The Washington Post today reviews the political push that led to the $36.5 billion in Obama’s stimulus package devoted to modernizing health records. Behind the president’s rosy predictions about the plan’s cost savings is the very industry that stands to gain a fortune from the bill’s passage.

Candidate Obama promised $77.8 billion could be saved annually from upgrading health information technology. The figure came from a 2004 report issued jointly by the The Center for Information Technology Leadership (CITL), a “non-profit research center,” and Healthcare Information and Management Systems Society (HIMSS), an industry trade group. Who are CITL’s sponsors and partners? They are: Microsoft; Hewlett Packard; ICW (Motto: “technology for health”); Intersystems, a health-care software company; Kaiser Permanente; and said HIMSS.

In his address to Congress about the stimulus bill, President Obama cited cost-cutting as one of the principal advantages of digitizing health records.

But the cost savings are turning out to be smaller than originally anticipated:

The stimulus bill suggests that the government will recoup about a third of the spending allocated for electronic health records over the next decade, an assumption that some health-care observers question, in part because of a critical analysis by the Congressional Budget Office last year.

The CBO, then led by Orszag, examined the industry-funded study behind the $77.8 billion assertion, among other things, and concluded that it relied on “overly optimistic” assumptions and said much is unknown about the potential impact of health information technology.

A CBO analysis of the stimulus bill this year projected that spending on electronic health records could yield perhaps $17 billion in savings over a decade.

One reason the anticipated savings are dwindling is that the government will have to incentivize the technology upgrades. Consider this passage from the Post article:

On Dec. 17, Lieber, the Healthcare Information group’s leader, said in a letter to the president-elect that a “minimum of $25 billion” in subsidies was needed to spur doctors to buy the technology.

And this one:

Under the stimulus package, Medicaid and Medicare providers will receive incentive payments to offset the cost of electronic health record systems they buy. No one knows for sure how widely the technology will be adopted, and no one knows for sure whether those systems will yield the expected savings, specialists said.

Another open question relates to the development of technical standards that define what equipment qualifies for stimulus payments. Some critics contend those standards could choke off innovation and funnel profit to certain vendors, without necessarily improving care.

Obama’s optimistic estimates were, nevertheless, greatly reduced from the Olympian heights of the Bush years, when the health care industry’s drive to improve information technology began. Dr. David Brailer, Bush’s “health information czar” and current chairman of Health Information Partners, an investor in health care companies, predicted that “a fully computerized health record system could save the industry $200 billion to $300 billion a year.”

For those scoring at home, we’ve gone from a $200–300 billion estimate from an investor to a $77.8 billion estimate from a research center funded by the health information industry. That’s certainly change we can believe in.


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