January 2008
In this issue
HIT Spending Projected at $10.8 Billion By 2012

The "generational overhaul" of Medicaid Management Information Systems (MMIS) currently underway appears to be the lead driving force behind state and local healthcare information technology (HIT) spending reaching $10.8 billion by 2012. That's according to the latest report from market research firm INPUT, a governmental business authority that helps companies develop federal, state, and local government business, and helps public sector organizations achieve their objectives.

According to the report titled, "State & Local Health Care IT Market 2007-2012," as many as 29 of the 36 vendor-operated MMIS systems will come up for recompete by 2012. The MMIS is an integrated group of procedures and computer-processing operations developed at the general design level to manage Medicaid funds. Immediate demand will be for such traditional MMIS needs as integration with other social services, outsourced eligibility processing and elimination of waste, fraud and abuse. Current and future MMIS investments will account for some $3.9 billion of growth in vertical HIT in the nation by the projected date.

Just five months ago, a report from the Department of Health and Human Services' Office of Inspector General recommended that the Centers for Medicare and Medicaid Services (CMS) continue to support the goals of the Medicaid Information Technology Architecture (MITA) initiative as part of their HIT planning. MITA is a new approach to state MMISs, providing a national framework that defines standards for system architecture, while also providing guidelines for adaptations to fit individual state needs. The current MMIS structure was defined more than 25 years ago. In the ensuing years, many changes were made to adapt the system to fit local recipient needs, resulting in drastic MMIS differences from state to state.

News outlets are widely citing the latest INPUT report, or more accurately, the abstract of the 49-page $3,900 report, which is part of the marketing research firm's State and Local IT Industry Analysis program. In addition to INPUT's study, a report from research firm Datamonitor predicts that widespread adoption of electronic health record systems in North America and Europe will boost e-health record spending in those regions from $4.4 billion in 2007 to $13 billion in 2012 - a compounded annual growth rate of 23.8 percent.

According to Chris Dixon, manager of state and local industry analysis for INPUT, "Health IT has become a buzzword that encompasses a wide range of concepts and technologies that can promote the quality-based transformation of the U.S. healthcare system." Although consumer healthcare spending reached $2.1 trillion in 2006, according to CMS's Office of the Actuary's National Health Expenditure Data (NHE), many believe that broader HIT implementation will help lower costs in addition to enabling a higher and more consistent level of care.

The Office of the Actuary in the Centers for Medicare & Medicaid Services annually produces projections of health care spending for categories within the National Health Expenditure Accounts, which track health spending by source of funds such as Medicare and Medicaid, as well as by type of service (hospital, physician, prescription drugs, etc.). To view or download national health expenditure category definitions, click here.


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