Federal spending on health information technology will expand substantially over the next five years, reaching $4.5 billion by 2013, forecasts market research firm Input in a report released Wednesday.

Spending by the Defense and Veterans Affairs departments on modernization projects, as well as plans by those departments to expand the scope of health IT into pharmacy and laboratory operations, should help create an annual growth rate of 7.1 percent in federal health IT spending, the report states.

One concrete sign of market growth is VA's budget request for fiscal 2009, said Lauren Jones, an Input principal analyst. The department wants a 19 percent increase for its IT budget relative to this fiscal year, for a total of $2.4 billion. A large chunk of that money would go toward funding an enhanced version of VA's electronic clinical health record system.

DOD has yet to release detailed budget specifications for its health IT plans, but Input expects that it likewise "will also be asking for a good-size percentage increase over what they asked for last year," Jones said.

Although projected market growth is already sizable – the compound annual growth rate will be larger than the overall growth rate of the federal IT market, the report states – it could be even more substantial, Jones said.

"As a whole what's had a dampening effect on health IT, not just in the federal market but nationwide, is a lack of agreed-upon data standards," she said. For several years, the federal government has led, via the Office of the National Coordinator for Health Information Technology, an initiative to establish data standards within the health IT community.

Over the next five years, those efforts should pay off, opening the door to potentially higher rates of market growth, the report states.

Input expects market expansion regardless of which political party succeeds President Bush in January, Jones said. Although the Democratic and Republican parties differ in how to address the coming crisis in health care quality and costs, "whichever party is in power, they're going to have to deal with this issue," she said.