The CMS Innovation Center unveiled a new demonstration program Tuesday that will allow Medicare Advantage insurers to encourage the use of clinically valuable services by lowering out-of-pocket costs for enrollees.

The demo is part of the Affordable Care Act's push to lower health care costs and improve clinical quality in the Medicare program. Policy experts also believe value-based insurance design may resolve some of the problems associated with high-deductible health plans, which are becoming more prevalent among employers and in the individual insurance market.

The Medicare Advantage Value-Based Insurance Design Model will begin Jan. 1, 2017, and run for five years, the CMS said. Eligible Medicare Advantage plans in Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvania and Tennessee can participate. The CMS chose those states because they were “generally representative of the national Medicare Advantage market.”

The model mirrors bipartisan legislation that was proposed in the House and Senate this year. It also “fills an immediate need for testing ways to improve care and reduce cost in Medicare Advantage plans and offers the prospect of lower out-of-pocket costs and premiums along with better benefits for enrollees in Medicare Advantage,” CMS Deputy Administrator Dr. Patrick Conway said in a news release.

Value-based insurance design, or VBID, refers to health plans that waive or lower out-of-pocket costs for services and prescription drugs that are considered to be effective for patients with chronic health conditions. For example, a plan might reduce copayments and other cost-sharing for diabetes exams and drugs in the hopes of lowering the long-term health costs for those patients.

The Innovation Center's model will focus on Medicare Advantage members who have diabetes, congestive heart failure, chronic obstructive pulmonary disease, past stroke, hypertension, coronary artery disease or mood disorders.

VBID plans provide an alternative to the current structure of high-deductible health plans, which some researchers say don't meet the needs of everyone and have called “archaic.”

Dr. Mark Fendrick has spearheaded much of the push for VBID plans. He is the director and co-founder of the University of Michigan Center for Value-Based Insurance Design, and has advocated for more “clinical nuance” in the construction of high-deductible plans.

Currently, patients in high-deductible plans “pay the same whether it's something I beg my patients to do or I beg my patients not to do,” Dr. Fendrick said in a recent interview.

In Medicare's new experiment, Advantage insurers can create VBID plans through four approaches. They can eliminate or reduce cost-sharing for evidence-based services and drugs; eliminate or reduce cost-sharing for “high-value” hospitals, doctors, skilled-nursing facilities and other providers; reduce cost-sharing for members who participate in disease-management programs; or provide full coverage for “supplemental benefits,” such as nonemergency transportation to primary-care visits.

The CMS will hold a webinar explaining the model in more detail on Sept. 24.

Bob Herman writes for Modern Healthcare, a sister publication of Business Insurance.