Preferred Provider Organization (PPO) Plans

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.

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).

In a PPO, doctors, hospitals and other health care providers negotiate with the insurance companies to come up with reduced rates to 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 those 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.

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.

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.

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 that 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 are $174.70 in 2024.

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.