HIT’s Promise of Efficiency, Savings, Is Still Just That

The promise of health care technology (HIT) over the last decade–providing better health care to patients, creating efficiencies among provider practices, and saving money for federal and state governments and patients– has proven to be somewhat of an illusion, according to a report from the RAND Health researchers published in the January 2013 issue of the journal Health Affairs.

The biggest issues facing health care providers and patients in enthusiastically and effectively adopting HIT, according to the RAND researchers, is that HIT systems are not very interconnected, and they aren’t very easy to use.

In 2005, RAND researchers published a study  that concluded that widespread adoption of various types of HIT could save up to $80 billion a year, at a cost of about $8 billion a year over 15 years. It encouraged the federal government to take an active role in subsidizing the expansion of different types of HIT, in part because their research showed that physicians and providers who paid for certain types of HIT were not necessarily the same entities that realized the benefits of the investment. Because of that disconnect, providers would be reluctant to adopt the cost and inconvenience of adopting HIT systems.

The Obama administration gave HIT a boost when it enacted The Health Information Technology for Economic and Clinical Health (HITECH) Act in 2009. Among other things, HITECH authorized payment incentives under Medicare and Medicaid to eligible professionals and hospitals for the adoption and meaningful use of certified electronic health record (EHR) technology. According to figures from the Centers for Medicare and Medicaid Services, as of November, 2012, over 4,000 hospitals and about 360,000 medical professionals were participating in the EHR program, and over 186,000 hospitals and providers had actually received incentive payments. Over $10 billion in incentive payments have been disbursed, more than $1 billion in December, 2012, alone.

Still, the recent RAND study noted that national health care spending has continued its rapid annual increase since 2005 (see “Cutting Health Care Spending: What Can Congress Do?”), despite the increased use of HIT. According to the study, “the disappointing performance of health IT to date can be largely attributed to several factors: sluggish adoption of health IT systems, coupled with the choice of systems that are neither interoperable nor easy to use; and the failure of health care providers and institutions to reengineer care processes to reap the full benefits of health IT.”

The report suggested the following changes:

  1. All providers, even those who are part of other health systems, should be able to easily retrieve health information stored in one IT system;
  2. Patients should be able to access their personal health information as easily as they access financial information from their banks; and
  3. HIT systems should be intuitive so they can adopted by health care professionals without extensive training.

Per Capita Medicare Spending Growth Slows

The HHS Assistant Secretary for Planning and Evaluation (ASPE) announced that Medicare spending per beneficiary grew more slowly than the gross domestic product (GDP) in fiscal year (FY) 2012. Although benefits have been added, the amount spent per beneficiary rose 0.4 percent, while the GDP grew 3.4 percent in FY 2012. HHS expects that Medicare spending per beneficiary will continue to grow at no more than the rate of GDP growth through FY 2022.

This slowed growth in per capita spending continued for a third consecutive year and constitutes an important shift. Medicare spending per beneficiary grew at an average rate of GDP growth + 2.7 percent per year from 1970 until FY 2010, according to HHS. The agency noted that aggregate Medicare spending will continue to rise because the beneficiary population is expected to grow by 3 percent per year until 2035 as the “baby boomer” generation reaches age 65.

The agency attributes much of the slowdown to the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), which curbed growth in payments to hospitals and Medicare Advantage plans and fostered the shift toward value-based purchasing. The agency highlighted projections of the Office of the Actuary and the Congressional Budget Office that support this view. Although demand for services fell somewhat during the recession, HHS believes that the low cost sharing required of beneficiaries with supplemental insurance would have softened the effects of the recession on Medicare beneficiaries’ use of services. The influx of baby boomers that began in 2011 is gradually reducing the average age of Medicare beneficiaries, but not enough to account for the entire slowdown in growth.

A story by Kaiser Health News suggests another possible reason that Medicare spending is growing more slowly. Consumer spending on prescription drugs has fallen because new generics are replacing brand name drugs as patents expire. As a result, consumers’ share of total health spending is not as high as expected. Perhaps these falling prices also affect Medicare payments for Part D beneficiaries.