Center for American Progress Action

NEW REPORT: Health System Modernization Saves $600 Billion over 10 Years, $1.6 Trillion over 25 Years
Press Release

NEW REPORT: Health System Modernization Saves $600 Billion over 10 Years, $1.6 Trillion over 25 Years

Modernization could boost productivity growth in health care by 2 percent, reduce hundreds of billions of inefficient health care spending

Read the full report  (pdf)

WASHINGTON, DC— As further evidence that enacting health reform is vital to the long-term health of the U.S. economy and the American people, a new report from the Center for American Progress Action Fund and the Democratic Leadership Council has determined that health system modernization has the potential to save the federal government nearly $600 billion in health spending over the next decade, and $9 trillion over the next 25 years. Over time, these savings will not only more than offset the cost of covering all Americans, but also will play a critical role in restoring long-term fiscal balance.

The report, Health System Modernization Will Reduce the Deficit, was conducted by Professor David M. Cutler of Harvard University, a leading health care economist and expert in projecting long-term health costs and savings. Cutler conservatively estimates the productivity payoff from enacting health system modernization measures that enjoy bipartisan support, such as electronic medical records, comparative effectiveness research, prevention, measuring results, paying for value, and consumer involvement. His findings demonstrate how much passage of health reform will do to brighten the prospects for long-term fiscal responsibility and economic growth:

· Health reform will spark a productivity boom in health care: Cutler projects that within four to five years of enactment, health system modernization will increase productivity growth in health care by 1.5% to 2% per year. 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% of GDP. Where baseline estimates project Medicare and Medicaid spending to rise to 9% GDP by 2035, health reform will reduce that projection to only 6.5% of GDP.

· Health reform is entitlement reform: Over the long term, bending the Medicare/Medicaid health care cost curve from 9% to 6.5% 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 this 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.

The potential savings from health care modernization are enormous, and so are the costs of doing nothing. As David Cutler rightly concludes, “Wasting hundreds of billions of dollars on inefficient health care is a luxury we cannot afford.”

Read the full report (pdf)