Health Maintenance Organization (HMO)

A Health Maintenance Organization (HMO) is a type of health care provider that offers “managed care” for a fixed annual payment (capitation fee) which Medicare pays for each covered patient. Patients are restricted, except in the case of an emergency, to receiving care only from doctors, hospitals, or other healthcare providers that work for or have contracted with the HMO.  These providers are known as the HMO’s network.  Care received outside the HMO’s network of providers is generally not covered unless that treatment isn’t available within the network and is preapproved. Each patient is assigned a primary care physician, also known as a gatekeeper, who oversees the patient’s medical care and who is required to make a referral for the patient to see a specialist. A primary component of an HMO is an emphasis on prevention and wellness.

It is estimated that one out of three HMO patients will need to use out-of-network services due to a complicated medical condition. Other than for emergency or urgent care situations, the patient is generally responsible for the full cost of these services with no maximum out-of-pocket cap on these expenses.

An important caveat: be sure to inquire if your HMO includes prescription drug coverage. HMOs are not required to offer Medicare prescription drug coverage, but they often do. If you are covered by an HMO, you ARE NOT ELIGIBLE to join a Medicare Part D Prescription Drug Plan. In fact, if you enroll in a Medicare Part D Prescription Drug Plan and your Medicare Advantage includes prescription drug coverage, you will automatically be disenrolled from your Medicare Advantage Plan and returned to Original Medicare.