How Can Medicare Transform Digital Health Payment Models?
Medicare can make digital health more cost-effective, but only if it shifts from paying for isolated digital activities to paying for measurable improvements in health. Digital health now includes telehealth visits, remote patient monitoring, wearable data, app-based coaching, digital mental health tools, and technology-supported chronic care. These tools are often promoted as ways to reduce avoidable office visits, emergency department use, medication nonadherence, and late detection of disease deterioration. Yet cost-effectiveness is not automatic. A connected blood pressure cuff, a mobile app, or a virtual visit can either improve care coordination or simply add another reimbursable service on top of traditional care.
The central policy question is whether Medicare can design payment models that reward technology when it prevents complications, improves access, and supports clinicians, while avoiding payment for tools that generate data without clinical action. Recent Medicare policy suggests a gradual move in that direction. CMS’s ACCESS model, which began on July 5, 2026, is explicitly designed to test outcome-aligned payments for technology-supported chronic care in Original Medicare, focusing on conditions such as high blood pressure, diabetes, chronic musculoskeletal pain, and depression. CMS describes the model as a way to pay for results rather than defined activities or service volume.
The Current Landscape of Digital Health Payment Models
Today’s Medicare digital health payment environment is a hybrid. Traditional Medicare still relies heavily on fee-for-service billing, where clinicians are paid for specific services, codes, and time-based activities. Telehealth, remote patient monitoring, remote therapeutic monitoring, and digital mental health treatment devices have each been incorporated into Medicare in different ways. This creates access, but it also fragments incentives.
Telehealth has become the most visible digital health benefit. Medicare Part B covers certain telehealth services, and through December 31, 2027, beneficiaries can receive covered telehealth services from anywhere in the United States, including their homes. Beneficiaries generally pay 20% of the Medicare-approved amount after meeting the Part B deductible, and most telehealth services carry the same cost-sharing as comparable in-person services.
Remote patient monitoring is another major category. CMS describes it as the collection of patient health data, such as blood pressure, weight, or glucose levels, through an internet-connected medical device that automatically transmits information to a provider. Medicare broadly covers remote physiologic monitoring for chronic and acute conditions, and CMS recognizes three main components: setup and education, device supply, and treatment management.
In the 2026 Medicare Physician Fee Schedule, CMS also continued adapting payment for remote monitoring and digital mental health treatment. The agency finalized use of hospital outpatient data to help set rates for some remote monitoring services and expanded digital mental health treatment payment policies to include devices used in the treatment of attention-deficit/hyperactivity disorder when furnished as part of ongoing behavioral health care.
Despite these developments, the dominant model remains code-based reimbursement. This can encourage adoption, but it may not distinguish between a digital tool that changes clinical outcomes and one that merely documents activity. The emerging ACCESS model is important because it tries to create a clearer payment pathway for care organizations that manage chronic conditions using technology, while tying full payment to measurable health outcomes.
Challenges in Implementing Digital Health Solutions in Medicare
The first challenge is evidence. Digital health products often reach the market faster than traditional medical interventions, and their performance can depend on implementation, patient engagement, clinician workflow, and data integration. A tool that works in a controlled pilot may not produce the same value across a diverse Medicare population that includes older adults, people with disabilities, rural residents, and beneficiaries with multiple chronic conditions.
The second challenge is payment design. Fee-for-service codes can help launch new services, but they may reward volume rather than value. For example, if a provider is paid for device setup, data transmission, and monthly management, Medicare must ensure that the data are clinically meaningful and that the patient receives appropriate follow-up. Otherwise, digital health can become additive spending rather than substitutive or preventive care.
The third challenge is program integrity. The HHS Office of Inspector General found that Medicare use of remote patient monitoring increased dramatically from 2019 to 2022, and about 43% of enrollees who received remote patient monitoring did not receive all three core components. OIG recommended stronger safeguards, more complete ordering-provider information on claims, methods to identify what health data are being monitored, provider education, and monitoring of companies billing for these services.
The fourth challenge is equity. Digital tools can reduce geographic barriers, but they can also worsen disparities if beneficiaries lack broadband, smartphones, digital literacy, accessible interfaces, or caregiver support. Medicare’s payment models must therefore account for the practical costs of patient onboarding, language access, technical support, and accessibility for people with visual, hearing, cognitive, or mobility limitations.
The fifth challenge is interoperability. Data from wearables, home devices, and apps are only useful if clinicians can interpret them inside normal workflows. If digital health creates dashboards outside the electronic health record, produces excessive alerts, or lacks clear accountability for follow-up, it can increase administrative burden rather than improve care.
Potential Benefits of Reforming Medicare Payment for Health Technology
If Medicare reforms payment carefully, digital health could become more cost-effective in several ways. First, it could support earlier intervention. A patient with hypertension, diabetes, heart failure, or depression may benefit when clinicians can see relevant trends between office visits and adjust treatment before a complication escalates. The cost savings would not come from the device alone, but from timely clinical action.
Second, better payment models could encourage team-based care. Nurses, pharmacists, behavioral health clinicians, health coaches, and primary care physicians can use digital tools to divide responsibilities more efficiently. A monthly or outcome-aligned payment can support these workflows better than billing for isolated encounters.
Third, payment reform could help Medicare evaluate technology based on outcomes rather than novelty. The ACCESS model’s emphasis on recurring payments tied to measurable improvement creates a framework in which digital care organizations must demonstrate value. CMS also plans for transparency through publication of risk-adjusted outcomes, which could help patients and referring clinicians compare technology-supported care options.
Fourth, Medicare’s scale can influence the broader market. When Medicare sets conditions for coverage, coding, documentation, and outcomes, vendors and providers often adapt. If Medicare rewards clinically integrated, evidence-based tools, the market may move away from stand-alone apps and toward technologies that are embedded in care plans. If Medicare pays without strong standards, however, it risks subsidizing low-value products.
Fifth, better digital health payment could improve access in underserved communities. Telehealth, remote monitoring, and app-supported coaching can be particularly valuable where transportation, specialist shortages, or mobility limitations make frequent in-person visits difficult. KFF notes that Medicare’s temporary telehealth flexibilities have been repeatedly extended and that the ACCESS model will test technology-supported chronic care payment options, although the model is limited to its performance period.
Conclusion: The Future of Digital Health and Medicare’s Role
Medicare can make health technology more cost-effective, but not by paying for technology simply because it is digital. The most promising path is a blended strategy: maintain appropriate fee-for-service coverage for clearly defined services, strengthen oversight where billing risks are high, and expand value-based models that reward improved outcomes, reduced avoidable utilization, and better patient experience.
The future of digital health in Medicare will depend on whether payment policy can separate useful care transformation from reimbursed gadgetry. Telehealth access, remote monitoring, and digital therapeutics all have legitimate roles, especially for chronic disease management and behavioral health. Yet their value depends on evidence, integration, patient support, and accountability. The ACCESS model represents an important test of whether Medicare can move beyond paying for devices and encounters toward paying for health improvement. If Medicare succeeds, it could shape a more disciplined digital health market: one where technology is not an added cost layer, but a tool for better, more efficient care.
The content is provided by Avery Redwood, Lifelong Health Tips
