Telehealth’s payment conundrum persists as innovation marches forward

telemedicine
In some instances, telehealth has figured out how to reduce costs and improve care. But payment policies haven't kept pace.

Proponents of telehealth have nearly run out of breath talking about how virtual care can improve quality and reduce costs, and for good reason—published studies combined with anecdotal evidence from providers show that virtual care can serve as a critical tool for population health.

And yet one major piece of the puzzle remains unresolved: how to structure payment.

Of course, telehealth reimbursement is nothing new: Patients, providers and payers have been grappling with a medley of payment policies for several years amid gradual progress. According to a report released by the American Telemedicine Association (ATA) in February, Medicaid agencies in all 50 states and the District of Columbia have adopted some level of telehealth coverage, and 31 states have telemedicine parity laws.

But Medicaid coverage is still lacking, writes ATA CEO Jonathan Linkous in Inside Sources, and that’s problematic for a program that is searching for ways to improve access to care and reduce the program’s ever-growing costs. The hodgepodge of state regulations means patients separated by a state line often face very different coverage options.

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“State Medicaid plans still lack complete coverage for many services that can effectively be provided via telemedicine,” Linkous wrote. “Remote health services in some states that are proven to be both effective and cost-effective are often not available to Medicaid beneficiaries next door.”

Spending data reflect that wide variation. But overall, states spend very little on telemedicine services. In Illinois, for example, telemedicine was less than $500,000 of the state’s $20 billion healthcare budget in 2015, according to a report released by the Government Accountability Office. Meanwhile, Connecticut—which limits telehealth coverage to provider-to-provider consults—spent less than $90,000. State officials raised concerns that expanded coverage would lead to unnecessary utilization.

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The same issues exist in Medicare. The GAO’s analysis of Medicare claims data shows just 0.2% of Medicare Part B beneficiaries accessed telehealth services. There may be several factors tied to that number—including the fact that telemedicine tends to attract younger patients—but Medicare’s restrictive coverage policies are impossible to ignore. Patients, providers and payers all told the GAO that coverage and payment restrictions were a primary barrier to adoption—marking a rare moment of consensus among those three groups.

In fact, the system with the highest telemedicine usage rates was the Department of Veterans Affairs. Still, only 12% of veterans used virtual services in 2016, according to the GAO.

As Chilmark Research analyst Brian Eastwood points out, reimbursement limitations won’t stop companies from targeting consumers directly, but that approach will bump into the push for value-based care and re-engineering treatment for chronic conditions. Direct-to-consumer apps, like the ones released by Samsung and American Well or the University of Pittsburgh Medical Center, might open up access to anyone with a smartphone, but episodic care won’t resolve the larger, systemic issues that plague the healthcare industry.

Interestingly, in the face of all this payment uncertainty, providers aren’t backing off telemedicine in the least. In fact, 83% of executives say they are either likely or very likely to invest in telehealth, and nearly all of those executives said gaining an advantage over competitors is their primary motivation.