HMO vs. PPO vs. PFFS
Understanding Common Medicare Advantage Plan Types
Medicare Advantage plans are not all structured the same way. Three common types you may see are HMO, PPO, and PFFS plans.
These are all types of Medicare Advantage, also called Medicare Part C. That means they are offered by private insurance companies approved by Medicare and provide another way to receive your Medicare Part A and Part B benefits.
The purpose of this page is to explain the basic differences between HMO, PPO, and PFFS plans so you can better understand how provider networks, referrals, drug coverage, and plan rules may work.
This page is educational only. We do not recommend any specific plan type, insurance company, premium, doctor network, prescription drug coverage, or plan benefit.
What Are HMO, PPO, and PFFS Plans?
HMO, PPO, and PFFS are different structures used by Medicare Advantage plans.
A simple way to think about it:
HMO = More network-based structurePPO = Network-based, but usually more out-of-network flexibilityPFFS = Plan sets payment terms; providers decide whether to accept them
The biggest differences usually involve:
Whether you must use a provider network
Whether you need a primary care doctor
Whether you need referrals for specialists
Whether out-of-network care is covered
Whether prescription drug coverage is included
How providers are paid
How much flexibility you have when receiving care
The best choice depends on your doctors, hospitals, prescriptions, budget, travel habits, and comfort with plan rules.
What Is an HMO?
Health Maintenance Organization
An HMO, or Health Maintenance Organization, is a type of Medicare Advantage plan offered by a private insurance company.
With an HMO, you generally must receive your care from doctors, hospitals, and other healthcare providers in the plan’s network. Medicare.gov explains that HMO members generally must get care and services from providers in the plan’s network, except for emergency care, out-of-area urgent care, and temporary out-of-area dialysis.
A simple way to remember it:
An HMO usually keeps your care within a specific provider network.
Some HMO plans are HMO Point-of-Service, or HMOPOS, plans. These may allow some out-of-network services, usually at a higher copayment or coinsurance.
How HMO Plans Usually Work
HMO plans are often built around a provider network.
That means you typically choose doctors, hospitals, and other providers that participate in the plan’s network. In most HMO plans, you also usually need to choose a primary care doctor. Medicare.gov states that, in most HMOs, you need to choose a primary care doctor.
You may also need a referral before seeing a specialist. Medicare.gov explains that, in most cases, HMO members need a referral to use a specialist, although certain services, such as yearly mammogram screenings, do not require a referral.
A simple way to think about an HMO:
Primary care doctor
↓
Referral if needed
↓
Specialist in the networkThis structure may work well for people who are comfortable using a defined network and coordinating care through a primary doctor.
HMO and Prescription Drug Coverage
Most HMO plans include Medicare prescription drug coverage, also called Part D.
Medicare.gov explains that prescription drugs are covered in most HMOs. If you want prescription drug coverage, you generally need to join an HMO that offers it. If you join an HMO that does not offer drug coverage, you cannot join a separate Medicare drug plan.
This is an important detail to understand before enrolling.
A question to ask:
Does this HMO include prescription drug coverage, and are my medications covered?
HMO Pros and Tradeoffs
Potential Advantages of an HMO
An HMO may appeal to someone who wants a coordinated care structure and is comfortable using a plan network.
Potential advantages may include:
Care organized through a network
A primary care doctor who may help coordinate care
Prescription drug coverage often included
Potentially lower costs when using in-network providers
A structured approach to referrals and specialist care
Potential Tradeoffs of an HMO
An HMO may feel limiting if you want broad provider flexibility.
Potential tradeoffs may include:
You generally must use the plan’s provider network
Out-of-network care may not be covered except in certain situations
You usually need a primary care doctor
Referrals are usually required for specialists
If you use care outside the plan’s network, you may have to pay the full cost, except for certain covered situations such as emergency care.
What Is a PPO?
Preferred Provider Organization
A PPO, or Preferred Provider Organization, is another type of Medicare Advantage plan offered by a private insurance company.
PPO plans have networks of doctors, hospitals, and other healthcare providers. Medicare.gov explains that you pay less when you use providers and facilities that belong to the plan’s network, but you can generally use out-of-network providers for covered services, usually at a higher cost.
A simple way to remember it:
A PPO usually gives you more provider flexibility than an HMO, but out-of-network care often costs more.
How PPO Plans Usually Work
With a PPO, you can typically use in-network providers at lower cost.
You may also be able to use out-of-network providers for covered services if they participate in Medicare or accept assignment, but you usually pay more. Medicare.gov recommends contacting your PPO plan before receiving out-of-network services to make sure the services are medically necessary and covered by the plan.
Unlike many HMOs, PPO plans generally do not require you to choose a primary care doctor. Medicare.gov states that PPO members do not need to choose a primary care doctor and do not need referrals to see specialists.
A simple way to think about a PPO:
In-network provider = usually lower cost
Out-of-network provider = usually higher costThis structure may appeal to people who want more flexibility but still want the option to save money by using preferred providers.
PPO and Prescription Drug Coverage
Most PPO plans include Medicare prescription drug coverage.
Medicare.gov explains that prescription drugs are covered in most PPO plans. If you want prescription drug coverage, you must join a PPO that offers it. If you join a PPO that does not offer drug coverage, you cannot join a separate Medicare drug plan.
That is an important point because some people assume they can simply add a separate drug plan later. With many Medicare Advantage plan types, that may not be allowed.
A question to ask:
Does this PPO include prescription drug coverage, and what are the plan’s drug rules?
PPO Pros and Tradeoffs
Potential Advantages of a PPO
A PPO may appeal to someone who wants more flexibility than an HMO.
Potential advantages may include:
You can generally use out-of-network providers for covered services
You usually do not need to choose a primary care doctor
You usually do not need referrals to see specialists
Prescription drug coverage is often included
You may save money by using in-network providers
Potential Tradeoffs of a PPO
A PPO may still involve plan rules and cost differences.
Potential tradeoffs may include:
Out-of-network care usually costs more
You should confirm out-of-network coverage before receiving services
Prescription drug coverage must be reviewed carefully
Provider networks can still matter
Costs can vary by plan and provider type
A PPO may provide more flexibility than an HMO, but that flexibility does not mean every provider or service will cost the same.
What Is a PFFS Plan?
Private Fee-for-Service
A PFFS, or Private Fee-for-Service plan, is another type of Medicare Advantage plan.
PFFS plans are different from both Original Medicare and Medigap. Medicare.gov explains that a PFFS plan determines how much it will pay doctors, other healthcare providers, and hospitals, and how much you must pay when you receive care.
A simple way to remember it:
A PFFS plan sets payment terms, and providers decide whether to accept those terms.
This makes PFFS plans different from HMO and PPO plans.
How PFFS Plans Usually Work
With a PFFS plan, you may be able to see any Medicare-approved provider or facility that accepts the plan’s payment terms, agrees to treat you, and has not opted out of Medicare for Part A and Part B covered services.
Some PFFS plans have provider networks. If the plan has a network, you can see providers in the network who have agreed to always treat plan members. You may also be able to use out-of-network providers who accept the plan’s terms, but you may pay more.
One important detail:
A provider can choose whether to accept the PFFS plan’s terms, and that may need to be confirmed before receiving care.
Medicare.gov explains that your provider can choose at each visit whether to accept the plan’s terms and conditions of payment.
PFFS and Prescription Drug Coverage
PFFS plans may or may not include prescription drug coverage.
Medicare.gov explains that prescription drugs may be covered in a PFFS plan. If your PFFS plan does not offer drug coverage, you will need to join a separate Medicare drug plan to get Part D coverage.
This is different from many HMO and PPO Medicare Advantage plans, where joining a separate drug plan may not be allowed if the plan does not include drug coverage.
A question to ask:
Does this PFFS plan include prescription drug coverage, or would I need a separate Part D plan?
PFFS Pros and Tradeoffs
Potential Advantages of a PFFS Plan
A PFFS plan may appeal to someone who wants a different type of Medicare Advantage structure.
Potential advantages may include:
You generally do not need to choose a primary care doctor
You generally do not need referrals to see specialists
Some plans may allow access to Medicare-approved providers who accept the plan’s terms
Some PFFS plans include prescription drug coverage
If the plan has a network, network providers have agreed to treat plan members
Medicare.gov states that PFFS members do not need to choose a primary care doctor and do not need referrals to see specialists.
Potential Tradeoffs of a PFFS Plan
A PFFS plan may require more checking before receiving care.
Potential tradeoffs may include:
Providers can decide whether to accept the plan’s payment terms
You may need to confirm acceptance before each visit
If the plan has a network, out-of-network care may cost more
Prescription drug coverage may or may not be included
The plan determines how much it pays and how much you pay
PFFS plans can be misunderstood because they are not the same as Original Medicare, even though they may allow you to use some Medicare-approved providers under certain conditions.
The Biggest Difference: Provider Access
The biggest difference between HMO, PPO, and PFFS plans is often how you access doctors, hospitals, and other providers.
With an HMO
You generally use the plan’s network, except for emergency care, out-of-area urgent care, and temporary out-of-area dialysis. You usually choose a primary care doctor and usually need referrals for specialists.
With a PPO
You can generally use in-network or out-of-network providers for covered services, but out-of-network care usually costs more. You generally do not need a primary care doctor or referrals.
With a PFFS
You may be able to use any Medicare-approved provider who accepts the plan’s payment terms and agrees to treat you. The provider may decide at each visit whether to accept the plan’s terms.
A simple way to remember it:
HMO = network-focused
PPO = network plus out-of-network flexibility
PFFS = provider must accept the plan’s payment termsWhich Plan Type Gives the Most Flexibility?
A PPO often offers more flexibility than an HMO because you can generally use out-of-network providers for covered services, although you usually pay more.
A PFFS plan may also offer flexibility in certain situations, but the key issue is whether the provider accepts the plan’s payment terms. That acceptance should not be assumed.
An HMO is typically the most network-focused of the three.
However, flexibility is not the only thing that matters. You also need to look at costs, prescriptions, provider access, prior authorization rules, service area, and how comfortable you are following plan rules.
Which Plan Type Is Best?
There is no one best plan type for everyone.
An HMO may fit someone who is comfortable using a network and wants care coordinated through a primary care doctor.
A PPO may fit someone who wants more provider flexibility and is willing to pay more for out-of-network care when needed.
A PFFS may fit someone who understands the importance of confirming whether providers accept the plan’s payment terms.
The better question is not:
“Which plan type is best?”
A better question is:
Which plan structure works best with my doctors, prescriptions, budget, travel habits, and healthcare needs?
Questions to Ask Before Choosing an HMO, PPO, or PFFS
Before choosing any Medicare Advantage plan type, ask practical questions.
Doctor and Hospital Questions
Are my current doctors in the plan’s network?
Are my preferred hospitals in the plan’s network?
What happens if my doctor leaves the network?
What happens if I need care while traveling?
What happens if I need care outside the service area?
Specialist Questions
Do I need referrals to see specialists?
Are my specialists in the network?
What happens if I need a specialist who is out of network?
Are there prior authorization rules?
Prescription Drug Questions
Does the plan include prescription drug coverage?
Are my prescriptions covered?
What pharmacies can I use?
Are my preferred pharmacies in the network?
Can I use mail order?
Cost Questions
What is the monthly premium?
What is the deductible?
What are the copayments and coinsurance?
What is the maximum out-of-pocket limit?
What costs more if I go out of network?
Which services require approval before the plan covers them?
PFFS-Specific Questions
Does this PFFS plan have a network?
Will my doctors accept the plan’s payment terms?
Do I need to confirm acceptance before every visit?
Does the plan include prescription drug coverage?
Would I need a separate Part D plan?
Common Misunderstandings About HMO, PPO, and PFFS Plans
“All Medicare Advantage plans work the same way.”
No. HMO, PPO, and PFFS plans can work very differently. Provider networks, referrals, out-of-network coverage, drug coverage, and payment rules can vary by plan type and by specific plan.
“A PPO means I can see anyone for the same cost.”
Not usually. PPO plans generally allow out-of-network care for covered services, but you usually pay more when you go out of network.
“An HMO never covers care outside the network.”
Not exactly. HMO plans generally require network providers, but Medicare.gov explains that exceptions include emergency care, out-of-area urgent care, and temporary out-of-area dialysis. Some HMOPOS plans may allow certain out-of-network services at higher cost.
“PFFS is the same as Original Medicare.”
PFFS plans are not the same as Original Medicare or Medigap. The plan determines what it pays providers and what you pay when you receive care.
“If a doctor accepts Medicare, they automatically accept my PFFS plan.”
Not necessarily. With PFFS, the provider generally must accept the plan’s payment terms and agree to treat you. A provider can choose at each visit whether to accept the plan’s terms.
“If a plan does not include drug coverage, I can always add a separate Part D plan.”
Not always. With HMO and PPO Medicare Advantage plans, if the plan does not include drug coverage, Medicare.gov says you cannot join a separate Medicare drug plan. With PFFS, if the plan does not offer drug coverage, you may need to join a separate Medicare drug plan to get drug coverage.
Common Questions About HMO vs. PPO vs. PFFS
What is the main difference between an HMO and a PPO?
An HMO generally requires you to use doctors, hospitals, and other providers in the plan’s network, except for certain situations such as emergency care. A PPO has a provider network too, but you can generally use out-of-network providers for covered services, usually at a higher cost.
Do HMO plans require referrals?
Usually, yes. In most cases, HMO members need referrals to use specialists, although some services do not require a referral.
Do PPO plans require referrals?
Usually, no. PPO members do not need referrals to see specialists.
Do PFFS plans require referrals?
PFFS members do not need referrals to see specialists.
Can I use out-of-network doctors with a PPO?
Generally, yes, for covered services, but you usually pay more. Contact the PPO plan before receiving out-of-network services to make sure the services are medically necessary and covered.
Can I use any doctor with a PFFS plan?
Not automatically. You can use a Medicare-approved provider or facility only if they accept the PFFS plan’s payment terms, agree to treat you, and have not opted out of Medicare. The provider can decide at each visit whether to accept the plan’s terms.
Do HMO, PPO, and PFFS plans include prescription drug coverage?
HMO and PPO plans usually include drug coverage. PFFS plans sometimes include drug coverage. You should always check the specific plan before enrolling.
The Simple Takeaway
HMO, PPO, and PFFS are three different types of Medicare Advantage plans.
An HMO is usually the most network-focused. You generally use in-network providers, usually choose a primary care doctor, and usually need referrals for specialists.
A PPO usually gives more provider flexibility. You can generally use out-of-network providers for covered services, but you usually pay more.
A PFFS works differently. The plan sets payment terms, and providers decide whether to accept those terms and treat you.
None of these plan types is automatically best for everyone. The right fit depends on your doctors, prescriptions, location, travel habits, budget, and comfort with plan rules.
Need Help Comparing Medicare Advantage Plan Types?
HMO, PPO, and PFFS plans can be confusing because each one uses different rules for doctors, hospitals, prescriptions, referrals, and out-of-network care.
If you are trying to understand which Medicare Advantage plan structure may fit your situation, we can help connect you with a licensed Medicare professional who can answer questions based on your needs.