SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Value Based Insurance Design for 
Better Care Act of 2014'' or the ``VBID for Better Care Act of 2014''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) A growing body of evidence demonstrates that increases 
        in patient-level financial barriers (including deductibles, 
        copayments, and coinsurance) for high-value medical services 
        (such as prescription medications, clinician visits, diagnostic 
        tests, and procedures) systematically reduce their use. Savings 
        attributable to cost-related decreased utilization of specific 
        services may lead to an increase in total medical expenditures 
        due to increased use of other related clinical services, such 
        as hospitalizations and emergency room visits.
            (2) Empirical research studies demonstrate that reductions 
        in beneficiary out-of-pocket expenses for high-value 
        prescription medications and clinical services can mitigate the 
        adverse health and financial consequences attributable to cost-
        related decreased utilization of high-value services.
            (3) Financial barriers to prescription medications and 
        clinical services that are deemed to be high value should be 
        reduced or eliminated to increase their use.
            (4) Value-Based Insurance Design is a methodology that 
        adjusts patient out-of-pocket costs for prescription 
        medications and clinical services according to the clinical 
        value--not exclusively the cost. Value-Based Insurance Design 
        is based on the concept of clinical nuance that recognizes--
                    (A) prescription medications and clinical services 
                differ in the clinical benefit provided; and
                    (B) the clinical benefit derived from a specific 
                prescription medication or clinical service depends on 
                the clinical situation, the provider, and where the 
                care is delivered.
            (5) The current ``one-size-fits-all'' copayment or 
        coinsurance design for prescription medications and clinical 
        services provided under the Medicare program does not recognize 
        the well-established value differences in health outcomes 
        produced by various medical interventions.
            (6) The establishment by Medicare of copayment and 
        coinsurance requirements using Value-Based Insurance Design 
        methodologies will improve patient-centered health outcomes, 
        enhance personal responsibility, and afford a more efficient 
        use of taxpayer dollars.

SEC. 3. DEMONSTRATION PROGRAM.

    (a) In General.--The Secretary of Health and Human Services (in 
this section referred to as the ``Secretary'') shall establish a 3-year 
demonstration program to test the use of value-based insurance design 
methodologies (as defined in subsection (c)(1)) under eligible Medicare 
Advantage plans offered by Medicare Advantage organizations under part 
C of title XVIII of the Social Security Act (42 U.S.C. 1395w-21 et 
seq.).
    (b) Demonstration Program Design.--
            (1) Selection of ma region and eligible medicare advantage 
        plans.--The Secretary shall--
                    (A) select at least two MA regions (as defined in 
                section 1858(a)(2) of the Social Security Act (42 
                U.S.C. 1395w-27a(a)(2))) with respect to which to 
                conduct the demonstration program under this section; 
                and
                    (B) approve eligible Medicare Advantage plans to 
                participate in such demonstration program.
            (2) Start of demonstration.--The demonstration program 
        shall begin with respect to the first plan year beginning after 
        the date on which at least two eligible Medicare Advantage 
        plans have been approved by the Secretary in at least one MA 
        region selected under paragraph (1).
            (3) Eligible medicare advantage plans.--For purposes of 
        this section, the term ``eligible Medicare Advantage plan'' 
        means a Medicare Advantage plan under part C of title XVIII of 
        the Social Security Act (42 U.S.C. 1395w-21 et seq.) that meets 
        the following requirements:
                    (A) The plan is an MA regional plan (as defined in 
                paragraph (4) of section 1859(b) of such Act (42 U.S.C. 
                1395w-28(b))) or MA local plan (as defined in paragraph 
                (5) of such section) offered in the MA region selected 
                under paragraph (1)(A).
                    (B) The plan has--
                            (i) a quality rating under section 
                        1853(n)(4) of such Act (42 U.S.C. 1395w-
                        23(n)(4)) of 4 stars or higher based on the 
                        most recent data available for such year;
                            (ii) in the case of a specialized MA plan 
                        for special needs individuals, as defined in 
                        subsection (b)(6)(A) of section 1859(b)(6)(A) 
                        of such Act (42 U.S.C. 1395w-28(b)(6)(A)), 
                        received a multi-year approval by the National 
                        Committee for Quality Assurance under 
                        subsection (f)(7) of such section; or
                            (iii) at least 20 percent of the population 
                        to whom the plan is offered consists of subsidy 
                        eligible individuals (as defined in section 
                        1860D-14(a)(3)(A) of the Social Security Act 
                        (42 U.S.C. 1395w-114(a)(3)(A))).
    (c) Value-Based Insurance Design Methodologies.--
            (1) Definition.--For purposes of this section, the term 
        ``value-based insurance design methodology'' means a 
        methodology for identifying specific prescription medications, 
        and clinical services that are reimbursable under title XVIII 
        of the Social Security Act, for which copayments, coinsurance, 
        or both should be reduced or eliminated because of the high 
        value and effectiveness of such medications and services for 
        specific chronic clinical conditions (as approved by the 
        Secretary).
            (2) Use of methodologies to reduce copayments and 
        coinsurance.--A Medicare Advantage organization offering an 
        eligible Medicare Advantage plan selected to participate under 
        the demonstration program, for each plan year for which the 
        plan is so selected and using value-based insurance design 
        methodologies--
                    (A) shall identify each prescription medication and 
                clinical service covered under such plan for which the 
                amount of the copayment or coinsurance should be 
                reduced or eliminated, with respect to the management 
                of specific chronic clinical conditions (as specified 
                by the Secretary) of MA eligible individuals (as 
                defined in section 1851(a)(3) of the Social Security 
                Act (42 U.S.C. 1395w-21(a)(3))) enrolled under such 
                plans, for such plan year; and
                    (B) may, for such plan year, reduce or eliminate 
                copayments, coinsurance, or both for such prescription 
                medication and clinical services so identified with 
                respect to the management of such conditions of such 
                individuals--
                            (i) if such reduction or elimination is 
                        evidence-based, for the purpose of encouraging 
                        such individuals in such plan to use such 
                        prescription medications and clinical services 
                        (such as preventive care, primary care, 
                        specialty visits, diagnostic tests, procedures, 
                        and durable medical equipment) with respect to 
                        such conditions; and
                            (ii) for the purpose of encouraging such 
                        individuals in such plan to use health care 
                        providers that such organization has identified 
                        with respect to such plan year.
            (3) Prohibition of increases of copayments and 
        coinsurance.--In no case may any Medicare Advantage plan 
        participating in the demonstration program increase, for any 
        plan year for which the plan is so participating, the amount of 
        copayments or coinsurance for any item or service covered under 
        such plan for purposes of discouraging the use of such item or 
        service.
    (d) Report on Implementation.--
            (1) In general.--Not later than 1 year after the date on 
        which the demonstration program under this section begins under 
        subsection (b)(2), the Secretary shall submit to Congress a 
        report on the status of the implementation of the demonstration 
        program.
            (2) Elements.--The report required by paragraph (1) shall, 
        with respect to eligible Medicare Advantage plans participating 
        in the demonstration program for the first plan year of such 
        program, include the following:
                    (A) A list of each medication and service 
                identified pursuant to subsection (c)(2)(A) for such 
                plan with respect to such plan year.
                    (B) For each such medication or service so 
                identified, the amount of the copayment or coinsurance 
                required under such plan with respect to such plan year 
                for such medication or service and the amount of the 
                reduction of such copayment or coinsurance from the 
                previous plan year.
                    (C) For each provider identified pursuant to 
                subsection (c)(2)(B)(ii) for such plan with respect to 
                such plan year, a statement of the amount of the 
                copayment or coinsurance required under such plan with 
                respect to such plan year and the amount of the 
                reduction of such copayment or coinsurance from the 
                previous plan year.
    (e) Review and Assessment of Utilization of Value-Based Insurance 
Design Methodologies.--
            (1) In general.--The Secretary shall enter into a contract 
        or agreement with an independent, non-biased entity having 
        expertise in value-based insurance design methodologies to 
        review and assess the implementation of the demonstration 
        program under this section. The review and assessment shall 
        include the following:
                    (A) An assessment of the utilization of value-based 
                insurance design methodologies by Medicare Advantage 
                plans participating under such program.
                    (B) An analysis of whether reducing or eliminating 
                the copayment or coinsurance for each medication and 
                clinical service identified pursuant to subsection 
                (c)(2)(A) resulted in increased adherence to medication 
                regimens, increased service utilization, improvement in 
                quality metrics, better health outcomes, and enhanced 
                beneficiary experience.
                    (C) An analysis of the extent to which costs to 
                Medicare Advantage plans under part C of title XVIII of 
                the Social Security Act participating in the 
                demonstration program is less than costs to Medicare 
                Advantage plans under such part that are not 
                participating in the demonstration program.
                    (D) An analysis of whether reducing or eliminating 
                the copayment or coinsurance for providers identified 
                pursuant to subsection (c)(2)(B)(ii) resulted in 
                improvement in quality metrics, better health outcomes, 
                and enhanced beneficiary experience.
                    (E) An analysis, for each provider so identified, 
                the extent to which costs to Medicare Advantage plans 
                under part C of title XVIII of the Social Security Act 
                participating in the demonstration program is less than 
                costs to Medicare Advantage plans under such part that 
                are not participating in the demonstration program.
                    (F) Such other matters, as the Secretary considers 
                appropriate.
            (2) Report.--The contract or agreement entered into under 
        paragraph (1) shall require such entity to submit to the 
        Secretary a report on the review and assessment conducted by 
        the entity under such paragraph in time for the inclusion of 
        the results of such report in the report required by paragraph 
        (3).
            (3) Report to congress.--Not later than 3 years after the 
        date on which the demonstration program begins under subsection 
        (b)(2), the Secretary shall submit to Congress a report on the 
        review and assessment of the demonstration program conducted 
        under this subsection. The report shall include the following:
                    (A) A description of the results of the review and 
                assessment included in the report submitted pursuant to 
                paragraph (2).
                    (B) Such recommendations as the Secretary considers 
                appropriate for enhancing the utilization of the 
                methodologies applied under the demonstration program 
                to all Medicare Advantage plans under part C of title 
                XVIII of the Social Security Act so as to reduce 
                copayments and coinsurance under such plans paid by 
                Medicare beneficiaries for high-value prescription 
                medications and clinical services for which coverage is 
                provided under such plans and to otherwise improve the 
                quality of health care provided under such plans.
    (f) Expansion of Demonstration Program.--The Secretary shall expand 
the demonstration program, pursuant to notice and comment rulemaking, 
to implement, on a permanent basis, the components of the demonstration 
program that are beneficial to Medicare beneficiaries and the Medicare 
program, unless the report under subsection (d) or (e)(3) contains an 
evaluation that the demonstration program--
            (1) increases expenditures under title XVIII with respect 
        to Medicare beneficiaries participating in the demonstration 
        program; or
            (2) decreases the quality of health care services furnished 
        to such Medicare beneficiaries participating in the 
        demonstration program.
    (g) Waiver Authority.--The Secretary may waive such provisions of 
titles XI and XVIII of the Social Security Act as may be necessary to 
carry out the demonstration program under this section.
    (h) Implementation Funding.--For purposes of carrying out the 
demonstration program under this section, the Secretary shall provide 
for the transfer from the Federal Hospital Insurance Trust Fund under 
section 1817 of the Social Security Act (42 U.S.C. 1395i) and the 
Federal Supplementary Insurance Trust Fund under section 1841 of the 
Social Security Act (42 U.S.C. 1395t), including the Medicare 
Prescription Drug Account in such Trust Fund, in such proportion as 
determined appropriate by the Secretary, of such sums as may be 
necessary.
Output: Value Based Insurance Design for Better Care Act of 2014 or the VBID for Better Care Act of 2014 - Directs the Secretary of Health and Human Services (HHS) to establish a three-year demonstration program to test the use of value-based insurance design methodologies under the eligible Medicare plans offered by Medicare Advantage organizations under part C (Medicare+Choice) of title XVIII (Medicare) of the Social Security Act. Defines "value-based insurance design methodology" as one for identifying specific prescription medications, and clinical services reimbursable under Medicare, for which copayments, coinsurance, or both should be reduced or eliminated because of the high-value and effectiveness of these medications and services for specific chronic clinical conditions (as approved by the Secretary). Directs the Secretary to expand the demonstration program to implement, on a permanent basis, those components beneficial to Medicare beneficiaries and the Medicare program, unless a required evaluation of the program states that it: (1) increases expenditures under Medicare with respect to participating beneficiaries, or (2) decreases the quality of health care services furnished to such beneficiaries.