WASHINGTON (Reuters) – Baby boomers wired to their iPads and smart phones are giving U.S. health experts some new ideas about ways to cut the soaring costs of medical care in graying America.

Some of the ideas might sound like “Robo-Granny”. An astronautical engineer at the Massachusetts Institute of Technology has made a skin-tight undersuit equipped with sensors that can constantly monitor the vital signs of its elderly wearer and feed the data into a computer that fires off health alerts. It was first designed for a landing on Mars.

There’s also Paro, the robotic seal which has fur, big eyes and responds to voice commands, a low-cost companion that the AgeLab at MIT is testing to help calm elderly people with dementia. Then there is the magic carpet with a built-in sensor that monitors gait to check for risk of falling.

Other ideas are simpler and already are being tested by governments and private health insurers. Marilyn Yeats, 79, is suffering from congestive heart failure and uses a personal healthcare computer, Connect, provided by the health insurer Humana Corp. She calls it My Little Nurse for helping her keep track of her blood pressure, weight, temperature and whether she is taking her medicines on time.

“It rings me up every morning at 10 am, and there I am, on my machine measuring myself, and if I have gained weight, it asks me additional questions. I say it is like having your own nurse come into your house every day.” said the Naples, Fla., resident.

If these programs succeed, home technologies could help slash billions of dollars from the nation’s $2.6 trillion healthcare bill by keeping elderly people in their homes for longer and out of expensive hospitals and nursing homes.

The United States spends far more on health care than any other country at 17.9 percent of GDP compared with the OECD average for advanced countries of 9.5 percent. And yet dollar for dollar it gets results that are consistently in the bottom third of developed countries along with Mexico or Hungary, as measured by average health outcomes.

Cutting healthcare costs is essential if the United States is to tame its $15 trillion government debt load. Medicare, the healthcare program for the elderly consumes 15 percent of U.S. budget spending. It is the biggest single expense after defense and the pension program Social Security.

Medicare costs are growing rapidly as the 79 million baby boomers — roughly equivalent to the entire population of Germany — retire over the next 20 years, threatening to push the U.S. debt load to $25 trillion in a decade.

Left unchanged, the Medicare hospital fund is forecast to go bankrupt by 2024. The ratings agency Standard & Poor’s, which already has downgraded the U.S. credit standing, has warned of further action within three years if the United States and other advanced G20 countries fail to get to grips with the costs of aging. It singled out healthcare as the biggest factor.

New technologies hold out promise for lowering costs. But they run into a basic problem — the fee-for-service payment model, which pays U.S. healthcare professionals for delivering treatments, diagnostic service or surgical procedures, rather than for keeping someone healthy and out of the hospital.

“We have to rethink entirely how we are paying our doctors, and the longer we fail to look at the results they deliver for the healthcare they provide the more we will fail,” said Prof. Amitabh Chandra, a health economist at Harvard University.

LOW-TECH SAVINGS

Initial studies on home health computers are sufficiently encouraging that Humana, the largest healthcare insurance company in the United States, is testing 1,000 patients in 34 states. They conduct daily self-monitoring and weekly video check-ins with a nurse. Its aim is to see whether it reduces emergency medical visits.

The Center for Disease Control in a study last year estimated that fewer emergency hospital stays could save $7 billion annually. One night in an intensive care unit can cost $10,000, in a nursing home over $200, while staying at home with a health monitor could cost as little as $10.

A Stanford University study last year found that two clinics using a similar product called Health Buddy saved between 7.7 percent and 13 percent per elderly person per quarter. UnitedHealthcare, which insures one out of every five Americans on Medicare, is also running a program.

The Obama administration, in its 2010 healthcare reform legislation now before the U.S. Supreme Court, is seeking to encourage this type of experimentation in healthcare delivery to cut costs. One initiative would pay healthcare providers a set price for each medical condition rather than reimbursing for each service. Douglas Elmendorf, director of the Congressional Budget Office. Elmendorf said the idea is to create incentives for doctors to treat patients more effectively by allowing them to pocket the difference if they save money.

“It is a period of great ferment, and how successful that will be is a big question,” he said.

HOME AS CLINIC

A telehealth project conducted by the National Health Service in Britain has excited health information technology advocates here in the United States.

Britain collected 12 months of data on 6,191 patients in using home health monitoring, half of whom had chronic conditions such as heart failure and diabetes. It found that emergency hospital admissions fell by 20 percent, patient stays were cut by a quarter and re-admissions by 14 percent. The results, released last December, were sufficiently impressive that the British government plans to roll out telehealth monitors to three million homes over the next five years.

“It shows you can really do simple things with simple technology. It’s about getting the right information into the right hands at the right time,” said Louis Burns, chief executive of CareInnovations, a joint project of GE and Intel Corp. which developed Connect.

Dr. Jeff Kaye, a gerontologist at the Oregon Center for Aging and Technology, is out to prove the case for wide rollout of telehealth devices in the United States. The center has wired 400 homes of the elderly with sensors and computers that feed medical and behavioral data into a computer bank. He wants to expand the project to 10,000 homes nationwide, a large enough sample to produce compelling scientific evidence of its value.

Software programs sift through all the data to check for developing trends or changes in personal habits such as whether someone is getting up more frequently at night, or communicating less with friends, or walking differently. These could signal the onset of dementia, Parkinson’s or a stroke. A nurse can call or arrange a doctor’s visit.

Without the data, Kaye said he might miss important signals in a short monthly visit.

“If you think that the average appointment is 15.7 minutes long, half of that time I am talking and half of that the patient is talking, that leaves only about five minutes to actually reach the diagnosis and prescribe the treatment. It is crazy,” he said.

Collecting reams of highly personal health information sounds intrusive, and adult children often protest. But if it keeps Dad in his home longer and if he controls who sees the information, most people welcome it, Kaye said.

The gerontologist is a huge advocate for these technologies. But he is no starry eyed evangelist. While it might be relatively cheap to turn the home into a health check-up center, comparable to the cost of a home burglary alarm, someone has to read all the print-outs and spotting diseases early can increase the medical bill further, Kaye and other experts say.

Under the fee-for-service payment model, where every time a doctor reads a chart, orders a test or consults with a patient a bill is generated, home monitoring devices would be scarcely affordable. And even if the technologies do help keep someone healthier, a longer lifespan pushes up the total healthcare bill. A 90-year-old is far more likely to have multiple chronic conditions from heart failure, diabetes and cancer to dementia.

“The simple connection from better health information technology to cost savings is very aspirational,” said Harvard economist Chandra.

In fact, longevity increases the bill. The MacArthur Research Network on an Aging Society estimated in a December 2009 study that by 2050, Americans will live between three and eight years longer on average than the government projects, adding $3.2 trillion to the Medicare and pension program.

PAYING FOR RESULTS

The job of Dr. Richard Baron, group director at the Center for Medicare and Medicaid Innovation at the U.S. Department of Health and Human Services, is to cut through this knot. His task is to improve the quality of care for America’s oldest and poorest, while lowering costs. His agency is distributing $900 million in grants this year to test various projects, including those including home technologies.

A specialist in geriatric and internal medicine, Baron was early to adopt email contact with patients, switch to electronic medical records and use some basic home health monitoring under a state-funded project at his Philadelphia practice in 2004.

“Patients loved it. Email was hugely popular,” he said.

The business challenge was how to make technology cost effective. Rather than charge for each email a doctor sent or electronic chart read, Baron focused health results – what does the patient want and how can we use technology to achieve that?

“If people are rewarded for the rates at which they use the technology, they will find ways for the technology to reward them. If they are rewarded for the way in which they solve the health problem, they will find ways to make that happen,” Baron said.

Studies by the OECD, McKinsey Global Institute and by Thomson Reuters have shown that 30 percent of U.S. health care spending is unnecessary. Experts point to the fee-for-service payment model as a major reason where doctors, surgeons, hospitals and other specialists have no incentive to coordinate care. This is a particular problem for elders who frequently have a number of chronic diseases.

Rand Corp. forecast that converting from paper to electronic medical records could save $162 billion a year by allowing doctors to coordinate treatment and reduce unnecessary procedures. But in a sign of how complex it is to change the dynamics of the healthcare system, a study in the Health Affairs journal last month found that access to computerized image results was associated with a 40-70 percent increase in doctors ordering extra tests, possibly because they were just a mouse click away.

For Baron, the study says less about electronic records than it does about the need to change incentives. Used differently, electronic records can make it easier to track whether people are having the regular tests they need.

This is the vision shared by Eric Dishman, director of health innovation at Intel, who carries a black rotary telephone around to speaking engagements to symbolize a U.S. healthcare system badly in need of a refresh.

By 2030 when all the boomers have turned 65, he wants to see elders using sensors like the MIT biosuit and smart phones to perform their own health checks. He wants to cut visits to hospitals and clinics by 50 percent and relegate nursing homes to the history books.

“Certainly 10 years out, we’d better be in that situation, or we will be in an economic crisis in the United States,” said Dishman.

(Reporting By Stella Dawson)