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Telemedicine and Supply/Demand Matching

By May 23, 2016Commentary

In many product and service industries or markets there is an issue matching demand and supply due to distribution difficulties; this has been described by one commentator as being a “long-tail” problem.  An interesting article from actuarial firm Milliman discusses this concept in regard to health care.   (Milliman Report)   We have generally been used to health care being a face-to-face business, which particularly for residents outside metropolitan areas can create access issues.  As in other industries, however, technology can be applied find new methods of matching supply and demand.  Various forms of telemedicine or virtual health care have begun to see widespread use to solve issues of matching expertise and need and matching general capacity and demand over wider geographic areas.  Use of telemedicine could also lower unit costs, either by matching lower cost supply or by reducing the actual cost of providing a medical service.  Milliman looked at Medicare and commercial claims and found that telemedicine use in both populations has grown significantly in the last few years, although it still accounts for a low percentage of all claims.  Such use appears to be higher in very rural areas.  Charges for telemedicine service are about 9.4% lower than for in-person services in Medicare, but about 1% higher for commercial plans.  One big inhibitor to further use of telemedicine is antiquated licensing laws and restrictive coverage terms.  This is beyond absurd.  First the idea of local health care professional or service licensing laws is totally outdated–we should have national standards and anyone licensed somewhere under those standards should be free to provide services, in-person or virtually, anywhere in the country.  The reason that is not the case today is local professionals trying to protect their turf.  There is absolutely zero quality justification.  And payers, just as they have with retail and onsite clinics, should recognize the cost benefits of greater use of telemedicine–it should lower costs, and by being more convenient and timely, it should help avoid use of more expensive services.  In the long-run, a great deal of health care will likely be delivered virtually, with equal or better quality and lower costs.  We ought to do everything we can to get the long-run here faster.

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