WASHINGTON – Automating the nation's healthcare system could save the government nearly $600 billion in spending over the next decade and $9 trillion over the next 25 years, according to the Center for American Progress Action Fund and the Democratic Leadership Council.

The progressive think tank's report, "Health System Modernization Will Reduce the Deficit," was written by David M. Cutler, a health economist and professor at Harvard University.

Cutler estimated the productivity payoff from health system modernization measures such as electronic medical records, comparative effectiveness research, prevention, measuring results, paying for value and consumer involvement.

He concludes:

• Health reform will spark a productivity boom in healthcare. Cutler projects that within four to five years of enactment, modernization will increase productivity growth in healthcare by 1.5 percent to 2 percent per year. These improvements – which are comparable to the rate of productivity growth already seen in many other economic sectors – will lead to dramatic savings for the government and private sector.
• Productivity growth can cut in half the rise in projected Medicare/Medicaid spending. Productivity-driven reductions in health spending will significantly improve the long-term federal budget outlook by decreasing projected increases in Medicare and Medicaid, which currently account for about 4 percent of the GDP. Where baseline estimates project Medicare and Medicaid spending to rise to 9 percent of the GDP by 2035, health reform will reduce that projection to 6.5 percent.
• Health reform is entitlement reform. Over the long term, bending the Medicare/Medicaid healthcare cost curve from 9 percent to 6.5 percent will produce tremendous savings for the federal budget and American taxpayers. The projected savings over 10 years are $585 billion. The projected savings over 25 years are a $9 trillion.

"Wasting hundreds of billions of dollars on inefficient healthcare is a luxury we cannot afford," Cutler said.

There are a number of areas where care is poor, ultimately leading to worse health and (often) higher costs, Cutler noted, adiding that most providers are still paid according to the number of services they perform rather than the quality of that care, which incentivizes doing too much.

He listed other examples of poor care and inefficiency:

• Failure of chronic care management. Primary and secondary prevention are not provided as routinely as they ought to be or in settings that work for patients.
• Lack of performance data. Little is known about which treatments are best for particular patients and which providers are best at doing them.
• Insufficient competition in insurance. The insurance market for individuals and small firms often revolves around selecting healthy patients to insure rather than providing valuable care to the sick.
• Ineffective health system design. The wrong people often provide services (e.g., primary care doctors doing what nurses do better) or services are provided in the wrong way (e.g., surgery performed at hospitals with a low volume of patients).
• Needless administrative complexity. Medical offices and insurance companies often have to hire extra administrative personnel to handle the complex paperwork that comes from dealing with multiple insurance companies and the uninsured.
• Inappropriate end-of-life care. Patient wishes about death are often overridden or unknown at the end of life.