Technology could cut federal deficit by billions, report says

As Congress and the administration grapple with how best to cut the federal deficit, a group of industry and government leaders are suggesting that information technology be used to reduce that number by billions of dollars.

The American Council for Technology and Industry Advisory Council’s (ACT-IAC) Institute for Innovation on Tuesday released recommendations for the Obama administration to cut the deficit by $220 billion annually through increased use of data analytics and industry best practices. ACT-IAC  is public-private partnership focused on helping government use technology to serve the public.

More than 100 volunteers from government and industry provided input for ACT-IAC’s first Quadrennial Government Technology Review, a series of reports detailing how IT can be used to solve the nation’s most challenging issues such as rising healthcare costs, citizen services and a lack of qualified workers for science and technology-related jobs.

Here’s a very high-level explanation from ACT-IAC on how it arrived at $220 billion in annual savings:  

– $70 billion by using big data analytics creatively in the federal healthcare space, based on numbers from the McKinsey Global Institute. McKinsey estimates that the nation’s healthcare sector could save $300 billion anually through big data, and $70 billion is the federal sector.

– $50 billion by using enhanced IT tools to better share, access and analyze data to reduce improper payments and uncollected taxes. In the report, ACT-IAC backs this claim using IRS reports that the amount of uncollected taxes is $385 billion and improper payments made by the federal government total more than $100 billion a year. The group suggests that IT tools could reduce the overall number by 10 percent.

– $100 billion by investing in technology to increase productivity and reduce costs, based on industry best practices. These savings are a fraction of the total $970 billion that government could save over 10 years by adopting industry best practices identified in the report.