Obama administration rolled out a program to make $1.2 billion grants available to help the nation’s health care system transition to electronic medical records. The grants are part of a $48.8 billion chunk of the economic stimulus bill devoted to health information technology, including grants for individual doctors to help cover the costs of converting from paper records.

These grants were approved by Congress under the economic stimulus bill, but they’re also a part of the administration’s ambitious health-care agenda. And advocates of the transition say the investment will not only upgrade the quality of care, it will also save the country money in the long run.

However, estimates of the potential savings from a transition to electronic medical records vary widely. The Obama administration says that increasing the adoption of health information technology will save the federal government more than $12 billion over the next 10 years. The left-leaning Center for American Progress estimates that investments in health information technology could lead to federal savings of $196 billion during roughly the same period. The RAND Corporation projects savings of about $80 billion a year for the entire health-care sector.

The variance among these estimates is caused in part by different assumptions about what a transition to electronic medical records really means. A 2008 report by the Congressional Budget Office noted that some optimistic estimates rely on a best-case scenario of “potential” savings if health IT systems are widely adopted – and other changes are made to the health-care system as well.

“The way to think about it is that alone, if all we do is electronic records, then we’re just going to do the wrong stuff faster,” says Len Nichols, the director of the Health Policy Program at the New America Foundation. “You’ve got to think about electronic records as a piece of a re-engineered delivery system.”

Part of the promise of electronic medical records systems is the idea that every time a doctor or nurse sees a patient, a whole database of information is instantly available: that individual’s medical history including any allergies, underlying conditions like diabetes, or tests that other specialists have already run, as well as public health data on what treatments have been proven to be most effective for patients with this person’s history and symptoms. Nichols describes a scenario in which a migraine sufferer, frustrated after years of ineffective treatment, asks his doctor for an MRI; the doctor has instant access to data that proves that an MRI isn’t the best option for this particular patient. She doesn’t order the test, and the system saves money on an unnecessary and expensive test.

The current health-care system, in which doctors are typically paid on a fee-for-service basis for every treatment they provide, offers no financial incentive for making that cheaper choice. The CBO report concludes that, without a change in the way providers are paid, electronic medical records could improve the quality of care, “but it is relatively rare for providers to be compensated for such improvements.” So a move to electronic medical records alone won’t save as much money as an electronic transition combined with a new system that rewards doctors based on the quality of care they provide.

The move to electronic medical records also raises privacy concerns because data could be shared widely among health-care providers – and used to create public health databases that could help identify the most effective treatments. The stimulus-bill grants include protections for patient privacy that could serve as a good first step to keeping health information secure, says Christopher Calabrese, a lawyer for the American Civil Liberties Union.

“Now the devil’s really in the details,” Calabrese says. “The central question is, what privacy is going to mean? Is privacy going to mean just confidentiality?” He says privacy protections should include patient control over which providers can see what information. “Your podiatrist does not need to know whether you’ve had an abortion,” he says.

Some electronic records advocates say the switch is so valuable that it should trump privacy concerns. Ellen-Marie Whelan, the associate director of health policy at the Center for American Progress, says privacy needs to be addressed, but it shouldn’t hold up the move to a more efficient system that could produce better outcomes for patients.“ I don’t know that we’ll ever get a 100% guarantee [of privacy],” Whelan says. “And it’s so important that I don’t think we can afford to wait until we have a 100% guarantee before we move forward.”

With health-care costs continually growing, policy makers are looking for any way to cut costs – even though the debate over coverage has left a cloud of uncertainty around the final bill.

“We may or may not decide as a nation that we care enough about our fellow human beings to expand coverage,” Nichols says. “We have no choice but to try to get our system to become more efficient.”

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