Preferred Provider Organization (PPO) Plans

A Medicare preferred provider organization (PPO) is a Medicare Advantage plan sold by private insurers. PPO plans offer a network of doctors and other health care providers you choose from for medical care. You will pay less out-of-pocket for services from these providers than those outside the PPO.

What Is a Medicare Advantage PPO Plan?

Medicare preferred provider organization (PPO) plans have networks of primary care doctors, specialists, hospitals and other health care providers that contract with the plan to provide services at set fees.

You can still seek care from doctors outside the network, but because of these contracts, going to the “preferred providers” in the network will cost you less than going to those out-of-network.

Both Medicare PPO and health maintenance organizations (HMO) plans offer networks of providers, but there are some key differences between the two types of plans.

Differences Between PPO and HMO Plans
PPO
  • Pays some costs if you go to doctors outside the PPO network.
  • Prior authorization is generally not required for services.
  • Offers a wider selection of health care providers to choose from.
HMO
  • You may have to pay all costs if you go to doctors outside the HMO network (except for emergency care).
  • You may need prior authorization before the plan will pay for a service.
  • Networks tend to be smaller and local.

One of the biggest trade-offs in deciding between an HMO or PPO plan is whether cost or convenience is more important to you. HMOs tend to be cheaper, but PPOs allow you access to a wider range of providers.

Medicare PPO plans are different from Original Medicare and Medicare supplemental insurance (Medigap) plans.

As part of Medicare Advantage coordinated care plans, Medicare PPO plans are sold by private insurers that contract with Medicare to provide services. All Medicare Advantage plans must offer all services provided by Original Medicare — Medicare Part A and Part B.

Other types of Medicare Advantage plans include HMOs, point-of-service (POS) plans, private fee-for-service (PFFS) plans and special needs plans (SNP) as well as Medicare savings accounts (MSA).

How Does a PPO Plan Work?

In a PPO, doctors, hospitals and other health care providers negotiate with the insurance companies to come up with reduced rates they charge people in the plan for each medical service. In exchange, the health care providers get access to a ready pool of patients made up of you and others who sign up for the PPO.

The premiums you pay for a PPO guarantee you the negotiated, reduced rate if you use the PPO’s network of health care providers.

PPO Basics
  • You do not need to choose a primary care doctor.
  • You are allowed to get your health care from any doctor, specialist, hospital or other health care provider, but it may cost more.
  • You can see a specialist without a referral.
  • PPO plans usually offer additional benefits such as hearing, vision or drug coverage at an extra cost.

You are still free to use doctors or other providers outside the PPO network, but it will cost you extra. The PPO puts together a fee schedule of reasonable and customary costs for services. The company uses this schedule to determine how much it will pay and how much you are responsible for if you do decide to use a health care provider outside the PPO network.

Costs of Medicare Advantage PPO Plans

PPO plans tend to be more expensive than HMO plans. You’ll likely pay higher monthly premiums and you will be responsible for paying any copayment or deductibles your PPO plan requires.

Quick Definitions for PPO Plans
Premiums
The monthly fee you pay for a PPO plan or other insurance policy.
Copayment
A fixed dollar amount you have to pay in addition to what the insurance company pays each time you receive a medical service.
Deductible
A specific amount of money you have to pay over a certain period of time before the insurance company will pay for a medical service.

Copayments are often included to discourage people from seeking unnecessary medical treatment, since you will have to pay out of your pocket for each visit. Not all PPO plans require copayments, but those don’t usually have higher monthly premiums.

In addition to premiums for your Medicare PPO plan, you generally also have to pay Medicare Part B premiums. These were $144.60 in 2020.

Prescription Drug Coverage with PPO Plans

In most cases, prescription drug costs are covered in Medicare PPO plans. But if you want prescription drug coverage, you need to make sure a plan does in fact cover drugs before purchasing the plan.

If you join a Medicare PPO plan that does not offer prescription drug coverage, you are not allowed to join a separate Medicare prescription drug (Part D) plan. And you may be on the hook for late penalties if you purchase a drug plan in the future.

Last Modified: June 29, 2020

6 Cited Research Articles

  1. U.S. Centers for Medicare & Medicaid Services. (2019, November 8). 2020 Medicare Parts A & B Premiums and Deductibles. Retrieved from https://www.cms.gov/newsroom/fact-sheets/2020-medicare-parts-b-premiums-and-deductibles
  2. U.S. Centers for Medicare & Medicaid Services. (2019, September). Understanding Medicare Advantage Plans. Retrieved from https://www.medicare.gov/Pubs/pdf/12026-Understanding-Medicare-Advantage-Plans.pdf
  3. U.S. Centers for Medicare & Medicaid Services. (2018, May). How Medicare Prescription Drug Coverage Works With a Medicare Advantage Plan or Medicare Cost Plan. Retrieved from https://www.medicare.gov/Pubs/pdf/11135-prescription-drug-coverage-with-ma-mcp.pdf
  4. U.S. Centers for Medicare & Medicaid Services. (n.d.). Medicare Advantage Plans. Retrieved from https://www.medicare.gov/sign-up-change-plans/types-of-medicare-health-plans/medicare-advantage-plans
  5. U.S. Centers for Medicare & Medicaid Services. (n.d.). Preferred Provider Organization (PPO). Retrieved from https://www.medicare.gov/sign-up-change-plans/types-of-medicare-health-plans/preferred-provider-organization-ppo
  6. Cigna. (n.d.). Preferred Provider Organization (PPO). Retrieved from https://www.cigna.com/individuals-families/plans-services/plans-through-employer/ppo