Medicare Advantage Testing Novel Way to Manage Chronic Conditions

By Bill Bithoney & Karen Meador

CMS recently announced a new Medicare Advantage Value-Based Insurance Design (VBID) model that will test ways to improve care and reduce costs for enrollees with a handful of specified chronic conditions. The focus is on several especially high cost diseases: congestive heart failure, diabetes, chronic obstructive pulmonary disease, a history of stroke, hypertension, coronary artery disease, mood disorders or the co-existence of these disorders.

While this pilot program doesn’t roll out until January 1, 2017, requests for applications will be released by early October and are due by December. It is a five-year program, but the Centers for Medicare and Medicaid Services (CMS) is encouraging all interested participants to join in the first year, as there are no guarantees new participants will be accepted later. The program is limited to seven states: Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvania and Tennessee.

The value-based redesign is significant because it will allow Medicare Advantage (MA) programs far greater flexibility to provide supplemental benefits to participants with these chronic conditions. It will also allow plans to decrease or even eliminate past patient cost sharing requirements within the MA program.

The potential upside:
  • Flexibility – providers are paid a determined sum, but have more flexibility in how to achieve the ultimate goals for patients and reach quality metrics. For sick patients in the groups targeted by the new insurance design model, having an element of flexibility is key. For example, this flexibility allows respiratory therapists to visit the homes of ill COPD patients and provide them home-based care, preventing trips to the ER. In the past, such an unusual approach to care has not been reimbursed, even though it may be quite helpful.
  • The cost benefits – The attachment to Medicare Advantage offers a significant benefit, giving providers the ability to keep any money they save; since MA is a capitated program, retained, unspent funds result in profitability. In particular, there is great potential to make money by reducing admissions for the most costly patients. In other insurance models, eliminating co-pays and allowing payments for preventive home visits has reduced the need for extensive, expensive and unnecessary hospitalization, and unwarranted emergency room utilization. The hope is that such preventive services provided without barriers will improve patient health and quality of care while decreasing cost.
The new model also will allow health plans to decrease co-pays when patients see low-cost, high-quality providers. Such narrowing of networks is something commercial payers are actively doing with great success. Medicare has traditionally not been allowed to restrict patient provider choice on the basis of quality. That still holds true, but the higher quality providers will cost the patient less out-of- pocket.

The whole idea of narrow networks is becoming very important. Hospitals must perform in the top percentage of care quality and efficiency to stay in-network—and with this value-based insurance design model, co-pays may be increased/decreased to benefit high-quality, low cost providers. Providers that go the extra mile will benefit.

The potential downside:
  • Success lies in execution – While the best providers may benefit, the model will have the opposite effect on those that execute poorly. The system is designed for more winners and more losers; if hospitals fall to the bottom quartile, their penalties raise the awards of those in the top quartile. Will certain health systems be sustainable if compensation is cut? What will it do to those who remain?
The VBID model is simply the latest development in the broader movement toward value-based payment, which is happening at a more rapid clip. Aetna and other health insurers are making aggressive moves to shift to a more value-based payment approach.

Medicare’s movement toward value-based payment is well under way, and VBID is just one aspect of that greater industry transformation. Providers that drag their feet and fail to transform with the industry are in for a rude awakening.