Healthcare spending unsustainable, says former Fed chair Greenspan
A massive investment in healthcare information technology will be meaningless in a global economy if the technology doesn't rein in runaway costs, according to former Federal Reserve Board Chairman Alan Greenspan.
Healthcare spending is unsustainable in the current economic climate, Greenspan said Wednesday at the HIMSS 2009 Annual Conference & Exhibition, and simply pumping more dollars into Medicare will not solve the healthcare crisis in America.
"We have to find a way to curtail the federal funding," Greenspan said, noting that perhaps IT is that way.
"If you cannot solve the overall funding problem, the [global] competitive issue will be quite secondary," Greenspan said. "There's going to be a clash invariably because resources are not going to be as ample as they have been."
Greenspan said medicine advanced throughout the 20th century, resulting in the most dramatic longevity increases in history. "This is an unprecedented demographic shift," he said. "When I was a child, high-tech medicine was my physician coming over to me and saying, 'Take two aspirin and call me in the morning.'"
But with the civilian labor force aging and new, expensive treatments gaining in popularity, health costs are increasingly becoming a major drag on the economy. Healthcare costs have been outstripping general inflation for 20 years now, but productivity gains were able to mask much of the problem up until short-term money markets froze up on Sept. 15, 2008.
"That is the date that Lehman Brothers collapsed and the world fell off a cliff," Greenspan said.
Greenspan said it is a mistake in any reform debate to discuss entitlement programs as a single entity because Medicare is not a defined-benefit program like Social Security. The latter can be fixed much more easily with extra money, while Medicare is a "moving target" because it's impossible to predict how medicine will advance. Only a sharp boost in healthcare efficiency can keep these factors in check, he said.
