Government Mandates Make Health Savings More Elusive

The Centers for Medicare and Medicaid Services recently released some data that show that the digital revolution continues to evade health care.

Through mid-May, just 1,026 registered hospitals and physicians out of a possible 56,599 have demonstrated that they are using electronic medical records and other health information technology in accordance with federal standards. That’s a scant 2%.

The federal government has tried to promote the switch from paper medical records to electronic ones in hopes of improving efficiency and bringing down health costs. It’s even putting money behind the push — some $27 billion over 10 years, or from $44,000 to $63,750 per physician and up to $2 million per hospital.

But even that vast sum of taxpayer lucre cannot will the necessary innovations into being.

Worse, like so many roads paved with good intentions, this one may yield some unfortunate consequences — paramount among them a decline in the number of doctors who will take Medicare patients.

A Rand Corporation study in 2005 concluded that health IT could save our health care system about $77 billion a year. Other studies have put annual savings in the $80 billion to $100 billion range.

The Rand study is popular with cost-cutters, but read the fine print: “much of the gains can only be achieved if all, or nearly all, of the healthcare organizations participate.”

At this stage, the cost of implementing health IT is a high threshold for many providers to cross. The average initial cost of an electronic health records (EHR) system is $44,000 per physician, with ongoing maintenance estimated at $8,500 a year.

Most physician office visits still occur in practices with 10 or fewer doctors. These aren’t just medicine men; they’re also small businesses, with the same concerns about remaining profitable as others. These health IT mandates only add a new level of complexity.

According to the head of the Business Management Department at North Carolina State University’s College of Management, “the main barriers to the adoption of EHR by small healthcare firms are due to legal and economic uncertainty.”

For years, politicians in Washington have been seeking a way to harness the savings from health IT. Each time they have tried, they ended up putting success further off.

In 1996, Congress passed the Health Insurance Portability and Accountability Act (HIPAA), predicting that portable health records would usher in a new golden age. Fifteen years later, we’re still waiting.

In 2004, President Bush signed Executive Order 13335 setting the goal of a nationwide health information network within ten years. Time is almost up, and government data show that only 1,026 registered hospitals and physicians — out of 56,599 — use technology that meets federal standards.

Washington politicians have spent years fiddling with carrots and sticks and regulations and mandates. In the process, they have gummed up the work that could have been done by the free market and private innovators.

If we want results, Washington needs to stop trying to legislate Star Trek-style medical tricorders into being. We’re better off leaving technology to the real-world innovators who have put communicators (er, rather, cell phones) into the hands of just about everyone.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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