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CMS Proposed Rule Allows Greater Flexibility for VBID in Medicare Advantage

Since its inception in 2005, the University of Michigan Center for Value-Based Insurance Design (V-BID) has led efforts to promote the development, implementation, and evaluation of innovative health benefit designs balancing cost and quality. A multidisciplinary team of faculty, including A. Mark Fendrick, MD and Michael E. Chernew, PhD, who first published and named the VBID concept, have guided this approach from early principles to widespread adoption in the private and public sectors. The Center has played a key role in the inclusion of VBID in national healthcare reform legislation, as well as in numerous state initiatives. The basic VBID premise is to align patients' out-of-pocket costs, such as copayments, with the value obtained from health services and providers.
This article was collaboratively written by A. Mark Fendrick, MD, director of the Center for Value-Based Insurance Design (V-BID), and several V-BID Center staff. 

The Medicare Advantage (MA) uniformity requirement—originally intended to deter discrimination against beneficiaries based on health-status—is often perceived as a barrier to plan innovation.

However, a recently released CMS Medicare Advantage Proposed Rule recommends giving MA plans greater flexibility around the uniformity requirement that will ultimately provide more targeted, “higher-quality and more cost-efficient care” to MA beneficiaries. Such a change would allow for the implementation of value-based insurance design (VBID) principles throughout the MA program.

Proposing Flexibility

The Proposed Rule, in which CMS reinterpret MA uniformity requirements to give MA plans the flexibility “to reduce cost-sharing for certain covered benefits, offer specific tailored supplemental benefits, and offer lower deductibles for enrollees that meet specific medical criteria,” would further shift the MA program from a volume-based to a value-based system and greatly improve the coverage options available to beneficiaries with specified medical conditions (p. 106).

In aligning patients’ out-of-pocket costs, such as copayments and deductibles, with the value of services, VBID plans are designed with the tenets of clinical nuance in mind. These tenants recognize: 1) medical services differ in the amount of health produced, and 2) the clinical benefit derived from a specific service depends on the consumer using it, as well as when, where, and by whom the service is provided.

This nuanced approach to benefit design allows seniors to choose plans that are tailor-made to their unique needs, thereby promoting better health outcomes through the removal of financial barriers to essential care, as well as more efficient health care expenditures by encouraging beneficiaries to utilize high-value services and providers

Highlighting Value in Medicare Advantage

Those already familiar with the MA program may recognize that this is not CMS’ first foray into value-based healthcare provision. Since 2007, CMS has evaluated MA plans based on quality and performance, yielding a star ratings system meant to guide consumer choice.

More recently, in January 2017, CMS launched the MA VBID Model Test. The model, run by the Center for Medicare and Medicaid Innovation (CMMI), allows selected MA plans in designated states to offer varied benefit designs for enrollees diagnosed with specified clinical conditions and is due to expand from 7 to 10 states and add 2 clinical conditions in 2018. With bipartisan, bicameral support to expand the MA VBID Model Test to all 50 states, it is no surprise that CMS is seeking to extend the successes of VBID in the private and public sector to the entirety of the MA program. 

The increased adoption of value-based insurance design, coupled with an increased focus on alternative payment models, can improve quality, enhance consumer experience, and lower costs in the MA program. 

For more information, view the CMS Medicare Advantage Proposed Rule and visit the Medicare Advantage initiative page on the V-BID Center website.

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