Breaking news: CMS will terminate MA Value-Based Insurance Design model at end of 2025

The agency blames the decision on excessive costs to the Medicare Trust Funds that can’t be addressed via policy changes.

The Centers for Medicare & Medicaid Services (CMS) announced Monday it will stop the Medicare Advantage (MA) Value-Based Insurance Design (VBID) model at the end of 2025 due to the model’s “substantial and unmitigable costs” to the Medicare Trust Funds. 

Indeed, the model cost $2.3 billion in calendar year 2021 and $2.2 billion in calendar year 2022, an amount that is unprecedented in CMS Innovation Center models.

There are currently 62 MA organizations with seven million enrollees participating in the model for 2025. Among them: CVS Health, Humana, and UnitedHealthcare. 

CMS had previously announced that it would end the hospice benefit component of the model as of January 1, 2025. The model had allowed participating MA organizations to include the Medicare hospice benefit in their MA benefits package. 

Last year the VBID program was extended through 2030 and CMS introduced changes so MA health plan participants could more fully address the health-related social needs of patients, advance health equity, and improve care coordination for patients with serious illness. 

But the agency said in Monday’s announcement that it decided to end the VBID model based on a 2023 report, an upcoming evaluation report that will be released in early 2025, and additional analyses of the model performance. The reports indicate that the costs were driven in part by the growth of increased risk score and Part D expenses and that there are no viable policy modifications that CMS can make to address these excess costs. The law that authorizes CMS to test innovative payment and service delivery models requires it to either terminate or make changes to models that are expected to increase costs to the Medicare program.

“CMS sees no viable modifications that could address the substantial costs associated with the model. Therefore, the VBID model will terminate at the end of CY 2025, in accordance with the law,” CMS said in a blog post. 

Ana Handshuh, principal of CAT5 Strategies, urged MA organizations that participate in VBID to start planning for the changes now. “Plans need to start planning today, especially those that really leaned into VBID to provide differentiated benefits (including in Part D)! Bids for 2026 are due in just a few months,” she said.

About the model

The VBID model was launched in 2017 and over the years has tested many MA plan interventions intended to lower health care costs and improve health outcomes. The model has given participating MA plans the flexibility to target potentially high-value services and cost-sharing assistance for prescription drugs to chronically ill and underserved populations with the goal to improve health and cut spending. 

CMS said the model has led to important lessons and strategies for broader MA program policies, such as:

Improved population health outcomes: The model required MA plans to screen for health-related social needs (HRSNs), offer certain supplemental benefits that address HRSNs, and implement health equity plans. CMS said it will be able to collaborate with plans on these important initiatives via Special Supplemental Benefits for the Chronically Ill (SSBCI), which mirror VBID interventions.

Improved transparency in MA: New reporting requirements, such as MA members’ use of supplemental benefits, have informed data collection efforts across the MA program, particularly regarding supplemental benefit policy.

Increased medication adherence: CMS said that the outcome was achieved through reduced Part D cost sharing, such as the expansion of the Low-Income Subsidy program under Medicare Part D. 

Despite its successes, initial findings from the 2023 evaluation report indicated the model resulted in skyrocketing costs due in part to higher risk scores of members in MA plans that participated in VBID compared to enrollees in MA plans that didn’t participate in the model.  MA plans in the VBID model also were associated with increased rebates and higher Part D expenses compared to MA plans that did not participate in VBID. “Together, this increase in risk scores, combined with rebates to MA plans and higher Part D expenditures, drove significantly higher Medicare costs,” CMS said.

To address the cost concerns, CMS made changes to the VBID model for 2025. The CMS Innovation Center also continued to review the model and conducted additional analyses for performance years 2020 through 2023. CMS found that MA plans participating in VBID continue to be associated with higher risk scores, which lead to higher payment above what the agency would have paid if they weren’t in the model. 

“In addition to the previously identified $2.3 billion in costs associated with the model in CY 2021, based on the forthcoming evaluation report, VBID is estimated to have resulted in a $2.2 billion cost to the Medicare Trust Funds in CY 2022—an unprecedented cost trend in Innovation Center models,” CMS explained.

What the termination means for MA members

CMS said it wants to ensure a stable transition for all enrollees in MA plans that participate in the model. In some cases, these enrollees may be able to remain in their MA plan based on the plan’s decision in calendar year 2026 or they can choose a different MA plan or enroll in traditional Medicare, depending on what best meets their needs during the 2026 Open Enrollment Period.

The agency said enrollees who choose to remain in an MA plan will likely be able to access many of the same benefits they received under the VBID model, such as transportation to medical appointments and assistance with groceries, because many features of the model have become supplemental benefits that can be offered in the MA program.

However, CMS said some MA members may see disruption to Part D cost sharing in 2026 due to the end of the model. The agency said it is committed to making prescription drugs more affordable by making improvements to the Part D prescription drug program and through a new voluntary model, which is scheduled to start in January 2027. It plans to work with consumer advocacy groups and State Health Insurance Assistance Programs to help beneficiaries the 2026 open enrollment period. 

“Ultimately, while the VBID model must be terminated due to its significant, unmitigable costs and the CMS Innovation Center’s statutory requirements, lessons learned lay the groundwork for continued improvement within the MA and Part D programs.”  CMS said. “Informed by this model experience, CMS will explore innovations that not only advance whole-person health, enhance transparency, and promote drug affordability but also address rising costs and protect the Medicare Trust Funds.”