CMS Models Target Patient-Centered Benefits Design, Drug Costs

The programs aim to improve patient-centered benefits design and reduce drug costs. Specifically, they impact Medicare Advantage and Part D.

By Sara Heath

January 23, 2019 - CMS has revealed two new regulations that will ideally improve patient-centered benefits design and lower prescription drug spending, the agency said.

Specifically, the agency announced a new Value-Based Insurance Design (VBID) modeland a  new Medicare Part D drug payment model, both out of the CMS Center for Medicare and Medicaid Innovation (CMMI). These models will impact Medicare Advantage and Medicare Part D, respectively.

Medicare Advantage and Medicare Part D are supplemental Medicare plans that many seniors purchase as another layer of insurance, CMS explained. According to the Kaiser Family Foundation, 43 million Medicare beneficiaries had Medicare Part D in 2018. In 2017, 19 million individuals had a Medicare Advantage plan, KFF said.

But these plans have begun to fall short of their promise to improve patient access to comprehensive and affordable healthcare and treatment options.

“The American healthcare system is very different today than it was thirteen years ago when the Medicare Advantage and Part D programs were launched in their current forms, but due to the slow pace of change in government, these programs have not been fully updated to reflect today’s realities,” CMS Administrator Seema Verma said in a statement.

“Today’s announcements are prime examples of how CMMI can test policies to modernize CMS programs and ensure that our seniors can access the latest benefits,” Verma added. “These two models ignite greater competition among plans, creating pressure to improve quality and lower costs in order to attract beneficiaries.”

The VBID models will allow Medicare Advantage plans new flexibilities, thus making it possible for plans to institute certain patient-centered benefits, CMS explained.

First, plan delivery models will allow plans to reduce patient financial responsibility. Additionally, plans may now offer benefits to enrollees on a more targeted basis. This will allow for more customized plans based on beneficiaries’ chronic disease status, socioeconomic needs, or other social determinants of health.

Changes will also allow Medicare Advantage plans to create new incentive programs that should drive overall patient wellness. These programs can now be higher value, CMS said.

Finally, these changes will put telehealth access front and center. Medicare Advantage plans can now measure telehealth access to meet access requirements, as long as plans also continue to offer in-person visits, as well.

CMS will also begin to include hospice care in Medicare Advantage, ideally improving access to hospice care and drive care coordination between all providers.

The VBID program also makes changes to Medicare Part D and how it pays for drug treatments.

Prior to these new regulations, Part D plans could wait until a patient reached the “catastrophic phase” of their benefit, meaning the final phase of their benefit. In 2018, the catastrophic phase meant the patient had spent over $5,000 on a prescription drug.

Not all patients should reach this phase, experts say. However, once a patient has reached the catastrophic phase, CMS has previously covered 80 percent of the drug’s cost, which the agency said has created an untenable situation.

Between 2008 and 2017, federal spending for the Part D catastrophic phase increased from $9.4 billion to $37.4 billion, averaging at a 17 percent increase each year.

These federal spending increases occurred because Part D plans had no incentive to lower prices, CMS said. Once costs became high, the onus fell on CMS, meaning plans did not have any risk responsibility that could motivate them to negotiate lower drug costs.

This new model would increase the risk Part D plans bear during the catastrophic phase. This will foremost reduce the federal spending CMS bears while also motivating Part D plans to negotiate lower drug prices.

Ideally, these savings will trickle down to patients, who currently also bear significant drug cost burdens.

This model is a cost-sharing one, CMS explained. Based on plan year performance, CMS will calculate how much it would have spent during the catastrophic phase had this VBID program not been implemented.

Part D plans will share in those cost savings, or, should they exceed that CMS calculation, become responsible for high costs.

The new model, which will begin in the 2020 plan year, will be offered alongside traditional Medicare Advantage and Part D options, CMS said. This will allow CMS to measure the efficacy of the VBID models, such as patient preference for these models and the cost saving the models yield. Should VBID models prove effective, CMS says it is prepared to scale them.

“Expanding choices for patients, aligning incentives, and providing new flexibility for insurers in Medicare Advantage and Medicare Part D will deliver better value from these programs,” HHS Secretary Alex Azar concluded.  “The models being announced today create new incentives for plans, patients, and providers to choose drugs with lower list prices, and new ways to meet the unique healthcare needs of specific populations, prevent disease, and expand the use of telehealth.  Today’s announcement draws on successes we have already seen in Medicare and advances our priority of using HHS programs to build a value-driven healthcare system.”

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