On January 18, the Centers for Medicare and Medicaid Services (CMS) Innovation Center announced a new Part D Payment Modernization Model for Part D plans. The aim of this five-year model is to reduce Medicare expenditures by creating incentives to reduce catastrophic phase spending and reinsurance subsidy payments. CMS also announced updates to the Value-Based Insurance Design (VBID) Model for the calendar year (CY) 2020 bid year.
Plans may apply to participate in one or both of these models with applications accepted through March 15, 2019. CMS will be releasing additional details and actuarial guidance in the near future.
Part D Payment Modernization Model
The Part D Payment Modernization Model will allow plans to take two-sided risk for CMS’s federal reinsurance subsidy in the catastrophic phase starting in CY2020. Currently, CMS is responsible for 80% of Part D costs for members whose drug spending exceeds the True Out-of-Pocket (TrOOP) threshold in a given calendar year. Plans project the expected value of this subsidy when submitting Part D bids, and CMS retroactively reconciles the actual value of the reinsurance subsidy with the plan after the bid year is completed.
Under the alternate model, plans will continue to bid prospective reinsurance amounts. After the plan year is completed, CMS will calculate a spending target benchmark that represents an estimate of what the catastrophic reinsurance subsidy would have been if the plan were not participating in the model. If the plan reinsurance amount is less than this estimate, then the plan will receive a share of this savings in the form of a performance-based payment based on the total percentage saved. Plans in this situation will receive 30% of the difference as a bonus payment on the first 3% of the savings, and 50% of any additional savings beyond this point. However, if the plan amount is greater than the CMS target benchmark, then the plan will pay a penalty equal to 10% of the difference.
Payments are calculated at the parent-organization level. As such, if a Medicare Advantage organization (MAO) applies with a standalone Prescription Drug Plan (PDP), then all PDPs in that same region must participate, and if an MAO participates with a Medicare Advantage Prescription Drug (MA-PD) plan, then the MAO must include all eligible MA-PD plans offered in or across the same Part D region that the MA-PD plan serves.
CMS will be maintaining all current Part D bid, payment, and reconciliation processes for these plans. Additionally, the direct subsidy will continue to be calculated and reconciled assuming the current 15% plan liability in the catastrophic phase.
As part of the Part D Payment Modernization Model, CMS will grant plans the flexibility to create Part D Rewards and Incentives programs. Enrollees will be eligible if they participate in disease management programs, engage in medication therapy management, receive preventive health services, and actively engage in understanding their medications, which may include selecting clinically equivalent alternative drugs that are more cost-accessible. CMS also plans to offer additional program flexibilities to participants, which will be announced at a later date.
Plans that are successful at managing their catastrophic phase costs will benefit by participation in this model as plans that outperform the CMS spending target benchmark will receive a share of the difference. The additional flexibility that CMS provides will also facilitate efforts to reduce reinsurance costs, although specific details are still forthcoming.
Value-Based Insurance Design Model
Starting in CY2020, the VBID Model will now include all 50 states and territories, and will allow participation by all Special Needs Plans and regional preferred provider organizations (RPPOs), as required by the Bipartisan Budget Act of 2018. The VBID model will also be extended until CY2024.
Previously, VBID participants were able to offer reduced cost sharing or additional benefits to MA enrollees with specified chronic conditions. Starting in CY2020, participants may now apply to test one or more different interventions:
• Value-based insurance design by condition, socioeconomic status, or both
• Telehealth networks
• Medicare Advantage and Part D Rewards and Incentives Programs
• Wellness and Health Care Planning (required for all VBID participants)
Participants testing the VBID intervention may now vary benefits depending on socioeconomic status, which is defined as low-income subsidy (LIS) eligibility or having dual-eligible status. When the LIS eligibility status is not available, such as in Puerto Rico and other territories, plans may vary benefits for members dually eligible for Medicare and Medicaid. Plans will also be able to offer benefits for “non-primarily health-related” items and services.
Plans may also provide increased access to telehealth services, and in certain circumstances use these services in lieu of in-person visits for network adequacy testing, so long as enrollee choice and access to in-person providers is preserved. CMS will be testing whether plans can successfully use telehealth services to expand their current networks of providers, and how telehealth can permit plans to offer expanded service areas, particularly in counties where MA plans were not previously able to be offered.
CMS will also be testing a broadened Rewards and Incentives (RI) program, where plans may offer RI programs with allowed values that more closely reflect the expected benefit of the health service or activity. This expanded program will also be permitted to offer incentives to enrollees taking covered Part D drugs, as is possible under the Part D Payment Modernization Model.
All VBID participants will be required to offer wellness and healthcare planning, which includes advance care planning. This will be an expansion to what is currently offered under original Medicare. VBID participants will be required to ensure timely access to these benefits for all enrollees.