The Future of Medicare Telehealth Coverage: CBO Hesitates, Congress Inches Forward

As telehealth gains traction as a way to deliver health care, Medicare reimbursement remains a major obstacle to broad implementation due in part to scoring methodology from the Congressional Budget Office (CBO). Rather than decreasing health care costs, CBO’s scoring methodology assumes that telehealth increases utilization and therefore overall costs. Recent legislation on the Hill, however, shows that there may be hope for the expansion of Medicare telehealth coverage in the future.

Medicare’s Telehealth Landscape

According to a Reach Health survey the top challenges to telemedicine programs include Medicare, Medicaid, and private payer reimbursement. Adjustments in Medicare policy have historically predicted larger changes in the healthcare landscape—primarily by shaping the expectations of employers and individuals who purchase private insurance. Likewise, to a certain extent, wide availability of telehealth coverage hinges on Medicare reimbursement. Currently, Medicare coverage of telehealth services is limited, restricting Medicare payments to beneficiaries in specified areas, such as rural counties outside of a Metropolitan Statistical Area (MSA) or in a rural Health Professional Shortage Area (HPSA) inside of a rural census track. Congress has shown tentative interest in expanding telehealth coverage, primarily because of the associated costs.

CBO’s Assumption that Telehealth Increases Utilization & Costs

The primary rationale for restricting Medicare telehealth is that it increases—rather than decreases—health care costs, mostly through additional utilization. Currently, the CBO’s scoring of most telehealth-related provisions assumes that telehealth does not replace traditional care, but rather adds services, thereby increasing health care costs. This is primarily due to the fee-for-service reimbursement structure of Medicare payments—not necessarily telehealth specifically—since it incentivizes providers to increase services. Medicare Advantage plans, on the other hand, have seen more success in telehealth adoption due to the managed care nature of the programs.

Much of CBO’s scoring, therefore, assumes that expanded telehealth coverage will increase cost. A March 2017 Health Affairs study corroborates this assumption, finding that only 12 percent of telemedicine consultations replaced an in-person provider visit, while 88 percent represented new demand. The study acknowledges that there are still pathways to cost-saving. For example, insurers could deter unnecessary usage by increasing telehealth visit costs. Telehealth could also encourage patients to avoid expensive emergency room visits for less severe illnesses.

A primary example of CBO scoring telehealth provisions came nearly 15 years ago when CBO scored the 2001 Social Security Act, which allowed limited coverage of telehealth services. The CBO predicted that telehealth would cost Medicare $150 million in the first five years; however, the program has only spent $57 million in 14 years, according to according to the Center for Telehealth and eHealth Law.

Nevertheless, in the Medicare Payment Advisory Commission (MedPAC) March 2016 meeting, Commissioner Jack Hoadley projected that Congress would continue to limit Medicare expansion of telehealth coverage due to CBO’s hesitancy.

Congress Pursuing Telehealth Legislation

Despite CBO’s belief of high costs, Congress has shown interest in a broader implementation of telehealth solutions. The December 2016 21st Century Cures Act  directed CMS to 1) report how Medicare beneficiaries with chronic conditions and/or who are dually eligible for Medicaid can benefit from telehealth coverage, and 2) identify high-volume services (and diagnoses) suitable for telehealth and identify barriers to expansion. A final report is expected in December 2017.

The bill also called on MedPAC to identify two types of telehealth services: those currently paid under Medicare’s fee-for-service and those reimbursed by private insurance plans that could be incorporated into the Medicare program in the future.

The CHRONIC Care Act (unanimously approved by the Senate Finance Committee in May 2017) also inches Medicare towards coverage of telehealth in four specific ways:

  1. coverage for telestroke throughout the U.S.,
  2. remote monitoring for dialysis therapy at home,
  3. additional telehealth benefits in ACOs, and
  4. flexible telehealth coverage through Medicare Advantage.

CBO determined that provisions expanding the reimbursement for telestroke services would be partially offset by allowing Medicare Advantage plans to incorporate telemedicine services in their bids. Expansion of telemedicine reimbursements within ACOs would have a similarly limited budgetary impact.

If telehealth advocates can present evidence that telehealth saves costs, they can increase the chance that the CBO will score telehealth favorably. Until then, The CHRONIC Care Act is poking holes in the dam rather than opening the floodgates for broader implementation of telehealth.

Other legislation aiming to increase Medicare coverage of telehealth includes the Furthering Access to Stroke Telemedicine (FAST) Act and The Creating Opportunities Now for Necessary and Effective Care Technologies (CONNECT) for Health Act of 2017. An independent analysis estimates that CONNECT will save the government $1.8 billion over 10 years, offsetting projected costs of $1.1 billion. CONNECT, unlike CHRONIC, is yet to be scored by the CBO.

Congress is taking incremental steps to expand coverage. Given the bi-partisan support, there is a real chance for change in the upcoming years, though high-cost CBO estimates remain a stumbling block for telehealth legislation. The faster Medicare makes the shift from fee-for-service to value-based payments, the faster the CBO will view telehealth services as a viable cost-saving option.

For more information on how Medicare is changing the health care landscape, please refer to our Value Based Pharmaceutical page or The MACRA All-Payer Advanced APM Pathway: System-Wide Implications.