April 20, 2021

Should Medicare rates for telehealth be the same as in-person care?

Daily Briefing

    When Covid-19 hit, Congress declared a public health emergency (PHE) under which Medicare paid the same rates for telehealth and in-person care. Now, some telehealth stakeholders want to extend payment parity beyond the epidemic—but critics argue doing so could lead to overuse and distorted incentives, Jessie Hellmann and Nona Tepper report for Modern Healthcare's "Transformation Hub."

    Cheat sheet: Telehealth reimbursement primer

    Background

    According to "Transformation Hub," prior to the epidemic, the traditional Medicare program generally did not cover telehealth care except in rare circumstances, such as when it was provided by a medical facility in a rural area. However, since the PHE was declared, Medicare has paid the same reimbursement rates for both telehealth and in-person care. The PHE is set to expire on July 20.

    This presents significant uncertainty for the future of telehealth payment. Chip Kahn—president and CEO of the Federation of American Hospitals (FAH), which supports increasing Medicare's telehealth reimbursement rates—said, "[L]iterally almost everything where the patient is at home and it's a digital contact, to get paid for it would require Congress to allow it."

    He added, "[And] [i]f Congress allows it, then you have the issue of how it would be paid for."

    The arguments for pay parity

    Advocates for keeping, or at least nearing, pay parity between telehealth and in-person care include the American Medical Association and America's Health Insurance Plans, and the American Telehealth Association, among others, "Transformation Hub" reports.

    Those in favor of keeping or nearing pay parity argue that pre-epidemic rates aren't high enough for health care providers. For instance, one 2020 article published in JAMA found that Medicare rates for audio and video calls were $15 just before the start of the epidemic, which the researchers said wasn't enough to cover even the cost of submitting the insurance claim.

    "We recognize that not having brick and mortar costs should be a factor in terms of telehealth reimbursement, but we also think that there's a level of investment required to get this technology off the ground and continue to innovate," Kyle Zebley, director of public policy for the American Telehealth Association, said. His organization supports a "fair rate" that would account for the costs of maintaining and bolstering a telehealth program, "Transformation Hub" reports.

    Other stakeholders in favor of pay parity have pointed out that several insurers have started building virtual-first plans requiring beneficiaries to consult with health care providers virtually before going to an in-person visit. According to "Transformation Hub," insurers believe this approach can help curb costs, bolster access, and improve outcomes.

    If the reimbursement rate for telehealth were suddenly cut, those virtual-first plans wouldn't move forward, and the implementation of various digital monitoring and home-based care products could be slowed, said Mark Wagar, a health care consultant and former head of Empire Blue Cross Blue Shield.

    "The rudimentary physician fee schedules for telehealth were very low because they were very low acuity types of business," he said. "Now, with the technology that's available, there's a much broader range of care complexity that you can manage through telehealth."

    Wagar argued that payment for health services should be based on the value of the service rather than how the service is delivered. Wagar also asserted that the health care industry could help close the digital divide, cut costs, and promote overall health by teaching seniors how to use devices and working with device manufacturers on developing tools that are easy to use.

    "You've got to open up your brain about what will help people improve their health status and their life status," Wagar said. "I do sympathize with the disparity thing and I think our challenge there is to solve what's causing the disparity."

    Arguments against pay parity

    However, other industry stakeholders have argued that, while pay parity could persist for a short time post-epidemic, lower payment rates should eventually be established for telehealth care so as to avoid overuse.

    For instance, MedPAC—which advises Congress on Medicare policy—has recommended that the telehealth rates established under the PHE be temporarily extended, but that Medicare should eventually go back to lower rates. MedPAC in its reasoning cited the overall lower costs of providing care via telehealth, as well as the risk of overuse, increased health care spending, and a lack of clarity as to how telehealth parity could affect outcomes.

    "Continuing to set rates for telehealth services equal to rates for in-office services after the PHE ends could distort prices and lead clinicians to favor telehealth services over comparable in-person services, even when an in-person service may be more clinically appropriate," MedPAC said in its recommendation to Congress and CMS.

    Ceci Connolly, CEO of the Alliance of Community Health Plans, said the industry group believes in extending pay parity for a transition period of around five years, then folding telehealth services into payers' and providers' value-based care relationships.

    "If you were to say to me that, Medicare, tomorrow, cut telehealth reimbursement by 25%, I would be worried because a lot of clinicians are not yet ready to make that math work," Connolly said. "You've got to give them time to get up to speed, get skills and get the technology that they need, and money helps to make that possible. We don't want physicians to be losing their practice by trying to do something really great."

    She added that if telehealth rates aren't updated, capitation bids submitted by Medicare Advantage insurers to CMS could become more complicated, and some payers may get rid of the benefits they started offering during the epidemic. Payers might also pass on higher costs of care to patients through increased premiums, she said.

    Ultimately, she argued telehealth services should be included in an insurers' base bid, rather than looked at as a supplemental service. "It's not a different benefit, it's just how you deliver a benefit," Connolly said.

    Separately, some insurers, large businesses, and other health care payers voiced concern that mandating reimbursement parity for telehealth services could undermine cost savings linked to virtual care, "Transformation Hub" reports.

    "One of the main benefits of telehealth is it can be offered at a lower price," Shawn Gremminger, director of health policy for the Purchaser Business Group on Health, which advocates for self-funding employer plans, said. "Mandating pay parity gets rid of those savings" (Hellmann/Tepper, "Transformation Hub," Modern Healthcare, 4/16).

    Cheat sheet: Telehealth reimbursement primer

    telehealth primerDownload this cheat sheet to learn about trends in telehealth reimbursement. The analysis reviews policies under public and commercial payers, and helps strategic planners assess the value and feasibility of telehealth investments.

    Download now

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