Report: Modernizing Health Care Would Save Billions over Decade
A new report from the Center for American Progress Action Fund and the Democratic Leadership Council argues modernizing the nation’s health system could save the federal government $600 billion over 10 years and $9 trillion over the next 25 years.
“Health System Modernization Will Reduce the Deficit,” compiled by Harvard Professor David Cutler, a leading health care economist and expert in projecting long-term health care costs and savings, argues modernization will pay off in three ways:
- Health reform will spark a productivity boom in health care. Within four to five years of enactment, health system modernization will increase productivity growth in health care by 1.5 percent to 2 percent annually. These productivity improvements – which are comparable to the rate of productivity growth already seen in many other economic sectors – will lead to dramatic savings for the federal government and private sector alike.
- 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 Gross Domestic Product. Where baseline estimates project Medicare and Medicaid spending to rise to 9 percent GDP by 2035, health reform will reduce that projection to only 6.5 percent GDP.
- Health reform is entitlement reform: Over the long term, bending the Medicare/Medicaid health care 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 staggering $9 trillion. In other words, by enacting health reform, the Obama administration and Congress have the chance to achieve sweeping long-term deficit reduction on the same scale as the massive deficits and indebtedness wrought by the previous administration.
Cutler notes several modernization measures already enjoy bipartisan support, including converting paper medical records into electronic medical records, comparative effectiveness research, prevention, measuring results, paying for value, and consumer involvement.