Out-of-plan use by Medicare enrollees in a risk-sharing health maintenance organization

In this study, we analyzed the cost and volume effects of a waiver that eliminated lock-in restrictions on out-of-plan use in a health maintenance organization (HMO) with a Medicare risk-sharing contract. We compared out-of-plan cost and number of claims during a 15-month base line period when the lock-in was in effect, with a 24-month waiver period when the lock-in was removed. The results demonstrate that average per capita cost and claims increased significantly for both Medicare Part A (hospital insurance) and Part B (supplementary medical insurance) out-of-plan services during the waiver. Self-referred out-of-plan use normally prohibited by lock-in, accounted for 20 percent of all out-of-plan costs during the waiver and 57 percent of the increase in out-of-plan costs from the lock-in to the waiver. The combination of risk-sharing and lock-in provisions holds promise as a method for reducing expenditures for the Medicare program.