Updated at 10:10 a.m. ET
The CMS Innovation Center on Friday announced a new model to try to shrink skyrocketing Medicare Part D drug spending, and 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.
The strategy for Part D—framed as a step in the Trump administration’s blueprint to lower prescription drug prices—targets the high spend in the catastrophic phase of the Part D benefit. Patients hit this 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 new 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 CMS 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 last 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. They will also be able to address an enrollee’s socioeconomic status by including non-healthcare related benefits like transportation.
Insurers can nudge their enrollees toward behavior that will lower costs, using things like lower co-pays for certain medications or supplies.
MA plans can also offer more financial rewards for enrollees who boost their healthy lifestyle efforts or focus on advance care or preventive care. And they can offer telemedicine consultations to enrollees as a replacement for office visits 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.
Also significant, the model 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.