Fostering Flexibility: How Medicare Advantage Potentially Accelerated Telehealth Benefits

Abstract

In 2018, the US Congress enacted a policy permitting Medicare Advantage (MA) plans to cover telehealth services in a beneficiary’s home and through audio-only means as part of the basic benefit package of services, where prior to the policy change such benefits were only allowed to be covered as a supplemental benefit. MA plans were afforded 2 years of lead time for strategizing, negotiating, and capital investment prior to the start date (January 1, 2020) of the new coverage option. Our data analysis found basic benefit telehealth was offered by plans comprising 71% of enrollment in 2020 and increased to 95% in 2021. At the same time, remote access telehealth was offered as a supplemental benefit for 69% of enrollees in 2020, a decrease of 23% compared to 2019. These efforts by MA plans may have enabled traditional Medicare (TM) to leverage an existing telehealth infrastructure as a solution to the access issues created by public health policies requiring sheltering in place and social distancing during the COVID-19 pandemic. The success of this MA policy prompts consideration of additional flexibility beyond the standard basic benefit package, and whether such benefits reduce costs while improving access and/or outcomes in the context of a managed care environment like MA. Subject to oversight, such flexibility could potentially improve value in MA, and facilitate future changes in TM, as appropriate.

• What do we already know about this topic?

• Prior to 2020, the use of telehealth among Medicare beneficiaries was rare. In 2018 the US Congress passed legislation to encourage Medicare Advantage private health insurance plans cover greater access to telehealth services.

• How does your research contribute to the field?

• Our research examines how Medicare Advantage plans covered telehealth services both before and after implementation of the 2018 policy change.

• What are your research’s implications toward theory, practice, or policy?

• Our findings imply that the 2018 telehealth policy change may have laid the groundwork to build the infrastructure, including strategizing, negotiating, and capital investment, enhancing the US’s ability to quickly convert to a virtual care system during the COVID-19 pandemic.

Introduction

In 2023, enrollment in Medicare Advantage (MA) plans surpassed the government-run traditional Medicare (TM) option for the first time. ¹ This marks a milestone in Medicare’s rapid shift toward privatized insurance. Scholars have contemplated the trade-offs between MA and TM—namely MA allows for supplemental benefits and an out-of-pocket maximum that TM does not, but MA requires more narrow provider networks and comprehensive utilization review. ² Another key difference is MA costs the beneficiary less on an annual basis but costs the taxpayer more.^1,2

The MA system was designed so private insurers could provide equivalent “basic benefits” to those offered in TM. Unlike TM, private insurers are allowed flexibility in design to lower costs and provide additional “supplemental” benefits. However, supplemental benefits must be funded by cost savings. Thus, because TM historically placed strong restrictions on telehealth services, MA plans were constrained in their ability to cover telehealth, unless it was provided as a supplemental benefit.

However, in 2018, Congress deviated from this norm and allowed MA plans to offer coverage of telehealth through the basic benefit. This allowed an MA beneficiary’s home to serve as a telehealth site of care and allowed reimbursement for audio-only services, even though such options were not permitted in TM (unless the beneficiary was part of an Accountable Care Organization).^3,4 Congress likely restricted this flexibility because of fraud and abuse concerns within TM due to its fee-for-service nature. ⁵ The changes took effect on January 1, 2020, which afforded 2 years of lead time for strategizing, negotiating, and capital investment. Over this 2-year period, venture capital investment in digital health increased 20% ($1 billion). ⁶ These efforts potentially enabled TM to leverage the infrastructure prompted by the MA policy during the COVID-19 pandemic. Thus, while originating in MA, this policy may have enabled a quick conversion to telehealth access for TM after temporary reimbursement for telehealth was enacted in 2020. ³

Background on the Medicare Advantage Program

The Medicare program establishes an annual benchmark system for MA plans. A different benchmark is set for each county in the US based on a statutory formula. ⁷ If an MA plan submits a bid that is lower than the benchmark, the plan receives a rebate. MA plans are required to reinvest a portion of the rebate, and plans typically elect to reinvest in premium reductions, reduced cost-sharing, and supplemental benefits. ⁸

Medicare and Telehealth

Regarding TM, the Social Security Act (SSA) has been modified 13 times to accommodate telehealth changes.^{3,9 -20} In contrast, the SSA has been modified once for MA telehealth changes, in 2018. ³ The intent of the MA policy was to allow insurance plans to transition telehealth from the supplemental to the basic package (Figure 1). From an economic standpoint, the MA telehealth policy was expected to allow plans to lower bids, thereby reducing federal spending. Both the Centers for Medicare & Medicaid Services (CMS) and the Congressional Budget Office (CBO) projected savings of $80 million over the 10-year budget window.^8,21 Further, CMS assumed Medicare beneficiaries will save $557 million, due to lower co-pays, over the next 10 years. ⁸ Finally, lower bids also increase MA rebates, which can be invested in services or cost-sharing reductions.^22,23

Figure 1.

Flow of Medicare advantage coverage of benefits.

Assessment of MA Telehealth Policy

Given the policy change, we hypothesized coverage of telehealth services as a supplemental benefit would decrease while telehealth coverage through the basic benefit (defined as “additional telehealth” in P.L. 115-123) would increase. ³ To test our hypothesis, we used CMS’ Plan Benefits Package (PBP) files from 2012 to 2022. We used the same methodology as in McCormack and Trish to analyze the PBP files. ²³

In 2020 (the first year of MA telehealth policy) additional telehealth was offered in the basic package by plans comprising 71% of enrollment, which increased to 95% in 2021 (Figure 2). However, remote access was offered as a supplemental benefit for 69% of enrollees in 2020—a decrease of 23% compared to 2019. In contrast, telemonitoring (onsite monitoring)—which was unlikely to be affected by the MA telehealth policy—remained stable for nearly a decade. Our findings, including considerable coverage of additional telehealth services in 2020 and increases in 2021, are like those previously reported.^24,25

Figure 2.

Change in MA supplemental and basic benefits.

Discussion

The timing of telehealth policy changes—including those for MA—possibly created a serendipitous situation during the pandemic. With no way to predict a world-wide pandemic occurring in 2020, any prior telehealth infrastructure groundwork could have readied the Medicare program to quickly transition to a virtual care system. Numerous studies have found a near-overnight transformation to telehealth as the predominant form of visits for TM in March and April, 2020.^{26 -40} Yet none of these studies can explain the mechanism behind this success. Though we do not formally test this, our results provide suggestive evidence that the policy change for MA telehealth may have helped facilitate this near immediate transition.

To the best of our knowledge the 2018 policy change is the first of its kind allowing MA plans the ability to convert a supplemental benefit into a basic benefit. The success of the policy change prompts consideration of additional flexibility beyond the standard basic benefit package, and whether such benefits reduce costs while improving access and/or outcomes in the context of MA. Requiring an act of Congress to do so is a high bar and may no longer be justified now that MA is the predominant choice of beneficiaries. Subject to oversight, allowing MA plans the ability to move services from the supplemental classification to the basic benefit package could enhance value in MA, and facilitate future changes in TM, as appropriate.

Conclusion

The 2018 telehealth policy change was precedent setting and likely enabled success for TM coverage of telehealth during the COVID-19 pandemic. Given that MA now constitutes half of Medicare enrollment, policymakers should consider allowing plans flexibility in provision of services beyond the standard benefits package.