In surprise move, Biden administration terminates the Medicare Advantage Value-Based Insurance Design Model

A nearly decade-long effort to promote value-based insurance design (VBID) in Medicare Advantage (MA) will be discontinued after 2025, the Biden administration announced in December.

The MA VBID Model has aimed to use health plan benefits design to encourage healthy behaviors and promote whole-person health among segments of beneficiaries. It began in 2017 and, after being extended in 2023, was scheduled to run through 2030. For 2025, roughly 7 million beneficiaries across 62 health plans are projected to be part of the model.

Costs incurred in the operation of the program under the aegis of the Center for Medicare & Medicaid Innovation (CMMI) led to the impending termination. The center said costs totaled $4.5 billion spanning 2021 and 2022, an “unprecedented” amount for CMMI pilots.

Analyses commissioned by the center indicated that “no viable policy modifications could address these excess costs,” CMMI said.

RAND researchers conducting those analyses found improved quality stemming from the model, as reflected in MA health plan star ratings, along with better beneficiary adherence to hypertension, cholesterol and noninsulin diabetes medications.

Still, in their 2023 report on model years 2020-22, the researchers wrote that “based on data available and the outcomes we considered, we have yet to find any evidence of overall improvements in health status or cost outcomes.” They left open the possibility that some of their findings would change in future years with the availability of additional data, especially given the difficulty of controlling for all impacts of the COVID-19 pandemic in the 2023 report.

Drivers of high costs

For the three-year period ending in 2022, the researchers found a 6.8% increase in the risk scores of targeted beneficiaries, reflecting expected medical spending stemming from recorded health conditions.

Model interventions “often aim to increase interactions with providers, which, in turn, may lead to more diagnoses and increase risk scores,” the researchers wrote.

A subsequent analysis found jumps in the number of hierarchical condition categories (HCCs) among MA beneficiaries in VBID-participating plans.

“Diagnoses with large increases in prevalence in the VBID group relative to the comparison group included conditions that were commonly targeted by VBID [health plan] participants, such as congestive heart failure, diabetes with chronic complications and rheumatoid arthritis, as well as such related conditions as vascular disease and morbid obesity,” the researchers wrote. “This suggests that VBID may be contributing to increases in risk scores by enabling plans to identify new or reestablish existing diagnoses.”

Health plan participation in MA VBID also was linked with higher rebates and increases in Part D expenditures. Part D cost-sharing reductions, which constituted the most frequently implemented intervention by MA VBID participants, helped cause premiums for MA Part D plans to increase by 9.1% in 2021 and 5.7% in 2022.

That increase affected Medicare costs because the program covers the premiums for recipients of the Part D low-income subsidy.

Utilization ticks up

Inpatient stays increased by 11.9% among targeted MA VBID beneficiaries in 2020. Although that was a skewed year for the healthcare industry, the researchers said the results were similar when controlling for stays involving a COVID-19 diagnosis.

The statistic defied forecasts among policymakers and participating health plans that interventions such as lowered cost sharing for drugs and improved care management would reduce the need for higher-intensity clinical services.

“Although this finding was contrary to our expectations, it is possible that the VBID Model may have prompted an increase in beneficiary interactions with primary care providers and care managers, which may have identified latent need for services, including those requiring inpatient stays,” the researchers wrote.

They also speculated that when supplemental benefits help cover nutritional needs or other daily expenses, beneficiaries have an easier time affording medical care, such as an appointment with a physician who identifies a need for hospital services.

A noteworthy increase in admissions was seen regardless of whether the VBID flexibilities (e.g., supplemental benefits, reduced cost sharing) were evaluated generally or in subsets such as those that targeted beneficiaries based on socioeconomic status or that included beneficiary participation requirements. The smallest increase, albeit still statistically significant at 5.5%, was seen among VBID plans that included rewards and incentives for beneficiaries.

No viable solution

CMMI’s initial response to the 2023 report’s findings was to make changes for 2025, including new reporting requirements, an eligibility threshold of three stars and a mandate for participating plans to achieve net savings.

Ultimately, the center concluded that such changes would not make the model financially tenable. The decision was greeted with chagrin by MA advocates.

“Terminating the only [value-based payment] model serving Medicare Advantage organizations will have negative consequences on nearly 9 million seniors and people with disabilities, and particularly on minorities and those in low-income communities who rely on essential benefits like in-home support services, groceries and transportation,” Mary Beth Donahue, president and CEO of the Better Medicare Alliance, said in a written statement.

The hope among stakeholders is that VBID will remain prevalent in MA even without a formal model. Regulatory changes made ahead of 2020 allowed MA plans to incorporate VBID principles more comprehensively outside of the model. Such initiatives include special supplemental benefits for chronically ill beneficiaries.

Reduced cost sharing for Medicare Part D drugs had been exclusive to the VBID pilot, except during a three-year separate model that ended in 2023. CMS hopes the impact of ending the cost-sharing reduction when the VBID model expires can be mitigated through provisions of the Inflation Reduction Act, including expansion of eligibility for the low-income subsidy. In addition, a voluntary model slated to start in 2027 would make some generic drugs available at reduced prices.

Shifts over time

The MA VBID model evolved during what will finish as a nine-year run. Initial policies, as implemented during the first Trump administration, allowed for reduced cost sharing or a wider array of supplemental benefits for beneficiaries with certain chronic conditions if they used high-value providers or participated in designated care management programs.

Between 2018 and 2020, the model expanded from 10 states to all 50 and, for a two-year period starting in 2020, was granted a waiver of the statutory requirement to modify or terminate any CMMI model that does not show reduced spending or improved quality metrics. Participating plans also received leeway to target supplemental benefits based on socioeconomic status, and the model was expanded to include special-needs plans.

A hospice component was introduced to the model in 2021 but was terminated at the end of 2024. That decision came down even though an assessment remained ongoing as to whether the component met cost and quality goals. CMMI said the decision arose from stakeholder feedback about operational challenges of incorporating hospice, along with decreasing participation by MA health plans.

For 2025, policies to address health-related social needs (HRSNs) and advance health equity have been instituted in the VBID model via metrics such as the Area Deprivation Index. Participating plans must offer supplemental benefits in at least two of the following HRSN categories: food/nutrition, transportation, and housing/living environment.

Increased costs stemming from a higher prevalence of HCCs did not appear to be associated with previous interventions to address HRSNs, according to CMMI.