Obama's Inflated Health Savings

The Obama campaign is counting on that unlikely event. Obama health adviser Cutler confirmed that the campaign's $2,500 per family projection doesn't represent only out-of-pocket savings for individual Americans. It includes savings to the government, employers and insurers, savings that could, Cutler says, trickle down to families in the form of lower taxes, higher wages or reduced premiums. In fact, Cutler says the $2,500 figure simply comes from dividing an overall savings estimate that's somewhat larger than $120 billion by an approximate number of four-person families in the U.S. "[W]e take the total and divide by the total population, then consider a 4 person family," he explained in an e-mail to FactCheck.org.

That's a bit of misleading math. It assumes individual Americans will share in all of the savings for the health care system, which includes insurance companies, the government and health care providers. Obama claims families will save $2,500 under his plan, but they won't see at least some of those savings directly in the form of lower premiums. And they may not see them indirectly either.

Questioning RAND
Even if Obama can beat the odds and implement widespread health IT in less than four years, it's unclear whether savings can reach $77 billion a year, as RAND said. Some have found RAND's figures to be optimistic. "There's definitely been a lot of rumbling about the RAND study," says Desroches, who adds she's skeptical of the dollar amounts. "I'm not sure we're going to see enormous savings."

In late May, the Congressional Budget Office published a report that was highly critical of the RAND study. It cited three main points:

First, it says, RAND measures the potential impact of health information technology, rather than the likely impact. The RAND study looked at what would happen if 90 percent of doctors and hospitals had adopted health IT and implemented and used it perfectly. CBO points out that there are many factors impeding widespread adoption and limiting efficient use. These have to be figured into any truly realistic calculation of costs and savings.

Second, CBO points out that RAND based its conclusions only on studies that found positive effects of health information technology, throwing out data that showed negative effects. The study acknowledges that "we chose to interpret reported evidence of negative or no effect of HIT as likely being attributable to ineffective or not-yet-effective implementation." Hillestad told FactCheck.org that the researchers assumed electronic records systems that had led to increased errors would be fixed or wouldn't be adopted by other health care providers.

Finally, CBO says, the RAND researchers were estimating the savings based on the actual level of adoption in 2004, not the possible level of adoption – even without any changes in policy – in the years covered by the study. That means RAND was using an inaccurate baseline, one that doesn't account for the doctors and hospitals that would have implemented health IT systems from year to year.

None of these points are huge "gotchas." The RAND authors are up front about the fact that they are examining potential impact of HIT, that they are discounting studies that found negligible or negative effects from HIT, and that their calculations are based on 2004 adoption levels. Kaushal told us that in her opinion, the CBO and RAND studies were trying to answer different questions: CBO wanted to look at likely outcomes, and RAND wanted to look at potential savings. But CBO is of the opinion that RAND's projections are overly rosy.

Obama's advisers disagree, calling the RAND estimate "conservative." Hillestad also told FactCheck that "we felt our numbers were relatively conservative," adding that RAND had left out some factors that could have resulted in even higher savings estimates. Kaushal agreed, with a caveat: "I personally don't think that the RAND numbers are going to be found to be completely off. I don't think they'll be off by an order of magnitude. But it depends on the way things are being implemented." Because RAND predicts potential savings in an ideal situation, there's a lot of room for its estimates, and those of the Obama campaign, to be wrong.

Republished with permission from factcheck.org