I finally had a chance to sit down and actually read Obama's Health Plan in more detail. I will leave the detailed analysis aside and concentrate on the paragraph for EHR's as well as look at a very highlevel macroeconomic impacts of this statement:

 "(1) INVEST IN ELECTRONIC HEALTH INFORMATION TECHNOLOGY SYSTEMS.  Most medical records are still stored on paper, which makes them difficult to use to coordinate care, measure quality, or reduce medical errors.  Processing paper claims also costs twice as much as processing electronic claims.13  Barack Obama and Joe Biden will invest $10 billion a year over the next five years to move the U.S. health care system to broad adoption of standards-based electronic health information systems, including electronic health records.  They will also phase in requirements for full implementation of health IT and commit the necessary federal resources to make it happen.  Barack Obama and Joe Biden will ensure that these systems are developed in coordination with providers and frontline workers, including those in rural and underserved areas. Barack Obama and Joe Biden will ensure that patients’ privacy is protected.  A study by the Rand Corporation found that if most hospitals and doctors offices adopted electronic health records, up to $77 billion of savings would be realized each year through improvements such as reduced hospital stays, avoidance of duplicative and unnecessary testing, more appropriate drug utilization, and other efficiencies."

So $50B (inflation adjusted $10B/year?) will be spent on Health IT and Electronic Health Records and the supporting systems. Just like with any massive Government spending (G), the macroeconomic theory is that a multiplier effect will take over and hence aside form the $77B in direct savings there will be additional dollars generated. Lets follow this hypothetical "healthy America" scenario...

* Governement spends $50B in the next 5 years. These dollars may consist of subsidies to hospitals, doctors, nursing homes, etc as well as direct payments to technology companies to improve standards, design systems, etc. 

* Hospitals, Doctors and other Healthcare organizations will now start suffering a learning curve effect and their efficiencies and workflows will degrade, therefore they now pay consultants and yet more technology companies to enhance their process in this new electronic world. Training their staff is yet another expense. New and innovative educational services are launched for the healthcare industry.

* Given these new and imporved electronic records, some people will loose their jobs and will need to be retrained to now fill the void in shortage of experts in EMR's

* Employers are now saving money on the health plans since the patients are much more educated, given the fact they have a copy of their EHR (PHR) in the cloud and it is completely portable form provider to provider (we can only hope). This is yet another outcome of the initial $50B spending

* By moving up the healthcare stack, the medical billing assitant is now an electronic health record expert and due to higher disposable income the whole aggregate demand curve shift in our favor

* Healthcare gets cheaper and patients ride the healthcare indifference curve to demand  enhanced total care management services

I can continue walking down this fictional yellow brick road, but please note that the multiplier effect is argued by non-Keynsians and is looked at as a very short-term measure.

So will the government injection into health IT spur innovation or will it be too slow and beurocratic and the free market forces will win?