Common sense saves Illinois $140 million in health care costs

FORTUNE -- Health care in the country is changing, but it's not the wholesale socialization of medicine that Obama administration critics have feared. Some of the best, most cost-effective changes are happening as states take their pieces of federal healthcare reform and tweak their own systems from the ground up, or reexamine their existing programs with an eye towards eliminating inefficiency. As it turns out, those little tweaks can add up to serious savings.

Several states have started "medical home" programs, which centralize patient information around one home base, and one primary care provider. So far, these programs have saved states hundreds of millions of dollars in medical costs.

North Carolina implemented a Community Care program in 1998 to scale its earlier Medicaid medical home program, Access, to serve more patients. The new program saved the state over $400 million in 2003 and 2004 compared to the state's previous fee-for-service medical model, according to estimates from Mercer Government Human Services Consulting.

Medical home systems save money because doctors can keep a better eye on patients with chronic conditions, like asthma and diabetes. This means patients see their doctors about acute problems with their illnesses, and don't wait until the ER is their only option. States can then avoid paying out costly emergency care fees. The University of North Carolina found that the community care program saved the state about $3.3. million on asthma patients and about $2.1 million for patients with diabetes.

In Illinois, medical home programs saved the state $220 million over 2008 and 2009, according to a recent study from the Robert Graham Center. The program actually saved $140 million in 2009 alone, the first year it was fully implemented. Illinois started seriously investing in medical home programs in 2006, when, according to the report, there wasn't much federal leadership on healthcare reform. So the state took matters into its own hands.

The millions of dollars in savings are especially relevant now, since the state's Department of Healthcare and Family Services is facing $208 million in cuts under Governor Pat Quinn. The report also predicts that state budgets all over will be stressed by the Patient Protection and Affordable Care Act. Illinois is one our most populated states, but even a back of the notebook calcaulation suggests multiplying its $140 million savings from the medical home program by all fifty states could add up to real money, even in health care terms.

States looking to cut costs could look to the Illinois and North Carolina medical home program as a model. In the programs, patients chose a participating primary care provider, who then curates all of the patient's medical needs. The physician can make referrals, but all of the records channel through that one doctor's office.

Think health care global, act health care local

These programs also help make sweeping health care reform digestible by folding preventative care services like screenings into a local health care model. Medical home programs generally offer certain screenings and tests for free, especially for children.

This could be a good way to sidestep possible issues with Americans making the mental shift necessary to make preventative care work, bundling it into an easily accessible package that's part of their regular care, while retaining access to a broader network of care as needed. In a way, it's nothing so much as a return to the days of actually knowing who your doctor is and vice versa, rather than debating billing codes with a huge HMO or insurance company.

Medical homes could also help with President Obama's project to computerize all medical records over the next five years. Obama just allotted $975 million to develop better technology in health care. Much of that money is going towards digitizing medical records. That'll be much easier to accomplish when records are held at a single point, like a medical home. In Illinois, medical home programs are partnering with a third-party company called Automated Health Systems, which organizes the information for the program, providing further savings.

Medical records across the country would be much easier to digitize if patients start trafficking all their forms through one hub, instead of pulling files from a scattershot system of clinics, doctors, emergency rooms and hospitals.

While figures for the cost of health care reform still vary, with many estimates coming in around $1 trillion over ten years, there's no question the thrust of the program is supposed to spur providers, insurers, and state administrators to wring inefficiences out of the system and direct the savings to improved care. The medical home model appears to fit that bill. And that, in turn, may end up lowering the bill on health care reform for everyone.