Medicare PPO plans, also known as a preferred provider organization, are Medicare Advantage plan which are offered by a private insurance company like AARP (through UnitedHealthCare) or Humana.
A Medicare Advantage plan is the private version of Medicare, where instead of joining government run Medicare and getting Parts A and B you go to a private insurance company and will receive a policy that will include hospitalization and doctor’s visitation coverage, plus possibly prescription drug coverage, all from one company as opposed to dealing with the government.
The way the PPO plan works is similar to the more familiar HMO.
An HMO, or health maintenance organization, gives you comprehensive coverage at a significant savings off of what you would normally pay going to the doctor alone. The HMO creates a pool of doctors they refer business to.
These doctors, in exchange for the increase in business, reduce their rates to the insurance company for the patients the insurance company refers to them.
The PPO is a similar set-up, but you have greater freedom with the PPO network to pick your own doctor.
Now, the downside is that because you can pick your own doctor, there is the possibility that the insurance company won’t get the same discount in services offered by a HMO.
Therefore, for the same coverage, Medicare PPO plans will cost more than an HMO.
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