Is Medicare a PPO? How Medicare PPO Plans Work

Medicare is a federal health insurance program providing coverage for millions of Americans, including those aged 65 or older and younger individuals with certain disabilities. Original Medicare, comprising Part A and Part B, does not function as a Preferred Provider Organization (PPO) model. However, beneficiaries seeking PPO-like flexibility can find such options through private Medicare Advantage plans, which offer an alternative way to receive Medicare benefits and often incorporate PPO features.

Original Medicare Coverage

Original Medicare, which includes Part A (Hospital Insurance) and Part B (Medical Insurance), is a fee-for-service program administered by the federal government. Part A primarily covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services. Most individuals do not pay a monthly premium for Part A if they or their spouse paid Medicare taxes through employment for a sufficient period.

Part B covers medically necessary doctor services, outpatient care, medical supplies, and preventive services. Beneficiaries typically pay a monthly premium for Part B, and after meeting an annual deductible, Medicare generally pays 80% of the Medicare-approved amount for covered services, leaving the beneficiary responsible for the remaining 20% coinsurance.

A defining characteristic of Original Medicare is its broad provider choice. Individuals can generally see any doctor, hospital, or other healthcare provider nationwide that accepts Medicare assignment. This means there are typically no network restrictions, and beneficiaries usually do not need referrals from a primary care physician to see specialists.

What a PPO Plan Is

A Preferred Provider Organization (PPO) is a type of managed care health insurance plan that features a network of contracted medical providers, including doctors, hospitals, and specialists. These providers agree to offer services at negotiated, reduced rates to the plan’s members. PPOs offer flexibility while incentivizing the use of specific providers.

PPO plans allow members to use providers both within and outside the established network. Members typically incur lower out-of-pocket costs, such as deductibles, copayments, and coinsurance, when they receive care from in-network providers. Opting for out-of-network providers is possible, but usually results in higher costs for the member.

Referrals to see specialists are generally not required in a PPO model, even when seeking care from an out-of-network provider. PPO plans typically involve a cost-sharing structure including a deductible (the amount paid before the plan begins covering services), and copayments or coinsurance for individual services. These plans also include an out-of-pocket maximum, a limit on the total amount a member will pay for covered services in a given year.

Medicare Advantage Plans

Medicare Advantage Plans (Medicare Part C) are health plans offered by private insurance companies that contract with Medicare to provide Part A and Part B benefits. These plans serve as an alternative to Original Medicare; beneficiaries must be enrolled in both Part A and Part B to join.

These private plans must cover all services Original Medicare covers, but they can also offer additional benefits, such as prescription drug coverage, vision, dental, and hearing services. When enrolled in a Medicare Advantage plan, individuals use their plan’s card for healthcare services instead of their Medicare card.

Medicare Advantage plans often have specific rules regarding provider networks and may require prior authorization for certain services. Various types of Medicare Advantage plans exist, including Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Private Fee-for-Service (PFFS), and Special Needs Plans (SNPs). Each plan type has distinct rules for how members access services and interact with providers.

PPO Plans in Medicare Advantage

Preferred Provider Organization (PPO) plans within Medicare Advantage operate under Medicare’s regulations. These plans establish a network of preferred providers where members receive care at a lower cost. While members can seek services from providers outside this network, doing so generally results in higher out-of-pocket expenses.

The cost difference for in-network versus out-of-network care typically manifests in higher copayments, coinsurance, or deductibles for services received outside the plan’s network. For instance, a plan might have a $0 deductible for in-network medical costs, but a higher deductible for out-of-network care. Beneficiaries can go out-of-network, but the provider must still accept the plan’s terms and be enrolled in Medicare.

Medicare Advantage PPO plans generally do not require referrals to see specialists, even when accessing out-of-network providers. All Medicare Advantage plans, including PPOs, are federally required to include an annual out-of-pocket maximum for Part A and Part B services. Once this maximum is reached, the plan pays 100% of covered Part A and Part B services for the remainder of the year. For 2025, the out-of-pocket limit for Medicare Advantage plans may not exceed $9,350 for in-network services and $14,000 for combined in-network and out-of-network services for Part A and B benefits. Most Medicare Advantage PPO plans also include prescription drug coverage and may offer other supplemental benefits.