Why Major Digital Health Firms Are Sitting Out Medicare's Chronic Care Initiative

Medicare's experimental chronic care management program aims to improve outcomes for seniors with multiple chronic conditions by leveraging technology. However, several prominent digital health companies—including Omada Health, Livongo, and Virta Health—have notably declined to participate. This Q&A explores the key reasons behind their absence, from reimbursement limitations to regulatory complexities.

1. What is Medicare's chronic care experiment, and why was it created?

Medicare's Chronic Care Management (CCM) program, launched by the Centers for Medicare & Medicaid Services (CMS), is a value-based initiative designed to provide comprehensive care coordination for beneficiaries with two or more chronic conditions. The program reimburses providers for non-face-to-face services such as care planning, medication management, and remote monitoring. Its goal is to reduce hospitalizations and improve quality of life for the growing number of older adults living with diabetes, heart disease, and other long-term illnesses. By using digital tools, CMS hoped to engage tech companies that could scale these services efficiently. However, despite early enthusiasm, many digital health players have opted out.

2. Why are big digital health companies not joining Medicare's chronic care program?

Several factors deter large digital health firms. First, the reimbursement rates are considered too low to cover the cost of intensive coaching and technology platforms. For example, Medicare pays roughly $42 per beneficiary per month for CCM, which many companies say is insufficient—especially when dealing with high-acuity patients who require frequent human interaction. Second, the regulatory burden is heavy. Companies must comply with HIPAA, Medicare billing rules, and quality reporting requirements, which can be prohibitively expensive for startups and established firms alike. Third, the program's structure requires integration with existing primary care providers, which many digital health companies find logistically challenging. Instead, many prefer direct-to-consumer models or partnerships with employers where margins are higher and rules are less strict.

3. How does Medicare's fee-for-service model clash with digital health business strategies?

Most large digital health companies rely on subscription-based, per-member-per-month (PMPM) revenue models that thrive on scale and predictable cash flow. Medicare's CCM program, while also PMPM, imposes strict patient eligibility criteria and requires time-consuming documentation. In contrast, commercial employer contracts often allow higher payment rates and fewer restrictions. Additionally, Medicare requires that services be provided “incident to” a physician’s care, meaning digital health firms must establish close relationships with provider groups—a step that adds complexity and dilutes their autonomy. Some companies have found that adapting to Medicare’s billing codes and audit risks erodes their profit margins, making the experiment unattractive compared to other markets.

4. What specific regulatory obstacles discourage digital health participation?

Digital health firms face multiple regulatory hurdles when entering Medicare’s chronic care program. HIPAA compliance is just the beginning; they must also adhere to Medicare’s intricate billing rules, including detailed documentation for each service code (e.g., CPT 99490 for CCM). CMS requires that beneficiaries consent in writing, and that the company provides 24/7 access to care coordinators—a costly operational demand. Furthermore, the program mandates integration with electronic health records (EHRs) certified under meaningful use, which many proprietary digital health platforms lack. The risk of audits and clawbacks is significant; if documentation is incomplete, CMS can demand repayment. These regulatory burdens create a high barrier, especially for firms that have optimized their services for less regulated commercial markets.

5. Have any digital health companies successfully entered Medicare's chronic care program?

Yes, a few smaller players and traditional disease management organizations participate, but the larger digital health firms remain absent. For instance, Livongo (now part of Teladoc Health) initially explored Medicare but pulled back after realizing the program’s low reimbursement and high compliance costs. Omada Health has focused on employer-based contracts and Medicare Advantage (MA) plans—which offer more flexibility than traditional Medicare. Virta Health, which targets type 2 diabetes reversal, also prefers working with self-insured employers and MA plans. Meanwhile, companies like Dexcom have succeeded in Medicare by selling devices (continuous glucose monitors) rather than providing comprehensive chronic care management services. That device-focused strategy avoids the heavy service-delivery requirements that deter platform-based firms.

6. How does Medicare Advantage differ from the chronic care experiment, and why do digital health companies prefer it?

Medicare Advantage (MA) plans are private insurance alternatives to traditional Medicare, and they have become a more attractive entry point for digital health companies. MA plans often contract directly with digital health vendors to provide supplemental benefits—like remote monitoring, coaching, and nutrition counseling—without the strict billing codes required by the CCM program. MA also allows for greater flexibility in pricing and service design. For example, an MA plan may pay a flat monthly fee for a digital diabetes management program, rather than tying payment to individual CPT codes. Additionally, MA plans can offer these services as value-added benefits to attract enrollees, creating a win-win. In contrast, the CCM experiment is locked into Medicare’s fee schedule and regulatory framework, making it less appealing for innovative companies that require higher margins to scale.

7. What lessons does the absence of big digital health players hold for the future of Medicare's chronic care efforts?

The reluctance of major digital health firms highlights a fundamental mismatch between Medicare’s rigid, fee-for-service structure and the flexible, subscription-based models that drive modern health tech. To attract these players, CMS may need to overhaul payment mechanisms—for example, by allowing bundled payments or risk-sharing arrangements that reward outcomes rather than process. Another lesson is the importance of reducing administrative overhead: simplifying consent, documentation, and EHR integration could lower barriers. Finally, policymakers might consider partnering directly with digital health companies through pilot programs that offer higher reimbursement for proven results. Without such changes, Medicare’s chronic care experiment risks being left behind as digital health flourishes elsewhere, potentially missing an opportunity to improve care for some of the most vulnerable patients.