What Is the Difference Between an HMO Plan and a Medicare Supplement Plan?

First, let’s start with Original Medicare

Medicare is basic health insurance provided by the Federal government for people 65 and older, and people under 65 who meet certain criteria. When you sign up for Medicare, you are signing up for Part A and Part B. This is the first step to completing your Medicare coverage.  

Medicare consists of 4 separate parts:

• Part A (Part of Original Medicare offered by the Federal government)
• Part B (Part of Original Medicare offered by the Federal government)
• Part C (Medicare Advantage plans offered by private insurance companies)
• Part D (Drug coverage offered by private insurance companies)

Why do you need additional coverage?

Many people discover that relying on Original Medicare (Part A and Part B) doesn’t provide enough coverage. With Original Medicare, there are gaps in your coverage. For example, Original Medicare only covers 80% of Part B expenses after the annual Part B deductible is met. The remaining 20% is your responsibility and could add up to thousands of dollars each year. Plus, Original Medicare doesn’t include Part D prescription drug coverage, routine vision and hearing exams, and certain other services.

In order to have enough coverage, many people choose to enroll in a Medicare Advantage HMO plan or a Medicare Supplement plan.

How does an HMO plan work?

An HMO plan is a Medicare Advantage plan (Part C) that offers everything Medicare covers plus additional benefits such as prescription drug coverage (Part D), vision and hearing exams, preventive dental coverage, and discounts on fitness programs. In addition, Medicare Advantage HMO plans can help save you money with monthly premiums as low as $0 and an out-of-pocket maximum that limits what you pay for medical services in a year.

With a Medicare Advantage HMO plan, you choose a primary care physician, or PCP, to be your main doctor. Your PCP keeps track of all the care you receive and refers you to specialists if needed. Your PCP makes sure you get the care that is right for you. Your PCP can also help you avoid unnecessary expenses such as duplicate tests. This is one of the advantages of an HMO plan, having a team behind you to make sure you are getting the right care.         

How does a Medicare Supplement plan work?

A Medicare Supplement plan helps cover the gaps in Original Medicare coverage. With a Medicare Supplement plan, you get coverage for extra benefits not covered with Original Medicare. Plus, you can see any doctor who accepts Medicare. Medicare Supplement plans generally have a higher premium than Medicare Advantage HMO plans, but fewer services require a copayment.

Comparing the two

• There is a difference in how you see a doctor.

With a Medicare Advantage HMO plan, you choose a PCP to oversee your care. Your PCP provides referrals to see a specialist when necessary. With a Medicare Supplement plan, you don’t have to choose a PCP. You can see any doctor that accepts Original Medicare, and you don’t need a referral to see a specialist.

• The monthly premium amounts are different.

Monthly premiums for Medicare Advantage HMO plans are generally less than Medicare Supplement plans. But Medicare Supplement plans have fewer copays for services. One way to think about it is with a Medicare Supplement plan, you pay upfront, and with an HMO plan, you pay as you go. 

• How you get prescription drug coverage is different. 

With a Medicare Advantage HMO plan, you can have Part D prescription drug coverage and medical coverage all in one plan. Medicare Supplement plans don’t include Part D prescription coverage. To have Part D prescription drug coverage with a Medicare Supplement plan, you would need to enroll in a separate prescription drug plan.

Which is right for you?

When determining which plan is right for you, it helps to weigh several factors including your health, your budget, and how you see your doctor.

• If you are in good health and want a low monthly premium with prescription drug coverage included, you may want to consider an HMO plan with a $0 or low monthly premium.
• If you want to see any doctor and don’t mind paying a higher monthly premium, you may want to choose a Medicare Supplement plan.        

At Tufts Health Plan, we have a team of Medicare Experts available to answer all your Medicare questions and help you find the plan that’s right for you. Tufts Health Plan offers both HMO plans and Medicare Supplement plans. Just call 1-800-890-6600 (TTY: 711).

You can also compare plans on our website.

Medicare Advantage plans (Part C) offer additional coverage not included with Original Medicare such as prescription drug coverage, vision and hearing exams, preventive dental coverage, and discounts on fitness programs. Plus, many Medicare Advantage plans include Part D prescription drug coverage.

In addition, Medicare Advantage plans can help save you money with monthly premiums as low as $0 and an out-of-pocket maximum that limits what you pay for medical services in a year.

With Original Medicare, there are gaps in your coverage. For example, Original Medicare has deductibles and does not have a limit on out-of-pocket spending. Original Medicare doesn’t cover Part D prescription drugs, routine vision and hearing exams, and certain other services. In order to have enough coverage, many people choose to enroll in an HMO plan or a Medicare Supplement plan.

What are the advantages of an HMO plan?

Many people choose an HMO plan because it covers everything Original Medicare covers plus additional benefits. HMO plans generally have lower monthly premiums than Medicare Supplement plans and are available with prescription drug coverage, so you can have medical and drug coverage in one plan. With an HMO plan, you have a primary care physician, or PCP, who keeps track of all your care and refers you to specialists. With an HMO plan, you have a team behind you to make sure you get the right care.

What about a Medicare Supplement plan?

A Medicare Supplement plan will help cover gaps in Original Medicare. Generally, Medicare Supplement plans have higher monthly premiums than HMO plans, but you can see any doctor who accepts Medicare. However, with a Medicare Supplement plan, you would need to purchase a separate prescription drug plan if you want prescription drug coverage.     

How do I know which plan option is the right fit?

When deciding whether to choose an HMO plan or a Medicare Supplement plan, it’s helpful to consider several factors:

• Your health – How many times a year do you visit a doctor, specialist, or hospital? If you are in good health, you may want to consider a plan with a $0 or low monthly premium. If you see your doctor more frequently, you may want a plan with a higher monthly premium in exchange for lower doctor visit copays.    
• Your budget – Do you want to pay less each month or pay less when you visit a doctor? You’ll want a plan that provides you with the right amount of coverage and still meets your budget. Generally, you’ll pay lower monthly premiums with HMO plans than with Medicare Supplement plans, but with Medicare Supplement plans, fewer services require a copayment. Also worth considering is that HMO plans provide what’s known as an out-of-pocket maximum that protects you by limiting the amount you would have to spend on medical costs in a year. With Original Medicare and Medicare Supplement plans, there is no limit to how much you may have to pay out of pocket in a year.  
• Your doctor – Choosing an HMO plan means you have a PCP who works together with a team of specialists to help you stay healthy and get the care that is right for you. With a Medicare Supplement plan, you don’t have a PCP, but you can see any doctor that accepts Original Medicare. 
• Drug coverage – With an HMO plan, you can have Part D prescription drug coverage and medical coverage all in one plan. With a Medicare Supplement plan, if you want prescription drug coverage, you would need to enroll in a separate prescription drug plan.

But, no matter which plan you choose, it’s important to sign up for prescription drug coverage when you are first eligible to avoid paying a penalty assigned by Medicare.

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