Federal, state and local governments will spend more than $5 billion in health information technology and traditional IT by 2015 to comply with the requirements of the new healthcare reform law, the Patient Protection and Affordable Care Act, according to an analysis of the law by market research firm Input Inc.

However, most of the requirements in the new law are unfunded and who will pay what and where the money will come from remains largely unclear, said Angie Petty, a senior analyst at Input. She said the health reform law funds only $1 billion to $2 billion of the health IT and IT requirements defined in the legislation.

The expenditures go beyond the $20 billion earmarked for electronic health records, health information exchanges and other health IT solutions in the HITECH portion of the American Recovery and Reinvestment Act. But they build on the earlier legislation by putting even greater emphasis on electronic health records and payment systems as critical to the success of health care reform, the firm said.

"The legislation calls for all kinds of demonstration projects and all these new organizations, expanded programs and what not, but when you look at the actual funding, it's just not there," said Petty.

"There's a big hole as far as where the money is going to come from to pay for IT."

According to Input's report, the legislation calls for $1.8 billion for the Department of Health and Human Services to upgrade and modify Medicaid and Medicare systems and related systems to meet new requirements.

It allocates a $2 billion to set up the IT systems for enabling state-run heath insurance exchanges. Up to $2.5 billion will go to the Internal Revenue Service to upgrade IT systems to support eligibility determination, documentation and verification processes for healthcare premiums.

The Input report also notes implications for HHS and state and local governments. At the state level, the creation of state insurance exchanges "will involve a ton of technology," Petty says, including setting up Web sites for individual to shop private plans but also to determine whether they qualify for government benefit programs and subsidies.

"All of this means that they'll have to be tied into state-level MMIS (Medicaid Management Information Systems) and other systems and eligibility requirements," Petty said. "And then the insurance exchanges will also have to be tied to HHS systems or at least interconnected at some point, whether it's real-time or in batches."

Input said HHS and state agencies will also need to modify or build systems for online enrollment in Medicaid, the Children's Health Insurance Program (CHIP) and coordinate dual-eligibility for Medicare and Medicaid.

Petty noted that the ultimate success of healthcare reform will hinge on how well health IT and traditional IT systems are built and integrated over the next several years.

"It mandates so much, but the money to make that happen is somewhat lacking so it is a bit of a disconnect," she said. "However, we think there's a real opportunity for government organizations to work with vendors to not only come up with creative and effective ways to upgrade their systems and implement these new requirements but also to do it in ways that are may be a little less expensive."