The Telehealth Explosion

In March 2020, the world shut down — and Medicare was forced to change overnight. CMS waived decades of telehealth restrictions, allowing providers to bill for virtual visits for the first time at scale. Medicare spending crashed 10.0% in 2020, shedding $9.0B in payments and 264.8M services. But what emerged from the wreckage was a fundamentally different system.

Before COVID: Telehealth Was a Rounding Error

Before 2020, Medicare telehealth was severely restricted. Beneficiaries had to be in a designated rural area, at an approved originating site (like a clinic — not their home), and see a provider on the other end via real-time video. The restrictions were so onerous that telehealth accounted for less than 0.1% of Medicare visits.

Modifier 95 — the CPT modifier for synchronous telehealth — existed but was rarely used. CMS maintained a narrow list of telehealth-eligible services, and most providers never bothered with the paperwork.

March 2020: Everything Changed

Under emergency authority, CMS made sweeping changes virtually overnight:

• Geographic restrictions eliminated — telehealth from anywhere in the country
• Home as originating site — patients could receive telehealth from their couch
• Audio-only visits allowed — a phone call could be billed as an office visit
• Payment parity — telehealth visits reimbursed at the same rate as in-person
• Expanded service list — hundreds of new codes eligible for telehealth billing

The Spending Trajectory Tells the Story

The pattern is unmistakable: steady growth through 2019, a sharp crash in 2020, then a rebound that exceeded pre-pandemic levels by 2021. By 2023, Medicare was paying $93.7B — up 20% from 2014.

Modifier 95: The Telehealth Marker

Modifier 95 is appended to CPT codes when a service is delivered via synchronous (real-time) telehealth. Before 2020, it was a footnote in Medicare billing. After March 2020, it became one of the most common modifiers in the system.

CMS data shows that by 2021, over 40% of evaluation and management visits for some specialties were billed with telehealth modifiers. Psychiatry and psychology led the way, with some providers shifting entirely to telehealth and never returning to in-person care.

The Winners: Rural Access

Telehealth's greatest promise was always about access. Rural Medicare beneficiaries who previously drove hours for specialist appointments could now see providers via video. Mental health services, which were critically underserved in rural areas, saw telehealth adoption rates exceeding 50%.

The data supports the access argument: the number of active Medicare providers grew from 1.1M in 2020 to 1.2M in 2023 — a gain of 90.0K providers. Telehealth lowered the barrier to serving Medicare patients, especially for behavioral health providers.

The Losers: Fraud Opportunities

Telehealth also created new fraud vectors. Without the natural constraint of a physical office — where there are only so many exam rooms and hours in the day — some providers billed impossible volumes. A provider could theoretically bill telehealth visits back-to-back with minimal actual patient interaction.

The DOJ's 2025 healthcare fraud takedown specifically called out telehealth fraud schemes where providers billed for services that were either never rendered or consisted of brief, medically unnecessary phone calls. Some telehealth companies were accused of paying kickbacks to providers for ordering unnecessary genetic tests and durable medical equipment after brief telehealth "consultations."

Is Telehealth Saving Money?

The intuitive answer seems like yes — a video visit should cost less than an in-person visit. But the data tells a more complicated story. With payment parity, a telehealth visit reimburses at the same rate as in-person. And by lowering access barriers, telehealth may increase utilization — people who wouldn't have bothered with an in-person visit will take a telehealth appointment.

Total Medicare spending in 2023 was $93.7B — the highest ever — with 2.6B services. The provider count (1.2M) is also at an all-time high. Telehealth didn't reduce spending — it expanded the system.

What Happens Next

Congress has repeatedly extended the COVID-era telehealth flexibilities, most recently through 2025. The question is whether they become permanent. CMS has been gradually tightening some provisions — requiring video capability for certain visit types, adding fraud safeguards — but the political pressure to maintain telehealth access is enormous.

The genie is out of the bottle. Patients expect telehealth. Providers have built their practices around it. And 1.2M Medicare providers aren't going back to the way things were in 2019. The question isn't whether telehealth stays — it's how Medicare controls it.