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Drive Innovation Video August 18, 2016

ICYMI: 6 Takeaways on Medicare Advantage Value-Based Insurance Design

Global Head, Provider, Health & Life Sciences, Oliver Wyman
Partner, Health & Life Sciences, Oliver Wyman
Engagement Manager, Oliver Wyman

On August 10, the Centers for Medicare & Medicaid Services (CMS) announced that it is expanding its Medicare Advantage Value-Based Insurance Design (MA-VBID) model. The program, which was unveiled in September 2015, allows MA plans to offer supplemental benefits or reduced cost-sharing to enrollees with certain chronic conditions. It is designed to connect these enrollees with services that are of highest clinical value to them and provides broad guidelines for health plans, which will be responsible for proposing and implementing specific programs. Last week, CMS announced that it will open the model to applicants in Alabama, Michigan, and Texas (bringing total number of states to 10); add rheumatoid arthritis and dementia to the clinical categories for which participants may offer benefits; and change the minimum enrollment size for some MA and MA-PD plan participants. Here, we reshare Oliver Wyman’s Dan Shellenbarger, Tomas Mikuckis, and Rohit Singh six implications for payers and providers:

1) While targeting “only” 7 conditions, the program takes a long-term view towards actively managing the health of a majority of Medicare.

An Oliver Wyman analysis shows that over 70% of the Medicare population has been diagnosed with one or more of the seven conditions targeted by the VBID program. The conditions span the continuum of chronic disease status, trying to “intercept” those members with early indicators such as hypertension while also offering new ways to actively manage those who may have already progressed to more severe stages such as CHF. The VBID program will enable payers and providers to design better coverage programs for a majority of their MA enrollees.

The following video from the University of Michigan's Center for Value-Based Insurance Design offers a visual guide to better understand "clinical nuance" where patients’ out-of-pocket costs are aligned with the value of services:

2) By enabling designs and incentives to direct member care, the VBID model represents a significant shift in CMS’s historically conservative approach to influencing provider selection by beneficiaries.

It’s no secret that the Medicare Shared Savings Program has had mixed results over its first three years, in part because the program does not formalize the relationship between patients and providers. That is, the program’s retroactive member attribution model—coupled with patients’ nearly universal access to provider networks—makes care coordination very difficult. This has been a similar challenge for MA plans as well, which have had to rely on an “all or nothing” approach of either including or excluding any given provider from their network. Under VBID, MA plans will now have opportunities to use benefit design, like in the commercial market, to align member incentives and directly promote both integrated high-value services and high-quality providers. If this first step proves successful, we can imagine CMS testing similar constructs outside of MA in traditional Medicare as an additional lever to enable and improve outcomes of various ACO and other programs.

3) VBID presents an opportunity for payers to actively design programs and allocate resources in new initiatives to better manage the care of patients.

Within Medicare Advantage, the “managed care” element has been gradually deprioritized. The old “all members are equal” restrictions that have hindered innovation in this space will now be lifted. Payers will have a new ability to competitively differentiate themselves. Payers will be able to reinvest savings into richer plan benefits or lower prices. Patient experience will improve. Both of these shifts will reward the payers through new enrollment and improved retention.

4) Model components enhance financial viability.

Risk coding and actively managing Stars scores have been two critical capabilities to maintain financial viability and grow membership in the Medicare Advantage space. The VBID initiative will allow payers to make progress against these objectives in two ways: 1) directing members to high quality providers and 2) removing financial barriers to routine, preventative care. With the right incentive alignment and programs in place with providers, members can be more appropriately coded and gaps in care can be closed – both benefits to payers.

5) For providers, VBID will offer new opportunities for providers to differentiate themselves and be financially rewarded.

There should be a sense of urgency for providers to focus on quality metrics, the basis for network tiering in the future. Payer-provider contracting considerations will advance beyond traditional cost and geography considerations due to: 1) the payers’ new ability to tier providers based on quality scores, and 2) the removal of network adequacy requirements within the preferred tiers. Providers across the healthcare value chain need to begin working now toward improving their quality ratings and partnering with payers for improved health and financial outcomes, especially as CMS continues to publish additional quality and performance data that may serve as an initial source of identifying or justifying the selection of high-value providers.

6) Payers will be looking to partner and invest with local providers.

New deals will need to be struck to facilitate the offering of new services that VBID allows, such as in-person disease management programs, nutritional guidance, and transportation. Progressive, population-health focused providers that have adopted these elements into their practices will be preferred partners for payers. These partnerships will insulate providers from financial risk of these pilot programs and offer greater upside. They can further offer new sources of patient referrals, enabling the practices to grow.

Based on our market experience, we believe payers and providers both stand to benefit from working together on value-based initiatives. CMS has provided the catalyst for these types of partnerships, and if recent history is any indication, this is just the beginning. For providers in particular, this also represents a potential risk, especially for those who have been slower to engage in the clinical transformation efforts required to improve quality and care management performance as Medicare beneficiaries are increasingly incentivized to select higher performing providers.

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