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Medicare is the nation's largest payor for health care services—and often a leader in using the power of the purse to pursue innovations. However, with regard to telehealth (the term Medicare uses), Medicare greatly lags behind most payors in terms of coverage and openness. Medicare spending for telehealth in 2015 was merely 0.00003% of total outlays.

Medicare is really two programs in one with roughly two-thirds of its beneficiaries in traditional volume-based or fee-for-service reimbursement and one-third in some variation of a value-based payment innovation. This is an important distinction for present telehealth because its coverage is often less restricted for value-based plans.

The shift is on, with the U.S. Department of Health and Human Services goals to have 50% of Medicare payments by value-based models and to adjust 90% of fee-for-service payments for quality or value, both by the end of 2018. This is an important trend for future telehealth because the shift to dramatically different provalue, antivolume incentives can provide a safer platform for telehealth use and innovation.

This area of Medicare and telehealth policy is expected to be much more dynamic than these HHS thresold percentages. Furthermore, momentum has been building in Congress for more fundamental and faster change, notably with a variety of legislative proposals on coverage and reimbursement.


The terms coverage and reimbursement are often used interchangeably, in large part because both are often relatively comprehensive, consistent, and widespread. For telehealth, in contrast, Medicare coverage is relatively restrictive, and reimbursement has some oddities. This situation is largely because Medicare telehealth provisions reflect a snapshot of late 1990s best-use cases, when they were last significantly updated. There have been major increases, nevertheless, in the use of Medicare's essentially static coverage as reported recently by the Medicare Payment Advisory Commission 1 and shown in Figure 23-1.

Figure 23-1.

Utilization of Medicare telehealth visits per 1,000 Part B beneficiaries, 2006 to 2014. (Source: MedPAC analysis of Medicare carrier file claims data. From Medicare Payment Advisory Commission. June 2016 Report to the Congress: Medicare and the Health Care Delivery System; 2016:240.)

The core provision in Medicare law about telehealth is Social Security Act section 1834(m)—also known as 42 U.S.C. 1395m(m)—and in regulation is 42 CFR 410.78 and 414.65.

The U.S. Centers for Medicare and Medicaid Services (CMS) defines telehealth services to include those services that require a face-to-face meeting with the patient via an interactive audio and video telecommunications system. 2

Unfortunately, the hallmark of Medicare telehealth is how restrictive its coverage essentially is:

  • No coverage for video-based services for about 80% of beneficiaries in metropolitan areas

  • No coverage for video-based services to a beneficiary at home or locations other than a designated type of health establishment

  • No coverage for some types of providers ...

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