In the past few months, we’ve seen a number of federal agencies take important steps to promote telemedicine. In May, the Department of Agriculture began a $15 million grant and loan program that will provide funding to innovative rural telemedicine programs; the Veteran’s Administration, building on its already impressive telemedicine capabilities, reported in July that it will be testing a new telemedicine system designed to support rural primary care providers; and in May and June the Centers for Medicare and Medicaid Services Center for Innovation awarded funding to a number of private sector initiatives that have a significant telehealth component.

Taken together these government initiatives, (as well as others not described in this post, see here and here), appear to signal a convergence of support within the federal government for telemedicine. Yet they also call into question why there appears to be growing support for telemedicine everywhere in government except for the one place where it matters most –the Medicare Program.

While the Centers for Medicare and Medicaid Services have taken peripheral steps to promote telemedicine through demonstration projects and innovation grants, Medicare continues to exclude most forms of telemedicine from payment.  In fact, the payment rules have not changed significantly in some time. Under the present rules, fee-for-service Medicare will not pay for telemedicine services unless all of the following conditions are met (subject to a few exceptions):

  • The patient resides in a designated rural health professional shortage area;
  • Communications with the patient are in real time (i.e. as opposed to the asynchronous transmission of health care information using store-and-forward technologies);
  • The patient is physically present at a medical office or facility (such as a physician’s office, hospital, or skilled nursing facility) during the telemedicine encounter;
  • The encounter corresponds with a small number of provider billing codes designated for telehealth (which limit reimbursement to certain types of clinical services); and
  •  The encounter was performed by a health care professional eligible for reimbursement for professional fees (e.g. Medicare will not pay for telemedicine services provided by speech therapists, occupational therapists, and licensed professional counselors, among others).

Some of these restrictions are in the Social Security Act, which means the Centers for Medicare and Medicaid Services may need new authority from Congress in order to remove them.  But in this era of budget tightening, convincing Congress to expand the scope of coverage and payment for telemedicine services will be difficult.

However, while Medicare remains largely on the sidelines, many private payors are stepping up to the plate, and there may also be opportunities for payment in Medicare Advantage programs.   This means that for companies that are looking to launch a new telemedicine product or service, there are a growing number of opportunities for reimbursement outside of fee-for-service Medicare.  But ultimately, for telemedicine to assume its rightful place in our health care system, Medicare is going to have to pay for it.



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