Posted: 18 Feb. 2020 12 min. read

Will greater flexibility in MA benefits lead to better outcomes and lower costs?

by Sarah Thomas, managing director, Deloitte Center for Health Solutions, Deloitte Services LP

Years ago, I worked as a health insurance specialist at the US Centers for Medicare and Medicaid Services (CMS). My job had several parts—I wrote countless letters to members of Congress explaining the Medicare Advantage (MA) payment system. I pitched in on implementation issues around the new risk-adjustment system, and I helped formulate options on a few policy topics related to payment and benefit-design.

One issue I remember clearly (even though this was a long time ago) was the question of whether MA plans could pay for care received at skilled nursing facilities (SNFs) if the member hadn’t first had a three-day hospital stay (a coverage requirement under traditional Medicare). My take away was that even though we said MA offered a way for health plans to figure out innovative methods to deliver high-quality care at a lower cost, the program was still bound by strict rules.

MA plans must use rebate funds to cover new benefits

A change in the law and a CMS demonstration has helped loosen some of the rigid rules that defined MA in those early years. Greater plan-design flexibility has made it possible for MA plans to launch some interesting and effective innovations. MA plans have always been able to offer wellness programs, coverage for vision and hearing aids, and premium rebates. What’s most different today is that health plans no longer have to offer targeted benefits to everyone. Special Needs Plans have been successful at tailoring benefits to high-risk populations, which has opened the door for MA plans that want to do the same.

Beginning in 2019, MA plans have offered supplemental benefits not covered under Medicare Parts A or B. These benefits address the drivers of health (also known as the social determinants of health) that can help enrollees improve or maintain their health. For example, an MA plan might cover the cost of air filters for a beneficiary who has asthma.1 I’ve seen a number of recent ads and analyses that highlight the range of supplemental benefits now allowed under MA. While health plans are clearly placing greater emphasis on the drivers of health, the new supplemental benefits must be financed through rebates. Prior to 2019, MA plans have used these rebates for other priorities. This means the full rebate amount (an average of $107 per member per month in 2019) might only be available to members if their MA plan eliminates other benefits.2

It has been about a year since my colleagues looked into how health plans perceived the drivers of health in Medicare and Medicaid. That study turned up several reasons some health plans are spending more time on this issue:

The drivers of health often align to a health plan’s mission: Evidence on overall cost savings/return on investment (ROI) is sparse but addressing the drivers of health could pay future dividends. Most of the executives interviewed said they intend to continue their investments because it aligns with their mission to improve the health of their communities. Moreover, these executives have faith that the savings derived from better health outcomes and lower care utilization will eventually surpass the cost of their investments.

Evidence is growing but still limited: A growing body of evidence shows that investments in the drivers of health can be cost-effective. This evidence, however, is largely based on pilot programs, small randomized-control trials, and population-specific interventions.

Investments could improve quality measures: Health plan executives also indicated that investing in social needs makes good business sense. In Medicare, interventions that improve customer satisfaction, or help members more effectively manage chronic conditions, could help improve quality measures that are tied to bonus payments.

VBID demonstration continues to grow

CMS is also continuing its demonstration project around Value-Based Insurance Design (VBID) and might extend this program to Qualified Health Plans (QHPs) sold through the public exchanges. The VBID model now has 14 parent organizations (four more than in 2019) providing care to more than 1.2 million beneficiaries (up from 440,000 in 2019). Moreover, 30 states and Puerto Rico now participate in the project—up from seven states in 2019. In 2021, CMS intends to test a hospice benefit in MA, something that to me has made a lot of sense for a long time.

CMS and MA plans should determine how effective these new programs and benefits are at improving the health, wellness, and experience of members—and see if they result in fewer emergency room visits and reduced institutional care.

CMS seems poised to offer more flexibility in Part D

On February 5, CMS released its proposed changes for 2021. I see these changes as being consistent with the agency’s goal of giving health plans greater plan-design flexibility and calling on them to develop tools that help beneficiaries understand their benefits.

In response to feedback from some health plans, one proposal could let MA plans use benefit design (through lower cost sharing) to encourage patients to consider less-expensive specialty drugs. But two specialty tiers might lead to some confusion among beneficiaries. Another proposal calls for MA plans to provide enrollees with an online tool that can help them understand their cost sharing for prescription drugs. Ideally, this “beneficiary real-time benefit tool” could help beneficiaries understand where they are in their benefit (e.g., how close they are to reaching their annual deductible), what they can expect to pay for drugs, and even whether other lower-cost drugs are available. Beneficiaries could also call customer-service centers to get this information over the phone. CMS has proposed allowing Part D plans to offer financial incentives to use the tool.

Network adequacy and telemedicine

CMS’s proposal to allow telemedicine visits seems consistent with giving MA plans more plan-design flexibility. Under this proposal, telemedicine—at least in part—could help satisfy the agency’s network-adequacy requirements. The proposal is fairly narrow—only certain specialties, and only a partial credit—but I think it indicates the agency recognizes that virtual care is a viable option (and in some rural areas, possibly the only option) for connecting beneficiaries with physicians.

Medicare Advantage now makes up 36.7 percent of total Medicare, according to CMS. It is likely the agency will continue to give MA plans more flexibility to experiment with benefit designs and new models of care. My take is that this flexibility offers important opportunities to learn what works so that it might be considered for traditional Medicare.  


1. CMS finalizes Medicare Advantage and Part D payment and policy updates to maximize competition and coverage, CMS press release, April 1, 2019

2. Are Medicare Advantage Plans Using New Supplemental Benefit Flexibility to Address Enrollees’ Health-Related Social Needs?, The Urban Institute, September 2019

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Sarah Thomas

Sarah Thomas

Managing Director | Center for Health Solutions

Sarah is the managing director of the Center for Health Solutions, part of Deloitte LLP’s Life Sciences & Health Care practice. As the leader of the Center, she drives the research agenda to inform stakeholders across the health care landscape about key trends and issues facing the industry. Sarah has more than 13 years of government experience and has deep experience in public policy, with a focus on Medicare payment policy.