California Increases Telemedicine Payments to Reduce Medicaid Costs

Published November 11, 2019

Medi-Cal currently serves more than 13.5 million residents. Telemedicine is increasingly seen as a way to help the hard-pressed program carry out its mission while the state struggles with a growing shortage of doctors. The new rules offer pay parity for telemedicine visits versus in-office consultations.

Medi-Cal defines telemedicine as “the mode of delivering health care services and public health via information and communication technologies to facilitate the diagnosis, consultation, treatment, education, care management, and self-management of a patient’s health care while the patient is at the originating site, and the health care provider is at a distant site,” as stated in an announcement laying out the new guidelines.

The polices began to go into effect on July 1. The California Department of Health Care Services released its final policy in August.

Sweeping Rule Changes

In a major departure from previous Medicare policy in California, there are no restrictions on where the consultation must begin. Patients will not have to go to a center, for example, to receive a telehealth service. The visit can originate from home. To be reimbursed, services must be covered by Medi-Cal, meet policies and guidelines, and be appropriate for telehealth.

The provider must be licensed in California and enrolled as a Medi-Cal provider. Nonphysician medical practitioners are covered.

Providers using telehealth no longer have to document a barrier to an in-person visit, nor are they required to document the cost-effectiveness of the telehealth option. Patients, however, must consent to the telehealth services, and the providers must be licensed under California law.

Medi-Cal does not embrace all forms of telemedicine. The new guidelines do not allow payment for remote patient monitoring that collects health data from the individual’s home through devices and mobile health platforms. Medi-Cal also does not pay for telehealth equipment purchases or compensate providers for phone calls or emails.

Increasing Doctor Shortage

Medi-Cal’s embrace of telemedicine arrives at a time of an acute shortage of health care providers throughout the state, including doctors, nurses, and home care workers. Putting further strains on the system, Gov. Gavin Newsom proposes extending Medicaid coverage to young adults who are in the country illegally and providing more subsidies for health care for middle-class families.

A February 2019 report by the California Future Health Workforce Commission found the state will need 4,100 more doctors and 600,000 additional home care workers over the next decade. More than one-third of the state’s doctors and nurse practitioners are reaching retirement age, the Los Angeles Times reported on February 5.

Growing Trend

California’s decision to offer pay parity for telemedicine visits is a significant reform, says Robert Graboyes, a senior research fellow at the Mercatus Center who focuses on technological innovation on health care.

“California is a pretty significant chunk of the U.S. population,” said Graboyes. “It offers ways to potentially cut some costs, but also ways to deliver better health care.

“The good news is they are paying for it,” said Graboyes. “The bad news is, potentially, one of the advantages of telehealth is it can be delivered less expensively. And now we’re saying we are going to have to pay you the same as an office visit. You may be undermining one of its biggest advantages: saving money.”

Graboyes says telemedicine will be especially helpful to people who can’t easily take time off from work to see a doctor.

“A lot of people don’t have that luxury,” said Graboyes. “They can’t walk away from work when they want to, or they’re going to lose their wages.

“Telemedicine offers a way to offer immediate help, anywhere you are, any hour of the day,” said Graboyes. “That is an extraordinary capability.”

Slipping Down

The Mercatus Center publishes a periodic report on states’ openness to new health care technologies and delivery models that can save consumers money. In the June 2018 report, “Healthcare Openness and Access Project: Mapping the Frontier for the Next Generation of American Healthcare,” California was ranked 39th in the nation, down from 34th in 2016. The state scored a three out of five on the telemedicine subindex, putting it in the middle of the pack.

Maine, Mississippi and Washington had the highest score, at 4.5. Pennsylvania was ranked last with a 1.75 score.

Scores are based in part on how state Medicaid programs reimburse for telehealth.

“States place varying restrictions on this type of telemedicine, in some cases limiting its use to the treatment of certain conditions or limiting the type of devices that can be used or the information that can be collected,” the report states. “For this indicator, states with fewer restrictions received higher scores.”


Bonner R. Cohen, Ph.D., ([email protected]is a senior fellow at the National Center for Public Policy Research and a senior policy analyst with the Committee for a Constructive Tomorrow.


Internet Info:

Darcy N. Bryan, Jared M. Rhoads, Robert F. Graboyes, “Healthcare Openness and Access Project: Mapping the Frontier for the Next Generation of American Healthcare, April 2019 Update,” Mercatus Center, George Mason University: