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There are three main types of Medicare Advantage Plans: Health Maintenance Organization (HMO) plans, Preferred Provider Organization (PPO) plans, and Private Fee-for-Service (PFFS) plans. Less common options include HMO Point-of-Service plans, Medical Savings Accounts, and Special Needs plans. Because different Medicare Advantage Plans offer plan-specific benefits, it is important to compare plans to find out which one is best suited for you.
To compare plans, you should focus on the benefits and coverage you need most. Since Medicare Advantage Plans are offered by private companies approved by Medicare, there are a number of differences between the plans, including cost, additional coverage (such as extra vision, hearing, dental, and/or wellness coverage), and rules for obtaining services.
Health Maintenance Organization (HMO)
An HMO is a health care plan in which your primary care doctor provides referrals to any specialists you may need to see for particular services. If you do not follow the proper rules for services, you may have to pay the full costs of the specialist's care. Except under certain circumstances, you are typically not covered for services obtained outside of the plan's network of Medicare providers. While the rules of an HMO health plan may be relatively restrictive compared to other plans, in many cases, the extra rules are offset by the plan's lower costs.
Preferred Provider Organization (PPO)
With a PPO plan you can generally obtain health care from any doctor or hospital you want. If you use an out-of-network provider you will often be required to pay a higher portion of the provider's fees. PPO health plans typically do not require a referral for care by a specialist. Compared to an HMO health plan, a PPO plan is much less restrictive. However, the monthly premium for a PPO plan is often higher than that of a more restrictive plan.
Private Fee-for-Service (PFFS)
With a PFFS plan, you do not need to choose a primary care doctor and referrals are not required for treatment by specialists. However, not all Medicare providers accept the plan.
At one time, PFFS plans were the fastest growing segment of the Medicare Advantage market. These plans were very popular because they were not tied to a specific doctor or hospital network. In 2011, changes in Medicare law required PFFS plans to have networks of providers in most counties. As a result of this new requirement, many PFFS plans chose to withdraw from Medicare.
Other Medicare Advantage Plan options
There are several other less common types of Medicare Advantage Plans that may be available:
An HMO Point-of-Service plan is a slightly different and less common version of the HMO health plan. Unlike a traditional HMO, however, an HMO Point-of-Service plan allows you to obtain services from an out-of-network provider at a higher out-of-pocket cost. This benefit can make the plan function more like a Preferred Provider Organization.
A Special Needs plan is a health care plan much like an HMO health plan, but it has limited membership. Some plans may include only those people who live at a particular nursing home or may limit coverage to individuals with a particular medical condition, such as HIV/AIDS, diabetes, or End-Stage Renal Disease (ESRD). The plans tailor their benefits, provider choices, and list of covered prescription drugs to best meet the specific needs of the groups they serve.
If you are eligible for a Special Needs plan, you typically must obtain health care services from in-network providers, and you must choose a primary care doctor. Except for certain services (such as yearly mammograms), your primary care doctor must give you a referral to see a specialist if you want the services to be covered under the plan.
Medical Savings Account (MSA)
An MSA is much less common than the other types of Medicare plans. In an MSA, a high deductible health plan is combined with a bank account. Medicare deposits a particular amount of money per year into the bank account and you are allowed to use the money to pay for any health-care-related expenses throughout the year. It should be noted, however, that the deposit made by Medicare is often less than the yearly deductible, which means that if you need care you will likely have to spend more than the amount originally deposited into the account.
Quick Overview of Popular Medicare Advantage Plans:
|Plan Type||How it works||Out-of-pocket costs|
|Health Maintenance Organization (HMO) Plans||With most HMOs, you must receive services from providers in the plan's network, except for emergency room, urgent care visits, and renal dialysis services.
You must also select a primary care doctor, who provides referrals to any specialists you may need.
|This is the most restrictive type of plan, but out-of-pocket costs are usually lower than with Original Medicare or PPO plans.|
|Preferred Provider Organization (PPO) Plans||Similar to an HMO plan, but you can also see providers for all covered services outside the provider network. |
br />You typically do not need a referral for care by a specialist.
|Out-of-pocket costs are typically higher than with HMO plans.
Your costs are generally higher if you use providers outside the network.
|PFFS Plans||As of 2011, most PFFS plans have provider networks.|
You can also see any Medicare-approved doctor as long as the provider knows you are enrolled in the plan and agrees to accept the plans' payment terms.
Referrals are not required for care by a specialist.
|Your out-of-pocket costs may be lower if you use in-network providers.|
How Do the Plans Differ?
As mentioned, different plans also have different rules for obtaining services. Some plans may require you to get a referral from your primary doctor if you want to see a specialist. In such cases, the absence of a referral may mean the services provided by the specialist will either not be covered by your plan or will require you to pay more out of pocket. Also, with some plans, if you obtain services from an out-of-network provider your out-of-pocket costs may be higher and/or the plan may decline to cover the services.
Another major disparity between Medicare Advantage Plans is how much you are required to pay for different medical services. Out-of-pocket costs will vary depending on the plan you choose. Some Medicare Advantage Plans charge a monthly premium on top of your monthly premium for Part B coverage. Yearly deductibles can also vary significantly between plans. When you compare Medicare plans, keep in mind the type of health services you medically need, how often you get them, and what the copayment or coinsurance amount for those services would be under the different plans.