The Centers for Medicare & Medicaid Services (CMS) announced today the Medicare Advantage Value-Based Insurance Design Model, which will test the hypothesis that giving Medicare Advantage plans flexibility to offer targeted extra supplemental benefits or reduced cost sharing to enrollees who have specified chronic conditions can lead to higher-quality and more cost-efficient care, helping health plans and consumers have the tools they need to improve costs and spend dollars more wisely.

The goal of the model is to improve beneficiary health, reduce the utilization of avoidable high-cost care, and reduce costs for plans, beneficiaries and the Medicare program. The model focuses on Medicare Advantage enrollees with the chronic conditions of diabetes, congestive heart failure, chronic obstructive pulmonary disease (COPD), past stroke, hypertension, coronary artery disease, mood disorders, and combinations of these categories.

“The Medicare Advantage Value-Based Insurance Design Model fills an immediate need for testing ways to improve care and reduce cost in Medicare Advantage Plans and offers the prospect of lower out-of-pocket costs and premiums along with better benefits for enrollees in Medicare Advantage,” said Patrick Conway, M.D., MSc, CMS deputy administrator and chief medical officer.

Part of the Department of Health and Human Services’ (HHS) “better care, smarter spending, healthier people” approach to improving health care delivery, the model is intended to improve outcomes and reduce costs by giving health plans the flexibility to provide new supplemental benefits specifically tailored to the enrollees’ clinical needs, such as the elimination of co-pays for eye exams for beneficiaries with diabetes or extra tobacco cessation assistance for enrollees with COPD. The model will begin January 1, 2017 and run for five years in Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvania, and Tennessee.

Value-Based Insurance Design (VBID) generally refers to health insurers’ efforts to structure enrollee cost-sharing and other health plan design elements to encourage enrollees to use high-value clinical services – those that have the greatest potential to positively impact enrollee health. VBID approaches are increasingly used in the commercial market, and evidence suggests that the inclusion of clinically-nuanced VBID elements in health insurance benefit design may be an effective tool to improve the quality of care and reduce the cost of care for Medicare Advantage enrollees with chronic diseases.

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