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Government Pays, Businesses Delay   January 26th, 2009
Demonstration of the effect of government funding       


More observations...

Why pay for something yourself if you expect the government to pay for it in the future?


In the weeks leading up to the election, Obama kept promoting the idea of electronic health records. He announced that all records should go online by 2014, and that the government would spend $50 billion to make that happen...

While such bigger players as McKesson and Cerner focus on hospitals, Allscripts sells mainly to smaller practices. Of the 550,000 doctors who work outside of hospitals, about 100,000 use electronic health records; 60,000 of those doctors use Allscripts' software...

Jones believes that hospital purchasers and independent practitioners will delay their purchases even more in anticipation of federal funding.

So the industry was already moving towards electronic health records. But now that there's talk of the government funding it, private sector migration to such electronic records is expected to be delayed because they'd rather the government pay for it.

While this may seem obvious, it's a perfect example of potentially misguided government regulation and spending distorting the economy. Essentially, the market was already moving towards what President Obama wanted to achieve. A market already existed. As more medical practitioners moved towards electronic records, it would become clear that they really did make those businesses more profitable (or not, as the case may be) and the market would respond to it automatically--either by more doctors moving to electronic records; or, if it became clear it wasn't saving any significant money, by abandoning it. The market was working on figuring it out.

But instead of letting the market take its course and allow the industry to find what is profitable and invest in it itself (which it was already doing), the promise of federal funding is expected to cause private industry to delay making its own investment. Why invest your own money if you think the federal government is going to pay for it?

So now, it seems, taxpayers are on the hook to pay for a migration to electronic health records that the industry was already investing in anyway. Is that a good use of $20 billion of taxpayer dollars?

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