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3 Ways Health-Care Reform Will Impact Government IT

Issues include electronic health records and upgrading Medicaid eligibility systems.

Photo: President Barack Obama fist-bumps a medical professional in the White House prior to a health-care event in March/Photo courtesy of the White House/Pete Souza

States are just beginning to confront the technology implications of federal health-care reform. At first blush, the new health-care law holds big risks and equally big opportunities for state governments, which will shoulder most of the burden of implementing these sweeping changes. On March 23, President Barack Obama approved health-care legislation that's expected to extend health insurance to an additional 32 million Americans. About half of those newly insured citizens will get their coverage through state Medicaid programs, thanks to expanded eligibility for these low-income insurance plans. Many of the rest will receive government subsidies to help them afford health coverage.

Technology upgrades could be pivotal to cutting the cost of delivering these new services - a notion that's getting more attention in state houses across the nation, according to Ray Scheppach, executive director of the National Governors Association.

"There's a lot of opportunity, but it's going to put a big burden on states," said Scheppach, speaking at the National Association of State Chief Information Officers (NASCIO) mid-year conference in April. "To me, there is high risk around these changes because the federal government hasn't been willing to put the money in for the upgrade of systems. But there's a high potential benefit for states that do it well."

From an IT perspective, health-care reform hits states from several directions. Medicaid eligibility systems will strain to handle millions of new applicants - and these systems will need to connect with other state and federal systems to accommodate new eligibility requirements. States must decide if their current Medicaid systems can be upgraded or if total replacement is necessary, Scheppach said. Either way, they'll need to add features like online benefits sign-up for Medicaid applicants that let agencies deliver benefits more efficiently.

The health-care legislation also envisions new state-run health insurance exchanges - essentially Web portals that will match citizens with insurance plans that meet their needs. These exchanges will need connectivity to other state and federal systems to determine eligibility for Medicaid coverage or federal subsidies.

In addition, health insurance exchanges - which will aggregate millions of health insurance customers - also could give states leverage to force health insurers and providers to adopt electronic health records (EHRs) and other money-saving technologies.

Using technology to cut the cost of delivering health benefits may prove fundamental to the long-term viability of health-care reform. Governors already worry that growing Medicaid caseloads and a spiraling federal budget deficit could prompt the feds to cut Medicaid reimbursements to states, according to Scheppach, forcing states to pay a larger share of the cost for providing health coverage to low-income families.

"We really have to get the costs down to something that's sustainable," he said.

As state governments struggle to simultaneously expand health-care coverage and cut the cost of providing it, here's a closer look at some of the biggest technology issues.

1. Upgrading Medicaid Eligibility Systems

According to some states, the massive expansion of insurance coverage - the flagship of the health-care overhaul - comes at a steep price.

The new law expands Medicaid programs to cover low-income Americans who earn up to 133 percent of the poverty level (or $14,404 for an individual and $29,326 for a family of four). Although the expansion isn't required for all states until 2014, a Kaiser Health News article pointed out that the vast increase could bring 15 million more people into the safety-net program nationwide, according to the Congressional Budget Office.

As the millions of potential recipients pour into Medicaid programs, the influx threatens to strain eligibility systems - especially now, with many states already suffering from

broken budgets.

"While the health-care reform bill gives the states extra money to help pay the costs for Medicaid services, no extra dollars have been identified for administrative functions," said Nathan Lewis, chief of program policy with the Florida Department of Children and Families. "Multiple systems are going to have to be able to talk to each other to support a population of recipients that doesn't exist today."

States such as Florida, he said, will need to find money to purchase new computers, increase data storage capacity for eligibility systems and beef up document imaging systems - not to mention the costs of hiring new workers to handle the increased workload. In addition, under the new law, states must upgrade eligibility systems to test recipients using the old and new criteria separately.

"We're going to have to reprogram the computer to recognize each of these populations and know how to treat them accordingly," Lewis said. "That means our Web-based application, eligibility determination and workload management systems will have to be modified as well as our interfaces with a variety of health-care agencies."

Health-care reform will force states to spend more on eligibility systems, but it also could trigger positive changes in how states operate Medicaid programs. For instance, eligibility determination traditionally is done in silos. The new law may bring systems together and force states to examine the roles of various agencies, according to Cindy Hielscher, an Accenture senior executive and leader of the firm's North American public health practice.

Under the new law, states also may be able to drive down Medicaid costs through value-based purchasing, quality reporting and a national pilot program to establish a bundled payment for specific services.

"Now there are incentives to change technology to focus on populations," said Steven E. Waldren, a physician and director of the Center for Health Information Technology with the American Academy of Family Physicians. "We can figure out how to deliver on quality, how to reach out to patients who don't come to see me."


2. Building Health Insurance Exchange Networks

Health insurance exchanges also will play a role in the eligibility process, according to experts at ACS, which processes 550 million Medicaid claims annually. Will Saunders, chief operating officer of the company's government health-care group, said that under the new law, states must build health insurance exchange portals that automatically determine Medicaid eligibility and direct qualifying patients to the Medicaid enrollment process.

By 2014, states must establish an online marketplace to make it easier for residents and small businesses to compare and buy affordable health insurance.

Cash-strapped states may partner to build regional networks, or they may use a template that will be developed by the U.S. Department of Health and Human Services. In any case, the purpose of these Web portals is to collect data from individuals in an interactive system that ties together treatments, outcomes and payments.

"How do you engage consumers in that process and allow them to request appointments online, do secure messaging, self-management, have glucometer and blood pressure machines record and submit data?" Waldren said. "That's how the Web portals start to be of higher importance and value."

Scheppach said the National Governors Association is still trying to gauge how many states intend to build their own insurance exchanges versus using the federal template. But he said states could use the exchanges to force significant changes in how health care is delivered to patients. Early on, as many as 50 million people will purchase health coverage through insurance exchanges, he told NASCIO members. And states will have the power to certify which insurers may participate.

"All of a sudden, states and governors have a fair amount of leverage in the marketplace," Scheppach said. "I would argue that it

can be used to bring the providers and plans to the table to begin to focus on delivery system changes like bundled payments, capitation in how we reimburse and expanded use of managed care."

In addition, states could use their exchanges to implement quality and efficiency measures that would reduce health costs, he said. But those benefits will require significant effort. Exchanges must link with Medicaid eligibility information, IRS data for income verification, and the U.S. Treasury for subsidy payments and tax credits.

3. Adopting Electronic Health Records

Health-care reform also could drive adoption of EHRs, which has lagged thus far in the U.S. According to Forrester Research, health-care enterprises in North America spend just 22 percent of their IT budgets on new IT initiatives, compared with 28 percent for businesses in other sectors.

With a goal for Americans to have EHRs by 2014, the U.S. government wants to implement an interoperable nationwide network, where health records - test results from labs and radiology, disease and symptom records, CT scans, etc. - can be accessed online from anywhere. The Obama administration set aside $19 billion in the American Recovery and Reinvestment Act to fund adoption of EHR systems that meet specific criteria.

Scheppach said states could demand that health providers adopt EHRs as a condition of joining insurance exchanges. But for hospitals, health-care reform's massive expansion of coverage might be incentive enough to move toward EHRs.

"With 30 million new records to enter, even skeptical physicians may decide that it makes sense to jump on the EHR bandwagon now in order to better manage new patients," said Jon Oltsik, a principal analyst at Enterprise Strategy Group, an IT analyst and consulting firm.

The new law, Oltsik added, might also motivate health-care firms to form partnerships to extend networks for "more data sharing and IT services over a greater pool of health-care providers."

But skeptics say it's too soon for governments to use EHRs to hedge their bets. A national health-care project in the U.K. using experimental health IT as a pillar for reform has been disastrous, according to Scot M. Silverstein of Drexel University, a physician and health IT expert.

To support his stance that EHRs have been overhyped, Silverstein cites studies concerning health IT (HIT) cost overruns and failed systems. He also points to Jeffrey Shuren, director of the U.S. Food and Drug Administration's Center for Devices and Radiological Health. At a health IT safety meeting in February, Shuren said, "In the past two years, we have received 260 reports of HIT-related malfunctions with the potential for patient harm - including 44 reported injuries and six reported deaths." In terms of health IT-related problems, he added, these incidents may represent only the tip of the iceberg.

"It's mystifying why they think this technology is ready to plug and play," Silverstein said. "It really isn't ready for prime time. While health-care reform is a great idea, if you depend on health IT as one of its pillars, you end up with project failure, lack of acceptance, information systems that are impossible to use, and you end up killing people."