After a tough couple of years for former Federal Reserve Chairman Alan Greenspan and in an era when the phrase affordable health insurance seems like an oxymoron, it is time to provide some credit where credit is due.
Chairman Greenspan hit the nail on the head in his recent book The Age of Turbulence.
The following are Greenspan’s comments regarding entitlement spending and the healthcare system:
The bottom line in the success of all retirement systems is the availability of real resources at retirement…The financial arrangements associated with retirement facilitate the diversion of resources that make possible the consumption of goods and services after retirement, but they do not produce those goods and services…With so many unknowns, I fear that given our demographics and the limited upside of productivity growth, we may have already committed to a higher level of real medical resources for baby-boomer retirees than our government can realistically deliver. As previously noted, Congress can enact an entitlement, but that in itself does not produce the economic resources required to provide the hospitals, physicians, nurses, and pharmaceutical companies that will be essential in 2030 to meet the letter of the current law.
Keep in mind that Greenspan’s comments are pre health reform and the letter of the law refers only to Medicare.
The recent health reform legislation will simply add fuel to this existing fire.
The Wall Street Journal reports that the United States faces a shortage of as much as 150,000 doctors over the next 15 years as federal health reform legislation extends insurance coverage to tens of millions of people.
Real promises require real resources, and productive capacity is the basis for those real resources.
In the absence of adequate productive capacity, inflating the demand side of the equation through healthcare entitlements is worse than disingenuous as it will likely result in high levels of inflation and further disruption to the healthcare system.
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