**Job Market Paper** The Effects of Telemedicine on the Treatment of Mental Illness: Evidence from Changes in Health Plan Benefits

Abstract

The COVID-19 pandemic resulted in an explosion in demand for telemedicine and with it myriad new, untested telemedicine policies. The effects of these policies are largely unknown, and the shift to telemedicine can have longstanding impacts. We isolate the impact of a policy which reduced cost-sharing for telemedicine services from April-September 2020, estimating changes in telemedicine utilization, the elasticity of demand, and the degree of substitution with in-person services. Additionally, we study the effects of shifting to the virtual environment on mental health treatment decisions, adverse health events, and overall spending. We estimate the elasticity of telemedicine to be -0.21, and that it is used as a near perfect substitute for in-person care, resulting in no net increase in utilization. For those with mental illness, we find that increasing telemedicine use results in more psychotherapy sessions and a reduction in the use of prescription medications. Finally, we show that higher rates of telemedicine use lead to a modest reduction in spending and a higher probability of receiving emergency department care