO

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Medicare Private-Fee-for-Service (PFFS), Health Maintenance Organization (HMO), and Preferred Provider Organization (PPO) plans are all different types of Medicare Advantage plans. Medicare Advantage plans are another way to receive your Original Medicare benefits through private insurance companies. All Medicare Advantage plans must offer at least the same level of coverage as Original Medicare. These plans may also offer additional benefits, such as vision, dental, or prescription drug coverage.

Learn the differences in cost and coverage between Medicare PFFS, HMO, and PPO plans.

Medicare Private-Fee-for-Service plans

Medicare PFFS plans differ in many ways from other Medicare Advantage plans. One significant difference is that the insurance company, not Medicare, determines how much it pays the provider and how much the beneficiary pays for a covered health service.

Medicare PFFS plans contract with all of the Medicare-participating providers that accept the plan’s payment terms. With a PFFS plan:

  • You don’t have to choose a primary care physician.
  • You don’t need a referral to see a specialist.
  • There is no guarantee a doctor will accept the plan’s payment terms or provide treatment for you, unless your doctor has an agreement with a PFFS network or you require emergency treatment. Non-network doctors and other providers can choose to accept a PFFS plan patient on a service-by-service, patient-by-patient basis. This means a provider can refuse to cover a particular service for a Medicare PFFS member, even if the patient was treated previously or another patient was given the same service. If you have a Medicare PFFS plan, you should confirm that your provider accepts your plan on every visit.
  • There may or may not be a provider network. If the plan has one, you can typically still go out-of-network if as the providers accept their plan’s payment terms and conditions. Always confirm this in advance because providers can change policies from visit to visit.
  • The plan must cover any service that’s considered medically necessary under Original Medicare.
  • You continue to pay the Part B premium, along with a separate premium for your Medicare Advantage PFFS plan.

Your costs in a PFFS plan

Under a Medicare Advantage PFFS plan, besides premium costs, you pay any cost-sharing expenses set by your plan (for example, copayments and coinsurance) at the time you receive the service. After that, the provider bills your plan for the remaining amount. Some Medicare PFFS plans allow “balance billing,” which lets providers charge up to 15% over what the plan pays for a covered service. In this case, you pay the remaining balance or the difference between what the provider charges and the plan’s reimbursement.

Some Medicare Advantage Private Fee-for-Service plans include prescription drug coverage. If your Medicare PFFS plan doesn’t include prescription drugs and you need this coverage, you can stay with the plan and sign up for a Medicare Part D prescription drug plan during the Annual Election Period (AEP), which takes place from October 15 to December 7 every year. You can also switch to a different Medicare Advantage plan during this time.

Medicare Advantage HMO and PPO plans

With a Medicare Advantage Health Maintenance Organization (HMO) plan:

  • You usually need to go to doctors within a provider network.
  • If you see an out-of-network doctor, your HMO plan costs may be higher.
  • You will typically have a primary care doctor and need a referral to see a specialist.

HMO plans may have lower costs compared to a Medicare Advantage PPO or a PFFS plan.

With a Medicare Advantage Preferred Provider Organization (PPO) plan:

  • There’s usually a network of preferred providers you can use.
  • You can also visit doctors and hospitals outside this network, but you will generally have to pay more to use a non-preferred provider.
  • Unlike an HMO, you don’t have a primary care physician, and you don’t need a referral to see a specialist.

Your costs in HMO and PPO plans

Under a Medicare Advantage PPO or HMO plan, you continue to pay the Part B premium, along with the Medicare Advantage plan’s premium. Unlike Medicare Advantage PFFS plans, Medicare-participating providers agree to accept the Medicare-approved amount as full payment for covered services (beneficiaries are still responsible for any plan cost-sharing expenses). Under a Medicare Advantage plan, providers aren’t allowed to use balance billing (except for PFFS plans).

Most Medicare Advantage HMO and PPO plans include prescription drug coverage. If you want drug coverage and your HMO or PPO plan doesn’t offer it, you cannot keep your plan and sign up for a stand-alone Medicare Prescription Drug Plan (in contrast to PFFS plans). You would need to switch to a Medicare Advantage plan that includes drug coverage during the AEP (October 15 to December 7 every year).

Which Medicare Advantage plan may be best for me?

Here’s a rundown on some of the pros and cons of Medicare Advantage PFFS, HMO, and PPO plans.

Advantages of Medicare Private Fee-for-Service plans:

  • They give you greater overall provider choice than an HMO or PPO.
  • PFFS members aren’t usually bound by a network, and most plans will contract with any Medicare-approved provider that accepts its payment terms.
  • You have the right to ask the plan for an “advance coverage decision” if you’re not sure whether a medical service or item is paid for. This is a written, binding document from your PFFS plan stating whether it will cover the service.
  • If your PFFS plan doesn’t include prescription drug coverage, you can add a Medicare Part D Prescription Drug Plan. (You cannot do this with Medicare Advantage HMO or PPO plans that don’t include drug coverage; you have to change plans if you want drug coverage.)

Disadvantages of PFFS plans:

  • You might have trouble finding a provider in your area that accepts your plan, and you might need to confirm at every visit whether the provider would cover the service under your plan.
  • Depending on if your plan allows providers to balance-bill, PFFS plans could have higher out-of-pocket costs than HMOs or PPOs. Balance billing means you could be responsible for up to 15% over what your plan pays for that service, on top of required copayments and deductibles.

Advantages of Medicare Advantage HMO and PPO plans:

  • These plans might be better for someone who needs to see the doctor frequently and doesn’t want to worry each time about not receiving treatment because the provider won’t accept the plan (note that in PFFS plans, all providers are required to accept PFFS members in medical emergencies).
  • You can typically get drug coverage through a HMO or PPO plan that includes prescription benefits. Also known as Medicare Advantage Prescription Drug plans, some beneficiaries may prefer the simplicity of having all of their Medicare benefits under a single plan.

Disadvantages of Medicare Advantage HMO and PPO plans:

  • You may have less flexibility on your choice of doctors. These plans generally restrict you to in-network providers, or require that you pay more for out-of-network doctors.
  • If your plan doesn’t include prescription drug coverage, you cannot add a stand-alone Medicare Part D Prescription Drug Plan. If you want this coverage, you have to drop your current Medicare Advantage plan and switch to one that does include this coverage, or go back to Original Medicare coverage and add a Medicare Part D Prescription Drug Plan. You can only make this change during the Annual Election Period (October 15 to December 7).

If you like the structure of a managed care plan and don’t mind paying more for provider flexibility, a Medicare Advantage PPO plan may be a good option. On the other hand, if cost is a concern, you might pay less under an HMO plan.

To a large extent, the Medicare Advantage plan that’s best for you will depend on which plans are offered in your area and what your health needs are. If seeing a specific doctor is important to you, make sure the provider accepts any Medicare Advantage plan you’re considering.

Medicare Advantage plans can vary greatly in what they cover and how much you pay, and not every plan may be available where you live. Because of this, it’s always a good idea to shop around and compare prices. To start comparing plans, just enter your zip code where indicated on this page. You can also talk to one of eHealth’s licensed insurance agents – you’ll find contact information at the bottom of the page.

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