Open-ended options in Medicare risk contracts with HMOs

The open-ended option has achieved broad acceptance in the health maintenance organization (HMO) industry. Permitting HMOs that enter into risk contracts with Medicare to offer open-ended products would expand the number of managed care options available to Medicare beneficiaries. The attractiveness of this option to HMOs depends in part on how issues are addressed relating to tracking and managing of out-of-plan use, education of Medicare beneficiaries, interface with peer review organizations (PROs), payment of nonnetwork providers, and use of medical screening. Perhaps most importantly, changes in the Medicare supplementary insurance market probably would be necessary before an open-ended product would be offered by HMOs under Medicare risk contracts.