surftheiop

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I've heard that discussion of HMO's and PPO's comes up occasionally during interviews.

Was curious if anyone here has basic understanding of the difference between them and some pro/cons of different models.

I've read a little bit on wiki and done some googling but they seem really similar to me and Im not sure how they are viewed by the medical community.

Also, how will this new legislation effect them?
 

LuciusVorenus

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HMOs work in the "classic" way you could say. The patient sees the doctor, the doctor bills the insurance company, the insurance company pays the doctor, and the patient pays the premium/copays.

PPOs, as far as I know, work by combining hospitals/providers into a network and then acting as a middle man between the insurer and the providers, giving discounts for those using doctors inside the network and then charging the insurer for access to their network. This works by increasing patients for the provider, but since the provider is giving a discount when the patient is in the network, the insurance company makes money by having to pay the provider less.

The main difference between HMOs and PPOs is that for most HMOs in order to see a specialist you need a referral from a primary care doc. For PPOs you can see a specialist without ever seeing a primary care doc. So overall HMOs place a lot more emphasis on primary/family docs. HMOs tend to hover over physicians a lot more, keeping track of how many tests they order, etc and in general do a lot more micromanaging (although PPOs also pay a lot of attention to what procedures are being "utilized" for the patient to determine if they're cost effective), and so have a reputation for not covering as much as PPOs (think of all those stories you hear about Kaiser for example).
 
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HMO is the lower cost provider and has more cost controls, ranging from which providers you can see to how you can see them. There are many, MANY other built-in restrictions to constrain cost beyond the provider relationship. And yes, your primary care doctor is the gateway provider for all other services. Under the Kaiser model, the provider can work directly for the HMO.

PPO costs the customer a LOT more, so they get some additional benefits such as the ability to see a wider range of providers... all within the network at a cut rate. In my previous company plan, we were able to go outside the network and Blue Cross covered half. I wasn't aware that the PPO network existed outside of the insurance company, but that may very well be (although eliminating the middleman would make economic sense for the insurer). I did not experience or perceive any form of cost-effective rationing under the PPO plan, but they clearly had a list of services that were covered versus those that weren't (elective and non-vital).

It always comes down to money. Pay the higher premium and get the higher service.
 
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LizzyM

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Health Maintenance Organizations (HMO) requires that each "covered life" have a primary care provider (PCP). That PCP receives a flat fee (called "capitation") for the care of each "covered life" in the practice. The PCP's job is to provide care that decreases the probability that the patient will become sick and need the services of a specialist (part of the cost of such care comes out of the PCP's capitated payment) so a large focus is made (theoretically) on screening, wellness programs, immunizations. In practice, most people don't stay with a given HMO for long enought for the HMO to reap the economic benefits of prevention programs and the care sometimes seems like barebones aimed at reducing costs in the short-term. In a closed panel HMO, the PCPs and other providers are employed by the HMO. In general, HMO member is not covered (except in emergencies when one is traveling) for care delivered outside of the panel and access to specialists must be pre-approved by the PCP. There is often "first dollar" coverage for care (no "deductable") and no co-pay so the choice for patients is less out of pocket cost but less liberty in choosing when and who to see for speciality services.

A Preferred Provider Organization (PPO) looks pretty much like regular insurance from the patients' perspective. There is often a deductable (a certain amount that must be paid out of pocket before insurance coverage begins) a co-pay (a proportion of the bill for which the patient is responsible), and an annual maximum out-of-pocket after which the insurer covers 100%. The difference is that there is a network of "preferred providers". If a patient choses a preferred provider the copay is lower (perhaps 10-20%) while an out -of-network visit will be covered but the patient may be responsible for a larger proportion of the bill. Physicians and hospitals are encouraged to join the PPO because it drives business to their practices/facilities. However, in joining they agree to accept payments that are lower than what they would ordinarily bill for a given service. In a sense, the insurance company has negotiated lower prices in exchange for bringing patients to the door.
 
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surftheiop

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Health Maintenance Organizations (HMO) requires that each "covered life" have a primary care provider (PCP). That PCP receives a flat fee (called "capitation") for the care of each "covered life" in the practice. The PCP's job is to provide care that decreases the probability that the patient will become sick and need the services of a specialist (part of the cost of such care comes out of the PCP's capitated payment) so a large focus is made (theoretically) on screening, wellness programs, immunizations. In practice, most people don't stay with a given HMO for long enought for the HMO to reap the economic benefits of prevention programs and the care sometimes seems like barebones aimed at reducing costs in the short-term. In a closed panel HMO, the PCPs and other providers are employed by the HMO. In general, HMO member is not covered (except in emergencies when one is traveling) for care delivered outside of the panel and access to specialists must be pre-approved by the PCP. There is often "first dollar" coverage for care (no "deductable") and no co-pay so the choice for patients is less out of pocket cost but less liberty in choosing when and who to see for speciality services.

A Preferred Provider Organization (PPO) looks pretty much like regular insurance from the patients' perspective. There is often a deductable (a certain amount that must be paid out of pocket before insurance coverage begins) a co-pay (a proportion of the bill for which the patient is responsible), and an annual maximum out-of-pocket after which the insurer covers 100%. The difference is that there is a network of "preferred providers". If a patient choses a preferred provider the copay is lower (perhaps 10-20%) while an out -of-network visit will be covered but the patient may be responsible for a larger proportion of the bill. Physicians and hospitals are encouraged to join the PPO because it drives business to their practices/facilities. However, in joining they agree to accept payments that are lower than what they would ordinarily bill for a given service. In a sense, the insurance company has negotiated lower prices in exchange for bringing patients to the door.
Thanks alot! This is really helpful, curious if you had any quick thoughts about what the general medical community's feelings about HMO's and PPO's are?

From my outside standpoint it seems that in theory the HMO would be a good model because of the supposed focus on preventative care, but in actuality it seems the PPO gives patients better coverage and flexibility.
 

LizzyM

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Thanks alot! This is really helpful, curious if you had any quick thoughts about what the general medical community's feelings about HMO's and PPO's are?

From my outside standpoint it seems that in theory the HMO would be a good model because of the supposed focus on preventative care, but in actuality it seems the PPO gives patients better coverage and flexibility.
The AMANews is a good source of information about how organized medicine views different health care delivery & payment schemes.
http://www.ama-assn.org/amednews/ I get the table of contents emailed to me every week which brings articles of interest to my attention. (You needn't be an AMA member, or even a physician, to get this service).

There is some stress in being a PCP who must serve as a gate keeper, keeping costs down by handling problems without referral to specialists but making appropriate referrals for patients who need specialist care. Just like patients who expect/demand antibiotics for a viral infection, you'll have patients who want a referral to a specialist before giving the PCP a chance to treat something with first line therapy.

For those in PPOs the biggest gripe seems to be that the "negotiated price list" is often "proprietary information" owned by the insurance company and not shared with the physician group, even after the contract is signed. So, you agree to take lower payments but you don't even know what those amounts those payments will be. It seems just nuts!