Why Obamacare Might Fuel a Telemedicine Boom

Telemedicine can help doctors deliver care to more patients at a lower cost.
Telemedicine can help doctors deliver care to more patients at a lower cost.

Telemedicine could deliver savings of more than $6 billion per year in the United States, according to Towers Watson, a global professional services company.

Two big factors expected to propel telemedicine in 2015 are increased technology saturation and a shift toward outcome based medicine, a key provision of the Affordable Care Act (ACA). Technologically, America has been ready for telemedicine for several years, and as ordinary people increasingly use broadband for a range of communication applications, they’re more comfortable with communicating with people (including healthcare providers) using these apps.

Even Medicare, usually cautious in adopting rule changes, is shifting to more of an outcome-based model, and for going on three years, Medicare has imposed fines on hospitals for having too many patients returning to hospital care within a month of being discharged. In October, federal records showed that Medicare fined over 2,600 hospitals for excess readmission rates. Readmission rates are falling, however, as more hospitals pay closer attention to what happens to patients after they leave the hospital. Rather than handing a patient an instruction sheet, they’re now taking a more active approach, helping ensure that doctors monitor them and helping patients acquire medications and services that could prove too expensive otherwise. Some monitoring plans include the use of telemedicine to help prevent readmissions.

What Is Outcome Based Medicine?

With the fee-for-service and “per-visit” payment model, the financial incentive is to deliver as many visits, tests, and treatments as possible to bring in more money, whether or not it’s best for the patient. (Malpractice concerns also contribute to an excess of tests and treatments in some cases.) The fee-for-service model encourages physicians to practice “defensive” medicine as opposed to taking a preventative, holistic approach.

Outcome based medicine, by contrast, aligns payments with outcomes, creating incentives to keep patients healthy rather than treating patient encounters as “just another office visit.” And outcome based medicine saves money, according to mounting evidence. One study of cancer care, by UnitedHealth in conjunction with five oncology groups across the nation, studied 810 patients with three of the most common types of cancer: breast, colon, and lung. The pilot program of outcome based care cut costs by 34% without compromising the quality of care patients received.

Providers can benefit from outcome based care too. UnitedHealth and other insurers are rewarding doctors and hospitals for improving quality while reducing costs. When providers in so-called accountable care organizations (ACOs) achieve better patient outcomes, they and insurers share the money saved. Outcome based care is encouraged under the ACA, through this type of sharing of savings and other value-based incentives.

Why Outcome Based Medicine and Telemedicine Work Well Together

When patients have an easier time complying with treatment plans, outcomes are better, and telemedicine can greatly assist with patient compliance. For example, when a patient must drive a long distance and / or take a day off work to attend a follow-up appointment, it can represent a serious inconvenience. But when a patient can have a follow-up appointment via telemedicine, through phone contact or a video conference-type visit, time and cost savings are significant, and the patient is more likely to follow through. Doctors save time too, due to a reduction in office tasks like exam room preparation and waiting room management.

Telemedicine can also lead to savings and better outcomes for a lot of the “routine illness” visits doctors must cope with. For conditions like upper respiratory infections, pinkeye, and other common illnesses, a telemedicine visit can offer patients prompt, convenient care that can prevent complications that could lead to the need for more specialized care. When a common cold is treated right away and prevents a patient from developing, say, bronchitis, time, hassle, stress, and money are saved by everyone involved.

Preventing the need for more specialized care is one of the biggest potential advantages of telemedicine.
Preventing the need for more specialized care is one of the biggest potential advantages of telemedicine.

Self-Insured Employers and Telemedicine

Self-coverage by employers is becoming increasingly popular, because companies that self-insure are exempt from some of the more unpopular requirements of the ACA. Companies do this by hiring a local insurer (perhaps one of their state’s BlueCross plans) to administer claims, and by purchasing stop-loss coverage. Stop-loss coverage goes into effect when the employer’s bills surpass a defined threshold, so if, say, an employee is diagnosed with cancer and suddenly has huge bills, the company is only liable for a fixed amount, with the stop-loss provider paying the rest.

To employees of self-insured companies, coverage works just like other health insurance. Like other types of insurance, self-insurance works out best when claims are avoided. Michael Antonnuci, Vice President of Sales at First Nationwide Title Agency, says, “If you look at the claims history for any group and isolate just the 15-minute or less visits, the cost savings is tremendous.”

It turns out that many of those “15-minute or less visits” are the very ones that telemedicine handles adroitly: the earaches, colds, and rashes that can be treated via phone or video conference at a much lower cost. As a result, more companies that self-insure are insisting on telemedicine coverage as part of their self-insurance plans.


By 2015, some 37% of large employers (those with at least 1,000 employees) plan to offer employees telemedicine consults as a low-cost alternative to routine physician visits, urgent care visits, and ER visits for non-emergencies, according to Towers Watson. Another 34% plan to offer telemedicine in 2016 or 2017. As of the summer of 2014, 22% of employers already offered telemedicine services.

Insurance companies are starting to offer telemedicine reimbursement, and the ACA’s requirements under outcome based medicine encourage the use of telemedicine. Patients, too, like the convenience and cost savings associated with telemedicine services. All these factors point to a broader role for telemedicine in coming years, through video conferencing, apps, wearable monitoring devices, and medical kiosks.

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