MedPAC: Lower Telehealth Payments to Pre-Pandemic Facility Rates

June 20, 2023 - The Medicare Payment Advisory Commission (MedPAC) released its 2023 report to Congress last week, in which it made numerous recommendations, including returning to the pre-pandemic lower facility rate requirement for telehealth services.

MedPAC is an independent congressional agency comprised of 17 members that advise the United States Congress on issues impacting the Medicare program. In its latest report, the commission offers recommendations on numerous topics, ranging from addressing the high prices of drugs covered under Medicare Part B to standardizing benefits in Medicare Advantage (MA) plans to aligning fee-for-service payment rates across ambulatory settings.

It also includes a report, mandated by the Consolidated Appropriations Act, 2022, on the usage of telehealth services during the public health emergency (PHE) and the association between expanded telehealth coverage and healthcare quality, access, and costs.

During the COVID-19 PHE, Congress relaxed several requirements governing telehealth use, significantly expanding adoption and use. The regulatory flexibilities included eliminating originating site restrictions for telehealth services, expanding the types of providers allowed to offer telehealth, and broader coverage of audio-only services. Congress extended many of these flexibilities through Dec. 31, 2024.

As a result of the waivers, fee-for-service (FFS) Medicare spending for telehealth services initially skyrocketed from $130 million in 2019 to $1.9 billion in the second quarter of 2020. However, telehealth spending declined in the latter half of 2020 and 2021, dropping to $827 million in the fourth quarter of 2021.

The number of FFS beneficiaries who received at least one telehealth service paid under the physician fee schedule also rose dramatically, from 239,000 in 2019 to 14.2 million in 2020. That figure then declined to 9.7 million in 2021.

But Medicare spending on telebehavioral health jumped between 2020 and 2021. The report shows that mental, behavioral, and neurodevelopmental disorders accounted for the highest share of spending for telehealth in 2021 at 34.4 percent, a higher share than 25.4 percent in 2020.

To assess the relationship between expanded telehealth coverage and healthcare quality, access, and costs, MedPAC examined four population-based measures: ambulatory care-sensitive (ACS) hospitalizations per 1,000 FFS Medicare beneficiaries, ACS emergency department visits per 1,000 FFS Medicare beneficiaries, total clinician encounters per FFS Medicare beneficiary, and total cost of care for Part A and Part B services per FFS Medicare beneficiary. They compared these measures from the second half of 2019 with those from the second half of 2021.

The commission found that risk-adjusted rates of ACS hospitalizations were lower in the second half of 2021 for hospital service area (HSA) groups with low and high telehealth use rates. But these rates decreased at a slower rate, on average, among HSAs with a high level of telehealth use. Similarly, risk-adjusted rates of ACS emergency department visits were lower during the 2021 period than the 2019 period for HSAs with low and high telehealth usage rates.

In addition, total clinician encounters per beneficiary were lower in the second half of 2021 than in the second half of 2019 across all HSAs. However, on average, HSAs with high telehealth use experienced slower declines than their low-telehealth-use counterparts.

Finally, the total cost of care per beneficiary increased in 2021 compared with 2019 in both high-and low-telehealth use HSAs, but the costs increased more in the ones with high telehealth usage.

"In summary, our findings suggest that during the pandemic, greater telehealth use was associated with little change in measured quality, slightly improved access to care for some beneficiaries, and slightly increased costs to the Medicare program," the report states.

As part of its mandated report, MedPAC also recommended alternative approaches to paying for telehealth services. The commission recommends that the Centers for Medicare and Medicaid Services (CMS) "resume paying the lower, facility rate for telehealth services as soon as practicable after the PHE."

Physician fee schedule payments differ depending on whether they are provided in a facility setting, like a hospital or skilled nursing facility, or a non-facility setting, such as a freestanding clinician's office. Prior to the pandemic, CMS paid clinicians performing telehealth visits the lower facility-based payment rate instead of higher non-facility rates, regardless of where they were located. After the pandemic hit, the agency changed its policy to take the clinician's location into account for both in-person and telehealth services.  

The commission also suggests that policymakers continue to monitor the impact of telehealth on healthcare access, quality, and costs, using the data to inform permanent policy changes.