Telehealth Series Part 1: Paying for Telehealth


In the first installment of our Telehealth Ahead of the Curve series, we look at how telehealth is paid for across the major payor types focusing on Medicare, given expanding coverage in MA starting 2020. We think Medicare will prove a bigger opportunity than the market currently expects. We see expanding coverage driving provider and health plan investment in telehealth benefiting telehealth vendors.

Telehealth Coverage Historically Limited, But Legislative And Administrative Efforts Changing That For The Better (Eric Assaraf – Washington Research Group)

Medicare already covers some telehealth services, but with numerous restrictions. However, that has started to change with CMS allowing MA plans to offer additional telehealth benefits in  2020. In addition, efforts continue on the legislative front to expand telehealth usage, such as through provisions within the 21st Century Cures Act, and looking ahead to bills like the CONNECT for Health Act.

Medicare Telehealth Opportunity Could Be Bigger Than Expected (Charles Rhyee)

While the market understands that expanding coverage in Medicare increases the TAM for telehealth, there remains some debate on how big the opportunity could be given uncertainty around likely usage by seniors. We believe Medicare telehealth will prove bigger than expected given that each Medicare member activated uses twice the amount of telehealth services than the average commercial member.

CMS data indicates that, although very few Medicare FFS members used telehealth (0.01%), those that did used it roughly 3 times a year compared to an avg of 1.5 times per member in the commercial population.

Expanding Coverage Will Help Providers Spur Next Leg Of Telehealth Growth (Charles Rhyee)

We believe providers are a key constituent in unlocking the Medicare opportunity (the other being health plans), but uneven coverage from an overall payer mix perspective has disincentivized providers. Expanding Medicare coverage starts to even out overall payer coverage. We see this as removing a key barrier to provider adoption, spurring near-term investment in telehealth. The provider opportunity hasn’t gone unnoticed by industry participants.

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