Navigating the Medicare Advantage Value‑Based Insurance Design Model

Judith Nelson
Judith Nelson
Director, Medicare Advantage Strategy

You may have read that on September 1, 2015 the Center for Medicare and Medicaid Innovation announced the Medicare Advantage Value-Based Insurance Design (MA-VBID) model. The term value-based insurance design generally refers to an approach to 1) structure the amount of a member's cost sharing, or 2) provide supplemental benefits to encourage the consumption of "high-value" clinical services that positively impact the member's health and reduce the overall cost of care. If you are thinking about participating, here's a few points on the background driving the initiative and things you need to consider.

An important aspect of the Affordable Care Act (ACA) was increasing quality and effectiveness in the healthcare system by improving the access to preventive services. The ACA specifically allows the Department of Health and Human Services to publish guidelines related to value-based insurance design.

Value-based insurance designs have been used in the commercial market and studies have shown a positive impact. As an example, in 2010, the impact of Pitney Bowes' value-based insurance design was evaluated and verified an increase in drug adherence. The Pitney Bowes’ plan design eliminated or reduced the copayment for selected drugs and members’ adherence to drug therapy increased1.

In the commercial market, the benefit design is modified to encourage the consumption of high-value health care services by reducing the member's cost sharing as well as increasing the cost sharing for services that are overused such as going to the emergency room for minor illness2.

Currently, Medicare Advantage (MA) plans are not able to implement value-based designs due to CMS regulatory requirements for uniform benefit designs. Plans are not allowed to vary the benefits based on the health status or other characteristics of the enrollee. So there has been a disconnect between the objective and the flexibility for MA plans to encourage members to take a more active role in utilization decisions as commercial plans have. However, this new pilot program is designed to provide plans the flexibility to modify benefit designs to encourage members to seek high-value clinical services. The Center for Medicare and Medicaid Services (CMS) will evaluate the clinical justifications of the plan's proposed interventions to ensure that they are not discriminatory to the members with and without the targeted conditions.

The pilot program for MA-VBID is a five-year program beginning on January 1, 2017 and continuing through December 31, 2021. CMS will test the effectiveness of the program in seven states: Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvania, and Tennessee. The VBID programs target members with the following clinical conditions:

  • Diabetes
  • Congestive heart failure
  • Chronic obstructive pulmonary disease (COPD)
  • Past stroke
  • Hypertension
  • Coronary artery disease
  • Mood disorders
  • And/or a combination of these conditions
The program allows for flexibility in the specific design of the programs but they must fit into four broad categories:
  • Reduced cost-sharing for high-value services,
  • Reduced cost-sharing for high-value providers,
  • Reduced cost-sharing for enrollees participating in disease management or related programs, and
  • Clinically targeted additional supplemental benefits.

It is important to note that the Medicare Advantage VBID model allows for the reduction of cost sharing or offering additional benefits but members can never receive fewer benefits or be required to pay higher cost-sharing than other members because of the model.

The ultimate objective of the VBID model is to improve the quality of care provided to enrollees as well as reduce the cost to the Medicare Advantage program. CMS will evaluate the model to answer the following key questions:

  • Does the model improve member outcomes, satisfaction, and out-of-pocket costs,
  • Does the model result in lower expenditures for participating health plans, and if so,
  • Do these lower costs translate into lower plan bids over time, resulting in savings for Medicare and/or enrollees?

The intent of this program is to improve care for a health plan's existing members – not to encourage or discourage enrollment in Medicare Advantage or a particular health plan – so CMS will not allow participating health plans to mention this model in any of the pre-enrollment marketing material. However, plans can share information when a potential enrollee specifically asks about the benefits. Plans will be required to submit materials to the enrollees in the target populations at the beginning of each plan year as part of the Annual Notice of Change (ANOC)/Evidence of Coverage (EOC). If an enrollee becomes eligible during the middle of the plan year, they must receive the same information.

The following table outlines the tentative timeline for MA-VBID model:

Date Milestone

  • January 8, 2016 model applications due to CMS
  • March 2016 provisionally selected model participants identified
  • June 2016 MA plan bids due (bids reflect negotiated agreement on VBID)
  • September 2016 contract addenda for model participation executed
  • January 2017 model implementation begins

The Request for Application was released on October 9, 2015 and the actuarial guidance was released October 27, 2015. Health plans are required to include actuarially certified financial projections of the impact of the value-based interventions for the targeted populations.

Appropriate design of the program could improve the health plan's financial performance and quality metrics, but the overall success of this model will depend upon the mix and volume of members with the defined conditions as well as the combination of benefit design interventions selected for the model. The ultimate objective is to improve the health outcomes for the members.

DST understands the significance of implementing this type of program and we are available to assist you with the overall evaluation of program participation, evaluation of the actuarial guidance as well as identifying your targeted population and designing interventions. The complexity in configuration of new benefit designs for target populations may challenge your existing resources and we are prepared to assist you in developing and implementing the most effective and efficient designs to maintain administrative productivity.

This is an opportunity to engage members more actively in their care utilization decisions and drive toward lower costs of care and improved outcomes. We're here to help you and your members.

1. http://scholar.harvard.edu/files/nkc/files/2010_impact_of_copayment_reductions_on_adherence_health_affairs.pdf

2. http://www.ncsl.org/research/health/value-based-insurance-design.aspx





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