True cost of stimulus won't be known for years

There seem to be a lot of questions about just how much money the federal government is allocating for EMRs as part of the American Recovery and Reinvestment Act. The number that gets bandied about the most is $19.5 billion, which breaks down to $17.5 billion in direct subsidies to hospitals and physician offices in the form of Medicare and Medicaid bonus payments, plus $2 billion in discretionary funding through the Office of the National Coordinator for Health Information Technology.

That $19.5 billion figure represents a net cost, based on estimated savings to Medicare and Medicaid from the efficiency gains that the technology is supposed to enable. The gross outlay is somewhere in the range of $31 billion to $45 billion, but that will depend on many factors, not the least of which is physician participation. EMRs are not required, though providers face penalties for not using them starting in 2015. There are more than a few doctors out there who believe it's more cost-effective for them to take the penalties than shell out tens of thousands of dollars on an EMR that may or may not make them more efficient. I'm not here to argue about the wisdom of such a strategy; I'm just communicating what some people have told me.

For hospitals, the formula is highly complicated. Institutions that achieve meaningful use of EMRs starting in 2011 can earn a baseline annual incentive of $2 million, plus an extra $200 paid per discharge for the 1,150th through 23,000th discharge per year. And the total payout will be adjusted according to each hospital's level of charity care and Medicare population. Good luck pinpointing how much Uncle Sam will owe in that category.

I bring this up for several reasons. First off, an anonymous reader commented on my Sept. 24 Editor's Corner about how I must somehow be in the pocket of the Obama administration because I wrote that the real cost to the federal government will be $45 billion on the high end. The reader noted that the real cost of digitizing all of the nation's medical records will be much higher, which is true. But I was referring only to the government subsidy. Read the ARRA legislation. You might learn something.

Anonymous rants aside, it surfaced within the past week that HHS reportedly is revising its estimates upward. And this is from the unabashedly liberal Huffington Post. But the HuffPo report offers nothing new. The $19.5 billion is a net figure. It always has been. Back in May, HHS bumped up its estimated gross outlay to $45 billion from the previous $31 billion estimate. Add another $1.8 billion in administrative costs, and the total price tag comes out to $46.8 billion.

More significantly, though, ONC honcho Dr. David Blumenthal says in a newly published interview with MIT's Technology Review that actual savings to Medicare and Medicaid from a nationwide system of interoperable electronic health records will be much more than what the Congressional Budget Office originally said. Maybe he's right. Maybe.

We won't know much until the program actually starts in 2011 and we see what participation levels look like. And we won't have the final answer for many, many years, once we know if the technology has its intended effect. - Neil