SNAP ANALYSIS: Obama healthcare plan relies on efficiency

WASHINGTON (Reuters) - President Barack Obama would reform the healthcare system with a 10-year fund of $634 billion in a budget proposal he put forward on Thursday. He offered few details but the budget reflects new priorities:

* It stresses a shift from an unwieldy paper-based health system in which doctors and clinics share little information to health information technology, including electronic records. This requires setting up a common platform so that records can be exchanged.

* Obama is gambling that although costly in the beginning, the system will reduce errors caused by poor communication and scribbled prescriptions, save tens of thousands of lives every year and billions of dollars that go into the federal Medicare and Medicaid health insurance programs.

* The budget includes a controversial $1.1 billion measure for the federal government to get into the business of comparing medical treatments. This is often left up to the private sector now, and drug companies have little interest in proving the benefits of cheap, generic treatments although studies have shown they often work better against disease such as heart failure and diabetes.

* It allocates $6 billion for cancer research at the National Institutes of Health. Cancer is the No. 2 killer of Americans and costs billions of dollars. For instance, the U.S. Agency for Healthcare Research and Quality estimates the average hospital cost for a single lung cancer patient in 2006 was $14,200 or about $1,900 a day. The total cost for all lung cancer patients was about $2.1 billion in 2007.

* The budget proposes cleaning up inefficiencies and reducing overpayments in Medicare, the federal health insurance plan for people over 65 and the disabled, which covers 45 million people and makes up 13 percent of federal spending.

* The budget says that using more competitive bids for Medicare will save more than $175 billion over 10 years. Critics call this unrealistic.

Reporting by Maggie Fox, Editing by Howard Goller and David Wiessler