How IT Will Make the Affordable Care Act Work for Americans

When speaking to the American Medical Association on June 15, 2009 about the need for health care reform, President Barack Obama cited an unlikely source. He said, “As Newt Gingrich has rightly pointed out — and I don’t quote Newt Gingrich that often — we do a better job tracking a FedEx package in this country than we do tracking a patient’s health records.”

Mr. Obama’s point was clear; although the debate over health care reform was intense and divisive at times along ideological lines, there was one area where almost everyone seemed to agree. In order to coordinate care, reduce costs and deliver better outcomes for patients, the United States health system needed to harness, analyze and share (within HIPAA guidelines) the data it generates. In May 2008, the non-partisan Congressional Budget Office published a report on the costs and benefits of health information technology. That report estimated an annual net savings in the healthcare sector of $80 billion. In Mr. Obama’s view, it was time for the dream of interoperable electronic health records to become a reality.

By the time of the President’s address to the American Medical Association, he had already signed the landmark Health Information Technology for Economic and Clinical Health (HITECH) Act into law as part of the American Recovery and Reinvestment Act of 2009. Among its many provisions, the HITECH Act established $20 billion in federal funding for electronic health records systems that satisfy “meaningful use” criteria. Yet, as Obama pressed Congress to pass a comprehensive health care reform bill, he made expanded use of health information technology part of his agenda.

The final healthcare reform law, the Patient Protection and Affordable Care Act, took the next step after the HITECH Act by instituting new electronic billing standards, requiring health plans to implement electronic health information exchanges, and creating new health insurance marketplaces called exchanges. It is perhaps even more critical to understand the law’s indirect impact on health information technology through its emphasis on value-based purchasing, physician quality reporting, accountable care organizations and patient-centered medical homes. If there is one common thread among the myriad changes brought about by PPACA, it is an increased dependence on health information technology.

Billing and insurance reforms

PPACA is primarily a law about expanding access to health insurance. Beginning in 2014 (with open enrollment starting October 1, 2013), individuals and small businesses will be eligible to purchase private insurance from multiple carriers through exchanges. Because health insurance is regulated at the state government level, each state will have its own marketplace. PPACA gives state governments the option to either operate their own exchanges, work in a state-federal partnership or defer to the federal government to operate their state’s exchange. Regardless of the governance structure (whether states choose to implement their own exchanges is driven largely by partisanship), exchanges will be heavily dependent on the Internet and on standardized electronic transactions to facilitate insurance purchasing.

On the surface, a health insurance exchange website may seem analogous to a travel booking website like Different private insurers could simply list and explain their offerings and let consumers choose. However, because PPACA includes means-tested subsidies for private insurance and a lengthy list of eligibility requirements for government programs (specifically Medicaid and CHIP), the data collected from insurance applicants is far more extensive.

Also, insurers that participate in the exchanges will be required to report to the government on quality measures, provider network adequacy, essential health benefits, claims payment, medical loss ratios, individual mandate compliance and many other details. That is why the law mandates standardized, secure electronic transactions (including financial transactions) maintained by the Department of Health and Human Services to facilitate these reporting requirements and simplify administrative tasks.

The task of setting up the exchanges is mammoth, and the Department of Health and Human Services has been working closely with states to make sure that residents of every state have access to a functioning exchange when open enrollment begins. However, deadlines continue to be pushed back to account for a lack of readiness by the states that have opted to operate their own exchanges. (This does not even account for the states where Republican governors who oppose PPACA are actively trying to derail its implementation.) Because PPACA was challenged in federal court (and ultimately at the US Supreme Court) and because candidate Mitt Romney vowed to repeal PPACA, a common attitude among governors was to wait until after the election to make any major decisions.

Health IT for clinical data

In order to minimize the cost impact of expanding health coverage to millions of Americans, PPACA also includes provisions designed to “bend the cost curve” by measuring and improving the quality of health care. PPACA depends heavily on expanded health information technology to collect, disseminate and analyze clinical data in the hopes of improving outcomes and reducing costs.

Just as third-party health payers will have new reporting requirements through the insurance exchanges, PPACA also includes provisions to expand health information exchanges for clinical data from the health care delivery system. Where the HITECH Act included grants to finance the health information technology infrastructure for electronic medical records, PPACA established quality reporting and public health data collection requirements that will employ the new infrastructure to measure quality and track population health. In the spirit of the HITECH Act, PPACA also provided additional funding for long-term care facilities to implement electronic medical records systems.

Indirect health IT impacts

Some of the most significant health IT impacts of PPACA are indirect — that is, provisions that do not explicitly cover health IT nonetheless incentivize investments in information systems.

Two of the more significant provisions of PPACA are the creation of two new voluntary health care delivery models for Medicare: accountable care organizations and patient-centered medical homes. Although the rules governing these new models are extensive, the concept behind them is essentially shifting reimbursement away from a fee-for-service structure toward a structure of bundled payments that reward providers for managing patients’ health across the whole continuum of care.

Accountable care organizations (established through the new Medicare Shared Savings Program) are required to use health information technology for electronic health records, disease registries, eHealth solutions, health information exchanges and advanced data analytics. Naturally when an accountable care organization is charged with keeping a population of patients healthy (regardless of where they go for their health care), it will have an incentive to participate in a health information exchange so the patient can be tracked. This can be particularly useful in the case of disease registries for chronic conditions such as diabetes.

Because PPACA requires healthcare providers to report their quality measures to the Department of Health and Human Services and bases reimbursement levels on performance against these measures, health information technology adoption will become more critical. PPACA extended the Medicare Physician Quality Reporting Initiative, which provides additional compensation to physicians who report quality measures and meet or exceed quality benchmarks (an example of value-based purchasing). Failure to report on these quality measures will result in penalties (reductions in Medicare reimbursement) beginning in 2015.

Not only can health IT enable providers to meet their reporting requirements, it can also help them improve their quality scores so that they can achieve higher reimbursement levels. Electronic health records systems often include decision support tools for physicians to help them practice evidence-based medicine. With the expanded reporting requirements from PPACA, the Department of Health and Human Services can use the data collected to continually improve decision support systems as new evidence and analytics become available. EHR systems also frequently include e-prescribing tools, which can substantially reduce prescription drug errors. Research has shown that handwritten prescriptions have a 37 percent error rate vs. a 7 percent error rate for electronic prescriptions.

Where are we now?

Nearly three years after Mr. Obama signed PPACA and nearly four years after the HITECH Act, health IT adoption in the United States is substantially higher than before, but still very low when compared to other developed nations. A 2012 survey of U.S. primary care doctors by the Commonwealth Fund found that 69 percent reported using an electronic health records system compared with 46 percent in 2009. By contrast, the United Kingdom has an adoption rate above 90 percent. Only 27 percent of U.S. primary care providers reported having access to electronic health records with “multifunctional” capabilities.*

As health IT adoption continues to increase over time, the United States should expect to see positive impacts on cost and quality, but how effective PPACA will be at controlling costs is a matter of intense debate. With health insurance exchanges set to go live for open enrollment on October 1, 2013, an enormous of amount of information technology work must be completed in a short timeframe. How successful the exchanges will be depends in large part about how effectively the technology is implemented — especially in terms of usability by people looking to enroll in health coverage.

All of this new data infrastructure brings with it new challenges for privacy and security. In addition to the requirements set forth in the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Department of Health and Human Services is building new capacity to enhance — and enforce — information security beyond the original HIPAA provisions. According to the National Coordinator for Health Information Technology, These added privacy and security protections are an integral piece of the government’s increased efforts to broaden the use of IT in health care.”

Efforts by the U.S. government to expand health information technology are very much in their infancy. Although some significant progress has been made, most of the work lies ahead. Whether all of this effort and cost will be worthwhile remains to be seen, but early signs of bending the cost curve are positive.


Obama, B. Remarks to American Medical Association, Chicago, 6/15/2009.

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U.S. Department of Health and Human Services. “Key Features of the Affordable Care Act, By Year.”

Kaiser Family Foundation. “Explaining Health Care Reform: Questions about Health Insurance Exchanges.” April 2010.

National Association of Insurance Commissioners. “Patient Protection and Affordable Care Act of 2009: Health Insurance Exchanges.” April 2010. Available:

Angle, J. “Administration scrambling to set up ObamaCare exchanges.” Fox News, 1/30/2013.

Goodnough, A. and Pear. R. “With Obama Re-Elected, States Scramble Over Health Law.” The New York Times, 11/8/2012.

Ungar, R. “New Data Suggests Obamacare is Actually Bending the Healthcare Cost Curve.” Forbes, 2/12/2013.

Healthcare Information and Management Systems (HIMSS). “The Patient Protection and Affordable Care Act: Summary of Key Health Information Technology Provisions.”

Impact Advisors. “The Role of Health Information Technology in Accountable Care,” January 2012.

Schmittdiel J et al. “BRIEF REPORT: The Prevalence and Use of Chronic Disease Registries in Physician Organizations.” J Gen Intern Med. 2005 September; 20(9): 855–858. Available:

Mather, R.C. et al. “Penalties coming under PPACA, PQRI,” from American Academy of Orthopaedic Surgeons.

Stross, R. “Chicken scratches vs. electronic prescriptions.” The New York Times, 4/28/2012. Available:

Terry, K. “EHR Adoption: U.S. Remains the Slow Poke.” InformationWeek,11/15/2012. Available:

Office of the National Coordinator for Health Information Technology. “Federal Health Information Technology Strategic Plan: 2011 – 2015.”

*The generation of patient information, such as lists of patients’ medications; the generation of patient registry and panel information, such as a list of patients due for preventive care; order entry management, such as electronic prescribing; and decision support, such as alerts about potential adverse drug interactions. To be counted as a user of a multifunctional EHR, a practice had to report that its system had at least two functions in each of these four domains.

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