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CMS Rule Creates More Flexibility for Value-Based Benefits 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. 

Building on the ongoing Medicare Advantage (MA) Value-based Insurance Design (VBID) demonstration, a new rule issued by CMS for contract year 2019 includes a reinterpretation of the MA uniformity requirement that will allow for more flexibility in benefit design for MA enrollees with specified chronic conditions.

Flexibility and Value Over Uniformity

The MA uniformity requirement—originally intended to prevent discrimination against beneficiaries based on health status—currently prevents MA plans from providing tailored benefits to enrollees with chronic conditions. However, a newly published CMS rule recognizes that “providing access to services (or specific cost-sharing) that are tied to health status or disease state in a manner that ensures that similarly situated individuals are treated uniformly is consistent with the uniformity requirement in the Medicare Advantage (MA) regulations” (p.41).

By giving MA plans greater flexibility around the uniformity requirement, the hope is that they will ultimately be able to provide more targeted, “higher-quality and more cost-efficient care” to MA beneficiaries. This new flexibility would also allow for the implementation of VBID principles throughout the MA program.

Beginning in 2020, MA plans will be able “to reduce cost-sharing for certain covered benefits, offer specific tailored supplemental benefits, and offer lower deductibles for enrollees that meet specific medical criteria.” These changes allow plans to use clinical nuance—the idea that medical services differ in the amount of health produced, based on who receives the service, who provides it, and the setting in which it is provided—to tailor benefit designs for beneficiaries with certain chronic conditions. This nuanced approach to benefit design allows seniors to choose plans that are specific to their unique needs, thereby promoting better health outcomes through the removal of financial barriers to essential care, as well as more efficient healthcare expenditures by encouraging beneficiaries to utilize high-value services and providers.

All of these features can already be found in the ongoing MA VBID Model Test that launched in 2017, but now, plans outside of the demo will have the flexibility to offer VBID benefit designs to their beneficiaries without being subject to the additional application and geographic limitations inherent to the model test. Although the ability to lower cost sharing for prescription drugs will remain a unique feature of the MA VBID demo, the application of clinically nuanced VBID strategies beyond the model test presents an enormous opportunity for patients and plans in the Medicare Advantage program. The increased adoption of VBID has the potential to further shift the MA program from a volume-based to a value-based system, enhance consumer experience, and lower costs in the MA program.

For more information, view the complete CMS Rule and visit the MA initiative page on the V-BID Center website.

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