Obama's Inflated Health Savings

Show Me the Savings
If health information technology can save so much money, why don't more people use it? There are a number of reasons, one of which is the financial disincentive that Hillestad mentions. In 2006, only 12 percent of physicians and 11 percent of hospitals had electronic records systems, according to the Congressional Budget Office. Estimates vary, however, and RAND used a higher level of adoption as of 2004 – 15 percent to 20 percent for doctors and 20 percent to 25 percent for hospitals. Both organizations laid out similar benefits and barriers to the use of paperless records.

Electronic health records can lead to fewer medical errors or bad drug interactions or duplicate tests. The systems could also allow doctors and hospitals to transfer or share patient records, shorten hospital stays, increase prevention efforts that lead to better health, and make getting a prescription filled as easy as hitting the send key. But all of that mostly reduces costs for the insurance companies paying the bills and, to some degree, uninsured patients who are footing the cost of their health care.

Individual physicians' offices and hospitals are the ones that have to pay to implement the systems. But, particularly at small practices, the only financial benefits they'll see are lower costs for maintaining records and transcribing data. And even health insurance companies, which stand to benefit the most, don't have incentive to push for faster adoption, because the savings benefit would go to competing insurance providers as well.

"It's really expensive to buy these systems, particularly for small, one and two doc practices," which are half of all physician practices, says Desroches. And the various records systems – CBO says there are 40 different vendors – can't communicate with each other. Desroches says doctors tell her that they're not implementing electronic records because of the cost, the limited value in terms of interoperability and the slow down in efficiency they'll face as they change the way their practices operate.

Carrots and Sticks
Hillestad says the government could speed up adoption by offering incentive money to physicians, requiring doctors to report measures of quality of care (which is easier to do with electronic records) or providing subsidies, particularly to physicians with a high proportion of disadvantaged patients – physicians who are less likely to buy electronic records systems. Desroches, too, says the government could "offer significant financial incentives combined with sticks," such as requiring electronic records for those getting Medicare payments.

Obama has proposed spending $10 billion a year over five years and phasing in requirements for adoption. Hillestad didn't want to comment on how that might affect the percentage of health care providers with electronic records. Both the RAND study and CBO agree, however, that adoption would be a lot faster if the government played a larger role.

There have been some efforts on the federal level: Bush set up a National Coordinator for Health Information Technology to set standards for such systems; Congress modified laws to prevent kickbacks so hospitals could give a system to outpatient providers at a heavy discount; Medicare gives additional money to physicians who submit performance data electronically. The Centers for Medicare and Medicaid Services gave out $98 million in state grants, much of it for electronic records or e-prescribing systems, and in the future the agency will give bonuses to small practices that have electronic records.

Obama's health plan says he'll "commit the necessary federal resources" to make health IT happen. But Kaushal, who is also the director of a group of independent evaluators who are assessing health IT improvement efforts in New York state, thinks that sticks and carrots alone will not be enough, and that the entire system will need to be overhauled to make information technology an integral part of daily operations. "It's not sufficient to take existing physician workflow and make it electronic, not sufficient to just go from paper to a computer," Kaushal told FactCheck.org. "What we want is to really wire the system; we want doctors and office practices and nursing homes and pharmacies to all be communicating. Adoption of health information technology becomes a byproduct of the requirement to wire the system." This will require guidance and vision, Kaushal says, not just incentives and disincentives. Realizing the kinds of savings that Obama cites will take much more than federal resources. It also requires a big-picture approach, and a lot of time.

Money in Whose Pocket?
Obama says his plan will "lower premiums by up to $2,500 for a typical family per year," partly through the use of electronic records. But experts say large savings from health IT are unlikely to flow to consumers.

Desroches points out that the average voter may never see the savings that the RAND study postulates. "Definitely insurance companies and federal and state payers would see savings," Desroches says. "I'm not sure individuals will see savings, [except] in the unlikely event that payers realize these savings and pass them on in the form of lower premiums."