Population health insights

How Medicare Advantage is boosting value-based insurance design

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Nov 19, 2018

In two previous blogs, we explored the ‘trust gap’ between healthcare payers and providers –  its negative implications for patients, strategies to help mitigate the divide, a recent narrowing of this gap and the promising shift to a ‘payvider’ model. This payvider model, which is increasingly being used in the commercial market, is based on a vertically integrated approach in which payers and providers share in the risk and rewards of managing care.


At the core of the ‘payvider’ model is a shared interest in better understanding the needs of populations (especially those needing chronic care), building trust and communicating effectively for optimal health outcomes and financial reimbursement.

Evidence is mounting that value-based insurance design (VBID) and the principles on which it was built can positively impact the utilization of high-value providers and limit the use of services that are of potentially low value, ultimately helping plans improve health and quality, enhance consumer engagement and reduce costs.


Until recently, however, the VBID model was largely limited to the commercial insurance sector. But that changed last year, when the Centers for Medicare & Medicaid Services (CMS) began diving into the VBID model in its Medicare Advantage (MA) plans, which may ultimately bring this approach to some 53 million people aged 65 years and over.

VBID’s role in Medicare Advantage

Having CMS adopt VBID is a key step, as many Medicare beneficiaries live with multiple chronic health conditions and are at especially high risk when they receive low-value care interventions and insufficient high-value care services. Because this population is particularly sensitive to out-of-pocket costs – contributing to non-adherence – and because it tends to consume a significant portion of the overall healthcare dollar, CMS saw the potential for VBID to realize major savings while improving beneficiary health.


In 2017, the CMS Innovation Center first announced the Medicare Advantage Value-Based Insurance Design (MA-VBID) model “to test innovative payment and service delivery models to reduce Medicare … expenditure while preserving or enhancing the quality of beneficiaries’ care.”


Starting January 1, 2017, it then launched a five-year model test in seven states, and invited MAs and MA-Part D plans to participate. By 2018, 11 MA organizations were participating in the program and were focused on treating the following pre-approved, high-value clinical conditions:

  • Diabetes
  • Congestive heart failure (CHF)
  • Coronary artery disease (CAD)
  • Chronic obstructive pulmonary diseases (COPD)
  • Patient with Past Stroke
  • Hypertension
  • Mood disorders
  • Rheumatoid arthritis
  • Dementia
  • Additional chronic conditions that were not previously eligible for the demonstration, such as chronic kidney disease and tobacco use

    MA enrollees with one or more of these chronic conditions pay lower out-of-pocket costs for their medical benefits, and in some cases, they also receive extra coverage and pay less for their prescription drugs.

    There are four ways that MA plans can approach VBID:
     
  1. Reduced cost-sharing for high-value services, whereby plans can reduce or eliminate cost sharing for items or services identified as high-value, such as eliminating co-pays for eye exams for diabetics
  2. Reduced cost-sharing for patients that see high-value providers, such as physicians who have strong track records in controlling hemoglobin A1c levels for diabetic patients.
  3. Reduced cost-sharing for participating in disease management or related programs, such as eliminating primary care co-pays for diabetic patients under case management
  4. Covering additional supplemental benefits, such as free telehealth physician consults for diabetics or help with tobacco cessation for those with COPD.

    In 2019, the MA-VBID model is to expand to 25 states, which will make it available in roughly half the country and likely lead to eventual national coverage.

Expanding the VBID model through the CHRONIC Care Act 

The MA-VBID model is getting an additional boost from the recently-passed Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act, which provides non-medical benefits such as nutrition, transportation, in-home assistance, supervised housing and expanded telehealth. It recognizes the importance of social determinants in shaping health, promotes more proactive treatment of chronic illnesses, and recognizes the potential of telehealth to help deliver preventive care.


This act expands the opportunities to improve and better integrate care, particularly for high-needs older adults. For example, beneficiaries with end-stage renal disease (ESRD) may receive in-home dialysis using telehealth. As stated in the preamble of the Act, these changes are meant “to improve management of chronic diseases, streamline care coordination, and improve quality outcomes.”

Moving beyond sick care with VBID

A recent Philips survey of health system executives identified three of their five top VBC challenges as:
  • Engaging patient in their care
  • Coordinating stakeholders
  • Addressing the social determinants of health (SDoH)

Healthcare leaders and government officials agree that the move towards value-based care is no easy task, but the VBID-MA model test is one high-profile example of deploying a population health initiative on a national scale.


Applying clinically nuanced VBID strategies to the Medicare population presents enormous opportunity for the healthcare system. It’s encouraging to see both government and commercial payers adopting this model to improve health and quality, enhance consumer engagement and reduce costs. Creating value through payer-provider alliances is more important than ever. Treating the older, chronically ill population so they can remain independent and out of the hospital is a win-win for healthcare consumers and payers/providers.

About the author

Greg Fulton
Greg Fulton,
Industry & Public Policy Lead, Philips
Greg Fulton is Industry & Public Policy Lead for Philips PHM. He has extensive health IT experience in government relations at Congressional, Health & Human Services, state and industry organizational levels. He is a current member of the CommonWell Health Alliance Government Affairs Advisory Council and the HIMSS Government Relations Roundtable.

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