What to Know About CMS’s Announcement That it Plans to Terminate VBID

By Rachel Schmidt and Carrie Graham

On December 16, CMS announced its intention to terminate the Medicare Advantage (MA) Value-Based Insurance Design (VBID) demonstration at the end of 2025 due to the model’s substantial cost. Evaluations of the VBID model found $2.3 billion higher program spending associated with the model in 2021 and $2.2 billion in 2022. Below we describe what VBID is and how its termination could affect benefits and cost sharing for Medicare beneficiaries enrolled in certain MA plans. Whether the incoming Administration maintains the decision to terminate the VBID demonstration remains to be seen.

What is VBID?

The VBID demonstration was launched by the CMS Innovation Center in 2017 to test the idea that providing MA plan sponsors with flexibility to target additional benefits towards certain groups of enrollees could reduce Medicare program spending and improve quality of care. As with all supplemental benefits offered by MA plans, plan sponsors finance VBID benefits through Part C rebates, which are generated from the difference between MA payment benchmarks and plan bids.

• Originally, MA plans offered primarily health-related supplemental benefits such as limited dental, vision, and hearing coverage uniformly to all of their enrollees.
• Over time, CMS has allowed plans to target supplemental benefits to certain categories of enrollees through both the VBID model and Special Supplemental Benefits for the Chronically Ill (SSBCI) flexibilities.
  • VBID allows MA plans to offer both uniform supplemental benefits as well as nonmedical benefits addressing health-related social needs such as food, transportation, and housing, or Part D financial rewards and incentives (a form of cash-equivalent benefit) to enrollees with low incomes or in certain geographic areas of socioeconomic disadvantage.
  • In 2024, the most common VBID benefits were assistance with food and utilities. 

Participation in VBID has grown substantially, especially in dual-eligible special needs plans (D-SNPs), a type of MA plan for individuals with Medicare and Medicaid through which increasing numbers of dual-eligible beneficiaries get MA benefits: 

• In plan year 2025, 62 MA organizations offer some VBID benefits or rewards and incentives to over 7 million Medicare beneficiaries. 
• Some observers note that for 2025, more MA plans use the VBID model to offer nonmedical benefits such as food, transportation, and housing assistance than SSBCI authority.
• Overall, in 2024, 36% of MA enrollees had VBID coverage, compared to 12% in 2021. 
• In 2024, 93% of enrollees in D-SNPs and 21% of non-SNP MA enrollees had VBID coverage. That same year, 21% of D-SNP enrollees and 19% of non-SNP MA enrollees were in plans that offered SSBCI benefits. 

How are VBID benefits different from other supplemental benefits that MA plans can provide?

All MA plans can target nonmedical benefits to certain enrollees through SSBCI. However, there are several ways in which SSBCI differs from VBID.

• Through SSBCI, MA plans can only use certain medically complex chronic conditions to qualify enrollees for nonmedical supplemental benefits. 
• In comparison, VBID enrollees can qualify for supplemental benefits based on: 1) certain chronic health conditions, 2) Low-Income Subsidy (LIS) eligibility (or, in the territories, dual eligibility for both Medicare and Medicaid), 3) place of residence in the most underserved areas, or 4) a combination of those factors. 
• VBID allows for flexibilities in Part D drug benefits while SSBCI does not. For example, MA plans participating in the VBID model often lower enrollees’ cost sharing to $0 per prescription or may use reward and incentive programs to promote medication adherence or participation in medication therapy management programs. 

Why have MA plan sponsors emphasized using the VBID model in their D-SNPs? 

Because D-SNP enrollees are dually eligible for Medicare and Medicaid, they have much of their cost sharing paid by Medicare Savings Programs and Part D’s LIS. Thus, plan sponsors do not need to cover those costs through Part C rebates and can use VBID flexibility for other types of benefits.

• D-SNPs that participate in the VBID model do not need to reduce enrollees’ medical cost sharing because it is already paid by Medicaid-run Medicare Savings Programs. 
• Similarly, D-SNPs typically waive cost sharing for Part D prescriptions filled by enrollees with the LIS. However, plan sponsors only pay for the nominal cost-sharing amounts set in law for LIS enrollees, not each plan’s full cost-sharing amounts. (In 2025, LIS enrollees pay no more than $4.90 per generic and $12.15 per brand prescription.) D-SNPs typically only include basic Part D benefits, with Medicare’s LIS paying for the bulk of enrollees’ cost sharing.

What is the evidence about VBID’s costs?

When the CMS Innovation center launches a new model, they are required to evaluate its impact on Medicare spending. Early findings from a RAND evaluation suggest that while VBID was associated with some improvements in care quality and medication adherence, it was also associated with higher costs. 

• Plan participation in VBID was associated with higher enrollee risk scores, both for non-SNP and D-SNP enrollees. RAND found that the VBID model may have contributed to higher risk scores by enabling plans to identify new diagnoses or reestablish existing ones.
• Higher costs were driven in part by higher risk scores and larger Part C rebate payments to VBID plans. CMS also noted that enrollees in VBID plans had higher Part D expenditures.
• The CMS Innovation center determined that there were no further modifications to the model that could be made to offset the substantially higher costs. 

What could happen if VBID ends?

If VBID is terminated it could affect: 1) the supplemental benefits offered by MA plans, 2) which beneficiaries qualify for supplemental benefits, as well as 3) beneficiaries’ cost sharing.

• MA plans that want to offer nonmedical supplemental benefits to their enrollees will need to use SSBIC instead of VBID. CMS says that many of the VBID model’s most widely used interventions are now available throughout the MA program including through the SSBCI pathway. If the VBID model is terminated at the end of 2025, the availability of nonmedical supplemental benefits could be affected by whether plan sponsors are willing to expand their use of SSBCI.  
• If MA plans expand their use of SSBCI, it means that beneficiaries will only qualify for supplemental benefits based on certain chronic conditions. Unless there are changes to SSBCI authority, beneficiaries will no longer qualify based on low incomes nor living in communities of socioeconomic disadvantage.  
• MA plans will no longer be able to provide rewards and incentives for Part D health-related behaviors. 

Ending VBID could lead to higher drug cost sharing for Medicare beneficiaries enrolled in D-SNPs:

• Beneficiaries who are dually eligible for Medicare and Medicaid may be most affected because they are most likely to be in plans that use VBID. For 2025, Milliman projects that 90% of D-SNP enrollees and 2% of non-SNP enrollees will have VBID coverage, while 15% of D-SNP enrollees and 16% of non-SNP enrollees will be in plans that offer SSBCI flexibilities.
• If VBID ends, MA plans could include prescription drug benefits at $0 cost sharing in their D-SNPs, but only if they offer it as part of an enhanced Part D plan rather than the basic coverage they now provide. MA plans would have to rely less on Part D’s LIS to pick up most of those enrollees’ cost sharing and plans would incur more of the financial liability.  As a result, D-SNP enrollees may find that fewer plan options are available in the future that have zero cost sharing for their drug benefits.
• CMS acknowledges that some beneficiaries may see some changes in their Part D prescription drug benefits. The agency says that the CMS Innovation center’s new $2 drug list model, which it aims to start in 2027, would help make prescription drugs more affordable.

In light of the decision to terminate VBID, there are several potential actions that various stakeholders could take:

• The new Administration will need to decide if they will uphold the decision to end the VBID program or reverse the decision.  
• Medicare beneficiaries will have the option during the 2026 annual enrollment period (in the fall of 2025) to choose an MA plan that offers supplemental benefits through SSBCI or get their benefits through original Medicare. 
• MA plans can choose to offer more supplemental benefits through SSBCI or offer fewer supplemental benefits.
• CMS could expand SSBCI to allow MA plans flexibility to offer nonmedical supplemental benefits and/or rewards and incentives on the basis of income or other factors similar to VBID. 
• MA plan sponsors could include prescription drug benefits at $0 cost sharing in their D-SNPs as part of enhanced Part D plans but would need to accept more financial liability to do so.