On January 18, 2019, CMS’s Center for Medicare and Medicaid Innovation (CMMI) announced a new payment model aimed at lowering drug prices in Medicare Part D, named the Part D Payment Modernization model (the Part D Model). In conjunction with the Part D Model, CMMI also announced changes to an existing payment model applicable to Medicare Advantage plans, called the Value-Based Insurance Design model (the VBID Model). HHS Secretary Azar commented that both models will “create new incentives for plans, patients, and providers to choose drugs with lower list prices, and new ways to meet the unique healthcare needs of specific populations.”
The Part D Model is designed to address incentives in the Part D “catastrophic phase,” which is when a patient’s prescription drug spending is sufficiently high for Medicare to become responsible for 80 percent of drug costs. CMMI points out that, despite the proliferation of generic medications, “overall Part D spending has almost doubled from 2010 to 2016 . . . [and] the high list price of new specialty and branded medications . . . has led to a six-fold increase in Part D catastrophic phase spending relative to 2006.” The President’s FY 2019 budget, MedPAC, and others have cited issues of Part D plans having limited responsibility in the catastrophic phase and the related lack of incentives to curtail high list prices.
Through the Part D Model, CMMI is testing addressing the high list price of drugs with the introduction of two-sided risk. Part D Plans who participate in the model will take on more risk for spending in the catastrophic phase but can share in the savings generated with CMS. CMS will calculate savings by estimating what governmental spending would have been without the incentives of the Part D Model and will compare that to actual spending. If actual spending is lower than the target, Part D Model participants will have an opportunity to share in the savings. Conversely, if they exceed the target, Part D Model participants will also share in the losses.
CMMI implemented the VBID Model in 2017 in a select number of states, and it plans to expand the model to more states. CMMI also announced changes to the VBID Model to address service delivery approaches for Medicare Advantage plan beneficiaries beginning in the 2020 plan year. Changes announced by CMMI include, among others:
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Allowing plans to provide reduced cost-sharing and additional benefits to enrollees in a more targeted fashion, including customization based on chronic conditions, socioeconomic status, or both, and even for benefits not primarily related to health care, such as transportation;
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Bolstering the rewards and incentives programs that plans can offer beneficiaries to take steps to improve their health; and
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Increasing access to telehealth services by allowing plans to use access to telehealth services instead of in-person visits.
CMMI intends to announce further details on the application process in the coming weeks for both models. Those interested in the Part D Model or VBID Model should stay tuned for announcements regarding the application period from CMMI by clicking here and here. CMS’s press release can be found here.
