Telemedicine Spending by Medicare: A Snapshot from 2012

Medicare has been one of the principal payers for healthcare services delivered via telemedicine to rural beneficiaries since 1997. Early projections of the cost of covering telemedicine for Medicare beneficiaries made legislators cautious to take on such a large obligation, but subsequent reports showed actual expenditures to be far below early estimates. As interest in expanding Medicare's coverage for services delivered via telemedicine grows, further examination of the extent of telemedicine use within the Medicare program and the costs associated with this use is warranted.

Medicare claims data from 2012 were examined. All valid claims associated with a Current Procedural Terminology code and modifier indicative of delivery via telemedicine were extracted and linked to the state of origin using carrier codes. Claims were summarized by clinical procedure code, medical specialty, and state. Expenditures were also calculated on a per member per month basis by state to compare the relative penetration of telemedicine among states.

Total Medicare telemedicine-related expenditures in 2012 were found to be a little over $5 million, 65.2% of the total allowed telemedicine-related charges of $7.7 million. This figure represents an expenditure of approximately $0.09 annually per Medicare enrollee, or about three-quarters of a penny per member per month. Wide variation was found among states in telemedicine use. Mental health services and service providers accounted for nearly 70% of total telemedicine-related professional fees, and originating site facility fee claims accounted for only 28% of the total number of paid claims.

Medicare spending on telemedicine is largely for mental health services and represents only a tiny fraction of overall Medicare spending. Adoption of telehealth is driven by multiple factors beyond need and rurality.