Medicare patients receive care through several distinct delivery models, but the two primary ones are Original Medicare (a fee-for-service system run by the federal government) and Medicare Advantage (private insurance plans that contract with Medicare to cover the same benefits). As of 2025, 54% of eligible Medicare beneficiaries are enrolled in Medicare Advantage plans, while the rest use Original Medicare. Beyond these two main pathways, several specialized models coordinate care for specific populations or aim to improve quality while reducing costs.
Original Medicare: Fee-for-Service
Original Medicare is the traditional model that has existed since the program launched in 1965. It works on a fee-for-service basis: you see a doctor or go to a hospital, the provider bills Medicare, and Medicare pays its share. You can visit any doctor or hospital in the country that accepts Medicare, with no need for referrals to see a specialist and, in most cases, no requirement for prior authorization before receiving services.
The trade-off for that flexibility is cost exposure. For Part B services (outpatient care, doctor visits, preventive services), you typically pay 20% of the Medicare-approved amount after meeting your annual deductible. There is no yearly cap on what you pay out of pocket unless you purchase a supplemental Medigap policy. Original Medicare also does not include prescription drug coverage on its own, so most people add a separate Part D drug plan.
Medicare Advantage: Managed Care Plans
Medicare Advantage plans are offered by private insurance companies approved by Medicare. They must cover everything Original Medicare covers, but they often bundle in extras like dental, vision, hearing, and prescription drug coverage. Enrollment has grown dramatically, jumping from 19% of eligible beneficiaries in 2007 to 54% in 2025, representing about 34.1 million people out of roughly 62.8 million total Medicare beneficiaries.
These plans typically use provider networks. You may need to choose doctors and hospitals within the plan’s network for non-emergency care, and some plans require referrals before you can see a specialist. Prior authorization, where the plan must approve a service before you receive it, is also more common. In exchange, Medicare Advantage plans set a yearly cap on your out-of-pocket spending. Once you hit that limit, covered services cost nothing for the rest of the year. Some plans carry $0 monthly premiums beyond the standard Part B premium, and some even help cover part of the Part B premium itself.
Accountable Care Organizations
Accountable Care Organizations, or ACOs, represent a model designed to bridge the gap between fee-for-service payment and coordinated, team-based care. An ACO is a group of doctors, hospitals, and other providers who voluntarily work together to manage the overall health of a defined population of Medicare patients. The goal is delivering the right care at the right time while cutting unnecessary services and avoiding medical errors.
The largest ACO program is the Medicare Shared Savings Program, run by CMS. It works within Original Medicare, meaning patients keep their existing fee-for-service benefits and provider choices. The difference is behind the scenes: when an ACO keeps its patients healthier while spending less than projected, the ACO shares in those savings as a financial reward. This creates an incentive for providers to coordinate with each other rather than operate in silos.
A newer iteration called the ACO REACH Model builds on these lessons with additional requirements around health equity, provider governance, and transparency. People with Medicare in a REACH ACO receive help navigating the health system and managing chronic conditions, with beneficiary advocates sitting on the ACO’s governing board.
Special Needs Plans
Special Needs Plans, or SNPs, are a category of Medicare Advantage plan designed for people with specific circumstances that require more targeted care. There are three types. Chronic Condition SNPs (C-SNPs) serve people with severe or disabling chronic conditions specified by CMS, such as diabetes, heart failure, or HIV/AIDS. Dual Eligible SNPs (D-SNPs) are built for people who qualify for both Medicare and Medicaid simultaneously. Institutional SNPs (I-SNPs) cover people who live in nursing facilities or other institutional settings.
Because each type of SNP restricts enrollment to a defined group, the plans can tailor their benefits, provider networks, and care coordination specifically to what that population needs most.
PACE: Community-Based Care for Older Adults
The Program of All-Inclusive Care for the Elderly, known as PACE, delivers comprehensive medical and social services to frail older adults who are still living in the community rather than a nursing home. Most PACE participants are dually eligible for both Medicare and Medicaid. The program wraps together primary care, specialist visits, therapies, social services, and transportation into a single coordinated package, typically centered around an adult day health center. The intent is to keep participants safely at home while providing the level of support they would otherwise only get in an institutional setting.
Home-Based Primary Care
For Medicare beneficiaries who are too sick or frail to easily visit a clinic, home-based primary care models bring the doctor to them. The Independence at Home demonstration, mandated by Congress, tested whether paying primary care practices to deliver house calls to high-cost, high-need patients could reduce spending and improve outcomes.
Over eight years of testing, participating patients received about two out of every three in-person visits at home and had 16% more ambulatory visits than comparable patients receiving standard care. Primary care played a significantly larger role in their overall healthcare. In the eighth year of the program, the model was associated with a 16.3% reduction in the probability of dying from any cause, a statistically significant finding. Estimated spending reductions reached 7.5% per patient, though that result was not statistically significant. The model illustrates a broader push toward meeting patients where they are rather than relying on office-based care.
Patient-Centered Medical Homes
The Patient-Centered Medical Home, or PCMH, is a primary care model where a single practice takes responsibility for coordinating all aspects of a patient’s healthcare. Practices that earn PCMH recognition (often through the National Committee for Quality Assurance) commit to standards like care coordination, expanded office hours, after-hours phone access, and enhanced electronic health records. In Medicare demonstrations, certified practices received monthly payments of up to $10 per patient to fund these improvements, including hiring care coordinators.
Because NCQA’s standards include roughly 100 different expectations and practices only need to meet a minimum percentage, the model varies significantly from one practice to another. Two PCMH-recognized clinics can look quite different in day-to-day operation. The common thread is a commitment to organizing care around the patient rather than around individual visits.
Hospice Within Medicare Advantage
Traditionally, when a Medicare Advantage enrollee elects hospice care, their coverage reverts to Original Medicare for most services. Starting in 2021, CMS began testing a new approach through the Value-Based Insurance Design (VBID) Model. Participating Medicare Advantage plans remain financially responsible for all services, including hospice, rather than handing that responsibility back to fee-for-service Medicare. The model does not allow plans to require prior authorization for hospice elections or transitions between levels of hospice care. The test is designed to assess whether keeping hospice integrated within a single plan improves the quality and coordination of end-of-life care.
How These Models Overlap
These delivery models are not always mutually exclusive. A person on Original Medicare might also be attributed to an ACO without even knowing it, since ACO participation does not change their coverage or restrict their provider choices. Someone in Medicare Advantage could be in a Special Needs Plan that uses PCMH-style coordination. A dually eligible person might enroll in PACE instead of a D-SNP. The landscape is layered, with the two foundational structures (Original Medicare and Medicare Advantage) serving as the base, and the other models layering on top to address coordination, cost, and quality for different patient populations.