New Jersey Governor Blocks Telehealth Payment Parity Mandate

Gov. Phil Murphy says payers should be able to negotiate payment for telehealth services with healthcare providers.

New Jersey Gov. Phil  Murphy has tapped the brakes on payment parity for telehealth, telling supporters he’s hesitant to make permanent a tactic that has been an emergency measure during the pandemic.

Murphy, a cautious supporter of telehealth in the past, has conditionally vetoed SB 2559, which would have mandated that payers – including the state Medicaid program – reimburse healthcare providers for telehealth services at no less than the rate they pay for in-person services.

“Approving this bill would amount to a very heavy thumb on the scale in favor of providers vis-à-vis carriers, in an area traditionally left to private negotiations,” he said in a lengthy notice attached to the veto. “Moreover, the cost to carriers – which would be felt both by those paying 3 premiums and taxpayers alike – could be substantial. And, while the cost of providing telehealth may be the same as or higher than the cost of providing in-person care in the short term, providers could realize significant cost savings over the long term, as expanding telehealth options might bring reductions in clinical space, support staff, and other expenses.”

Long a controversial strategy, payment parity has become popular during the pandemic as means of convincing hesitant care providers to try out telehealth, with the promise that they’ll be paid at the same rate as for in-person care. But opponents, including many in the insurance industry, say payers should be able to negotiate their own reimbursement rates, and that telehealth over the long run will actually reduce costs and save money.

Murphy’s action keeps the state’s current payment parity mandate in place through the end of 2023 to give the state Department of Health time to study the issue and make a policy recommendation, and to give lawmakers the time to decide whether they want to revise the legislation. Murphy also said that he would be recommending amendments to the Legislature “to remove some of the restrictions placed on carriers in order to ensure that carriers continue to have the flexibility they need to adapt to changing circumstances.”

Murphy’s veto isn’t unique. While most states and the federal government enacted a flurry of emergency rules to expand telehealth coverage and access during the height of the pandemic, many of those measures are ending. Some states have made those rules permanent, particularly for mental health and substance abuse services, while others are waiting on the federal government to enact long-term telehealth policy.

Telehealth advocates worry that an abrupt end to these emergency measures will force health systems to discontinue telehealth programs and patients to lose access to needed services. Opponents say the measures may have worked well during the pandemic but won’t be successful in the long run.

Murphy took a similar tack with proposals to allow medical marijuana providers to prescribe via telehealth. The governor initially vetoed the proposed legislation earlier this year, saying it created too many legislative hoops to jump through. He approved an amended bill in July.

Murphy argues that the concept of payment parity is good, in that it forces payers, providers and patients to think of telehealth on the same level as in-person care. But the concept hasn’t been fully thought out, and it might do more harm than good in the long run, he says.

“We do not yet have a full understanding of whether or how pay parity could negatively affect patients,” he said. “Notably, the federal Centers for Medicare & Medicaid Services has not yet taken a permanent position on pay parity. And, although providers must meet the same standard of care for telehealth as for in-person care, the quality of care could be impacted. In the short term, the flexibility afforded by expanded access to telehealth has greatly benefited New Jersey residents who may not have the time or resources to receive in-person care when local in-network options are limited. But I am concerned that in the long term, pay parity could over-incentivize telehealth, further limiting in-person options. This could be especially detrimental for those in underserved communities.”