CMS unveils new payment model aimed at bringing down Part D catastrophic coverage spending 

Medicare enrollment form
CMS unveiled two new payment models aimed for Medicare Advantage and Part D. (Getty/zimmytws)

CMS has unveiled a new payment model for Medicare Part D with the goal of bringing down high drug spending, especially in the catastrophic coverage phase of the benefit. 

The Part D Payment Modernization model is voluntary, and plans that choose to participate would take on greater financial risk but keep savings should spending come in under a target set by the Centers for Medicare & Medicaid Services. Any spending over that limit would be paid for by the insurer, CMS officials said. 

CMS Administrator Seema Verma said on a call with reporters that spending on Part D catastrophic coverage has nearly quadrupled over the past decade, growing from $9.4 billion to $37.4 billion. Senior officials on the call said the agency’s estimates suggest the new payment model could save more than $2 billion in taxpayer money each year. 

Free Daily Newsletter

Like this story? Subscribe to FierceHealthcare!

The healthcare sector remains in flux as policy, regulation, technology and trends shape the market. FierceHealthcare subscribers rely on our suite of newsletters as their must-read source for the latest news, analysis and data impacting their world. Sign up today to get healthcare news and updates delivered to your inbox and read on the go.

Part D beneficiaries in the catastrophic phase would still pay their 5% cost out of pocket, Verma said, but she said CMS expects the model to bring down prices so they would ultimately save money at the pharmacy counter. 

“Innovative models like these will show us the path to a more efficient healthcare system that offers higher quality of care to our patients,” Verma said. 

RELATED: 8 Medicare and Medicaid reforms that would have the biggest impact on federal spending 

CMS said that about 3.2 million Medicare beneficiaries are in the catastrophic phase, and the current system structure incentivizes plan sponsors to push members toward that phase. A change like the one CMS released Friday was among the slew of policy suggestions included in the administrations drug price blueprint, which was released last May. 

The Medicare Payment Advisory Council has also raised concerns about the incentives around catastrophic coverage, CMS said. 

Alongside the Part D model, CMS also announced an updated version of its Medicare Advantage Value-Based Insurance Design (VBID) model, which it first launched in seven states in 2017.  

The updated version will be available in all U.S. states and territories, Verma said, and adds in several new components, including a focus on telehealth, tools plan sponsors can use to reduce beneficiaries’ cost-sharing and new reward and incentive programs. 

The goal was to allow plan sponsors to better push beneficiaries toward medication adherence and other improved health behaviors, Verma said. For example, an MA plan could reduce or even eliminate a diabetic patients’ cost-sharing for needed supplies if he or she follows a care plan appropriately, she said. 

RELATED: Medicare Advantage provider directories are riddled with errors. They’re not the only ones 

Traditional MA plans will still be offered alongside those participating in the new model, CMS said. 

Though both policies announced on Friday would begin in the 2020 plan year, CMS said that for 2021 it also wants to test allowing the VBID participants to administer hospice coverage to Medicare Advantage patients. 

It said that having the MA plan sponsor administer both medical and hospice care, which is covered under traditional Medicare, would allow for greater coordination and increase access to hospice care. 

CMS will begin accepting application requests for the two demonstrations later this month.

Suggested Articles

Memorial Sloan Kettering Cancer Center has tapped former CVS Health and Aetna executive Claus Torp Jensen, Ph.D., as its first chief digital officer.

California health officials have released their first report on the price hikes drug companies sought to shield.

Nancy Pelosi's drug prices plan would save Medicare an estimated $345 billion over seven years, according to the Congressional Budget Office.