Abstract: The use of telemedicine has recently undergone rapid growth and proliferation. Although the feasibility of many applications has been tested for nearly 30 years, data concerning the costs, effects, and effectiveness of telemedicine are limited. Consequently, the development of a strategy for coverage, payment, and utilization policy has been hindered. Telemedicine continues to expand, and pressure for policy development increases in the context of Federal budget cuts and major changes in health service financing. This article reviews the literature on the effects and medical effectiveness of telemedicine. It concludes with several recommendations for research, followed by a discussion of several specific questions, the answers to which might have a bearing on policy development.