Telehealth Opportunity versus Telehealth “Parity”

33806243 - chinese doctor video chatting with african patientA great opportunity to reduce costs and improve quality in U.S. health care is telehealth, which uses information technology to eliminate distance between a patient and a medical provider. A subset of telehealth is telemedicine, which allows physicians to consult patients over the phone, by text, or by video.

Take a couple of obvious examples: Telepsychiatry, whereby a patient undergoing talk therapy has a session with his psychiatrist over the phone instead of having to go to the doctor’s office; or e-prescribing, whereby a patient can describe symptoms over the phone or send a photo (of, for example, a rash) and the doctor can prescribe immediately (if appropriate).

Most people tend to categorize these as “no-brainers,” and if we paid for our own care directly, these and many other examples would have long since taken off. However, because payment for medical care is dominated by health insurers and government, they have been stifled. Third-party payers fear being forced to pay fraudulent claims.

Telehealth restrictions are the topic of a new health policy brief published by Health Affairs, a leading journal, which reviews federal and state laws governing telemedicine. One is so-called “parity” which many telemedicine providers demand:

While states have implemented telehealth coverage laws, of greater concern and controversy are telehealth parity laws that require reimbursement by health plans for telehealth services at the same or equivalent rate as paid for in-person services. Without parity laws, health plans can pay for telehealth services at only a percentage of what they pay for in-person services. Many telehealth coverage laws passed by states fail to include parity language ...

It is hard to imagine a more harmful policy for the appropriate uptake of telemedicine than government-dictated parity of payment. In some cases, I can imagine that patients might actually be willing to pay more for convenience. Of course, our third-party payment health system does not value convenience to patients in most cases, so we will never know.

On the other hand, much telemedicine depends on technological innovation that should reduce the cost structure of providing care. If so, those providers should compete on price.

Indeed, the primary reason we are able to benefit from telehealth is the deregulation of telephone service in 1982. Imagine if new entrants competing against AT&T had demanded that government regulate a price floor at the same tariffs as had prevailed during AT&T’s monopoly. We never would have seen the cost-cutting innovation that resulted in today’s smartphones.

The key to successful adoption of telemedicine is to return patients’ health spending to their direct control, not to impose government price controls.

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For the pivotal alternative to Obamacare, see the Independent Institute’s widely acclaimed books, Priceless: Curing the Healthcare Crisis and A Better Choice: Healthcare Solutions for America, by John C. Goodman.

John R. Graham is a Senior Fellow at the Independent Institute.
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