What Medicare's Value in Treatment Demonstration Tells Us About Paying for Addiction Recovery

In August 2026, the Centers for Medicare & Medicaid Services (CMS) released the final Report to Congress on the Value in Opioid Use Disorder Treatment (VIT-OUD) Demonstration. Compared with a matched group, people in the demonstration had 20 percent fewer hospitalizations and cost Medicare about 10 percent less, even after the new payments. It adds federal evidence that paying for team-based opioid use disorder (OUD) care can improve outcomes and lower total cost of care. The gains extend beyond SUD services to all-cause hospital use and total Medicare spending, suggesting that comprehensive OUD treatment can affect a person’s whole health and their entire health care spend.

Congress created VIT-OUD in the 2018 SUPPORT Act. The demonstration ran from April 2021 through December 2024 for Fee-For-Service Medicare beneficiaries with an OUD diagnosis. Its goals were to expand access to OUD treatment, improve physical and mental health outcomes, and, where possible, reduce Medicare spending.

The Alliance for Addiction Payment Reform (the Alliance) has worked since 2017 to change how the country pays for addiction treatment and recovery. The Alliance tracks national, state, and local efforts to bring value-based care to substance use disorder (SUD) treatment. VIT-OUD is particularly relevant to the Alliance because it tested several principles of the Alliance’s consensus model, the Addiction Recovery Medical Home Alternative Payment Model (ARMH-APM), inside the country’s largest payer. It also produced something still relatively rare in the field: four years of claims results against a matched comparison group. Those results support a belief at the center of the Alliance’s work that addiction care delivered as whole-person care can create economic value.

How the Payment Model Worked

VIT-OUD added two payments on top of standard Medicare reimbursement, including the existing OUD bundled payments for opioid treatment programs (OTPs) and office-based care.

A care management fee. Providers received $125 per beneficiary per month (PBPM) to underwrite care management teams and services Medicare does not usually cover. These included mobile services, certified peer specialist services, and other recovery supports.

A performance-based incentive. Part of the bundled fee was withheld and earned back based on quality: 0 percent in year one, 5 percent in year two, and 10 percent in years three and four. The incentive metric was whether a patient started medication for OUD (MOUD) within 30 days of their first visit.

CMS also waived beneficiary deductibles for OTP and OUD bundle services, and required each participant to build an OUD care team. At a minimum, the team included a physician and a clinician who could prescribe MOUD. Many also added counselors, social workers, peer specialists, and community health workers.

Although the incentive was modest and tied to one process measure, VIT-OUD tested a core principle of the ARMH-APM: providing flexible funding for a care team that supports the patient over time.

Exhibit 1 — How VIT-OUD mapped to ARMH-APM elements

The ARMH-APM goes further. It carries payment across three phases of recovery, including community-based recovery management for up to five years, with shared-savings opportunities for providers. VIT-OUD demonstrates the potential impact of even an initial layer of that model.

What the Evaluation Found

CMS compared 1,403 enrolled beneficiaries with 4,209 similar beneficiaries treated for OUD by similar providers that did not participate. The largest effects were in hospital use and total spending, and they are measured against all four years of claims data.

Utilization. Enrollees used the hospital less, with the largest declines in SUD-related care.

Exhibit 2 — Utilization per 1,000 beneficiaries per month

Total spending. Medicare spent less on enrollees before and after counting the demonstration payments. Nearly all of the savings came from inpatient care.

Exhibit 3 — Medicare spending per month

Note: CMS found the differences in ED and SUD-related ED spending were not statistically significant.

After accounting for demonstration payments, CMS estimates savings of more than $12 million with an average per beneficiary savings of $8,887.

Whole-person impact. The results reinforce the importance of treating OUD as part of whole-person care. Most enrollees had other significant health needs: 75 percent lived with chronic pain, 76 percent had a mental health condition, and 62 percent had hypertension. Under the demonstration, all-cause hospitalizations fell 20 percent and all-cause ED visits fell 19 percent, alongside the larger drops in SUD-related use. CMS reports that the cost savings came almost entirely from lower inpatient spending. Enrollees also had eight fewer avoidable ED visits per 1,000 beneficiaries, which CMS says may reflect better management of OUD or of other conditions.

Evaluators suggest that stronger patient engagement may help explain the results. Participating providers reported better treatment engagement, and demonstration OTPs were more likely than other OTPs to offer wraparound services such as peer support, employment counseling, and housing services.

What This Means for Advancing APMs for Substance Use Disorders

VIT-OUD adds evidence the field has long lacked: a federal test, with a matched comparison group showing that paying for comprehensive OUD care can lower total cost of care. For everyone working to move addiction care toward alternative payment models (APMs), it offers a starting point and reinforces that the value of whole-person addiction care extends beyond SUD services.

Payers. VIT-OUD provides a tested starting point: a relatively modest care management payment tied to comprehensive OUD care. Payers can use the total cost-of-care data for members with SUD to establish a baseline and evaluate whether similar payment approaches improve outcomes and reduce avoidable utilization.

Providers. The results strengthen the case for financing care coordination, peer support, and social-need services that are difficult to sustain under traditional fee-for-service reimbursement. Providers can use the findings to support discussions about care management fees and outcome-based payments.

States. Because 68 percent of enrollees were dually eligible, the findings are particularly relevant to Medicaid. States such as West Virginia are writing value-based SUD payment into law. Pennsylvania has required its Medicaid managed care plans since 2016 to pay OUD centers of excellence a monthly payment for care management, much like VIT-OUD’s fee.

Federal policymakers. CMS says VIT-OUD informed its Innovations in Behavioral Health (IBH) Model. Future demonstrations can build on VIT-OUD through broader participation (e.g., Medicare Advantage), larger enrollment, and additional support for implementation and technical assistance.

Building on VIT-OUD

VIT-OUD offers important evidence for the next generation of addiction payment models. A relatively modest investment in care teams and engagement can keep people in treatment and out of the hospital while lowering the total cost of care.

For the Alliance, the findings reinforce the principles underlying the ARMH-APM: addiction treatment should be financed as whole-person care, with payment that supports recovery over time and rewards better outcomes. The model takes these ideas further through longer recovery episodes, shared risk, a care team that includes primary care, and quality metrics. Payers, providers, and policymakers considering a similar program can work with Third Horizon to assess current total cost of care for people with SUD, structure the payment, and identify outcomes to measure.

Download the ARMH-APM paper to learn more, and reach out through Third Horizon to talk through your specific needs for your program.

Sources

1. CMS, Value in Opioid Use Disorder Treatment (VIT-OUD) Demonstration Evaluation: Final Report to Congress, August 2026
2. CMS, VIT-OUD Final Report to Congress: At a Glance
3. Alliance for Addiction Payment Reform, ARMH-APM paper
4. West Virginia Legislature, Enrolled SB 231, Addiction Care Recovery Outcomes, 2026
5. National Academy for State Health Policy, How States Are Leveraging Payment to Improve the Delivery of SUD Services, 2022
6. Health Affairs Forefront, The Addiction Recovery Medical Home Alternative Payment Model, 2018