How the world really works

by Russ Roberts on May 17, 2009

in Politics, Regulation, Stimulus

Is it a good idea to have medical records stored in electronic form rather than paper? Maybe. One argument is that if there are stored electronically, it will help us find the "best" treatments because we will have all kinds of data. This optimism may be warranted. Against it, is the consideration that "best" is often unclear, depends on the individual, depends on the cost, and is subject to political manipulation if the determination of the "best" treatment is a government decision.

Another argument often advanced for electronic records is cost-saving. It will prevent needless duplication. But of course mobilizing the medical profession to do something they don't seem to think worthwhile doing on their own will have its own costs as well.

This article in the Washington Post deserves to be read in its entirety. It explores how implementing electronic records became part of the stimulus bill. Not because it's a great idea but because the people who would profit from it lobbied like crazy. It may be a great idea. Suffice it to say that the evidence is highly biased.

HealthLobby
At the center of this picture is the proposed savings in costs of $77 billion.  But as the Post reports:

The stimulus bill suggests that the government will recoup about a third of the spending allocated for electronic health records over the next decade, an assumption that some health-care observers question, in part because of a critical analysis by the Congressional Budget Office last year.


The CBO, then led by Orszag, examined the industry-funded study behind the $77.8 billion assertion, among other things, and concluded that it relied on "overly optimistic" assumptions and said much is unknown about the potential impact of health information technology.


A CBO analysis of the stimulus bill this year projected that spending on electronic health records could yield perhaps $17 billion in savings over a decade.

This is how the world really works. When Obama says that electronic record-keeping is a crucial way to control costs, it seems like a really cool idea. It may be. But I doubt it. And the real reason we're going this route isn't because a wise President sees a cost-saving opportunity. It's a lot uglier than that.

As for this being part of the stimulus plan, what a joke. The main thing that will be stimulated are the bank accounts of the people who make the products that help computerize the records.
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{ 46 comments }

Scott Johnson May 17, 2009 at 2:02 pm

Doesn't the portability of electronic records and consumer control/access undercut the medical cartel(s) incumbent/gatekeeper position? Seems like a plausible answer to why they haven't persued it themselves.

Fred May 17, 2009 at 2:13 pm

Do you remember Joe the plumber and how governemnt records were plundered and exposed? You saw everything about Joe's life except his medical records.

That exception existed because the government didn't have Joe's medical records.

Mathieu B├ędard May 17, 2009 at 3:22 pm

Yes Russ, but the bill had to be passed, otherwise 500 million honest americans would loose their jobs monthly weekly daily hourly!

Kit May 17, 2009 at 3:34 pm

Please just look to the UK. Been there done that and a lot poorer as a result.

Mike Farmer May 17, 2009 at 3:47 pm

It surprises me that private companies haven't formed to provide these database/ medical records services on a broad scale. There should be a way to protect confidentiality, and all that data would make for great research, which could be anonymous. Or, have some companies formed to provide these services?

vikingvista May 17, 2009 at 4:38 pm

With the health care industry already subsidized to the extend of 2.9% of all USA wages, I'd say there is enough money in the system to fund EMR to the extent that they really are useful.

And where they are efficient, they have been implemented. In some cases they have been implemented, found NOT to be efficient, and removed.

The Left constantly comes up with these cockamamie arguments that this or that government spending program or mandate will pay for itself–EMR, government health insurance, preventive medicine, cap & trade, etc. Two obvious notions elude them:

1. Thousands of profit-hungry individuals obviously disagree (or else the government programs would not be necessary);

2. Just because something is good doesn't mean that it isn't a net expense. I buy things all the time that deplete rather than grow my savings. Obviously the true "profit" is subjective and not measurable in terms of any medium of exchange.

Bob Smith May 17, 2009 at 4:49 pm

My dentist already keeps all records in electronic form, including X-rays. He didn't need a government mandate to do this.

The Other Eric May 17, 2009 at 6:41 pm

There really are no savings in creating a national (or even international) health records system. It's an infrastructural system that might generate a great deal of new information, evidence of efficacy, and data on care and symptoms but those are side benefits. The lobbyists for this idea seem to want to create a whole new type of economics where you create savings by spending money and getting others to spend money. In the old days that would be seen as a con job.

Look at it another way– there are no 'savings' in education (national or otherwise). There are no savings in extending the road or rail networks. The investment in those systems may create new opportunities and new social circumstances that are desirable or deplorable, but they don't ever save money because they cost money to create and sustain.

Bill Stepp May 17, 2009 at 6:46 pm

Kit writes:

It surprises me that private companies haven't formed to provide these database/ medical records services on a broad scale. There should be a way to protect confidentiality, and all that data would make for great research, which could be anonymous. Or, have some companies formed to provide these services?

There are companies working on medical data bases, etc. According to a recent Business Week article (maybe 4-5 weeks ago), there are serious unresolved issues, including creating a common standard that can read and manipulate millions of records.
Quality Systems is a player in this market; there were a couple firms mentioned whose names I don't recall, but they have had horrible problems because of the standards issue.

Mike Farmer May 17, 2009 at 6:55 pm

Bill,

Thanks, I can see where standards would be a problem, but not insurmountable — however the costs, right now, might not be worth the benefits, so this would explain why private companies haven't done it industry wide — sort of like alternative energy. If this is true, then the points by Russell and others are valid, that with the government doing it, we're surely not going to see any savings.

Randy May 17, 2009 at 7:47 pm

I read an article a couple of months ago about how the Air Force is trying to retain medical doctors. Seems a primary point of annoyance for the doctors who are leaving is, wait for it, the computerized record keeping system they are forced to use. They can't update the records while seeing patients because the system is way too slow, so they are forced to work overtime to do the updates.

save_the_rustbelt May 17, 2009 at 8:32 pm

There are about a dozen reasons why most physicians do not have EMR systems.

None of which bother the Obama-ites.

Why let reality intervene?

muirgeo May 17, 2009 at 9:25 pm

"Is it a good idea to have medical records stored in electronic form rather than paper? Maybe."

RR

No the answer as a practicing physician who's career has now spanned from complete paper charts to a fully integrated medical records system is an absolute YES.

The fact that most ( i think all) private for profit health insurance systems do not have fully integrated electronic medical records ( at least here in the USA) is just one more example of a "market failure" on the part of private enterprise. Specifically a failure of private health care industry to provide a service that is much needed and will save lives. In this case the government has and will be a more efficient conduit providing the inertia to set up a system that private markets have been unable to do.

Sam Grove May 17, 2009 at 11:42 pm

In this case the government has and will be a more efficient conduit providing the inertia to set up a system that private markets have been unable to do.

Possibly because government has appropriated the resources from the "private" markets in the first place.

I placed "" around private, because markets are not "private" in the sense that a business or property may be private.

Sam Grove May 18, 2009 at 1:23 am

Let us remember also that medical professionals are rent collectors and that medicine has been highly regulated for many decades.

We observe that protected industries tend to lag in innovation.

Rafi May 18, 2009 at 3:15 am

EMR hasn't been developed on a mass scale because there has been little incentive to. If those doctors/NPs/hospitals who did use it were making more money then everyone would be doing it already. The big question is why hasn't the marketplace already adapted to that. To suggest that this is a "market failure" is hubris. As Sam Grove just said, health care is a very heavily controlled (or "regulated") industry in the USA. To analyze the dynamics of the health care industry requires imagining it with *and* without those controls. If it was so profitable and cost saving to implement EMR then we wouldn't need the government to force it upon the industry. Government has a terrible track record of telling industry how to be more efficient, but that point is just beating a dead horse.

vidyohs May 18, 2009 at 7:18 am

Russ,

I had to laugh when I hit this quote:

"Another argument often advanced for electronic records is cost-saving. It will prevent needless duplication."

Didn't we just see a couple of days ago in your post of "Administration's Sixth Sense" just how well and accurately the government keeps records?

Checks to dead people, an MRI of a stranger being read by a doctor as yours, then surgery being performed? Could it happen……..sta tooned chilluns we's bout to enter the rabbit hole!

geoih May 18, 2009 at 7:18 am

Quote from muirgeo: "The fact that most ( i think all) private for profit health insurance systems do not have fully integrated electronic medical records ( at least here in the USA) is just one more example of a "market failure" on the part of private enterprise. Specifically a failure of private health care industry to provide a service that is much needed and will save lives."

Says who? I could give a rats ass if my records are electronic or integrated. That's not a market failure, thats a logical market response to the desires of customers.

If it was cost effective and good for business, private firms would go to electronic records, but obviously it isn't. More obvious, it's just another mechanism for expanding government control through an ossifying bureaucracy.

It's just one more example of something that is so spactacularly wonderful that the only way it can be implemented is by government passing a law and requiring compliance at the point of a gun. It's for your own good. Do this, or we'll kill you.

John May 18, 2009 at 7:59 am

Once the government has access to electronically stored medical records it will find new and interesting ways to use them.
Since the government will soon be paying everyone's health care bill, it will soon need to cut that bill down by reducing the costs associated with preventable diseases.
Mandatory physicals will give data necessary to mail out orders to change diet, get more exercise, drop a bad habit, or otherwise get healthier.
They might even get back into the business of deciding what sexual practices are acceptable, for health reasons.

Think I'm crazy? In the UK there are government employees inspecting people's refrigerators, and the Japanese government is fining employers if their employees' waistlines are too big.

There are people who will not be satisfied until they tell us when to wake up, what to eat, where to work, when to exercise, with whom to have sex and in what position.

Once they administer our "health" they will be able to control every aspect of our lives.

Electronic records are a critical step towards that goal.

Martin Brock May 18, 2009 at 8:29 am

The main thing that will be stimulated are the bank accounts of the people who make the products that help computerize the records.

Woo hoo!

Russ is right, of course. The "stimulus" package probably stimulates a lot of ivory tower intellectualizing too, and many "shovel ready" construction projects will be little more that architectural/engineering welfare programs.

muirgeo May 18, 2009 at 8:41 am

"If it was cost effective and good for business, private firms would go to electronic records, but obviously it isn't. "

Posted by: geoih

Oh right because that is a quote from The Bible of Libertarianism, Book Tautology 2:12.

Yeah… it's a religion with you guys.

Rafi May 18, 2009 at 8:45 am

What does the profit motive have to do with religion? What principle are *you* operating with?

Randy May 18, 2009 at 9:19 am

Muirgeo,

You keep referring to libertarianism as a religion. You've got a point. And so does Rafi. We all have our principles. We are all believers. I believe in liberty first. I had a thought the other day which might help to clarify it for you;

Liberty is worth fighting for. Society is not.

Martin Brock May 18, 2009 at 9:36 am

If it was cost effective and good for business, private firms would go to electronic records, but obviously it isn't.

Many firms go to electronic records without any external, authoritarian mandate. You're using electronic records right now to carry on this conversation, and no one is forcing you.

I don't advocate compelling the health care business to adopt electronic records, but I'm still a great believer in the technology after all these years. Computers and networks waste tons of money, but they also attract many consumers in the market.

Murali May 18, 2009 at 10:19 am

Pardon my economic ineptitude, but, if setting up the system enriches those who do the setting up, dont they consume more and create more demand? And doesnt that fuel the economy?

Electronic records are probably a good idea. I think that it is a good thing that if I go to a clinic and give my identification number, the doctor is able to see my medical history, even if Ive never been to that clinic or seen that doctor or been refered to him by my regular doctor. If done properly, it saves a lot of hassle on the part of patients and doctors

Murali May 18, 2009 at 10:20 am

The only problem seems to be that it takes forever to key in ALL the existing records

Snarky May 18, 2009 at 10:29 am

The fact that most ( i think all) private for profit health insurance systems do not have fully integrated electronic medical records ( at least here in the USA) is just one more example of a "market failure" on the part of private enterprise.

I guess we have to redefine the term "market failure" as: "Stuff muirgeo doesn't like."

John Dewey May 18, 2009 at 11:02 am

Does anyone know whether the proposal would convert all medical records to electronic form? Would doctors and nurses enter all their notes into portable devices? or would clerical assistants simply transcribe those notes into electronic documents, as Randy suggested? If the solution is the latter, where are the direct savings?

Would electronic documents – in lieu of handwritten notes and signatures – be as acceptable in legal proceedings? It's hard to top the credibility of notes in a doctor's or nurse's handwriting.

Randy May 18, 2009 at 11:08 am

Murali,

It takes a lot of time to key in the new information too. I've sat in appointments with doctors who do use electronic systems. It takes them several minutes just to bring up my record, and then they spend more time typing in the discussion and all the required entries associated with the discussion than they do actually discussing the problem.

I troubleshoot a computer based system for a living, and I wouldn't want to use such a system while troubleshooting a system that is far less complex than the human body. There's a flow, and these systems destroy the flow. I think that in real life the doctors may be forced to use them, but in time their entries will become so cryptic as to be useless to anyone else.

MnM May 18, 2009 at 11:23 am

Murali,

You've missed the other side of the equation. That is, the cost.

We could, of course, simply break windows and we'd kickstart the economy, right?

Murali May 18, 2009 at 11:52 am

I know that a comment is really no place for econs 101, but could you explain to me how thhat would work? Any dollar spent on this by the hospital/ government is a dollar gained by the computer company. How does cost factor in?

Mike Laursen May 18, 2009 at 12:16 pm

It probably is a great idea to keep everybody's medical records electronically — if someone comes up with a viable approach to doing so. There's no particular reason to think that Obama is that someone.

Mike Laursen May 18, 2009 at 12:24 pm

I know that a comment is really no place for econs 101, but could you explain to me how thhat would work? Any dollar spent on this by the hospital/ government is a dollar gained by the computer company. How does cost factor in?

You're correct. It is a benefit to the computer company, the folks who work there, and folks who serve them. However, that's half the story. You have to look at what purpose that dollar was taken from.

MnM May 18, 2009 at 12:35 pm

It ignores the cost to doctors/dentists/hospitals, etc., that have to change the standards and procedures over to the new system (and this assumes that the system is subsidized by Uncle Sam, the costs are even higher if the doctors have to spring for the system itself).

What might they have spent that money on otherwise? Is the economy somehow better stimulated by the programmer's spending? I don't think so. I think it's safe to assume that you don't either.

Let me put this another way, and relate it to the broken window fallacy a little more clearly: Doctors currently have a system that they, ostensibly, prefer. We break or destroy that system to replace it with a different(electronic) one. Are we economic benefactors for destroying the system? Or have we vandalized the doctor's practice?

Well, the programmers certainly benefit (like the glass maker in the parable of the broken window). And certainly whatever he spends his money on will profit the producers of his consumption.

However, the doctor his harmed by the destruction of his property (like the butcher and his window in the parable). Had his property not been destroyed, what would he have spent his money on? Would those producers have benefited from this consumption just as well as they would from consumption of the programmer?

I think so. I'm also sure that you do too. If other producers benefit just as well from the doctor's consumption as they do from the programmer's, what is the sense in imposing costs on the doctor? After all, if there is no difference in the the consumption of each actor, the cost is simply dead-weight loss.

In encourage you to read the link I provided above. There is a lot of wisdom to be gleamed from understanding it.

Rich Berger May 18, 2009 at 12:46 pm

"No the answer as a practicing physician who's career has now spanned from complete paper charts to a fully integrated medical records system is an absolute YES."

Muirgeo

Did I read this correctly – you are a physician?

Methinks May 18, 2009 at 12:47 pm

Let's not forget the cost to patient in the form of increased risk of having the medical records made public. Hacking into a computer system is pretty easy.

Martin Brock May 18, 2009 at 2:08 pm

Pardon my economic ineptitude, but, if setting up the system enriches those who do the setting up, dont they consume more and create more demand? And doesnt that fuel the economy?

If I write software by writ of some statutory decree, then I haven't necessarily added a valuable good to the economy, so my consumption decreases the stock of valuable goods without increasing it commensurately. Maybe the software is a "public good" in some sense, but then again, maybe it's not.

Simply creating "demand" without creating more stuff to demand doesn't simulate the economy usefully. A market economy is not a zero sum game, but simply entitling people to consume regardless of any productivity is zero sum.

Martin Brock May 18, 2009 at 2:09 pm

The first paragraph in the preceding post should be offset by a blockquote. Pardon the programmer's ineptitude.

Greg Worrel May 18, 2009 at 2:36 pm

I developed a software program for chemical lawn care companies about 23 years ago. Our customers were usually small mom and pop operators of companies with 400-6000 customers.

Due to the relatively small transaction sizes and need for detailed scheduling and billing records, even small companies in this industry were eager to computerize.

It did not require a government mandate or subsidy to get it done. These companies saw it as an essential business expense, just like a truck or other piece of equipment.

The idea that doctors and hospitals, a richly rewarded and highly compensated industry, needs a government subsidy to computerize is ludicrous.

Every doctor or hospital I have had any business with in recent years has handled their billing electronically.

So the issue must be the doctor's notes and treatment recommendations. Obviously those would have to be entered by the doctor directly or transcribed from notes. Either takes extra time compared to the current system with no ability to bill extra to the patient.

So the medical industry has already largely decided that additional computerization is not cost effective. Why is that a problem?

It is like someone with an iphone or other PDA saying, "Everyone should have one of these. Look at all the time and money you will save using your time waiting in line at the grocery store to do your banking, check movie listings, etc, etc. Everyone should have one. Let's make it a law!"

Martin Brock May 18, 2009 at 3:28 pm

If drs. notes and treatment recommendations are the issue, data entry time is not the issue. It's the malpractice risk.

Randy May 18, 2009 at 5:34 pm

Martin,

My thought while watching the doctors stepping through the program asking the questions as prompted was that this is CYA medicine. But data entry is also a problem. What I saw was very time consuming.

vidyohs May 18, 2009 at 5:44 pm

Methinks, above, is correct about having your medical records available on-line and that storage being hacked with ease.

When Palin was announced as running candidate for McCain, how long did it take the little socialist squirrel in Tennesee to hack into her e-mail to find any dirt he could find to give to the news agencies. Imagine how neat it would have made him feel to be able to hand over details on every Palin medical visit, diagnosis, and treatment at the same time, not only for her but her entire family as well.

And don't think for a moment he would have hesitated, nor that the media would have hiccuped over printing and broadcasting it.

Dr. T May 18, 2009 at 7:09 pm

Most hospital records and a significant percentage of physician records are electronic. This has been true for years. It has done nothing to improve medical care in general, though it has helped improve care at individual hospitals and physician offices.

Our problem isn't lack of electronic medical records. Our problem is connecting them all and doing something useful with them while still maintaining patient confidentiality. But, installing more electronic medical record systems is easier, so that's what will happen. The data will still sit idle.

Maximum Liberty May 18, 2009 at 9:21 pm
Babinich May 18, 2009 at 10:01 pm

Posted by: muirgeo on 05/17/09 9:25:57 PM

"No the answer as a practicing physician who's career has now spanned from complete paper charts to a fully integrated medical records system is an absolute YES."

No, you're wrong. As someone "in the game" I can tell you, unequivocally, that the number of those favoring electronic records versus paper records is in not a overwhelming majority.

Dallas May 21, 2009 at 12:21 pm

The silliness of the data systems at my Dr's and hospitals is amazing. When the hospital does chemical analysis, this digital data is converted into an image file and faxed to my Dr's office, which is then printed out as a paper document then scanned into my "computer file" as an image file.

Now it is impossible to obtain a graphical trend line for my results (ie, glucose, HDLP, LDL, etc.) as related to medications. I did my own data base (excel workbook) with manual entry of the data and showed that some drugs were totally (statistically significant results) ineffective for me. I also showed that other drugs helped on parameter of concern while harming another factor of concern.

These are some of the advantages of a digital data system. However, MD's aren't the most progressive individuals around. I had (past tense) one comment to me "don't you have something better to do than keep track of data", when my statistical analysis showed that his recommended drug was ineffective, in my case. He has forgotten that drug approval is a statistical problem where they have been shown to work for the average, but that there is a statistical distribution of individuals where it works much better than average or doesn't work at all. It is my health, not his ego that is important.

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