The Centers for Medicare & Medicaid Services (CMS) recently announced it is terminating 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.
Excess costs to the Medicare Trust Funds of this magnitude — $2.3 billion in Calendar Year (CY) 2021 and $2.2 billion in CY 2022 associated with the VBID model, based on the prior and forthcoming evaluation reports, respectively — are unprecedented in CMS Innovation Center models. Additional analyses of model performance and policy options demonstrated that these substantial costs were driven in part by increased risk score growth and Part D expenditures and that no viable policy modifications could address these excess costs. As such, CMS determined the model must be terminated at the end of 2025 to meet the CMS Innovation Center’s statutory requirements.
CMS is making this announcement more than a year before the termination effective date to provide ample time for MA plans and their partner organizations to prepare for CY 2026 in ways that best support their enrollees’ needs. In particular, as many of the VBID model’s interventions are now widely available in the MA program, model termination will not impact the ability of MA plans to continue to offer most of the interventions offered under the model.
CMS will also continue to promote whole-person health, transparency, and affordability in the MA program and effectively manage MA program costs to protect beneficiaries and the Medicare Trust Funds.
VBID model background
Since its launch in 2017, the VBID model has tested an array of MA health plan interventions intended to lower Medicare spending and improve the quality of care for MA enrollees. It has also built on CMS’ commitment to transparency and whole-person health in the MA program. Through the model, participating MA plans have had the added flexibility to target potentially high-value services and cost-sharing assistance for prescription drugs to chronically ill and underserved populations, with the goal of increasing access to and uptake of these services to improve health and decrease avoidable medical spending of these enrollees.
CMS said the VBID model has generated important lessons that have informed broader MA program policies, including strategies to:
- Improve population health outcomes, enabled by the model’s requirements for MA plans to screen for health-related social needs (HRSNs), offer certain supplemental benefits that address HRSNs, and implement health equity plans. In particular, the Special Supplemental Benefits for the Chronically Ill (SSBCI), which can generally mirror VBID interventions, provides an opportunity for CMS to continue collaboration with plans and other partners on these important initiatives across the MA program.
- Improve transparency in MA through new reporting requirements, for example, regarding enrollees’ use of supplemental benefits. This has informed data collection efforts across the MA program, particularly regarding supplemental benefit policy.
- Increase medication adherence through reduced Part D cost sharing, some of which were enacted in the Inflation Reduction Act (IRA) for all qualifying beneficiaries, for example around the expansion of the Low-Income Subsidy program under Medicare Part D.
Evaluation findings and model termination
Initial findings from the 2023 evaluation of the VBID model indicated that the model incurred substantial costs in part due to the fact that risk scores of enrollees in MA plans participating in VBID increased substantially more than those of similar enrollees in other MA plans not participating in the VBID model.
MA plans participating in VBID were also associated with increased rebates and increased Part D expenditures, 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. Based on the 2023 evaluation report, the model’s cost to the Medicare Trust Funds is estimated to be $2.3 billion in CY 2021.
In a December 2023 blog post, CMS summarized these findings and indicated that the evaluation results would continue to be reviewed more closely and additional model changes or model termination might be possible in the future. To be responsive to initial concerns regarding costs associated with the model, CMS made changes to the VBID model for CY 2025.
Since the release of the 2023 evaluation report, the CMS Innovation Center also continued to review the model, conducting additional analyses and examining new data from the forthcoming evaluation report covering performance years 2020 through 2023. In its additional analyses of the risk score findings, CMS found that although the magnitude of association varied, the increased enrollee risk scores associated with the VBID model were not isolated to subsets of the VBID model. Likewise, as noted in the executive summary of the forthcoming evaluation report that will be released in early 2025, CMS found that MA plans participating in VBID continue to be associated with higher risk scores, again leading to higher payment above what CMS would have paid absent 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.
The law authorizing CMS to test innovative payment and service delivery models requires CMS to either terminate or make changes to models that are expected to increase costs to the Medicare program. Consistent evaluation report findings of significantly increased costs associated with the VBID model, combined with unsuccessful efforts to consider policy options to mitigate losses, left CMS with 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.
Charting a path forward
CMS reiterated that it is committed to supporting a stable transition for all enrollees in MA plans participating in the VBID Model. Importantly, even with VBID’s termination, enrollees may be able to remain in their MA plan based on their plan’s decision in CY 2026 or will be able to choose a different MA plan or Traditional Medicare, depending on what best meets their needs during the 2026 Open Enrollment Period.
Additionally, enrollees who choose to remain in MA will likely be able to access many of the same benefits after VBID’s termination (e.g., transportation to medical appointments, healthy food assistance), because many elements of the VBID model have become benefits that can be offered in the MA program. Since the model launched, Congress and CMS have made key legislative and regulatory changes related to supplemental benefits, such as CMS’ reinterpretation of uniformity flexibility (i.e., who can be the target population(s) for certain benefits) and the Bipartisan Budget Act (BBA) of 2018 that created SSBCI.
In particular, SSBCI allows MA plans to offer similar interventions to those available under the VBID model. MA plans will be able to leverage similar pathways and help enrollees maintain access to supplemental benefits that meet their needs.
CMS said it recognizes some beneficiaries may experience disruption to Part D cost sharing in CY 2026 due to the end of the VBID model. CMS also said it strives to make prescription drugs more affordable for millions of Americans by continuing the improvements to the Part D prescription drug program enacted in the IRA — including the expansion of the Low-Income Subsidy — and through continued development of the CMS Innovation Center’s voluntary Medicare $2 Drug List model, which CMS aims to start in January 2027. CMS will also coordinate closely with beneficiary and consumer advocacy groups and the State Health Insurance Assistance Programs to assist beneficiaries in the 2026 Open Enrollment Season.
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. 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.
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