Cost Concerns Limiting Telemedicine for Medicare Patients

Insurance reimbursement of telemedicine services is a major factor in telemedicine expansion.
Insurance reimbursement of telemedicine services is a major factor in telemedicine expansion.
One of the biggest factors affecting the expansion of telemedicine in the United States is how the costs are reimbursed by insurers, both private and public.

Medicare has long offered limited telemedicine services to patients who live in clearly defined rural or remote areas and who go to designated medical facilities in their area. While this can be beneficial, it doesn’t take full advantage of the convenience that telemedicine offers. Private insurers are becoming much more amenable to reimbursing telemedicine care, because patients like telemedicine and it can keep them out of emergency rooms or expensive urgent care centers should they become ill at night, during a holiday, or over a weekend when they likely couldn’t get in to see their regular physician. But there are a number of reasons why Medicare has been so slow to employ telemedicine.

Medicare Slow on Uptake of Telemedicine Technology

Currently, fewer than 1% of Medicare recipients use telemedicine via video conferencing. Only a handful of Medicare Advantage insurers offer telemedicine services, but these providers do cover services that Medicare itself does not. For example, two Medicare insurers in Pennsylvania allow telemedicine doctor visits by video conference from patient homes, so that they don’t have to live in a rural area or receive telemedicine services from designated healthcare facilities.

Congress has maintained many of the Medicare restrictions on telemedicine out of fear of increasing Medicare costs. But employers and private insurers who cover telemedicine services have found exactly the opposite: that telemedicine reduces healthcare costs rather than increasing them.

Argument: Telemedicine Makes Medical Care Too Convenient

Lawmakers in Washington are concerned that if Medicare restrictions on telemedicine are loosened and senior citizens suddenly have access to doctors online, they’ll over-utilize the services, and won’t use telemedicine to replace expensive emergency room and urgent care visits. In other words, they worry about Medicare making telemedicine too convenient for people.

In 2012, Medicare spent about $5 million on telemedicine services, which is pocket change compared to that year’s total Medicare spending of $466 billion. But some healthcare industry analysts say that telemedicine’s ability to make care convenient is “potentially its Achilles’ heel.” So far that hasn’t been the case private insurers and employers have experienced. They have found telemedicine indeed cuts down on expensive ER and urgent care visits.

Telemedicine Use Growing With Private Insurers and Medicaid

Medicaid, which is administered by the individual states, has been quicker to warm to the concept of telemedicine, as have private insurers. While it would seem that seniors would be almost ideal users of telemedicine because of its convenience and elimination of many transportation issues, most seniors simply can’t take advantage of telemedicine, even though their able-bodied children and grandchildren can through their employers and insurers. The American Telemedicine Association, a telemedicine trade group, estimates that 800,000 online medical consultations will take place in the US in 2015. Very few of these will involve Medicare patients.

Urging Medicare to Embrace Telemedicine More

Things may be changing over the next few years, though. Medicare Advantage plans and Medicare accountable care organizations (ACOs) are pushing for expanded use of telemedicine for seniors through Medicare. Medicare Advantage plans have the advantage of being able to offer telemedicine without adhering to the tight restrictions (such as rural location, and delivery of telemedicine only to patients located in designated healthcare facilities) that Medicare itself requires. Medicare Advantage plans are paid a fixed amount by the government for care of older patients, and these plans are starting to use plan revenues to offer telemedicine services, though few do that so far.

Both Republicans and Democrats in Washington want to broaden telemedicine use, and have introduced bills that would help that happen. And Medicare has expanded telemedicine coverage this year to include mental health services and annual wellness visits, though these are still only available to rural patients and must take place at designated facilities rather than from home.

AARP, AMA, and AAFP Favor Use of Telemedicine for Medicare Patients

AARP is also in favor of expanding Medicare coverage for telemedicine services, as are the American Medical Association (AMA) and the American Academy of Family Physicians (AAFP), which says telemedicine has the potential for improving healthcare quality and reducing costs, particularly for disabled patients and those without reliable transportation to medical offices.

The AMA, AARP, and AAFP support expanded Medicare reimbursement for telemedicine.
The AMA, AARP, and AAFP support expanded Medicare reimbursement for telemedicine.
Medicare Advantage providers that cover telemedicine believe that it improves the consumer healthcare experience and allows patients to receive care almost immediately, around the clock, every day of the year. And although seniors are more likely to have complex health histories, telemedicine is no riskier for them than for their children and grandchildren. Online telemedicine providers are acutely aware of what they can handle via telemedicine, and when they need to advise patients to head to the hospital or schedule an in-person visit.

Even Reimbursed at the Same Rate, Medicare Saves With Telemedicine

A December 2014 report titled “Assessment of the Feasibility and Cost of Replacing In-Person Care with Acute Care Telehealth Services” says that even if Medicare reimburses telemedicine at the same rate it does traditional care, it will save money. Assuming a telemedicine visit costs $50 to provide, each visit saves over $100 compared to the cost of providing an in-person visit. Replacing in-person acute care with telemedicine visits and reimbursing them at the same rate as in-person visits could potentially save Medicare an estimated $45 per visit.

The report also argues that the fear of overutilization is unfounded, and such problems would only occur if more than one-third of patients use telemedicine when they would have otherwise done nothing. Furthermore, the cost of follow-up care after telemedicine visits is expected to be less than the $104 “worst case” cost Medicare pays for follow-up for in-person care.


As Medicare reimburses more telemedicine services, it’s likely more private insurers will start to do the same. Currently Aetna, Cigna, and Highmark are three of the main private insurers that reimburse telemedicine services, but more are expected to follow suit over the next few years. This may happen even if Medicare maintains a conservative approach to reimbursing telemedicine services.

At, we are happy to see the expansion of telemedicine options for healthcare consumers. For over 15 years we have worked closely with US-licensed pharmacists to dispense and deliver name brand prescription medications to over half a million satisfied customers, so we understand the value and convenience of medical services provided at a distance.

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