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Value-Based Insurance Design Model: What the Extension Means for Consumers and Innovation


May 25, 2023 – The Medicare Advantage (MA) Value-Based Insurance Design (VBID) Model was just extended by CMS through 2030. And they’ve done so with changes that are designed to support social determinants of health (SDOH) and health equity.

We know that Medicare Advantage is available for those not eligible for Medicaid, but this model could serve as a test for how value-based payments will be implemented more broadly in the future.  So, what is the VBID model and why is this significant? In this blog, we are going to look at the results generated by the Value-Based Insurance Design Model that led to the extension and what this means for consumers and quality of care. 

What is the Value-Based Insurance Design Model?

Since its inception, the Value-Based Insurance Design Model has been making waves in the healthcare industry. Originally set to run from 2021 to 2024, the VBID model is used by Medicare Advantage plans to structure cost-sharing and other benefit designs that push beneficiaries to pursue high-value healthcare services. This is unique because while many state Medicaid programs have been utilizing Managed Care, a value-based payment model, for quite some time, this is new to the Medicare Advantage realm. 

The VBID model is being tested through the CMS Innovation Center and is designed to test different Medicare Advantage service delivery and payment models under the overarching goal of lower costs and improved quality of care. Overall, the VBID model allows Medicare Advantage Organizations to design benefits that target enrollees based on chronic conditions or socioeconomic characteristics. It also requires things like timely wellness and healthcare planning, providing non-health related supplemental benefits, and advanced care planning. 

After an initial phase, CMS announced that the Medicare Advantage VBID Model will be extended through 2030. This is a testament to the model’s success in enhancing patient care and outcomes, and its potential for further innovation in the healthcare industry. Most importantly, is that over 30 million individuals are enrolled in Medicare Advantage plans, which allows the VBID model to serve as a test for how value-based payments can be implemented more broadly. 

The Results of the VBID Model

So, what led to the extension of the VBID Model? The model showed strong results for Medicare Advantage Organizations, which encouraged CMS to extend it through 2023. 

One example is a recent study of the California Public Employees’ Retirement System (CalPERS), which implemented a VBID approach. The model was associated with fewer inpatient admissions and surgical procedures in 2019 and 2020 compared to those enrolled a health plan that did not participate in VBID in the same timeframe. 

Further, the VBID Model has been associated with better medication adherence. A key feature of the model is the lowering of co-pays for high-value services, such as medications for chronic diseases. This has led to improved medication adherence among patients, which is crucial for managing chronic conditions and preventing costly complications.

The VBID Model has also shown promise in improving preventive care. By reducing out-of-pocket costs for preventive services, the model encourages beneficiaries to take advantage of these services. This not only helps in early detection of diseases, but also promotes a healthier population.

For plan year 2023, the value-based insurance design model has 52 participating Medicare Advantage Organization (MAO) with a total of 9.3 million enrollees estimated to be enrolled in plan benefit packages. Taking that even further, over 6 million enrollees are expected to receive additional Model benefits and/or rewards and incentives as part of the Model test in 2023. As the model continues to evolve and expand, we can look forward to more positive outcomes in the future.

VBID Model Extension Comes with Changes

As CMS is always keeping an eye towards innovation and improvement with consumers in mind, the extension of the Value-Based Insurance Design Model does not come without some changes. There are three new policies that are designed to address the Medicare Advantage enrollees need for health-related social needs.

The first of these is that MAOs in the model will need to offer supplemental benefits to address health-related social needs in at least two of three health-related social needs areas. These include food, transportation and housing insecurity, and living environment. Benefits offered would need to be targeted to meet beneficiaries’ needs and could include things like meals, transportation to medical appointments, air conditioning units, and housing assistance. Under the current version of the model, these benefits can be offered, but they are not required. By requiring MAOs to offer these benefits, the model aligns with the CMS goal of addressing social determinants of health.

The next change is that the VBID model will introduce a new flexibility to address health-related social needs in socioeconomically disadvantaged areas. The Area Deprivation Index (ADI) will direct benefits to enrollees in underserved communities. The current VBID model allowed MAOs to focus on health-related social needs with targeting criteria based on income, so enrollees who still may be relatively disadvantaged might not qualify for these programs.

As with many other models, a change will require additional data collection to increase CMS’s understanding of how enrollees are using supplemental benefits and their impact on enrollees. This will be used to tailor future versions of the model to ensure that consumers are getting the best healthcare services and delivery possible. 

The VBID Model: A Platform for Innovation

So, what does the extension of this model mean for consumers and the healthcare industry overall? One of the most exciting aspects of the VBID Model is its potential for innovation under the Medicare Advantage umbrella. By adopting a value-based approach, the model encourages healthcare providers to think outside the box and design care plans that are tailored to individual patient needs. This is something that Medicare Advantage enrollees have not had before and is a testament to how far value-based payments have come and their impact on the health industry. 

The VBID Model is more than just a payment model – it’s a catalyst for change in the healthcare industry. It challenges healthcare providers to prioritize quality over quantity and encourages the development of innovative, person-centered care solutions. Medicare Advantage Organizations are now required to offer supplemental benefits to address health-related social needs. But how they do so is up to them. This will result in innovation across the country with testing of various methods of service and delivery. Through sharing of best practices, overtime, we will see a shift towards a better healthcare system that provides improved health outcomes and lower costs. 

As we venture further into the landscape of the VBID Model, it’s important to note how it empowers healthcare providers to be creative and innovative in delivering care. But what does this newfound flexibility mean for the millions of Medicare Advantage beneficiaries receiving care under the model? Well, it’s all about meeting person-centered needs. The VBID Model brings the needs of individuals to the forefront, paving the way for a more personalized approach to healthcare. It offers the flexibility to tweak Medicare Advantage plans to cater to the unique medical and non-medical needs of consumers to provide whole-person care, which is what value-based payments are all about. 

By allowing customization of benefit designs, the VBID Model ensures that the care provided aligns with each beneficiary’s health status, chronic conditions, socio-economic factors, and other individual characteristics. This focus on person-centered care not only improves the health outcomes of beneficiaries but also enhances their overall healthcare experience.

Advocates Perspective

In a healthcare world often dominated by complexities, the Value-Based Insurance Design Model stands as a beacon of change and progress. With its focus on value, person-centered needs, and innovation for Medicare Advantage enrollees, it’s no wonder CMS has extended its run through 2030. However, as we see the VBID model progress over the next seven years, it is important to keep consumers’ needs at the forefront. What’s unique about the value-based insurance design model is not only that it provides a look into the future at how value-based payment models can be implemented more broadly, but it also really supports enrollees. Consumers that are at risk and suffering from lack of nutrition, housing, or transportation, are not able to receive benefits through the Medicare Advantage plan. This provides a safety net for consumers struggling with not just medical issues, but also with health-related social needs. It is encouraging to see these benefits being offered and we will keep an eye on how Medicare Advantage Organizations innovate to provide quality care through the VBID model. 


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About the Author

Fady Sahhar brings over 30 years of senior management experience working with major multinational companies including Sara Lee, Mobil Oil, Tenneco Packaging, Pactiv, Progressive Insurance, Transitions Optical, PPG Industries and Essilor (France).

His corporate responsibilities included new product development, strategic planning, marketing management, and global sales. He has developed a number of global communications networks, launched products in over 45 countries, and managed a number of branded patented products.

mandy sahhar

About the Co-Author

Mandy Sahhar provides experience in digital marketing, event management, and business development. Her background has allowed her to get in on the ground floor of marketing efforts including website design, content marketing, and trade show planning. Through her modern approach, she focuses on bringing businesses into the new digital age of marketing through unique approaches and focused content creation. With a passion for communications, she can bring a fresh perspective to an ever-changing industry. Mandy has an MBA with a marketing concentration from Canisius College.