Billions of unspent stimulus dollars intended to jump-start health care providers’ transition from paper to electronic records have suddenly become a target for lawmakers looking in every corner of the federal budget for cuts.

But backers of health information technology will have to make their case for preserving the money without help from the Obama administration’s point man, Dr. David Blumenthal, who departs this spring.

The funds are rooted in the HITECH Act, part of the 2009 federal stimulus law, which allotted $27 billion in Medicaid and Medicare incentive payments to doctors, hospitals and other health care providers who adopt electronic health records and show they’re being used to improve patient care. 

HITECH’s hefty price tag — and the fact that most of the cash hasn’t yet been spent — may make it susceptible to the budget-cutting fervor that has swept Capitol Hill, and the Republican-controlled House in particular. 

“This is a big challenge for politicians who ran on cutting federal spending and cutting out health care reform,” said Dave Roberts, vice president of government relations for the Healthcare Information and Management Systems Society.

Two pending bills in the House call for repealing health IT funds.

In January, Republican Jim Jordan of Ohio introduced the Spending Reduction Act, which proposes — among other cuts — eliminating $45 billion in unspent stimulus dollars, including the funds from HITECH. In February, Republican Thaddeus McCotter of Michigan introduced the Preserving Patients’ Choices Act, which specifically proposes repealing health care-related stimulus appropriations. Both bills have been referred to committee.

The National Taxpayers Union approves of targeting remaining stimulus money to help reduce the federal budget deficit. “You can look at any program that spends a given sum of money and make an argument that it will improve a certain social program,” said Andrew Moylan, vice president of government affairs for the group, “but doing so overlooks financial burdens.”

Veteran Congress-watchers say neither House measure is likely to become law in its current form.

But economist Douglas Holtz-Eakin, a former head of the Congressional Budget Office and adviser to Sen. John McCain’s 2008 presidential campaign, said these bills represented only the beginning of what would likely be a continuous effort to rescind unspent stimulus funds. 

“This has been a standard part of the House Republican efforts,” he said. “The easiest thing to cut out is something that was done in the past but not yet spent.”

Medicaid payments underway, Medicare starts in May

The unspent money to encourage adoption of electronic health records is part of an estimated $168 billion that remains from the $787 billion economic stimulus law.

The health IT incentive plan, which runs for five years, said providers could begin receiving Medicaid payments in January 2011 once they demonstrated that guidelines for use of electronic records were being followed. Payments through Medicare are scheduled to begin in May.

The flow of money so far, though, is little more than a trickle.

A January tally of payments by the Centers for Medicare and Medicaid Services (CMS) shows that $20.4 million has been spent, said a CMS press officer. Only four states — Kentucky, Oklahoma, Louisiana and Iowa — have begun to coordinate Medicaid incentive checks to providers. 

Kentucky was the first state to begin administering those Medicaid payments. It is briskly mailing out checks just two weeks after it receives applications, on average.

“There is always fear of losing the funds,” said Jeff Brady, executive director for Kentucky’s Office of Electronic Health Information. “You hang a $27 billion piece of legislation up there and it becomes a big target to shoot at just because it’s a lot of money.”

Providers were already skeptical about the funds to begin with, said Carter Kimble, spokesman for Oklahoma Health Care Authority. “They were wondering what strings were attached when it came to government money.”

The possibility of the funds evaporating makes health providers think twice about whether the incentive payments will come through, though state department heads remain hopeful and say they continue to press the health IT agenda forward.

“We have seen things in the past that have not materialized,” said Kim Norby, executive director of Iowa e-Health. “But seeing payments going out in this case may encourage providers.”

Others remain unabashedly optimistic. Dr. Edward Shortliffe, chief executive of the American Medical Informatics Association, said he does not think the funds are really threatened. “Any attempt to make those dollars go away would be met with an outcry,” he said. “It would be unfair to those who believe the government will do what it publicly announced it would do.”

Health IT coordinator leaving soon

In the midst of this uncertainty, the government’s health IT program will soon find itself without a leader.

Dr. David Blumenthal, who has served as National Coordinator for Health Information Technology , announced early last month that he would leave in the spring after just over two years in the job. The Department of Health and Human Services says it is conducting a national search for his replacement.

Blumenthal is the third person to hold the job since it was created by former President George W. Bush in 2004. 

Health IT leaders would not speculate about who might be the next coordinator, but news reports say the short list includes several Health and Human Services figures such as Dr. Farzad Mostashari, deputy national coordinator for programs and policy; Dr. Carolyn Clancy, director of the Agency for Healthcare Research and Quality; and Chuck Friedman, the national coordinator’s chief scientific officer.

Mostashari and Clancy declined to comment. An HHS spokesman said a search is underway to replace Blumenthal, and declined to comment on any candidates for the position.

The Department of Health and Human Services could also choose an outsider. Among those who have been the source of speculation: Stephanie Reel, vice provost for information technology and chief information officer at Johns Hopkins University; Dr. J. Marc Overhage, director of medical informatics at Indiana University’s Regenstrief Institute; Dr. Paul Tang from the Palo Alto Medical Foundation; or Janet Corrigan, chief executive of the National Quality Forum.

Reel told the Center in an e-mail that she has not been offered the job. Tang and Corrigan could not be reached for comment.

Overhage declined to directly respond, saying in an e-mail to the Center that Blumenthal has “set a high bar” for the next national health IT coordinator to match.

Blumenthal will return to teaching at Harvard to comply with the university’s tenure rules. Industry leaders say his background as a physician, coupled with his experience working with now-deceased Democratic Sen. Edward Kennedy, made him an ideal health IT coordinator.

“The next person has to be able to work across party lines,” said Roberts of the Healthcare Information and Management Systems Society. “Politicians will need to be able to have talking points to go back to voters and say why they don’t want to cut from this particular issue.”