Electronic Medical Records

Medical records in the next several decades will shift completely from paper to electronic media. This shift will facilitate great improvements in medical care by providing medial care givers decision support systems to aid in diagnosing diseases, proscribing tests, the choice among alternative procedures and medicines. When a patient moves from one type of care facility to another, his or her medical record can easily be made available. At the same time computerized medical records will require much more care to preserve patient record privacy. On the down side, the ease with which computerized records can be copied and communicated makes the task of preserving medical privacy very difficult.

In the current US medical financial arrangement third party financing agents, such as insurance firms and self-insuring firms, have access to patient medical records in order to make decisions about authorizing medical procedures. The financing agents, frequently businessmen and women without medical training, have discretion over the prescribed procedures. Two questions can be raised about such arrangements. First, the fact the patient medical records flow from medical caregivers to insurance firms and self-insuring firms makes the creation of medical privacy much more difficult because of the large number of individuals who have legitimate access to the records. Second, a fundamental question in US medical care is to what extent the slowdown in medical cost is due to medical rationing and to what extent by increased efficiency.

Self-insured firms have powerful economic incentives to hire and retain healthy employees as medical payments in fully self-insure firms directly reduce profits. From the perspective of market economics the total compensation should equal the value of the marginal product. For conservative economists an efficient market is social justice. To fully understand the implications consider two equally productive workers which have different health costs. Since the total compensation should be equal, the less healthy worker should have a lower money to compensate for his or her higher medical costs. On this point, current law takes a liberal perspective that self-ensuring firms should pool medical risk. From the perspective of the disabilities act the attempt of a self-insuring firm to obtain a healthy work force would be consider discrimination. If testing equipment becomes very inexpensive, self-insuring firms will be strongly tempted to break the law, which will be difficult and expensive to enforce.

We propose that the proper way to promote medical record privacy is redesign the medical delivery system such that agents outside the immediate medical care givers have no demand for medical patient records. For such a system to be economically desirable, it must promote economic efficiency in the delivery of medical care. Also for such a system to be politically feasible, we assume it must be based on a compromise between the conservatives desire for a medical system based on individual risk and liberals desires for a medical system based on pooling.

We propose a compromise between the conservative ideals of individual risk and the liberals ideals of pooling of medical risk. The compromise is individual medical savings accounts combined with pooled catastrophe medical insurance. With the individual medical savings accounts, the healthy receive much greater benefits than the sick, and with the pooled catastrophe medical plan the healthy are subsidizing the sick. Because of these opposite tendencies conservatives and liberals should be able to reach a compromise. The cut off between medical savings accounts and catastrophe medical insurance determines that balance of benefits to the sick and healthy.

With medical savings accounts the demand for patient medical information beyond the medical care givers can be eliminated. The degree to which catastrophe medical insurance creates a demand for patient medical information beyond the medical care givers depends on two factors. First, the larger the catastrophe medical pool, the less interest any firm has in the medical history or either potential or current employees. Second, if medical rationing is determined by rules and not be discretion, the self-insuring firms and medical insurance firms have no reason to access patient medical files.

Medical rationing prescribed in terms of rules instead of discretion means that the catastrophe plan, much like the Oregon plan must spell out the authorized procedures upfront. The care givers would know what procedures, tests, and medicines were authorized through the decision support systems. The financing agents could perform an audit on the care givers. This would involve an analysis of medical care records done on the premises without downloading records to a remote computer. Financing agents would not be allowed to make decisions about authorizing care based on examining individual patient records.

Economic efficiency comes about by two mechanisms. First with medical savings accounts, individuals will choose between alternative procedures on the basis of cost-effectiveness provided they have the information and tools to make such decisions. Individuals will carefully examine charges and strenuously object when medical facilities try to pass costs for indigent care or medical equipment through to them. Although the trend now is to choose medical plans on the basis of cost alone, in future firms selecting catastrophe plans will choose on the basis of cost effectiveness.

The one aspect of increased information flows is unlabelled patient records in order to analyze the effectiveness of risk adjusted outcomes. This type of research is needed to determine variations in procedures in the field and to determine cost effective procedures. Such information would lead to greater efficiency as opposed to greater rationing.