The 2021-22 Budget: Analysis of the Governor’s Medi-Cal Telehealth Proposal

analysis full gutter The 2021-22 Budget: Analysis of the Governor’s Medi-Cal Telehealth Proposal MAY 2021 This budget series post provides (1) an overview the implementation of the package of policy of the Governor’s January budget proposal for an changes would be cost neutral.) In addition to the ongoing, post-pandemic Medi-Cal telehealth policy; Governor’s statutory proposal, there are legislative (2) an assessment of the Governor’s proposal; and proposals in this subject area that currently (3) issues for legislative consideration. We note are being considered in the policy process. We that the Governor’s proposal is primarily policy intend for this post to assist the Legislature focused and would largely be implemented through in its deliberations on the broader, continuing budget-related legislation. With the exception of issue of what ongoing Medi-Cal telehealth policy one discrete related budget item involving the should be going forward (after the temporary establishment of a new Medi-Cal benefit, the telehealth-related flexibilities granted during the proposal is not accompanied by budget requests course of the coronavirus disease 2019 [COVID-19] for additional funding. (The administration assumes come to an end). Background Medi-Cal Is the State’s Medicaid Program. through which services are provided. (There are two Medi-Cal is the state’s Medicaid program. As a joint main Medi-Cal delivery systems, which we discuss state-federal program, Medi-Cal costs are shared later.) This section describes several ways providers between the state and federal governments, usually are reimbursed in Medi-Cal. with each paying 50 percent of costs. While states Clinicians Typically Are Paid on have significant flexibility to set their own policies Fee-for-Service or Capitated Basis. Clinicians around eligibility, benefits, and provider payment include physicians, mental health counselors, nurse methodologies and rules, state policies generally practitioners, and many other health care provider must be consistent with federal Medicaid rules for types. Clinicians who serve Medi-Cal patients federal funding to be made available. However, generally are reimbursed in one of two ways. The federal law allows states to waive certain federal first is fee-for-service, whereby Medi-Cal pays Medicaid rules without having to forego federal clinicians a predetermined fee for each service funding, provided states meet special conditions. they deliver. When multiple billable services are For example, in response to the onset of the provided during a patient visit, the clinician can COVID-19 pandemic, the federal government bill individually for each of the services. Another waived certain Medicaid requirements to allow common reimbursement methodology is capitation, states to adopt temporary health care flexibilities in whereby clinicians (usually as a member of a their Medicaid programs. provider group) receive a monthly payment for each patient whose care they oversee. This “capitated” Medi-Cal Provider Reimbursement payment does not vary directly with the costs Medi-Cal reimburses providers for the services of treating each patient, but instead is intended they provide to program beneficiaries in a variety of to cover the average cost of all the provider ways. How Medi-Cal reimburses providers can vary group’s patients. by the type of provider and by the delivery system 2021-22 LAO Budget Series 1 analysis full gutter Health Centers Are Subject to a Unique Telehealth Modalities Medi-Cal Reimbursement Methodology. Health A Variety of Telehealth Modalities Exist. centers—commonly known as Federally Qualified Telehealth is not a distinct health care service, Health Centers—are nonprofit health care clinics that but rather a method through which health care is provide primary care and other health care services provided to patients. Telehealth services can be in medically underserved areas or to medically delivered through a variety of “modalities,” which underserved populations regardless of their are the mechanisms through which telehealth patients’ ability to pay. With over 1,400 locations services can be delivered. We describe the various in California and having served roughly 4 million telehealth modalities below. Medi-Cal beneficiaries in 2019, health centers make up a significant portion of Medi-Cal’s primary care • Live Video. Services delivered through live provider network. Under federal law, health centers video are provided by a health care provider to are entitled to a unique Medicaid reimbursement a patient in real-time through a video system. methodology known as the prospective payment Services delivered through live video can system (PPS). Under PPS, health centers receive an include both (1) services intended to replace all-inclusive payment for each patient visit, generally an in-person health care visit and (2) services regardless of what individual services were provided that are not intended to replace an in-person during that visit. Medi-Cal payment rates for health health care visit (such as a brief check-in with centers range from as low as $64 per visit to as high a health care provider that lasts for a short as $719 per visit, depending on the health center period of time). and their services. Statewide, the average Medi-Cal • Telephone. Services delivered by telephone health center payment rate is $215 per visit. By are also provided in real-time. Under this contrast, the average physician clinic payment in modality, the patient and health care provider Medi-Cal fee-for-service is $84 per visit. States cannot see each other while services are are allowed to waive federal PPS requirements being delivered. Services delivered by and instead reimburse health centers for services telephone are often referred to as “audio-only” delivered to Medicaid beneficiaries according to telehealth, and can also include both an alternative payment methodology. However, the (1) services intended to replace an in-person alternative payment methodology must guarantee visit and (2) services that are not intended that health centers receive as much funding as they to replace in-person visits. Generally, health would have under PPS. care providers deliver services by telephone Medi-Cal Provider Reimbursement for a similar set of services as those delivered Methodologies Can Vary Depending on through live video. Delivery System. Around 80 percent of Medi-Cal • Non-Real-Time Exchange. We define beneficiaries receive care through Medi-Cal’s non-real-time exchange as the delivery of managed care delivery system. In this system, health information through an electronic managed care plans are responsible for arranging messaging system (such as secure and paying for most Medi-Cal services, like primary email). Services delivered through care and hospital inpatient services, utilized by non-real-time exchange are often referred their members. Managed care plans generally are to as “asynchronous” or “store and forward” responsible for establishing their own provider telehealth. Non-real-time exchange usually reimbursement levels and methodologies (with refers to services delivered by a health fee-for-service and provider capitation being care provider to a patient. (For example, a the most common methodologies). Medi-Cal dermatologist assessing a patient based beneficiaries not enrolled in managed care receive on a photograph of their skin.) However, services through the fee-for-service delivery system. non-real-time exchange may also refer to In Medi-Cal’s fee-for-service system, providers are remote consultations between providers paid on a fee-for-service basis at reimbursement (such as between primary care and specialist levels determined by the state. providers), known as “eConsult.” 2021-22 LAO Budget Series 2 analysis full gutter • Remote Patient Monitoring. Remote patient example, there are studies that examine the impact monitoring refers to the tracking—by a health of live video mental health services and dermatology care provider through use of a medical eConsults on access, respectively.) As a result, device—of a patient’s vital signs or other health generalizing findings on telehealth’s impact on information from a distance. Remote patient access in available literature to telehealth services monitoring is often provided for (1) high-risk in general is difficult. Nevertheless, there is some patients, such as those with heart conditions research that indicates that telehealth may improve or who have been recently discharged from access to care in particular circumstances. For a hospital, and (2) patients with chronic example, a recent study found that non-real-time conditions. For example, remote patient exchange among health care providers was monitoring can be used to track glucose levels associated with an increase in specialist referrals for patients with diabetes. to endocrinologists. Another study of a health care provider network found that a telehealth expansion Research Findings on Telehealth resulted in an increase in total service utilization (including both in-person and telehealth services) There is broad academic literature on the various within that network of 80 percent. aspects of telehealth service delivery. (Notably, Telehealth Payment Rates May Affect Use. the academic literature generally pre-dates the How providers are paid for telehealth services may onset of the COVID-19 pandemic. The pandemic affect the extent to which those services are offered has changed how telehealth is used in health care and, by extension, customer utilization. The concept delivery substantially. As such, the pre-pandemic of covering telehealth services at the same payment research on telehealth may not entirely apply to rate as health care services provided in-person is the post-pandemic world.) This literature explores known as “payment parity.” A number of states have the clinical effectiveness of telehealth, the patient in place telehealth payment parity policies. California characteristics of its users, and the impact has a payment parity law, though it does not apply telehealth expansions have had on health care to Medi-Cal. Available research (which predates the utilization (a proxy for access) and costs. This onset of the COVID-19 pandemic) suggests that section summarizes several of the major research residents of states with payment parity laws utilize findings. However, in our assessment, the research telehealth services to a greater extent than residents on telehealth leaves open major questions. While of states without such laws. telehealth expansions likely do increase access to Clinical Effectiveness of Telehealth Tends care, their impacts on the quality of care (clinical to Vary by Modality and Service. Clinical effectiveness) and their fiscal impacts are less effectiveness of telehealth services often is defined consistent and clear. as the quality of outcomes after receiving telehealth Telehealth Expansions Have Been Shown services relative to the quality of outcomes after to Improve Access to Health Care, but It Is receiving the same services in-person. Studies Difficult to Generalize Research Findings. Since assessing the clinical effectiveness of telehealth expansions of telehealth services generally increase services have measured the quality of outcomes the convenience of seeking out health care, they across several different dimensions. For example, have potential to improve access to health care. For some studies have measured the quality of example, telehealth services can help reduce the outcomes through self-reported patient health burden associated with traveling long distances for information, and others have focused on measures in-person health care visits, which may dissuade of the processes of health care such as accuracy certain patients from accessing health care. In of treatment diagnoses. In our review of available addition, telehealth services also can result in fewer literature, we find that the clinical effectiveness of cancelled health care appointments. Most studies telehealth services tends to vary depending on two examining the impact of telehealth services on main factors, which we discuss below. access to care generally focus on specific health care service types and telehealth modalities. (For 2021-22 LAO Budget Series 3 analysis full gutter • Modality. Available research indicates that Fiscal Impact of Telehealth Expansions Are there are differences in the clinical effectiveness Not Fully Understood. Telehealth expansions of telehealth services based on whether appear to have the potential to increase or services are provided through live video or decrease health care costs, likely depending through telephone. (Available research on the on a number of factors, including the relative clinical effectiveness of telehealth services reimbursement rates for in-person and telehealth provided through non-real-time exchange services (under a fee-for-service reimbursement or remote patient monitoring is limited.) In method) and the type of health care being general, the literature indicates that telehealth provided through telehealth. Our review of the services delivered through live video likely are literature finds that data on the fiscal impact of more clinically effective than telehealth services telehealth expansions are more limited than that delivered through telephone. However, whether available with respect to the clinical effectiveness there is a difference in clinical effectiveness of these expansions. Below, we highlight several based on telehealth modality also depends on outstanding questions we have about the fiscal the specific health care service type examined. impact of telehealth expansions. For example, available research indicates that • How Do Provider Expenses for Delivering behavioral health services provided through Telehealth Services Differ From In-Person telephone likely are as clinically effective as Services? In our review of the academic those provided through live video. literature, we found little information around • Service. Studies examining the clinical the extent to which the expense of delivering effectiveness of telehealth generally focus telehealth services from a provider perspective on specific health care service types. (For differs from the expense of delivering example, one study we reviewed examined in-person health care services. While provider the impact of infectious disease consultations labor costs might be similar between the two, through telehealth on hospital lengths of stay.) other expenses likely differ. For example, Accordingly, extrapolating the findings in the the delivery of telehealth services generally literature to telehealth services in general requires the purchase of communication is difficult. However, the available literature technology platforms and could involve does indicate that there likely are differences changes to providers’ electronic health record in the clinical effectiveness of telehealth systems. In-person health care services, on services based on health care service type. the other hand, require the purchasing or For example, available research indicates that leasing and maintenance of a facility of the telehealth services are particularly clinically size needed to accommodate in-person visits. effective for behavioral health treatment. Providing hybrid telehealth and in-person In a 2020 survey, University of California, services generally could involve incurring all Los Angeles (UCLA) primary care providers the above expenses, though certain in-person reported that treatment for mental health expenses, such as cleaning exam rooms conditions was particularly appropriate for between each patient visit, could go down telehealth. In the same survey, providers to the extent telehealth visits substitute for reported that treatment for upper respiratory in-person visits. Even if the provider expenses infections, diabetes, and skin conditions also that come with delivering telehealth and were appropriate for telehealth. However, in the in-person services might not differ markedly in same survey, providers reported that treatment the short run, the expanded use of telehealth for chest pain, shortness of breath, ear or potentially could lower the long-run expense hearing issues, and abdominal pain were not of delivering care if providers adapt to appropriate for telehealth. providing fewer in-person visits. However, as noted above, data in the academic literature that would allow us to assess the likelihood of this potential are limited. 2021-22 LAO Budget Series 4 analysis full gutter • At What Level Should Telehealth Telehealth Impacts on Health Equity Reimbursement Rates Be Set Relative Telehealth Expansions Have Potential to to In-Person Services to Encourage Promote Health Equity… As discussed earlier, Widespread Provider Participation? expansions of telehealth services have potential As noted earlier, research suggests that to broadly improve access to health care (through residents of states with payment parity laws increasing the convenience of seeking out health utilize telehealth services to a greater extent care). Certain population groups may especially than residents of states without such laws. benefit from this improved access to health care. However, how high reimbursement rates for For example, individuals who live in rural areas are telehealth services need to be to encourage especially likely to need to travel long distances widespread provider adoption of telehealth for in-person health care visits. In addition, modalities remains uncertain—particularly individuals with complex care needs also may have going forward following the expansion of difficulty traveling to health care appointments, telehealth services that occurred during and individuals who face difficulties with taking COVID-19. (We discuss the expansion that time off work—who are especially likely to be low took place in California later in this post.) income—may not seek out in-person health care • Do Telehealth Expansions Increase or visits despite needing medical care. Accordingly, Decrease Net Health Care Costs Overall? the increased convenience of telehealth services Overall, research on how telehealth expansions may particularly benefit these population groups, affect utilization suggests that they have the which available research has shown experience potential to increase net costs, however, some disparities in their health outcomes. To the extent studies do point to potential cost savings. For that telehealth services lead to additional necessary instance, one study found that state mandates health care services being provided to these requiring that health insurers cover telehealth populations, they have potential to reduce health services led to reductions in hospitalizations disparities and promote health equity. in nonmetropolitan areas (though not in …However, Health Equity Is Not Necessarily metropolitan areas). Another study found that Improved for All Populations. To the extent telehealth services could lower health care that telehealth expansions lead to fewer available costs to the extent they serve as a lower-cost in-person visits for services that are not appropriate substitute for in-person care. Other studies, to provide through telehealth—some of which we however, show that telehealth expansions lead discussed earlier—they could have harmful effects to increases in health care utilization overall. on promoting health equity. In addition, telehealth As discussed earlier, one study of a health expansions may not reach populations that could care provider network found that a telehealth benefit most. For example, although low-income expansion increased overall service utilization individuals and individuals with complex conditions (including both in-person and telehealth are especially likely to benefit from the increased services) within that network by 80 percent. convenience that available telehealth services offer, With significant increases in overall service research has shown that telehealth services are utilization, reimbursement rates for telehealth used more widely by higher-income and healthier services would have to be significantly less people. In addition, available research also has than those for in-person services for net found that individuals who do not speak English health care costs to go down as a result are substantially less likely to receive telehealth of a telehealth expansion. On balance, services. In the 2020 UCLA survey discussed telehealth expansions appear more likely to earlier, primary care providers reported that it was increase, rather than decrease, net health easiest to provide telehealth services to individuals care costs unless their reimbursement rates with higher levels of education (who are typically are set at relatively lower levels compared to higher income), and difficult to provide telehealth in-person visits. services to people for whom English was not their 2021-22 LAO Budget Series 5 analysis full gutter preferred language. Notably, available research also covered brief patient check-ins with health care indicates that the particular modality through which providers over the phone. These services were not telehealth services are provided also is relevant to covered at payment parity. The above coverage whether telehealth expansions benefit populations requirements applied to both fee-for-service health that experience health disparities. For example, care provider reimbursement and reimbursement to reflecting disparities in broadband access, health care providers through capitation. receiving telehealth services through live video is Outside of the fee-for-service and capitated more prevalent among higher-income individuals. reimbursement models, under this Medi-Cal Conversely, low-income individuals are more likely telehealth policy there were specific exceptions for to receive telehealth services through telephone. certain health care provider types. For example, counties generally were able to be reimbursed Telehealth in Medi-Cal Before and at payment parity for behavioral health services During COVID-19 delivered through telephone. (In California, counties generally are responsible for providing both mental In early 2020, the federal government declared health services for severe mental illness and a national public health emergency in response to substance use disorder services through Medi-Cal, the onset of the COVID-19 pandemic and waived and receive reimbursement for these services certain Medicaid health care delivery requirements through a separate reimbursement model.) In for the duration of the emergency. In California, the addition, while Medi-Cal covered live video and Department of Health Care Services (DHCS) used certain non-real-time exchange services at health this authority to adopt several temporary flexibilities centers at payment parity, health center patients in the Medi-Cal program related to the delivery of generally could only receive telehealth services telehealth services. In this section, we summarize on location at the health center (with the provider both (1) the state’s Medi-Cal telehealth policy as it attending remotely). Health centers also were not existed prior to the COVID-19 pandemic and (2) the allowed to establish new patients through telehealth state’s current temporary Medi-Cal telehealth policy modalities. Figure 1 on the next page contains a (which is authorized by the federal government description of the state’s Medi-Cal telehealth policy to continue until the end of the declared national as it existed just prior to the COVID-19 pandemic, public health emergency). and compares it to the state’s policy during the Prior to COVID-19, Medi-Cal Covered Certain pandemic and as proposed by the Governor to Services Delivered Through Telehealth. In 2019, continue after the pandemic on an ongoing basis. DHCS adopted a permanent Medi-Cal telehealth The latter two sets of policies are discussed below policy after a process of stakeholder engagement and later in this post, respectively. and public comment. This Medi-Cal telehealth During the COVID-19 Pandemic, the State policy, which was in effect until the onset of the Temporarily Expanded Telehealth Flexibilities COVID-19 pandemic (specifically at the time the to Ensure Continued Access to Health Care. national public health emergency declaration was As discussed earlier, in response to the onset made), allowed for the coverage of certain Medi-Cal of the COVID-19 pandemic, the state has services delivered through certain telehealth implemented temporary COVID-19 telehealth modalities. Notably, under this telehealth policy, the flexibilities in Medi-Cal, which expire at the end Medi-Cal program covered (1) telehealth services of the national public health emergency. Notably, provided through live video and (2) telehealth these temporary flexibilities include coverage of services provided through non-real-time exchange, telehealth services provided through telephone at if a health care provider determined the service payment parity (including at health centers through to be clinically appropriate. With the exception PPS). Furthermore, several of the state’s temporary of eConsult, the Medi-Cal program covered Medi-Cal telehealth flexibilities pertain specifically these services at the same payment rate as to health centers. These include (1) removing the services provided in-person. In addition, under requirement for a patient to be present at the health this telehealth policy, the Medi-Cal program also 2021-22 LAO Budget Series 6 analysis full gutter Figure 1 Medi-Cal Telehealth Policy Before, During, and Proposed for After COVID-19 Pandemic a Before COVID-19 During COVID-19 Proposed for After COVID-19 b Fee-for-Service and Managed Care Network Clinicians Live Video Covered benefit? Yes, for new and established Yes, for new and established Yes, for new and established patients. patients. patients. Reimbursement policy Parity with in-person services. Parity with in-person services. Parity with in-person services. Telephone Covered benefit? Yes, but generally limited Yes, for new and established Yes, for established patients. to brief check-ins, for patients. established patients. Reimbursement policy Brief check-in reimbursement Parity with in-person services. Separate fee schedule developed c rates. by DHCS. Non-Real-Time Covered benefit? Yes, for new and established Yes, for new and established Yes, for established patients. Exchange patients. patients. Reimbursement policy Store and forward at parity Store and forward at parity Separate fee schedule developed c with in-person services, with in-person services, by DHCS. eConsult at separate rate. eConsult at separate rate. Remote Patient Covered benefit? No No Yes, for established patients. Monitoring Reimbursement policy N/A N/A Separate fee schedule developed c by DHCS. Health Centers d Live Video Covered benefit? No with exceptions. Yes, for new and established Yes, for new patients who live in patients. service area, and established patients. Reimbursement policy N/A Parity with in-person services Parity with in-person services (at PPS rates). (at PPS rates). Telephone Covered benefit? No Yes, for new and established No patients. Reimbursement policy N/A Parity with in-person services N/A (at PPS rates). d Non-Real-Time Covered benefit? No with exceptions. Yes, for opthalmology, No Exchange dermatology, and dentistry for new and established patients. Reimbursement policy N/A Parity with in-person services N/A (at PPS rates). Remote Patient Covered benefit? No No No Monitoring Reimbursement policy N/A N/A N/A a As proposed in the Governor’s 2021-22 budget through budget-related statutory language. b This section describes policy for clinicians that provide care through Medi-Cal’s managed care and fee-for-service delivery systems. Clinicians working within Medi-Cal’s other delivery systems, such as school-based care and behavioral health providers, are subject to their own pre-COVID-19 telehealth policies. The Governor’s proposed payment parity policy would allow managed care plans to reimburse their network providers for telehealth services at rates other than parity when mutually agreed between the plan and provider. c The proposed budget-related statutory changes would authorize but not require DHCS to develop and use a separate fee schedule. Accordingly, DHCS would have authority to reimburse for some or all of these services at parity with in-person services. d While live video and certain non-real-time exchange telehealth services are covered at health centers (and reimbursed at parity with in-person services), a patient generally can only receive the telehealth services on location at the health center. Given this requirement, these services at health centers generally involve a telehealth visit with a specialist attending from a distant site. COVID-19 = coronavirus disease 2019; DHCS = Department of Health Care Services; and PPS = prospective payment system. 2021-22 LAO Budget Series 7 analysis full gutter center to receive telehealth services (allowing increase availability of telehealth services. (A 2020 beneficiaries to receive telehealth services at home) study found that among commercially insured and (2) allowing health centers to provide telehealth enrollees, the number of telehealth visits increased services to both new and established patients. from 17 visits per 10,000 enrollees enrollees in Figure 1 contains a description of the state’s March 2019 to 650 visits per 10,000 enrollees temporary Medi-Cal telehealth flexibilities. in April 2020.) The state’s temporary Medi-Cal Expanded Telehealth Flexibilities Likely Have telehealth flexibilities likely have helped sustain Helped Sustain Service Utilization in Medi-Cal access to health care for Medi-Cal beneficiaries During Pandemic. During the COVID-19 pandemic during the pandemic. For example, DHCS data (and especially in the initial months), utilization of indicate that telehealth visits in the Medi-Cal in-person care plummeted. To ensure continued program rose to a high of over 11,000 per access to care, health care providers began to 100,000 beneficiaries in April 2020 (compared to just 285 per 100,000 beneficiaries in April 2019). Governor’s Proposal The Governor proposes budget-related that were adopted during the pandemic. legislation to change Medi-Cal telehealth policies Under the Governor’s proposal, flexibilities not on a permanent basis. With the exception of the extended would expire at the end of the national remote patient monitoring benefit discussed below, COVID-19 public health emergency. Most notably, these changes are expected by the administration the Governor proposes ending payment parity to be cost neutral and generally would take for services provided through telephone (instead effect once the COVID-19-related national public paying for them according to a new fee schedule health emergency ends. Many components of the that would be developed by DHCS) and eliminating proposal may need to receive federal approval in Medi-Cal coverage of services through telephone order for there to be federal financial participation in at health centers. The administration has indicated the expanded telehealth services. that it is open to re-examining coverage of Governor Proposes to Make Permanent Some telehealth services through telephone and other Medi-Cal Telehealth Flexibilities Adopted in telehealth modalities at health centers within the Response to Pandemic… As shown in Figure 1, context of broader reform of the health center the Governor proposes to extend and make payment model (through the alternative payment permanent some, but not all, of the Medi-Cal methodology for health centers discussed earlier). telehealth flexibilities that were temporarily adopted Governor Also Proposes to Modify during the COVID-19 pandemic. Major telehealth Longer-Standing Medi-Cal Telehealth Policies. flexibilities proposed to be made permanent The Governor’s proposal also would modify some include, for example, (1) coverage of telehealth longer-standing Medi-Cal telehealth policies (with services through telephone for providers other than changes taking effect after the declared national health centers (2) removal of the requirement for public health emergency ends). For example, while beneficiaries to be on location at health centers to the Governor’s proposed permanent Medi-Cal access telehealth services, and (3) allowing health telehealth policy generally would require payment centers to provide live video services to both new parity for live video services, Medi-Cal managed and established patients. care plans would not be required to conform …And Discontinue Others, in Particular to payment parity requirements for live video in Policies Related to Coverage for Services cases where they come to an agreement with a Through Telephone. As previously noted, the provider on an alternative reimbursement rate or Governor does not propose to extend and methodology. In addition, the Governor’s proposal make permanent all the telehealth flexibilities would allow for non-real-time exchange services to 2021-22 LAO Budget Series 8 analysis full gutter be reimbursed through Medi-Cal at an alternative the goal of better managing the patients’ care. fee schedule (not at payment parity). (However, The Governor’s budget proposes to make remote we understand that the administration intends patient monitoring a Medi-Cal benefit available to keep reimbursement rates at parity for certain beginning in 2021-22 through providers other non-real-time exchange services.) than health centers, where the benefit would not Governor Proposes Adding New Remote be reimbursable under Medi-Cal. Unlike the other Patient Monitoring Benefit. As previously proposed Medi-Cal telehealth policy changes, the discussed, remote patient monitoring is a Governor assumes the addition of remote patient telehealth service through which clinicians monitoring would affect Medi-Cal costs. To fund receive physiological data on their patients that this new benefit, the Governor proposes spending is collected by remote monitoring devices, with $34 million General Fund ($94.8 million total funds) in 2021-22 and ongoing. Assessment Given Potential for Improved Access, care services through health centers. During the Components of Governor’s Proposal Have COVID-19 pandemic, the majority of telehealth Merit. As discussed earlier, expansions of services delivered through health centers were telehealth services have potential to increase overall provided through telephone, rather than through access to health care. Furthermore, Medi-Cal live video or other telehealth modalities. This beneficiaries—who generally are low income and is consistent with research that shows that who may have complex care needs—may be differences in broadband access contribute particularly likely to benefit from the increased to low-income individuals being less likely to convenience that telehealth services offer. receive telehealth services through live video Accordingly, the permanent extension of certain (and more likely to receive telehealth services telehealth flexibilities could lead to improved access through telephone). However, the Governor does to health care—beyond the end of the declared not propose to permanently allow for Medi-Cal national public health emergency—for Medi-Cal coverage of telehealth services through telephone beneficiaries. Given the potential that expansions at health centers. Not continuing coverage for of telehealth services have to improve overall this modality could substantially impede access access to health care (especially for Medi-Cal to care for the significant number of Medi-Cal beneficiaries), we find that the components of the beneficiaries receiving services at health centers. Governor’s proposal that make permanent current Moreover, the Governor’s proposed permanent flexibilities have merit. These include (1) maintaining Medi-Cal telehealth policy would create differences coverage of telehealth services through telephone in access to health care among Medi-Cal for providers other than health centers and beneficiaries depending on which health care (2) maintaining that Medi-Cal beneficiaries do not provider they receive services from. For example, need to be on location at health centers to receive under the Governor’s proposed permanent telehealth services. Medi-Cal telehealth policy, a Medi-Cal beneficiary However, Proposed Limits on Health Center with a primary care provider based at a health Flexibilities to Provide Telehealth Services center would not be able to receive services Going Forward Could Impede Access and through telephone, while a beneficiary with another Work Against Efforts to Promote Health Equity. primary care provider would be able to. We find As discussed earlier, health centers make up a that this inconsistency in Medi-Cal coverage significant portion of Medi-Cal’s primary care among program beneficiaries—which could provider network. In 2019, roughly one-third create inequities within the Medi-Cal beneficiary of all Medi-Cal beneficiaries accessed health population—lacks a sufficient policy rationale. 2021-22 LAO Budget Series 9 analysis full gutter Governor’s Proposal Would Implement to those for in-person visits, the Governor’s Different Telehealth Payment Policies Between proposed policies generally would encourage Medi-Cal and Commercial Insurance, Potentially providers to make live-video telehealth Affecting Access. Under current law, commercial services available at comparable levels to health plans must reimburse telehealth services in-person services (to the extent telehealth (including telehealth services provided through is appropriate). Accordingly, this proposed telephone) at parity with in-person services. By reimbursement rate policy could significantly contrast, the Governor’s Medi-Cal telehealth increase access to live-video services and, proposal potentially would set reimbursement in doing so, improve the convenience of levels for certain telehealth services at lower rates obtaining care for patients and delivering than in-person services, creating a difference in care for providers. This improved access telehealth reimbursement policy between Medi-Cal to live-video telehealth likely would partially and commercial insurance. Given the role that substitute for in-person care—and thereby reimbursement rates can play in encouraging maintain access while improving patient and service availability, this difference could create provider convenience—while also partially or exacerbate disparities in access to telehealth being in addition to in-person care—thereby services between individuals with commercial increasing overall access. insurance and Medi-Cal beneficiaries. The • How Would Lower Reimbursement proposed limitations in Medi-Cal coverage of Rates for Services Through Telephone telehealth services at health centers may widen Affect Access? The Governor’s proposal these disparities since health centers make to set telehealth services provided through up a significant portion of Medi-Cal’s primary telephone at an alternative fee schedule— care network. likely with lower reimbursement rates—could Several Outstanding Questions on Proposed discourage providers from making these visits Payment Rate Policies. As previously noted, and available at comparable levels to in-person among other changes, the Governor proposes services. However, the added convenience paying for live-video telehealth services at parity and potentially lower expense of delivering with in-person visits and paying for services these telehealth services nevertheless could delivered through telephone on a separate fee encourage reasonably widespread provider schedule (except at health centers, where these adoption of this modality. At this time, how services would not be reimbursable). Setting these reimbursement rates would compare to payment rates at appropriate levels is important for in-person reimbursement rates is unknown, encouraging clinically effective care (the appropriate pending the administration’s development type of care) and discouraging clinically ineffective of the alternative fee schedule for these care. Additionally, to ensure services are made services. Ultimately, we likely would not know available, payment rates must at least cover what reimbursement levels are sufficient for the marginal cost of the service rendered. The encouraging reasonable access to telehealth Governor’s proposed policies for setting payment services through telephone until after changes rates raise a number of outstanding questions, to Medi-Cal telehealth policy have been which we explore in the following bullets. in place for one or more years following the pandemic. • How Would Payment Parity for Live-Video • How Would Proposed Reimbursement Telehealth Services Affect Access? Higher Rate Policies Affect the Quality of Care? reimbursement rates for a given service As previously discussed, certain telehealth encourage health care providers to deliver modalities, such as live-video telehealth, the service and thereby facilitate access to have been shown to be clinically effective that service while lower reimbursement rates for treating a variety of conditions. However, do the opposite. By setting reimbursement evidence of the clinical effectiveness of rates for live-video telehealth services equal 2021-22 LAO Budget Series 10 analysis full gutter other telehealth modalities is less robust and payment methodology is appropriate for certain health conditions are not amenable live-video services. to diagnosis and treatment via telehealth and • What Are the State’s Options for instead require an in-person visit. Providing Reimbursing Telehealth Services at Health telehealth services may be more attractive Centers? Changing how health centers than providing in-person services due to are paid, such as through waiving their their potentially superior convenience and federal entitlement to PPS, is a complicated the possibly lower expense of their delivery. process that is constrained by federal rules. If providers receive high reimbursement Accordingly, what options the state has for rates for telehealth services relative to the reimbursing health centers at rates other services’ delivery expense, providers may than those dictated by PPS is not entirely elect to provide telehealth services even in clear. While reimbursing health centers for cases where in-person care would be more telehealth services at lower rates than PPS appropriate. This could negatively affect the may be the most reasonable option, finding quality of care. The state could consider these a methodology for doing so that conforms incentive effects in setting reimbursement with federal rules could prove challenging. rates for telehealth services. Potential policy options include (1) making • Is the Current Health Center broad changes to how health centers are Reimbursement Model Appropriate reimbursed through waiving PPS and adopting for Live-Video Telehealth Services? As an alternative payment methodology (such previously discussed, health centers generally as a value-based payment methodology), receive an all-inclusive payment rate known (2) reimbursing at least certain telehealth as PPS for each Medi-Cal patient visit, rather services at Medi-Cal fee-for-service rates, than being paid for each service delivered and (3) establishing separate PPS rates for during the visit. PPS rates in the state range in-person and telehealth services. from $64 to $719 per visit depending the Administration’s Assumption That the health center, averaging $215 per visit. Proposal Generally Does Not Have a Net One reason why PPS rates are higher than Fiscal Impact Warrants Scrutiny. Although the a typical visit to a physician clinic is that Governor’s proposed Medi-Cal telehealth policy health center visits often include additional likely would generate various costs and savings in services on top of a standard checkup. Medi-Cal, the administration has not provided a Such additional services—which often are fiscal estimate of its proposal (with the exception reimbursed through health centers’ per-visit of the remote patient monitoring component). payment rate—can include dental services, Rather, the administration has shared that, on net, mental health counseling, the dispensing of it assumes the fiscal impact of the proposal is prescription drugs (including the cost of the zero. (The administration assumes that potential drugs themselves), and even transportation. increased costs due to increased utilization of While some of these services can be provided telehealth services would be offset by the lower via telehealth (mental health counseling, for cost of providing telehealth services and reductions example), others cannot (the dispensing of in more costly interventions due to increased prescription drugs). Nevertheless, under the access to preventative care.) We question the Governor’s proposed reimbursement policy, reasonableness of this assumption. In particular, we telehealth reimbursement rates for live-video think that significant net costs could arise over the services provided by health centers still long term to the extent that telehealth expansion would cover the average cost of providing significantly increases overall service utilization, these additional services, even those not and reductions in costlier interventions do not deliverable via telehealth. This raises the materialize to the extent necessary to offset these question of whether health centers’ current costs. As discussed earlier, research has found that 2021-22 LAO Budget Series 11 analysis full gutter previous telehealth expansions have increased total telehealth policy to approve, the Legislature service utilization (in-person and telehealth services could consider the associated fiscal risks and ask together) by as much as 80 percent. In deciding the administration for more information on why on which aspects of the Governor’s Medi-Cal generally assuming cost neutrality is reasonable. Consider Deferring the Establishment of Ongoing, Post-Pandemic Medi-Cal Telehealth Policy The Governor’s January budget proposed could consider generally extending the current significant changes to Medi-Cal telehealth policy, temporary flexibilities through 2021-22 to allow for which generally would take effect after the end greater deliberation over what ongoing Medi-Cal of the COVID-19-related national public health telehealth policy should be. If the COVID-19-related emergency. Changes to the Governor’s proposal national health public health emergency expires could be forthcoming in the May Revision. on December 31, 2021 as assumed by the The Legislature also is currently deliberating Governor’s January budget, an extension through telehealth-related statutory proposals in the policy 2021-22 reflects a six-month extension of current process. This post broadly analyzes and raises Medi-Cal telehealth policy. Extending current outstanding questions about what Medi-Cal Medi-Cal telehealth policy would come with General telehealth policy should be going forward. As we Fund (and federal fund) costs and likely would discuss below, setting ongoing Medi-Cal telehealth require approval from the federal government. policy involves a number of important policy Consider Approving Remote Patient considerations, many of which may benefit from Monitoring Benefit and Extending Its Availability more deliberation than this year’s budget process to Health Centers Now. As previously discussed, has allowed. the Governor proposes adding a new telehealth Given Outstanding Questions and Concerns, benefit called remote patient monitoring at an Setting Ongoing Medi-Cal Telehealth Policy annual General Fund cost of $34 million beginning Now May Be Premature. As discussed earlier, in 2021-22. We do not have concerns with the the Governor proposes to establish a permanent proposed addition of this new Medi-Cal benefit. Medi-Cal telehealth policy following the many However, we find that the Governor’s proposed telehealth policy changes that have been put in prohibition on health centers from being reimbursed place during the COVID-19-related public health for this new benefit lacks a policy rationale. emergency. This proposed ongoing telehealth Specifically, we find the exclusion of health centers policy would maintain some, but not all, of the raises equity concerns as a significant portion temporary COVID-19 Medi-Cal telehealth flexibilities of Medi-Cal beneficiaries would not be able to and make other changes to long-standing Medi-Cal access the new benefit through their primary telehealth policy. These changes would take place care providers. Accordingly, the Legislature could before a number of outstanding questions could consider extending the Governor’s proposed new be answered related to the clinical effectiveness remote patient monitoring benefit in Medi-Cal to and fiscal impact of telehealth services, the health centers. Doing so would result in additional impact of telehealth services on health equity, costs and likely would require federal approval. and the appropriateness of payment rates for In our review of other states’ Medicaid telehealth telehealth services. policies, we find that gaining federal approval for Consider Extending Current Flexibilities on health center reimbursement of remote patient a Temporary Basis. Given the many outstanding monitoring at an alternative fee schedule than PPS questions about what permanent Medi-Cal (which could potentially reduce the costs of this telehealth policy should be, the Legislature extension) is possible. 2021-22 LAO Budget Series 12 analysis full gutter Consider Convening a Workgroup to Develop Specifically, the workgroup could evaluate the and Evaluate Options for Longer-Term Medi-Cal potential impacts of various telehealth coverage Telehealth Policy. The Legislature could consider and reimbursement policies on access, the quality directing DHCS to convene a workgroup to develop of care, health equity, and Medi-Cal program and evaluate the state’s options for longer-term costs. For example, the workgroup could evaluate Medi-Cal telehealth policy. The workgroup could what is an appropriate and federally permissible include representatives from the Legislature, telehealth reimbursement methodology for health administration, and the Medi-Cal stakeholder centers. If consensus could be reached, the community. The workgroup would be tasked with workgroup could offer recommendations on what evaluating the benefits and trade-offs of various longer-term Medi-Cal telehealth policy should be. policy options related to Medi-Cal coverage The workgroup would report back to the Legislature of and reimbursement for telehealth services. on its findings during the 2022-23 budget process. LAO Publications This report was prepared by Corey Hashida and Ben Johnson, and reviewed by Mark C. Newton and Carolyn Chu. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. 2021-22 LAO Budget Series 13