Part D plans would take on more financial risk under new CMMI model

(Updated at 11 a.m. ET)

The CMS' Center for Medicare and Medicaid Innovation Friday announced a new model to try to shrink skyrocketing Medicare Part D drug spending. It also expanded the scope of its so-called value-based insurance design model for Medicare Advantage plans while also rolling it out over all 50 states.

Some aspects of the value-based insurance design model are coming for Obamacare exchanges as well, according to an expert who has been working closely on the policy with the administration.

The strategy for Part D—framed as a step in the Trump administration's blueprint to lower prescription drug prices—targets the high expenses in the catastrophic phase of the Part D benefit. Patients hit the catastrophic phase once they have spent the limit permitted under their insurance. Medicare then steps in to cover 80% of the drug costs, while patients pay for 5% and Part D plans 15%.

Under the optional model, Part D plans will shoulder more of the financial risk for that catastrophic phase and share in the savings if the total spend comes in under the target set by the CMS. They will be responsible for any spending that exceeds the goal.

Agency officials Friday projected roughly $2 billion in savings for Medicare.

In a call with reporters, CMS Administrator Seema Verma said that by taking on more responsibility for excessive spending, plans would be driven to tougher negotiations with drug companies. Verma did not speculate on the level of interest Part D plans are likely to show in the model.

Government spending for this catastrophic phase has spiked from $9.4 billion to $37.4 billion over the past decade, averaging a 17% increase annually. The agency said 3.2 million people have reached this phase.

The expansion to all 50 states of a value-based design option for Medicare Advantage plans will happen in concert with the Part D model as part of the agency's drive to rework Medicare. Agency officials said they estimate "hundreds of millions of dollars" in savings for the federal government.

The model, known as V-BID, will also take on much wider scope, letting plans tailor their benefits and lower cost-sharing to accommodate a patient's particular chronic condition. The "uniformity" rule that requires insurers offer roughly equivalent coverage for everyone regardless of their financial circumstances can be waived.

This means the plan can consider an enrollee's socio-economic status and expand benefits to include help not related to healthcare, like transportation.

Insurers would be able to nudge their enrollees toward behavior that reduce costs, using things like lower co-pays for certain medications or supplies. They could offer more financial rewards for enrollees who boost their healthy lifestyle efforts or focus on advance care or preventive care.

Significantly, they can replace in-person office visits with telemedicine consultations to enrollees and still meet network adequacy requirements—as long as patients still have the option of an in-person visit and can always keep their preferred choice.

This will likely expand MA plans' reach in rural areas where due to network adequacy requirements they currently don't have much market reach.

The same network adequacy issues have plagued the Obamacare exchanges, and Mark Fendrick of the University of Michigan V-BID Center who has consulted on the policy, said the agency will test similar approaches for that market.

Also key, the expanded Medicare Advantage V-BID would open up hospice care, currently limited to Medicare fee for service, to MA plans. If a Medicare Advantage enrollee goes into hospice, he or she is booted off the plan and an agency official said the hope in testing this model is to keep care more consistent for the patients.

The V-BID demonstration launched in 2017 in just seven states, and has gradually grown. A provision in the 2018 Bipartisan Budget Act authorized the nationwide expansion.