Congressional Budget Office Presentation to The Alliance for Health Reform Health Costs and Health Information Technology Peter Orszag Director June 20,

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Presentation transcript:

Congressional Budget Office Presentation to The Alliance for Health Reform Health Costs and Health Information Technology Peter Orszag Director June 20, 2008

Federal Spending Under CBO’s Alternative Fiscal Scenario Percentage of Gross Domestic Product

Estimated Contributions of Selected Factors to Long-Term Growth in Real Health Care Spending per Capita, 1940 to 1990 Smith, Heffler, and Freeland (2000) Cutler (1995) Newhouse (1992) Aging of the Population 222 Changes in Third-Party Payment Personal Income Growth <23 Prices in the Health Care Sector Not Estimated Administrative Costs Not Estimated Defensive Medicine and Supplier-Induced Demand 0 Not Estimated 0 Technology-Related Changes in Medical Practice >65

Sources of Growth in Projected Federal Spending on Medicare and Medicaid Percentage of Gross Domestic Product

Medicare Spending per Beneficiary in the United States, by Hospital Referral Region, 2005

Variations Among Academic Medical Centers UCLA Medical Center Massachusetts General Hospital Mayo Clinic (St. Mary’s Hospital) Biologically Targeted Interventions: Acute Inpatient Care CMS composite quality score Care Delivery―and Spending―Among Medicare Patients in Last Six Months of Life Total Medicare spending50,52240,18126,330 Hospital days Physician visits Ratio, medical specialist / primary care Use of Biologically Targeted Interventions and Care-Delivery Methods Among Three of U.S. News and World Report’s “Honor Roll” AMCs Source: Elliot Fisher, Dartmouth Medical School.

Health Information Technology (Health IT) Applications of health IT can enable providers to deliver better-quality health care more efficiently by: –Eliminating medical transcription and physical management of files –Prompting prescription of generic rather than brand-name drugs –Reducing duplication of diagnostic tests –Reminding physicians of appropriate preventative care –Identifying drug interactions and allergies But the cost implications of health IT depend on context: –Health IT is “necessary but not sufficient” to generate savings Financial incentives Use of information Toaster analogy –Health IT applications are most promising in integrated health systems

Untapped Resource: Health IT Could Have Critical Role in Comparative Effectiveness Research  Widespread use of health IT applications could make large sets of data on care and outcomes available for comparative effectiveness research  Health IT systems could aid in implementing and tracking changes in care based on research findings

The RAND Corporation Study  RAND estimated $80 billion in net annual savings potentially attributable to Health IT adoption  Examined potential rather than likely impact  Considered only studies demonstrating positive effects from implementation of Health IT systems  Did not consider growth in adoption under current law when calculating savings

Policies to Promote Health IT Systems Mechanisms to promote the use of health IT  Subsidies for adopting new technologies –Induces those who are “close” to adopting  Penalties for failing to use health IT system  Requirement to use health IT