The Effect of Telehealth on Spending—Reframing the Debate

Telehealth faces an uncertain future. Without congressional action, broad reimbursement for telehealth in Medicare will expire at the end of 2024. Physicians and health systems have asked Congress to craft permanent policy. They argue that without a signal that telehealth will be available permanently, clinicians will not make the necessary investments to optimize these services. In other words, telehealth cannot deliver on its promise to improve access and quality if Congress does not commit. Yet despite these repeated and seemingly reasonable calls for lasting change, congressional activity in the spring of 2024 indicated that payment will be extended for just 2 years.¹

To many, Congress’ actions do not make a lot of sense. Clinicians and patients seem to value telehealth and its convenience. Why not give telehealth a permanent role in our delivery system? It boils down to money, and it is time to start talking about it. In high-level policy discussions about telehealth, various stakeholders have historically ignored or misrepresented the implications of telehealth expansion on spending.² This entrenched approach has substantial downsides, confusing policymakers or making them distrustful of otherwise compelling arguments about telehealth’s benefits. In this commentary, we argue that to make lasting progress on telehealth policy, we need a reframing of the discussion on costs.

Claiming Telehealth Saves Money

In some cases, physicians and health care leaders have made recommendations to Congress (eg, remove burdensome in-person visit requirements for mental health care, cover audio-only visits) without ever acknowledging the implications for spending. When pressed to discuss costs, these leaders often argue that telehealth reduces spending for both payers and patients. The basic argument is that by improving access, telehealth will lead to better disease management and prevent hospitalizations and other downstream care. For example, the American Telemedicine Association argues that “[r]educing or containing the cost of healthcare is one of the strongest motivators to fund and adopt virtual care technologies. Telehealth reduces the cost of healthcare and increases efficiency with better management of chronic diseases, shared health professional staffing, reduced travel times, and fewer or shorter hospital stays.”²

Problems With These Claims

Claims that telehealth will reduce spending are problematic. They are supported by neither theory nor robust evidence. Telehealth is a powerful tool to increase access to care, but it is critical to acknowledge the trade-offs in the “iron triangle.”³ The theory of the iron triangle is that when it comes to access, costs, and quality, a service may improve 1 or 2, but it is impossible to improve all 3.

By improving access, telehealth will facilitate more care. More use almost always leads to more spending. For example, physicians recommend that patients undergo colonoscopies or take medications for diabetes because they improve health. It is accepted that these interventions increase spending. Requiring telehealth to reduce spending is an unfair expectation: innovations in health care delivery seldom do, which is why debates on innovation generally focus on value or cost-effectiveness. Does a new innovation improve health at a reasonable cost? With every new drug, for example, policymakers assess cost-effectiveness, accepting that additional costs are a given.

Many of the studies that argue telehealth reduces spending have critical flaws. First, some studies compare spending among individuals who received telehealth vs those who did not without addressing selection bias. For example, a 2022 study showed that telehealth users had fewer visits to other settings (eg, primary care practices) than nonusers, but it did not use robust methods to address the concern that telehealth users may be healthier than those who seek in-person care.⁴ Second, some studies do not address that the availability of telehealth will increase the number of people who receive care. For example, a 2017 study found that costs for an episode of care (ie, costs for the initial visit, subsequent medical care, and pharmacy costs) for an acute, nonurgent condition were significantly lower for patients who received care via telehealth.⁵ However, this study did not explore how the convenience of telehealth may increase the number of people who receive care. Third, some studies ask telehealth users what they would have done if telehealth had not been available. Some telehealth users always report that they would have gone to the emergency department or other more costly settings.⁶ However, in these cases, estimates of cost savings are affected by various response biases, including hypothetical bias.

Because of these flaws, organizations such as the Congressional Budget Office typically do not incorporate such findings into their cost projections and consistently state that permanent telehealth policies will increase spending.⁷ This reasoning is why permanent policy has not been implemented; a temporary expansion is less costly for the Medicare program than a permanent one. When we observe seemingly strange restrictions on telehealth that do not make sense from a quality or access perspective, it is likely that policymakers are deliberately introducing friction to keep costs in check. For example, Congress has required in-person visits before telemental health visits. The point of this requirement has little to do with improving quality. Rather, the goal is to reduce use and therefore minimize the projected increase in spending.

If the singular aim were to deploy telehealth as a tool to reduce health care spending, reimbursement and regulations would likely be very different. To reduce spending, Medicare could reimburse only for clinical circumstances in which telehealth visits are likely to substitute for in-person visits and simultaneously reimburse telehealth visits at a substantially lower rate than comparable in-person visits. For example, a health system could schedule all visits as in-person visits and then convert a subset of them to (less generously reimbursed) telehealth visits based on the recommendation of the clinician. This change would result in net decreases in reimbursement to clinicians. Policies that actually reduce spending would limit access to and use of telehealth or in-person care. We do not advocate this approach because telehealth's greatest strength is its ability to increase access and convenience, and poor access to care is a critical problem in many communities.

Improving the Debate

The ongoing debate about telehealth’s future could be improved if clinicians and other stakeholders consistently stated their assumptions about costs when advocating particular policies and accepted that most telehealth services will increase costs. We argue that the focus of the debate should instead be whether particular telehealth services are high value (improve care at a reasonable cost) and how we can design policy to maximize value. Because telehealth can improve access and is often of comparable quality, in many applications it may be high value. We as a society should be willing to pay for service that can improve health and well-being.

If the debate were reframed around value, it would lead to a different set of choices. Congress could opt for limited expansions that target the highest-value services for permanent reimbursement. For example, Congress could allow federally qualified health centers to provide telehealth for both physical and mental health conditions, given improving access in these settings will likely improve both quality and equity. In addition, certain guardrails could be incorporated such as limitations on audio-only visits, which can be gradually removed if costs remain modest. Given the rapid changes in telehealth delivery, continued research and monitoring of effects on spending, quality, health equity, and fraud and abuse will be critical to guide policy.

For far too long, high-level policy discussions on telehealth have ignored or misunderstood the cost implications, or even misled policymakers about them. Greater emphasis on and transparency about costs is long overdue. A reframing of the costs debate is not only constructive but also will lead to better—and perhaps more permanent—change.