VBID Model: Overview1
The Centers for Medicare and Medicaid Services (CMS) introduced its Medicare Advantage (MA) Value-Based Insurance Design (VBID) Model to “test a broad array of MA health plan innovations designed to reduce Medicare program expenditures, enhance the quality of care for Medicare beneficiaries (including those with low incomes such as dual-eligibles), and improve the coordination and efficiency of health care service delivery.” CMS also noted the VBID Model is intended to “contribute to the modernization of MA and test whether the model components improve health outcomes and lower costs for MA enrollees.”
What is Hospice VBID?
The hospice component of the VBID Model (Hospice VBID) first became available in contract year 2021. It carves hospice benefits into an MA plan, as opposed to the alternative system of separately covering hospice benefits via Medicare fee-for-service (FFS) and covering other medical (non-hospice) services by an MA plan.
Key stakeholder objectives for Hospice VBID include:
- Beneficiaries receive seamless and integrated care for hospice and other medical services while easing families’ burden of care and potentially keeping enrollees in the comfort of their own homes.
- Hospices meet patient needs via collaboration with other providers to offer an array of supportive and palliative services.
- MA organizations (MAOs) receive additional Hospice VBID capitation payment revenue in exchange for providing coverage of hospice services with robust access to a continuum of care.
- CMS aligns incentives to support concurrent care as part of care transitions while measuring the VBID Model’s impact on quality and cost.
What is the prevalence of Hospice VBID?2
Nine MAOs (in 206 counties) participated in 2021.
Thirteen MAOs (in 461 counties) are participating in 2022.
How are the Hospice VBID capitation payments determined?
The CMS capitation payment for each Hospice VBID enrollee is calculated as the nationwide hospice capitation base rate multiplied by both:
- The monthly rating factor (1-6 days, 7-15 days, or 16+ days within Month 1; or a consistent amount for Months 2+)
- The hospice average geographic adjustment (separate factors for Month 1 and Months 2+).
The nationwide hospice capitation base rate is based on historical hospice claims costs for Medicare FFS beneficiaries, with adjustments for fee schedule changes, trend, and a small administrative cost allowance (0.09%) for claims processing.
How can MAOs successfully offer Hospice VBID?
MAOs may start their assessments for Hospice VBID participation by determining whether the capitation payments provide sufficient funding to make the benefit offering viable and sustainable. As part of that assessment, MAOs should consider any potential savings from improved coordination of end-of-life care as an additional offset for hospice program costs.
From that funding assessment, successful Hospice VBID participation and offerings require three vital characteristics of MAOs:
- Integration of hospice services into the existing care continuum. This is much easier to accomplish if existing contracted facilities include a hospice wing with access to Medicare-certified hospice providers. Otherwise, MAOs will need to contract with hospice providers and meet CMS network requirements by year 2 of the program.
- Well managed continuum of care. This allows the beneficiaries’ needs and desires to be met in their preferred setting, if possible (home or otherwise), while potentially realizing overall claims cost savings.
- Targeted marketing and available and effective consultation. Directed to beneficiaries and their families, such services may emphasize the array of services and care available, potentially also yielding broader market appeal and improved positioning of the MA plan in the market.
Underlying those critical success characteristics include the following steps:
- Institute robust care management advance planning to promote timely and accurate evaluation of beneficiary preparedness for hospice and availability of hospice settings and services.
- Implement Wellness and Health Care Planning (WHP) procedures to drive awareness and availability of advance care planning (in case of enrollee incapacitation).
- Establish reporting metrics to understand service use and performance related to lengths of stay, use of providers (physicians, nurses, social workers, therapists, and aides), and live discharge rates.
- Develop hospice-specific administrative functions to support patient planning, care transitions, palliative care, and related communications and reporting.
What are an MAO’s risks when offering Hospice VBID?
While there may be opportunity to offer Hospice VBID, MAOs should consider potential risks, including:
- Inadequate networks for hospice services, limiting the ability of MAOs to manage hospice care provided by out-of-network providers.
- Unfavorable contracting terms for hospice services, such as contracted rates greater than Medicare FFS rates.
- Inability to integrate hospice services needed and manage the continuum of care well.
- Ineffective marketing and communication resulting in low enrollment that fails to cover fixed costs associated with starting Hospice VBID.
- Mix of stays with mismatched expenses and revenue, as a result of higher payments to providers (days 1 to 60) relative to revenue (payments to MAOs decrease in the second month, and Part A/B capitation payments are only paid for the month in which an enrollee elects hospice).
- Higher live discharges and higher costs post-discharge due to needs not addressed while in hospice, as well as other complications.
- Penalties arising from survey and enforcement regulations for Medicare-certified hospice programs and failures to report, meet, or address quality of care standards and issues for Medicare-certified hospices.
What are the important dates for an MAO considering Hospice VBID for contract year 2023?3
Following application submission, additional crucial dates include the following:
- Mid-May 2022: CMS completes application review and provides feedback to MAOs for inclusion in their 2023 Plan Benefit Packages (PBPs).
- June 6, 2022: Deadline for MAOs to submit bids.
- September 2022: Hospice VBID model participants announced and contract addenda executed.
Please note the opinions stated in this article are those of the authors and do not represent the viewpoint of Milliman.
Guidelines issued by the American Academy of Actuaries require actuaries to include their professional qualifications in all actuarial communications. The authors are members of the American Academy of Actuaries and meet the qualification standards for sharing the information in this article. To the best of their knowledge and belief, this information is complete and accurate.
This information is intended to provide a discussion of select items MAOs should consider when exploring the Hospice VBID option and considering participation in the Hospice VBID program. The list of considerations discussed in this article are not exhaustive and do not reflect the unique situations of each MAO. This information may not be appropriate, and should not be used, for other purposes. Milliman does not intend to benefit and assumes no duty of liability to parties who receive this information. Any recipient of this information should engage qualified professionals for advice appropriate to its own specific needs.
1 CMS. Medicare Advantage Value-Based Insurance Design Model. Retrieved March 23, 2022, from https://innovation.cms.gov/innovation-models/vbid.
2 CMS (September 19, 2021). Fact Sheet: Medicare Advantage Value-Based Insurance Design Model Calendar Year 2022 Model Participation. Retrieved March 23, 2022, from https://innovation.cms.gov/innovation-models/vbid.
3 CMS. Value-Based Insurance Design Model Incorporation of the Medicare Hospice Benefit Into Medicare Advantage: Calendar Year 2023 Request for Applications, page 58 (Timeline). Retrieved March 23, 2022, from https://innovation.cms.gov/media/document/cy-2023-rfa-vbid-hospice-benefit-component.