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Kaiser CEO Urges Congress to "Wire U.S. Health Care" via Improved Diabetes Care

SEPTEMBER 16, 2005 -- The CEO of the health plan that's farthest along nationally in the adoption of health care information technology urged Congress Friday to "wire U.S. health care" with an infrastructure investment program along the lines of the Federal Highway Act or the Rural Electrification Administration.

George Halvorson, CEO of Kaiser Permanente, the nation's largest HMO with 8 million members, said financial assistance to health care providers could be funded through improved diabetes care in the Medicare program.

"Diabetics spend 25 percent of Medicare dollars—a 10 percent improvement in care would allow for a 2.5 percent allocation" to a program of financial assistance to providers of health care, he told a forum on IT sponsored by the nonpartisan Alliance for Health Reform. The allocation would add up to about $7.5 billion a year.

Without data—electronic medical records and computerized systems to ensure that physicians prescribe drugs safely and deliver care based on the best medical practices—reform of the health system isn't possible, Halvorson said. But with data, the "Six-Sigma" principles applied in some industries to drive down errors to almost zero can be pursued in health care, he said.

Quality improvement hinges on having systematic ways of delivering health care services and IT is essential to creating and improving those systems, he said.

Few observers see any chance of a big federal program to wire the nation's health care system. But speakers at the forum agreed that a key obstacle to IT adoption is the fact that doctors and hospitals pay for the systems but insurers reap almost all of the savings.

Halvorson said that both government health programs and private insurers should help fund the wiring of health care. Kaiser is investing some $3 billion to do so for its members, but its investment pays off in savings, too, since the HMO, unlike other many other payers, actually delivers care because it owns hospitals and medical practices.

The only chance of a big federal investment hinges on scoring changes by the Congressional Budget Office (CBO), opined Carolyn Clancy, head of the Agency for Healthcare Research and Quality (AHRQ). Right now, CBO doesn't score IT as producing savings, which adds to the cost of legislation promoting health care IT. Clancy said AHRQ is funding research that may prove useful to CBO in assessing whether IT delivers savings.

Clancy also noted private insurers have provided funds for IT. She said the giant insurer Wellpoint, for example, gave doctors computer systems or agreed to pay for them, but got a relatively weak response to the offer in part because of concerns about the costs of supporting the systems.

RAND Corporation researcher Richard Hillestad said if 90 percent of the U.S. health system adopted electronic medical record systems, savings would total about $70 billion per year after subtracting costs.

That estimate prompted Brookings Institution economist Henry Aaron to comment from the audience that the emphasis on IT as a way to save money is misplaced. The yearly savings are small relative to overall U.S. health spending, he said, adding that the emphasis instead should be IT's ability to deliver enormous improvements in quality.

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