Health IT Funding: The Dance Begins

(MoneyWatch)  The first glimpse of the Senate Democrats' legislation for funding health IT reveals that the Democrats want to use both carrots and sticks to persuade providers to adopt electronic health records. While no mandate is mentioned in the Senate Finance Committee portion of President Obama's economic stimulus package, it's reported that hospitals and physicians that participate in Medicare or Medicaid and acquire EHRs would be eligible for temporary bonus payments from 2011 to 2015. Physicians could receive up to $15,000 the first year, and the annual payments would decline annually, sinking to $2,000 in the final year. Providers who didn't adopt certified EHRs by then would start seeing CMS payment reductions of 1 percent each year, beginning in 2016.

Starting in 2011, hospitals that implemented EHRs would receive additional Medicare payments of at least $2 million, which would phase down annually to 75 percent of the initial amount, then 50 percent, and finally 25 percent. These numbers would vary, depending on when the hospital shows that it's using the technology "in a meaningful way," according to a published report.

The physician health IT incentives resemble those that CMS recently started offering for the adoption of electronic prescribing. Although this program took effect on Jan. 1, the anticipation of the 2 percent bonus has already prompted a significant number of physicians to begin e-prescribing. Of course, EHRs are much more expensive and complex than standalone e-prescribing systems are.

Meanwhile, the Senate version of the stimulus package includes $3 billion more for health IT than does the House of Representatives' version, which calls for $20 billion to be spent in this area. The Senate Finance Committee is expected to approve nearly $18 billion for health IT. The Senate Appropriations Committee is set to appropriate an additional $5 billion, but details of that spending are not yet available.

As momentum builds toward passage of these bills, some in Congress are trying to attach amendments that, in the view of some, could distort the legislation's intent. One amendment would require that health IT purchases funded by the government be restricted to U.S.-made products. Another would guarantee pharmacists access to the same patient information as physicians. And a third, opposed by America's Health Insurance Plans, would require personal health information to be encrypted.

The latter two amendments underscore the fact that some privacy concerns--which have helped block Congressional action on health IT for years--have still not been allayed. Watch for much more maneuvering on this and other fronts before the health IT provisions have been reconciled and set in stone.

What will put this over the top is not the pious belief--still unsupported by solid data--that health IT will substantially increase the quality of care and reduce health costs. Instead, it will pass if enough legislators believe that health IT will produce jobs in significant numbers. To help make this case, the Obama transition team last month released a report showing that investing $30 billion in health IT, creating smarter electrical grids, and expanding high-speed Internet access could create 900,000 jobs in the first year.