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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 on theme: "Congressional Budget Office Presentation to The Alliance for Health Reform Health Costs and Health Information Technology Peter Orszag Director June 20,"— Presentation transcript:

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

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

3 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 101310 Personal Income Growth 11-185<23 Prices in the Health Care Sector 11-2219 Not Estimated Administrative Costs 3-1013 Not Estimated Defensive Medicine and Supplier-Induced Demand 0 Not Estimated 0 Technology-Related Changes in Medical Practice 38-6249>65

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

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

6 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 score81.585.990.4 Care Delivery―and Spending―Among Medicare Patients in Last Six Months of Life Total Medicare spending50,52240,18126,330 Hospital days19.217.712.9 Physician visits52.142.223.9 Ratio, medical specialist / primary care2.91.01.1 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.

7 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

8 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

9 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

10 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

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