The headline warning of $1.2 billion in telehealth surprise bills for seniors requires immediate correction: that figure does not exist in current government records or healthcare data. However, seniors face very real out-of-network telehealth billing risks that deserve your attention. Recent research reveals that while a $1.2 billion loss did occur related to Medicare telehealth services, it stemmed from a coordinated fraud scheme involving orthotic braces and false medical assessments between 2014 and 2019—not from legitimate surprise bills. This distinction matters because it changes how you should protect yourself.
The actual threat to seniors is more nuanced. Out-of-network telehealth providers can still create billing complications, and during 2025’s telehealth coverage uncertainty, many seniors worried they’d face unexpected charges. The good news: the No Surprises Act does provide federal protections. The bad news: implementation gaps, claim denial rates above 40% at some providers, and insurer penalties on hospitals using out-of-network physicians all create friction that can delay care or increase administrative burden. Understanding what protections you actually have—and what gaps remain—is essential for anyone over 65 using virtual care.
Table of Contents
- What Happened to That $1.2 Billion in Medicare Telehealth Losses?
- Out-of-Network Telehealth and the No Surprises Act Protection
- The Hidden Cost: Rising Insurer Penalties on Out-of-Network Providers
- Telehealth Billing Complexity Hasn’t Simplified
- Where Surprise Bills Still Slip Through
- What Your Medicare Plan Should Cover for Telehealth
- The Future of Telehealth Billing: What’s Coming for Seniors
- Conclusion
What Happened to That $1.2 Billion in Medicare Telehealth Losses?
In May 2024, the U.S. Department of Health and Human Services Office of Inspector General reported that medicare lost $1.2 billion related to telehealth services. The story behind that number reveals how fraud and legitimate billing concerns can get tangled in public perception. The loss occurred through an organized scheme in which telemarketers and durable medical equipment companies used telemedicine physicians to bill Medicare for orthotic braces—knee braces, back braces, and other supports—without proper patient assessment or medical necessity documentation.
The scheme operated primarily between 2014 and 2019, targeting vulnerable seniors who didn’t realize they were enrolled in unnecessary brace programs that Medicare was funding. The man at the center of this fraud, Herbert “Herb” Kimble, became a fugitive in October 2024. His network worked by having offshore telemarketers contact seniors, enroll them in telehealth “evaluations” with physicians who had no medical relationship with the patients, and then bill Medicare for expensive braces the patients never needed or ordered. This is fraud—a healthcare crime—not a surprise billing issue. Conflating this fraud with legitimate out-of-network telehealth billing concerns obscures both the real threat of organized healthcare fraud and the more common problem of unexpected bills from virtual care providers. The lesson: seniors must verify that telehealth providers are in-network and that prescriptions are medically necessary before proceeding.
Out-of-Network Telehealth and the No Surprises Act Protection
The legitimate concern about out-of-network telehealth billing exists because virtual care didn’t fit neatly into traditional insurance networks when it scaled rapidly post-pandemic. A senior might book a telehealth visit through their health plan’s portal, thinking they’re seeing an in-network provider, only to receive a bill weeks later because the actual clinician consulted was out-of-network. The Federal No Surprises Act, which took full effect in 2022, created a critical protection: patients receiving telehealth from out-of-network clinicians can only be billed at the in-network rate for that service. This prevents the worst-case scenario of a $500 virtual visit getting billed as $1,500 because the provider was out-of-network. However, protections only work if insurance companies enforce them and patients know they exist.
During 2025, uncertainty around CMS telehealth waivers created a brief window where some clinics and patients weren’t sure whether this protection still applied. It did, but confusion led to unnecessary worry. The limitation: the No Surprises Act caps what you can be billed, but it doesn’t eliminate all billing friction. Healthcare Finance News reported implementation challenges, and many seniors still struggle with claim denials (41% of providers reported denial rates of 10% or higher as of early 2025, according to Experian survey data). When a claim is denied, patients may face requests for additional documentation or appeals—a process that can take weeks or months, delaying both care and bill resolution.
The Hidden Cost: Rising Insurer Penalties on Out-of-Network Providers
A less-publicized development is affecting seniors who use out-of-network telehealth providers. Starting January 1, 2026, Anthem Blue Cross (part of Elevance Health) implemented a policy penalizing hospitals 10% if they use out-of-network physicians for any service, including telehealth consultations. This is not a surprise bill to the patient—it’s a financial penalty between the insurer and the provider. However, these penalties create incentives that can affect care delivery and provider behavior. Some hospitals and telehealth platforms may stop using specialists who are out-of-network, which could limit access to the specific expertise a senior needs.
Others may raise their rates to offset the penalty, which could eventually affect premiums. For seniors, this means the out-of-network telehealth landscape is tightening. In-network options are becoming more economically attractive to providers and insurers, which sounds like good news—fewer surprise bills. But it also means fewer choices if an in-network specialist isn’t available for your specific condition. If you need a telehealth visit with a cardiologist or neurologist who isn’t in-network, you may find fewer options or longer wait times as providers shy away from out-of-network consultations due to insurer penalties. This is a reminder to always confirm your provider’s network status before booking and to ask your insurance plan whether they’ve implemented similar penalty policies.
Telehealth Billing Complexity Hasn’t Simplified
One reason out-of-network telehealth remains a concern is that the billing rules themselves are complex and inconsistent. According to a 2025 Experian healthcare survey, 68% of healthcare providers reported that submitting clean (error-free) claims has become harder over the past year. The culprit: complex, evolving billing rules specific to different types of telehealth—synchronous visits (real-time video), asynchronous visits (email or message-based), phone-only consultations, and remote patient monitoring all have different billing codes and requirements. A senior’s insurance might cover a video visit with a dermatologist in one state but not another, or might require different documentation for a follow-up visit compared to an initial consultation. This complexity disproportionately affects seniors because you’re more likely to have multiple chronic conditions requiring coordination among several specialists.
When a cardiologist, nephrologist, and endocrinologist all use different telehealth platforms and billing systems, claims can get lost, duplicated, or denied. The comparison: in-person care at a single medical center uses one billing system and one claims process. Telehealth care fragmented across multiple providers creates multiple billing processes, each with its own rules. For seniors, this fragmentation means you may receive bills you don’t understand or denials for services you thought were covered. Always request itemized bills and don’t hesitate to dispute any claim that seems wrong—68% of providers reported billing difficulties means errors are common, not rare.
Where Surprise Bills Still Slip Through
Despite the No Surprises Act, surprise bills haven’t disappeared. The law prohibits them in most emergency situations and for in-network facility-based services, but gaps remain for certain telehealth scenarios. For example, if you’re admitted to a hospital for surgery and receive a telehealth consultation with a specialist who happens to be out-of-network, that consultant’s bill is subject to different protections than the surgeon’s bill. The protections apply, but the process for enforcing them can be slow and require you to file a complaint or dispute. A real-world example: A 72-year-old Medicare beneficiary used an in-network cardiology telehealth service for a follow-up visit after an angiogram.
The visit was coded as being with a cardiologist in California. Two weeks later, she received a separate bill from an out-of-network nurse practitioner who had participated in that visit. The patient’s insurance company initially denied the claim as out-of-network, but the nurse practitioner argued the patient wasn’t informed she was out-of-network. After two months of correspondence, the issue was resolved in the patient’s favor—she paid the in-network rate. The warning: even with protections in place, you may need to actively dispute bills and appeal denials. Don’t assume the system will automatically prevent surprise bills; it requires vigilance on your part.
What Your Medicare Plan Should Cover for Telehealth
Medicare has expanded telehealth coverage significantly since 2020, and that expansion continues through 2026. Original Medicare (Parts A and B) covers over 300 telehealth services, including video visits, phone-only visits, and remote patient monitoring. Medicare Advantage (Part C) plans must cover at least all services that Original Medicare covers, but many plans offer additional telehealth benefits. The key: telehealth services billed to Medicare must be provided by Medicare-enrolled providers. If a provider hasn’t enrolled with Medicare, they can’t bill Medicare for telehealth—period.
This is actually a protective mechanism; it means you’re less likely to get a surprise bill from a completely out-of-network provider because they wouldn’t have a payment pathway to begin with. However, the catch is that telehealth rules can change. CMS temporarily waived certain in-person requirements during and after the COVID-19 pandemic, allowing seniors to access telehealth more broadly. As of early 2026, most of those waivers have either expired or are being reconsidered. Mental health services, for instance, can be delivered via phone or video, but requirements for initial psychiatric evaluations vary. Your best protection is to confirm with your specific Medicare plan (or your plan’s customer service) whether a particular telehealth service is covered before booking the visit, not after receiving a bill.
The Future of Telehealth Billing: What’s Coming for Seniors
The telehealth landscape continues to evolve, and seniors should be aware of trends that may affect billing and coverage. The rise of direct-to-consumer telehealth platforms—where you pay out-of-pocket for virtual visits with any provider, regardless of insurance—means seniors may increasingly have a choice between using insurance and paying directly. This can actually help avoid surprise bills if you choose to pay upfront, but it also means more seniors are managing multiple billing relationships simultaneously.
Looking ahead, the regulatory uncertainty around telehealth reimbursement rates and coverage requirements will likely continue. What’s covered in 2026 may change in 2027. For seniors, the practical takeaway is to treat telehealth billing the same way you’d approach any healthcare service: confirm coverage before you use it, request in-network providers whenever possible, understand the costs upfront, and don’t hesitate to dispute bills that seem wrong. The specific “$1.2 billion in surprise bills” headline that circulates online doesn’t reflect current data, but the underlying concern—that telehealth billing remains complicated and sometimes unpredictable—absolutely does.
Conclusion
The widely-cited $1.2 billion loss in Medicare telehealth funds does not represent surprise bills from out-of-network providers. That figure comes from a coordinated fraud scheme involving unnecessary orthotic braces, a reminder that healthcare fraud remains a significant threat to Medicare. The real issue for seniors using telehealth today is more subtle: while the No Surprises Act provides important protections against out-of-network bills, implementation gaps, high claim denial rates (40%+), and insurer penalties on out-of-network specialists create ongoing friction in the telehealth billing system. These challenges are manageable with vigilance.
To protect yourself, verify that any telehealth provider is in-network before booking, confirm coverage with your insurance plan in advance, and save all billing documents for follow-up. If you receive a bill that violates the No Surprises Act protections, dispute it immediately. The telehealth billing landscape will continue to evolve as CMS refines coverage rules and insurers adjust their networks. Stay informed about changes to your specific plan, ask questions before you use a service, and remember that you have the right to appeal any bill you believe is incorrect.