Medicare’s existing Geographic Direct Contracting model has been controversial legislation for years. This regulation intends to test the feasibility of basing pricing models on regional trends. The Centers for Medicare and Medicaid Services (CMS) aimed for this initiative to reduce costs and enhance value-based care for subscribers.

The primary objective of Geographic Direct Contracting was to ensure that all subscribers had access to standard Medicare benefits as well as added features. One of these advantages was intended to be equal or lower out-of-pocket charges for choice services when compared to traditional Medicare plans. This includes lower costs for Part A and Part B plans as well as subsidies for Part B premiums.

Changes to final legislation toward the end of 2020 appeared to make requests for prior authorization less streamlined. For this reason, it has not been as well-received as anticipated. When a CMS subsidiary completed a review in early 2020, results showed that bundled payment models with a geographic focus had variable savings whereas globally-based plans fared better. Provider groups also reported that this translated to ambiguity for the subscribers,
who often did not know details about their care.

The first of two three-year testing cycles was intended to begin across five regions on January 1, 2022, and last until 2027. However, in early 2021, CMS determined they would complete an additional review and place the program indefinitely on hold. This means the first implementation has been postponed, and CMS has not indicated the reason for this review or pause.

This reevaluation will allow insurance companies the additional time they may need to reinforce provider networks across these geographic regions. Insurers will need a strong base of providers to focus on supporting the subsequent demand once the Geographic Direct Contracting model’s implementation is officially rescheduled.