The Centers for Medicare and Medicaid Services (CMS) has recently exercised its Section 1115A waiver authority to allow Medicare Advantage plans in seven states to offer benefit flexibility in the form of Medicare Advantage Value Based Insurance Design (MA-VBID). The model will launch on January 1, 2017 and run for five years.

The intent of the MA-VBID model is to incentivize high value utilization of health care by restructuring enrollee cost sharing and other benefits to be more clinically nuanced. Under VBID, enrollees face low or no cost for high-value clinical services but may have higher out-of-pocket costs for low-value services. The ultimate goal of the MA-VBID model is to determine whether a flexible plan design based on value can help improve health outcomes and lower expenditures for targeted Medicare Advantage (MA) enrollees. MA plans that are part of the demonstration will be able to offer varied plan benefit design for enrollees who fall into one of seven groups defined by the following clinical conditions: diabetes, chronic obstructive pulmonary disease (COPD), congestive heart failure, past stroke, hypertension, coronary artery disease, and mood disorders.

Under Medicare Part C today, CMS establishes county level benchmarks for health plans to bid against. Health plans bid to provide Medicare Part A and Part B services to a “standard” Medicare patient. When bids are below the benchmark, plans receive a “rebate” that ranges between 50 and 70 percent of the difference (depending on their star rating) between the benchmark and the bid. The rebates are funded through lower cost sharing or an additional premium and are used to provide supplemental health benefits not covered under Part A or B such as dental, vision, hearing, and preventive services. Other services such as meals and transportation may be provided to beneficiaries but they are limited and need to be tied to health related issues and available to all members of the plan.

Per CMS regulations, health related supplemental benefits must “prevent, cure, or diminish an illness or injury” and not be used for “comfort, cosmetic, or daily maintenance.” CMS reviews all supplemental benefits and utilizes a test based on national typical usage and community patterns of care to determine if the item or service is “health related.” However, rebates cannot be used to provide valuable social services such as help at home, home energy needs, and other social determinants of health. Allowing plans clinical flexibility to use their rebates to add both health and social service benefits with the rebate would enhance patient care.

The move to test VBID under Part C of Medicare represents a move towards flexible, individualized plans that promote the consumption of high-value clinical services. Indeed one of the reasons why MA plans have generated lower costs than traditional Medicare is the flexibility they have to design prevention and care coordination strategies to treat patients that are not available in traditional Medicare. The demonstration is another step in the right direction of providing treatment flexibility.

However, it could go further and rather than target some chronically ill patients, it could allow plans to provide additional social services to all enrollees with their rebates that affect health care outcomes. A major avenue into high-quality care and cost savings is in the provision of social services that impact health. While social determinants of health are often addressed outside of the health care system, there is evidence that shows positive associations between social services spending and better health outcomes. In a recent Health Affairs article, Elizabeth Bradley et. al found that “states with higher ratios of social to health spending had better health outcomes one and two years later, compared to states with lower ratios.” This suggests that there is value in using some of the plan rebates to address social needs, such as nutrition and housing.

Social Determinants of Health

Access to affordable transportation is a major obstacle that low-income populations face. This barrier can impact an individual’s ability to access much needed medical care, attend medical appointments, and keep up with preventative services. In 2003, the Government Accountability Office (GAO) reported that “the coordination of transportation services across government programs not only improves the quality but also increases the cost-effectiveness of service.” Access to nutritional meals is another barrier often faced by individuals who have been recently hospitalized. These individuals may be unable to shop for groceries or prepare meals and as a result their recovery may suffer. While the research on home-delivered meals has been more descriptive than outcome focused, nutritional services have been shown to decrease hospital readmissions and improve health of enrollees.

Some health care insurers have taken steps to cover benefits that aim to address social determinants of health. For example, Medicaid incorporates the provision of certain social services such as non-emergency medical transportation and home meal deliveries post-hospitalization, into their coverage.

CMS requires that states provide non-emergency medical transportation (NEMT) to eligible, qualified Medicaid beneficiaries. This service is an attempt to help low-income beneficiaries, who may be unable to afford transportation, access needed medical care. NEMT enables enrollees to have consistent access to medical services such as preventative care, which can help stop medical needs from escalating. Medicaid’s NEMT requirement has been shown to have positive effects such as fewer missed appointments, fewer emergency room visits, and reduced length of hospital stay.

Providing NEMT has been shown to be cost-effective for a wide range of medical conditions and has actually been shown to be cost-saving for asthma, congestive heart failure, chronic obstructive pulmonary disease, and prenatal care. Medicaid also has home and community-based services waivers (HCBS Waivers), which enable states to provide additional targeted benefits, such as habilitation services, delivered meals at home, and personal care for beneficiaries who wish to receive services in their home. State level studies have shown that expanding the HCBS Waivers results in cost containment and slower spending growth rates. The studies reported lower per-individual average costs compared with institutional care, even in cases where absolute cost savings were not documented.

The Affordable Care Act’s Medicaid Health Home Initiative is an additional avenue through which Medicaid funds the provision of social services to enrollees. Health Homes are structured so as to provide better and more comprehensive care for the patient. They incorporate and promote coordination among medical care, behavioral health care, and long-term community based services. States are required to evaluate their cost savings, but so far these have not been measured in a uniform manner. The program’s overall effect on cost will be reported in 2017 as part of an independent longitudinal analysis.

Cost Savings

Many private providers have engaged in similar models of care to that of the Medicaid Health Home and have become certified as a patient-centered medical home (PCMH). These care models utilize various payment models such as capitated payments, shared savings arrangements, and hospital readmission penalties in an attempt to lessen health care costs and promote high-quality care. PCMHs incorporate social services as an attempt to address the health of the whole person and lessen overall health costs.

Cost savings have been reported from several different PCMH programs: Geisinger Health System has reported savings in acute inpatient care and the Pennsylvania Chronic Care Initiative has reported cost savings in their highest risk patients. A recent evaluation by RTI found that community health teams in Vermont delivered a 3-to-1 return on investment for Medicare. This is in part linked to the design of the teams care coordination functions, which include the Support and Services at Home (SASH) program that leverages services from social service agencies, community health workers, and non-profit housing services to improve health care outcomes.

Medicare and Medicaid have coordinated to create The Program of All-Inclusive Care for the Elderly (PACE), which does include social services. PACE is a Medicare program and a Medicaid state option that provides comprehensive home and community-based support to low-income, community dwelling seniors. Individuals are able to join PACE if they meet the following criteria: age 55 or older, live in the service area of a PACE organization, meet eligibility for nursing home care, and are able to live safely in the community. PACE services include adult day care, meals, transportation, social services, and more.

What the enrollee is required to pay for PACE depends on their financial abilities and the program through which they are accessing PACE long-term care services. If PACE is accessed through Medicaid then there is no required monthly premium, but if it is accessed through Medicare then there is a monthly premium and a premium for Medicare Part D drugs. In 1998, it was reported that costs for PACE enrollees were 16-38 percent lower than Medicare fee-for-service costs for a frail elderly population. The PACE program has also shown to cost 5-15 percent less than costs for comparable Medicaid beneficiaries.

Another route through which a Medicare recipient may receive limited social benefits is through a Medicare Advantage (MA) plan, as these plans may cover more, with extra services or an expanded amount of coverage. For example, CarePlus MA plans offer several different benefit choices, which may include transportation to plan approved locations and home meal delivery following hospitalization.

Other MA plans have similar comprehensive benefit packages. For example, Humana MA provides meals to their eligible members through their Humana Well Dine benefit at no additional cost. This service is for members recovering from an inpatient stay in a hospital or skilled nursing facility and for some Humana Medicare members who are enrolled in a qualified chronic-condition special needs plan.

Providing plans greater flexibility to provide both additional health care services and social services through the rebates received by MA plans may be a route to higher quality and more effective care.