What's Next for Value-Based Care?

CMS has announced it is phasing out Medicare Advantage value-based insurance design (VBID), but the model is far from dead. On the commercial side, VBID is expected to continue as carriers adjust and adapt their approaches to incentive clinically beneficial and cost-effective services.   

CMS Announcement Marks Change, Not the End 

CMS is terminating the VBID model for Medicare Advantage due to excess costs associated with the model. In the calendar year 2022, VBID plans cost the Medicare Trust Funds $2.2 billion. An analysis of the model concluded that the costs were driven by increased risk score growth and Part D spending.    

This is a major reversal of previous plans. CMS introduced the VBID model in 2017, extended it in 2020, and planned to extend it again between 2025 and 2030. Instead, the program will be terminated at the end of 2025. 

However, as Health Affairs explains, this move likely represents a reassessment of the specific plan design used in Medicare, not a judgement on the potential of value-based care in general. Most of the clinical services incentivized by VBID models were cost effective but not cost saving, in that they required additional spending to achieve improved health outcomes. Therefore, it was unrealistic to expect VBID to lower aggregate spending in the short term.  

Although the VBID program – as it currently stands – must be terminated to comply with the CMS Innovation Center’s statutory requirements, Health Affairs suggests that other versions of a value-based model could meet regulatory requirements for cost neutrality. For example, plans could implement policies to reduce unnecessary spending. Analyses that capture the long-term savings that results from improved health outcomes could also demonstrate cost neutrality. 

Outside of Medicare, Value-Based Care Is Alive and Well 

While CMS is hitting pause on VBID, carriers in the commercial health space are continuing to leverage value-based care design. A 2024 survey conducted by the Health Care Payment Learning & Action Network shows participation in value-based care arrangements among commercial health plans increased from 34.6% in 2022 to 39.2% in 2023.  

According to A. Mark Fendrick, MD, co-editor in chief of The American Journal of Managed Care and director of the Center for Value-Based Insurance Design at the University of Michigan, hundreds of public and private insurers have used VBID since it first emerged decades ago. Although there is no standard implementation, many carriers focus on prescription drugs for chronic diseases. Some large employers and plans have also applied VBID to cost-sharing offsets for some high-value visits, diagnostic tests, and procedures. 

Navigating the Path Forward 

VBID models were originally implemented to control costs while removing barriers to high-quality and effective care. As those remain important goals, it’s likely that the model will continue to attract interest from carriers, regulators, providers, and patient advocates. 

However, as the AAMC Research and Action Institute points out, quantifying the cost savings of VBID is difficult because the model focuses on prevention. It’s hard to identify and measure what negative outcomes these efforts avoided, especially in the short term.   

This means carriers will need to continue to assess the long-term benefits of these models. This is true of any approach to plan design. No matter how promising a model is, it will require ongoing adjustments and improvements to achieve optimal results.  

Technology plays a critical role. Carriers must be able to update plans, benefits and cost shares efficiently when implementing or updating a VBID plan and integrating with all the downstream systems. When using outdated technology, VBID changes may require more time to get to production – making harder to stay ahead of the curve. 

FJA’s modular platform has all the tools carriers need to build, manage, and distribute complex insurance products. The platform is supported by industry experts who can help guide and advise carriers in keeping up with the ever-changing market.   Learn more.