Health IT from the Bottom Up

Today I attended the event "Explaining International Health IT Leadership" at The Information Technology and Innovation Foundation to release an ITIF report by the same name. In addition to the ITIF scholar who authored the report, the panel included experts from the small, relatively homogenous nation-states of Finland and Denmark.

The panel discussion focused on government initiatives to spur development of electronic medical records, telemedicine, and other innovations that Information Age consumers expect in many other sectors of the economy. One got the impression that the primary impediment to broad penetration of these technological advances is a lack of political leadership.

But if health care consumers want these things, why doesn't the market provide them? Well, to a certain extent, it does, but probably not as much as people want.

The vast majority of private sector health plans are purchased through an employer. This has at least two effects with respect to health IT.

First, employment decisions are generally made based on total compensation, which includes wages, benefits (medical and otherwise), and intangibles like opportunities for advancement, prestige, enjoyability of work, and so forth. This bundling prevents workers from exploring alternatives and selecting something that fits them best, as we do when we choose universities, automobiles, and homes. Instead, employee demands on health care providers are mediated by insurance companies AND employers, neither of whom can efficiently communicate the individual preferences of workers. As a result, neither the insurance market nor the providers face sufficient competition to drive the rapid innovation seen in other sectors.

Second, the linkage of employment to health insurance means that insurance coverage is very likely to change every time a worker changes employment. Electronic medical records may be a worthwhile investment when long-term relationships exist, and perhaps less so in a market with contractual instability.

Medical records also raise concerns about privacy. What is the appropriate level of privacy protection? No 'correct' answer exists--demand for privacy varies subjectively with individuals. Any one-size-fits-all standard will in fact not fit all, but will leave many people unhappy--both those who want more privacy and those who are willing to trade off some privacy for other benefits (like individually tailored advertisements).

Concerns are also raised about interoperability and standards. This is an important point, but one that markets have resolved time and time again--railroad track gauges and PC operating systems, just to name a few. Far better to encourage experimentation that gets us to the medical records equivalent of modern operating systems instead of locking us into something like Windows 3.1--once state-of-the-art, now completely obsolete.

Giving individuals more control over their health care dollars ought to force insurance companies and medical providers to innovate and offer these products and invent others simply to attract and retain customers. It's not at all clear that government leadership is the only way to get there.