Hefty Health Spending in Stimulus Bill

Law Signed by President Obama Includes Funds for Medicare, Research, and Insurance

Medically Reviewed by Louise Chang, MD on February 17, 2009
From the WebMD Archives

Feb. 17, 2009 -- The economic stimulus bill signed by President Obama contains more than $140 billion in health care spending, designed mostly to ease the recession's effects on workers and also to boost long-held goals of improving the nation's health information infrastructure.

Most of the money is targeted to programs providing health coverage to low-income families or that help workers keep private coverage if they lose their jobs. But the new law also provides billions of dollars for medical research and incentives for doctors and hospitals to buy and use electronic medical records systems.

It also, for the first time, directly commits federal dollars to studies comparing medical treatments head-to-head in the hopes of finding out which ones work best or are the most cost-effective.

The key health care provisions of the American Recovery and Reinvestment Act of 2009 include:


More than 50 million Americans get medical care through Medicaid, but state governments say they may be forced to cut back on coverage to make up budget shortfalls. The bill increases federal payments by $87 billion to prevent those cuts, and also penalizes states if they do cut benefits while the extra money is available.

Private Insurance

A federal law called COBRA guarantees workers can keep their private health insurance if they lose their jobs. But those workers have to pay the full premiums themselves. The bill spends $25 billion to cover 65% of the premium costs for lower-income workers.

"It will not achieve any structural reform in the system but it will help a lot of people in the near term," says Len Nichols, who directs the health policy program at the New American Foundation.

Health IT

Doctors, hospitals, and health insurers have been slow to acquire electronic prescribing and computerized medical records systems. The systems are expensive and many medical practices fear that any system they buy won't be able to communicate with other systems on the market, says Henry Aaron, a senior fellow at the Brookings Institution.

The recovery bill commits $19 billion in grants and incentives for companies and practices to buy health information technology. Aaron says the money isn't a short-term economic stimulus, but instead a "down payment" on an effort to improve efficiency and quality in the health system.

"They do hold out the promise of producing very real long-term benefits -- and I emphasize long-term benefits -- in the health care system," he says.

Medical Research

The bill includes $10 billion to increase the research budget of the National Institutes of Health (NIH).The Senate originally boosted that spending by $6.5 billion, but the figure was moved higher in negotiations with the House. That's on top of the agency's $29 billion budget, which remained flat last year.

Medical and research groups praised the extra funding. "This bill will reverse years of flat research funding, create economic growth, and allow doctors and researchers to accelerate progress against cancer and other diseases," Richard L. Schilsky, MD, president of the American Society of Clinical Oncologists, says in a statement.

Comparative Effectiveness

Many policy experts are calling for more studies pitting different drugs, treatments, or care regimens directly against each other. The hope is that the studies will tell policy makers, doctors, and insurance companies which treatments actually work best and which are the most cost-effective.

Both parties have called for the research, and the bill devotes $1.1 billion to comparative-effectiveness studies at NIH and other agencies.

James Weinstein, MD, a comparative-effectiveness researcher at the Dartmouth Institute for Health Policy and Clinical Practice, says the health system is full of examples of more expensive treatments that may not necessarily be better. One example is thiazide diuretics, which research suggests are just as effective as more expensive calcium channel blockers at lowering blood pressure, preventing heart attacks, and avoiding hospitalizations.

"And if the drug was the same, shouldn't the nation think about using the drug that's just as good for a third the price?" he tells WebMD.

The inclusion of the money in the stimulus package angered some Republicans, who argued that the new law opens the door for government or private insurers to refuse payment for certain kinds of care based on the studies. That could lead to rationing of medical care if the government takes a bigger role in national health policy as part of reform efforts.

Billions of dollars could be at stake if one drug or treatment is found to be more cost-effective than another, Aaron says. He called the studies potential "political dynamite."

Show Sources


H.R. 1, The American Recovery and Reinvestment Act of 2009.

Len Nichols, director, health policy program, New America Foundation.

Henry Aaron, senior fellow, Brookings Institution.

Richard L. Schilsky, MD, president, American Society of Clinical Oncologists.

James Weinstein, director, Dartmouth Institute for Health Policy and Clinical Practice.

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