Addressing concerns about permanent telehealth expansion in Medicare

On Wednesday, the House Ways & Means Committee advanced a 2-year extension of Medicare’s covid-era policies to allow Medicare patients continued access to telehealth services. Over the next week, the House Committee on Energy and Commerce is also expected to markup one of several bills that all aim to address patient access to telehealth. These bills are being considered now because Congress faces a critical deadline for telehealth access. The Covid-era flexibility that allowed Medicare to pay for certain telehealth services expires at the end of this year. Medicare beneficiaries could lose access to telehealth services like occupational and physical therapy, certain audio-only services, and some behavioral telehealth providers without Congressional action. The provisions’ expiration would also prevent Federally Qualified Health Clinics (FQHCs) and Rural Health Clinics (RHCs) from offering telehealth services as distant site providers. 

With an ongoing physician shortage and limited access to care in rural areas, telehealth has helped fill the gap since the pandemic’s beginning, extending access to patients who would either have to forgo needed care or travel long distances to receive it. Most policymakers agree that patients and providers should continue to have a telehealth option when appropriate. 

But how do we ensure continuity in access without driving up spending, reducing quality, or leaving room for potential abuse? 

Currently, lawmakers seem poised to extend rather than make the Covid-era policies that allow  more providers to conduct telemedicine permanent. Because most of the research on telehealth use in Medicare is limited to periods with lingering pandemic effects, predicting how telehealth will be utilized in the near future is challenging. Congress should proceed cautiously to ensure that incentives are aligned for payers and providers to avoid overuse, fraud, and unnecessary spending. 

However, despite those concerns, telehealth remains a low-cost and efficient care model that patients seek out. Rather than cut access to telehealth services or offer a blanket extension, Congress should establish a fair payment policy for telehealth services, allow Medicare to root out the abuse, and pursue standardization of telehealth licensing. 

The COVID-19 context

The COVID-19 pandemic necessitated a more flexible care setting while also exposing a glaring flaw in U.S. health care delivery. While there was less demand for telehealth at the time, federal and state restrictions made it difficult for providers to navigate telemedicine and many lacked the necessary infrastructure to provide services virtually. This includes state licensing rules that prevent doctors from conducting virtual visits with patients across state lines, federal restrictions on the site of care, and limits on the services that qualify for telehealth reimbursement. 

But at the onset of the pandemic, Medicare rolled back its geographic requirements for both providers and patients, allowing them to offer and receive services from home. They also expanded the services, providers, and technologies that Medicare can cover via telehealth, allowing FQHCs, RHCs, physical and occupational therapy, and other providers to receive payment for telehealth services. These flexibilities are due to expire at the end of 2024. 

Similarly, nearly all states rolled back their own restrictions on licensing for telehealth across state lines, allowing physicians to see patients in other states for the first time. Unfortunately, when the state of emergency ended, licensing restrictions in many states were reinstituted. Now, 30 states either ban or otherwise restrict interstate telemedicine.

Legislative context

The House Ways & Means Committee advanced H.R. 8261, the Preserving Telehealth, Hospital, and Ambulance Access Act, which extends telehealth access for Medicare beneficiaries through 2026. The extension comes with some guardrails on durable medical equipment and clinical diagnostics, due to recent instances of fraudulent billing. The bill will also extend additional Medicare programs and add-on payments for rural hospitals and other services. To offset the costs of the expansion, the bill regulates some Pharmacy Benefit Manager (PBM) practices, a measure that failed to advance in a spending package earlier this year. 

Among the bills before the House Energy and Commerce Committee, the CONNECT Act (H.R. 4189/S. 2016) is the most comprehensive and has broad bipartisan support. It offers a framework for expanding the Medicare telehealth flexibilities, permanently removing all geographic site requirements and in-person visit rules for behavioral health. The bill would also offer additional resources and directives to identify fraud and abuse in telehealth billing. The Telehealth Modernization Act (H.R. 7623) would establish permanent access for Medicare beneficiaries and also roll back restrictions on audio-only care for those without internet connectivity. Other bills, like H.R. 3875, would expand the types of physicians and assistants eligible for telehealth payments in Medicare. Most of the legislation being considered by the House Energy and Commerce Committee would either expand the Medicare telehealth portfolio or make aspects of the COVID-era flexibilities permanent. 

Spending and overuse

Because telehealth is convenient and accessible, patients may opt for a telehealth visit to address a condition that they would not have received any care for otherwise. In that case, the visit would be an additive cost to the health care system rather than substituting for an in-person visit. Research from Harvard University and RAND estimates that telehealth was responsible for a 1.6 percent relative increase in Medicare spending in 2021-22 compared to 2019, which accompanied fewer emergency department visits and more adherence to chronic disease medication. The Medicare Payment Advisory Commission (MedPAC) had similar findings in their analysis, estimating that higher telehealth uptake led to a $165 per capita increase in spending. While telehealth is modestly increasing spending and utilization, it is also leading to modestly better health outcomes.  

This development is also evident in the rise of urgent care clinics over the last few years. With wait times increasing amid a shortage of primary care physicians and staffing issues, urgent care clinics can help fill the gap and ease the burden placed on hospital ER departments. But they also have the potential to add costs, and some research shows that they do increase costs on the net because of added utilization, where patients receive treatment for lower-acuity conditions. 

In response to a modest cost increase, policymakers should find areas to drive efficiency and address misaligned payment incentives rather than restrict the supply of care models that patients are demanding. This is ultimately a question of value. Rather than receiving more expensive care in a hospital or emergency department, patients choose lower-cost and more convenient settings when given the option. Both telehealth and urgent care centers may slightly increase costs, but they also increase the amount of time patients have with a provider and do so using a more efficient and lower-cost model.

Misuse and abuse

Rep. Anna Eshoo (D-CA) cautioned during an April hearing that “wherever there’s money, there’s someone or some outfits in the country that look to game it because it can become a cash cow.” Over the last few years, companies have taken advantage of the flexibilities and used kickback schemes and upcoding to defraud Medicare. However, a September 2022 report by the Office of Inspector General only identified 1,714 providers that were billing in a potentially fraudulent way (on at least 1 of 7 measures). These providers represent 0.2 percent of the 741,759 clinicians billed for telehealth services. 

Another concern expressed by lawmakers and witnesses revolved around the rise in virtual-only clinics that could get an unfair advantage because of Medicare’s payment parity. So far, data from MedPAC shows that payment parity has not led to a significant increase in the share of virtual-only providers for non-behavioral health, with “telehealth-only” providers making up just 1 percent of clinicians in both 2021 and 2022.  However, “telehealth-only” clinicians have made up over 20 percent of behavioral health providers in both 2021 and 2022. Virtual-only mental health providers are given a competitive advantage over brick-and-mortar mental health clinics due to payment parity, which could lead to distortions in the market for telehealth behavioral care. 

The potential of virtual-only clinics is concerning as it could hinder patient choice. While patients should have access to telehealth, maintaining an in-person option for all patients should be paramount. As it stands, MedPAC concluded in its April 2024 report that it is “unlikely” that telehealth flexibilities impede patient access to in-person services. Congress should establish safeguards and ensure that payment policy rewards providers that offer patients a choice in the site of care.

3 issues to consider

Patient behavior during 2021 and 2022 is challenging to generalize due to the impacts of COVID-19, and telehealth use in Medicare declined in 2021 and 2022. It’s unclear whether telehealth use has reached a point of equilibrium, so estimating costs or utilization moving forward is difficult. Because of that uncertainty, caution by lawmakers on establishing telehealth rules permanently in statute is understandable. But regardless of the concerns about permanent telehealth expansion, patients should have the option to receive care virtually when it’s appropriate and lawmakers on the House Committee on Energy and Commerce Health Subcommittee made it clear in the April hearing that they all agree the flexibilities need to be extended. Whether Congress extends for another two years or passes a permanent expansion, there are two immediate issues and one long-term issue that Congress should address to ensure continued access and prevent telehealth overuse and misuse. 

Misaligned incentives in telehealth payment

Dr. Ateev Mehrotra at Harvard Medical School argues that spending and overuse concerns could be addressed by paying providers less for telehealth services than in-person services. Because Medicare generally pays for telehealth services at the same rate as if the service was completed in-person, there is a financial incentive to move patients from in-person to virtual settings with less overhead costs for providers. The Committee for a Responsible Federal Budget points out that telehealth payment parity unnecessarily costs Medicare because Medicare’s physician fee schedule already accounts for provider overhead costs in its calculation. Removing this additional incentive to shift care from in-person to virtual will help patients continue to have an in-person option and save taxpayer money. 

The temporary extension bill advanced by the House Ways and Means Committee seeks to pay for telehealth expansion by regulating Pharmacy Benefit Manager (PBM) practices, but does not address payment parity.

Fraud and misuse in telehealth billing

In an April 2024 presentation, MedPAC outlined two changes to current Medicare policy to address concerns over fraud and abuse. First, Medicare could apply more scrutiny to “outlier physicians” that bill for either more high-cost telemedicine or significantly more services per beneficiary. The CONNECT Act would direct HHS to identify and notify those providers by establishing outlier billing thresholds for those that code telehealth services for an inappropriate amount of time or bill with unnecessary levels of complexity. The Ways & Means temporary extension focuses on services rather than providers, targeting durable medical equipment and diagnostics. The bill would list certain billing as “aberrant” and trigger a claim review if the order came from a physician without a previous relationship with the patient. Some have argued that this measure is a restatement of Medicare’s existing authority. 

Secondly, Medicare can prohibit all “incident to” billing for telehealth services in the case where a clinician can bill Medicare directly. “Incident to” billing rules offer an exception where non-physicians such as nurse practitioners or physician’s assistants can bill for services under their supervising physician’s identification number to get 100% reimbursement as physicians. This prohibition would make it easier for Medicare to track who performed each telehealth service to identify fraudulent providers. Both of these safeguards would reduce the risk of fraud and abuse which drive up Medicare costs.

Long-term: Restrictive licensing rules

While this piece centers on the looming federal deadline for Medicare coverage, we have advocated for Congressional action to require mutual recognition of all health practitioner licenses and to encourage states to adopt compacts to recognize licenses across states mutually. For example, programs like the Licensure Portability Grant Program support states seeking to reduce licensing barriers to telehealth. 

Still, with the upcoming deadline, Congress could offer an exception to state licensure requirements so that any doctor with an established relationship with an out-of-state patient can continue providing services unencumbered. This would allow college students to continue seeing their therapist or family doctor while in school, for example. In his March 2024 testimony, Dr. Ateev Mehrotra points out that similar narrow exceptions have already been made for sports medicine and telehealth for veterans. Although licensing flexibilities would not increase the supply of physicians, which is sorely needed, it would help fill the current gaps in access and ensure that patients can continue seeing their out-of-state doctor.

Moving forward

Congress must address telehealth in Medicare before the end-of-year deadline. Without these additional options for care, Medicare beneficiaries and those who benefit from rural and federally qualified clinics could lose access to existing avenues for virtual care. Another extension of the existing rules would allow for more time to consider research on the impacts of telehealth use in the years after the pandemic, but Congress will continue to debate the best path forward for telehealth this summer ahead of the deadline. Still, any extension should address fraud concerns and align payment incentives to help reduce Medicare costs. They can lower costs and better detect fraud without restricting access to a critical care model.