When choosing a Medicare Advantage plan, it's important to understand the different forms that these policies can take. Your costs and experiences when getting medical treatment will vary wildly depending on the type of Medicare Advantage plan you have. Here are the most common types of plans that may be available in your area.
Health Maintenance Organization (HMO)
An HMO is a network of doctors, hospitals, and other healthcare professionals. The members of this network contract with the HMO insurance company to provide service at a discounted rate; in return, the insurance company requires policyholders to stick with members of the network when getting medical care. Because of this contract, HMOs tend to be cheaper than most other forms of health insurance.
Most HMOs won't provide any coverage for out-of-network healthcare services except in an emergency. A few may allow you to go out-of-network for certain services, although at a higher cost to you -- this is called a point of service (POS) option. HMOs also generally require you to get a referral from your primary care physician in order to see a specialist.
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Preferred Provider Organization (PPO)
Like HMOs, PPOs have a network of healthcare providers. However, with a PPO you're not required to use someone within the network (although it's generally cheaper to do so). Because of this extra flexibility, a PPO will likely be significantly more expensive than an HMO offering the same set of benefits.
With a PPO, you're not required to choose a primary care physician and you don't need referrals to see a specialist. This can cut down on the time it takes to get medical treatment if you already know what kind of specialist you need to see. Most, but not all, Medicare Advantage PPOs include prescription drug coverage. If you sign up for a PPO that covers prescription drugs, you're not allowed to also sign up for Medicare Part D, the prescription drug coverage component of Medicare (although you generally wouldn't want to if you already have drug coverage from your Medicare Advantage policy).
Private Fee-for-Service (PFFS)
While HMOs and PPOs are common types of private health insurance plans, PFFSs are designed specifically for Medicare. These plans allow you to see any doctor or health professional who is eligible to receive payments for Medicare and who agrees to the plan's rules and policies. Some PFFSs have networks. The health professionals in these networks have agreed to always treat any patient who is enrolled in the plan, even if they've never seen him before.
With a PFFS, you don't have to pick a primary care physician or get a referral to see a specialist. When making an appointment with any health professional not in the PFFS's network, it's important to confirm that they'll treat you under the insurance plan and accept the plan's payment terms. If they don't, and you see them anyway, you'll be responsible for paying all charges related to the visit.
Medical Savings Account (MSA)
MSAs are Medicare's version of the health savings account. These plans are less common than the previous types, so there may not be one available in your area. Like HSAs, MSAs have two parts: a health insurance plan with a high deductible, and a special savings account (the MSA). Unlike HSAs, with an MSA the insurance company actually puts money into the savings account for you.
You can use the money in your MSA to pay any healthcare-related expenses, even those that aren't covered by Medicare, and the money won't be taxed. If you spend MSA money on non-healthcare related expenses, you'll have to pay taxes on that money. MSA money spent on healthcare expenses that are covered by Medicare count toward your plan's deductible for the year. MSAs never include prescription drug coverage, so you'll likely want to get a Medicare Part D plan to help with those expenses.
Choosing a type of plan
MSAs can be really nice for retirees in good health, since any money that you don't spend during the year just stays in the savings account for use in future years. If you don't have access to an MSA but are in fairly good health, an HMO will likely minimize your healthcare expenses -- but check first to make sure that the network in your area is fairly robust, since you don't want to be caught without access to a particular type of specialist if you should need one. PPOs and PFFSs are typically more costly, but if you have significant health problems, they may end up being the cheapest choice in the end. When choosing a plan it's always important to look at what the specific plans in your area cover and how much they cost; that's what will matter the most when it comes time to get treatment.
