Should Government Subsidize Electronic Health Records?

Abstract

Health information technology (HIT) innovation focuses on electronic health records (EHRs) that can collect, store, and transmit health information within electronic health information exchanges. HIT innovation holds great promise not only for improving public health, but also for controlling what many believe is out-of-control healthcare spending in the United States. These benefits, along with the perception that providers were too slow in adopting HIT, motivated passage of the Health Information Technology for Economic and Clinical Health Act in 2009. That act authorized government subsidies to encourage the adoption and use of EHRs. This paper examines whether recent government investments in EHR adoption were wise. Theories that market failure in EHR innovation and adoption is caused by network externalities, lack of information, and free-rider problems are found to be not entirely convincing, especially given that the government case for subsidies mistakenly assumed that interoperable mature technologies were mostly in place and that healthcare providers would voluntarily share data among themselves. Government subsidies have thus likely “locked in” immature technology rather than spurred HIT innovations that would otherwise have evolved over time. Lost opportunities for better patient care at lower expense are one major cost of the government subsidy program. The paper concludes with recommendations for government policies that are more likely to promote HIT innovation that will improve public health.