The Impact of Telehealth Parity Laws on Health Expenses

Telemedicine is becoming increasingly popular as a way of providing remote medical care to patients. COVID-19 has pushed providers, patients, and payers into widespread adoption of telehealth. While there is extensive literature on how telemedicine impacts utilization of medical care at the individual level, little is known about how it affects aggregated medical expenditures. Using the staggered implementation of Telehealth Parity Laws (TPLs), I conduct difference-in-differences (DiD) analysis on aggregated stateyear expenditure data (1991-2014). I find that the passing of TPLs decreased total healthcare expenses by 3.9%, hospital care expenses by 3.0%, and physician service expenses by 5.9%. I also observe steady increases in both the empirical value and statistical significance of the effects 1 year down the road from implementation. After the 4th and subsequent years of implementation, reductions in total, hospital and physician health expenses categories are estimated to be 6.8%, 6.4%, and 9.4%, respectively.