New payment-related Medicare demonstration project begins

CMMI brings risk to Part D, other Medicare Advantage changes

On January 14, 2019, the Centers for Medicare and Medicaid Services (CMS) Center for Medicare and Medicaid Innovation (CMMI) began a new push to release additional Medicare demonstration projects aimed at increasing payer risk in the Medicare Part D prescription drug program (Part D) and to widen the scope of Medicare Advantage (MA) Value-based Insurance Design (VBID) demonstrations.

February 15, 2019 | Health care

The new payment initiatives are the beginning of at least a half-dozen new models expected over the coming months. In addition to the recently announced Part D and MA models, CMMI is expected to launch a model on emergency triage, treatment, and transport (ET3), as well as changes to Comprehensive Primary Care Plus (CPC+). Looking toward 2021, CMMI will also allow MA participants to test a VBID model for the Medicare hospice benefit.

Below is a summary of the recently announced models.

Part D Payment Modernization Model

Starting in January of 2020, CMS will begin a five-year initiative to test modifications to the Part D program design that introduce two-sided risk to plan drug spending and to implement new incentive structures for Part D stakeholders to choose drugs with lower list prices. The Request for Applications will be available on the model website shortly, with a closing date of March 1, 2019.

Standard Part D uses drug list prices to determine beneficiary out of pocket costs as well as the phase of the benefit (i.e., deductible, initial coverage, coverage gap, and catastrophic coverage). Differences between a drug’s list price and the net price have resulted in increasing federal reinsurance payments, even as spending has shifted to lower-cost drugs.

Under the model, Part D and MA prescription drug plans will assume the risk for CMS’s federal reinsurance subsidy (80 percent of catastrophic phase liability), creating space for performance-based payments to successful plans, or penalties for plans that do not meet established benchmarks.

In addition, the model will grant participating plans flexibility to implement drug utilization management strategies such as prior authorization or step therapy and will allow plans to provide rewards and incentives directly to beneficiaries.

Participating plans will continue to receive prospective federal reinsurance payments under existing rules, but at the end of the plan year, CMS will generate a retrospective spending target benchmark associated with the federal reinsurance subsidy that would have been paid to those organizations had they not participated in the model. Participating plans will then receive performance-based payments for reinsurance subsidies that come in below the benchmark or be required to pay back 10 percent of the difference between the benchmark and any excess spending.

MA VBID changes for 2020

CMMI announced a series of changes to the MA VBID program for 2020 that are intended to improve the overall experience for MA beneficiaries and to reduce costs to the Medicare program. The VBID program has been available in certain states and will become available in all 50 states and territories starting in 2020, consistent with requirements under the Bipartisan Budget Act of 2018.

The CY 2020 VBID application period is open now through March 1, 2019. Under VBID, MA organizations apply to test one or more broad intervention categories.

VBID by condition, socioeconomic status, or both

MA plans may propose offering reduced cost-sharing or additional supplemental benefits that extend to “non-primarily health-related” items or services, for enrollees based on chronic condition or socioeconomic status. Beneficiaries who receive the low-income subsidy or who are dual-eligible will qualify on the basis of socioeconomic status.

Primarily health-related supplemental benefits currently include such items as medical transportation or safety modifications in a beneficiary’s home. Non-primarily health-related benefits will need to “have a reasonable expectation of improving or maintaining the health or overall function.” For example, an MA plan could offer to install an air conditioning unit for beneficiaries with asthma or purchase appropriate groceries for diabetics.

MA and Part D rewards and incentives (RI) programs

The 2020 VBID program will allow for RI programs to offer rewards and incentives that are closer to the expected benefit of the health-related service or activity that is intended to improve health, prevent illness or injury, or to more efficiently use health resources. MA plans with a prescription drug component may offer rewards and incentives to beneficiaries who take a particular Part D-covered drug to engage in disease management, medication therapy management, receive preventive health services or devote the effort to understand their medications and any appropriate alternatives.

Telehealth networks

Under the Telehealth model, CMMI will test how plans can use telehealth to complement and augment their provider networks. CMMI will allow telehealth networks to make up to one-third of the in-network providers for a required specialty. In addition, CMMI will allow MA organizations to propose a broadened service area on the basis of leveraging telehealth with the goal of bringing new plan options to rural and other underserved areas.

Wellness and health care planning

A requirement for all MA organizations in the VBID program will be to offer enrollees improved access to Wellness and Health Care Planning (WHP), as well as advance care planning.

All VBID applications will be required to submit a proposed strategy for meeting this requirement.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

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Anne Phelps

Deloitte Risk and Financial Advisory
US Health Care Regulatory leader
Deloitte & Touche LLP


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Deloitte Risk and Financial Advisory
Deloitte & Touche LLP


Ethan Joselow

Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

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