Obama's Inflated Health Savings

In One Term? Unlikely.
If electronic medical records can save $77 billion a year (and no one knows for sure), it won't happen during an Obama presidency, even in a second term, according to the RAND study itself. The $77 billion figure represents savings that could occur once 90 percent of doctors and hospitals have adopted and are effectively using electronic medical records, a process RAND estimates will last through the end of 2018. The study assumed a 15-year adoption period, from 2004 through 2018, a span based on the implementation of complex technology in other industries. Savings are substantially less during this period.

RAND study: At 90 percent adoption, we estimate that the potential HIT-enabled efficiency savings for both inpatient and outpatient care could average more than $77 billion per year (an average annual savings of $42 billion during the adoption period).

In other words, RAND predicts the health care system overall will save $42 billion a year on average throughout the next president's term, and even during a second term – not $77 billion as the Obama campaign says. That also means some of these savings are occurring right now. The amount would be less than the estimated $42 billion and would increasingly grow as more and more providers adopted electronic records.

So, the health care system is reaping some amount of these savings already, and the Obama campaign is including them in its calculations. John Shiels, senior vice president of The Lewin Group, a health care research organization, criticized Obama (and Clinton, who also had cited the RAND figures) for inflating the savings he could produce. The Democratic candidates "can't take credit for savings that are already occurring because of that," he told FactCheck.org in a February interview. "You could accelerate the adoption of new technology ... but savings would be far less than they're saying."

Richard Hillestad, a RAND senior principal researcher who led the study, confirms that the health care system won't reach $77 billion in savings until 2019, according to RAND's model. And he adds that the figure doesn't represent net savings; there would be some costs for maintaining the systems.

Obama adviser Dr. David Cutler of Harvard told us the campaign's savings estimates included the full $77 billion figure but didn't include a number of other expected savings, which would have made the estimates higher. Thus, says Cutler, the estimate remains conservative even if the $77 billion figure is artificially high.

When Will IT Happen?
Hillestad says steps could be taken by the government to speed up that 15-year adoption period, but he also says he's "not real confident" there will be 90 percent adoption by 2019. "It could take a lot longer if there's not something in the health care system that gets beyond the disincentives that physicians have for adopting these systems," Hillestad told us. "Basically, they have to buy the system and yet many of the benefits go to the insurers or the payers of public health care insurance."

Dr. Rainu Kaushal, a professor of public health at the Weill Medical College of Cornell University, agreed that the right policies could make 90 percent adoption achievable, but that success wouldn't come quickly. "I think it's pie in the sky for the next five years," she told FactCheck.org. "I think we're looking more in the eight to 10 [year] range, but I think it's achievable."

Near universal adoption of electronic health records by 2014 was a goal set by President Bush, but it's one that Catherine Desroches calls "unlikely." Desroches, an instructor at the Harvard Medical School and a researcher at the Institute for Health Policy at Massachusetts General Hospital, was part of a team that conducted a survey on the adoption of health IT that will run in the New England Journal of Medicine this week. She also doesn't believe the U.S. will see 90 percent adoption, or even 75 percent, in the next four years. "It could be anywhere from tens of billions to hundreds of billions of dollars to really have a fully interoperable national system," she told us. "And whether any administration is going to have the financial resources to pull something like that off is really an open question, I think."

Cutler, the Obama adviser, was more confident that Obama's plan could generate its full projected savings within a two-term presidency, but he also acknowledged that the system won't be seeing significant savings right out of the gate. "It's kind of a full system transformation," he told us, and "it takes a while to get anything transformed." The Obama plan phases in health information technology over five years, after which the full savings potential could still be years away.