HIMSS: Greenspan Says Economy 'Will Turn, But Not Yet'

But he suggested that advances in health-care IT were "avenues" that would make a huge difference in curbing medical expenses.

"The American economy is not going to grow as fast as it has in years past," Greenspan said. "Not only is it a consequence of the particular problems we're confronting, but basically because the retirement of the baby-boom generation means moving a very large part of the population -- the most productive part -- from work into retirement."

Health care itself is expected to consume 20 percent of the GDP by 2017, according to most economic forecasts.

"Even though there is a very large government intervention in the market, it's also evident that even if there were none of that, the share of medical expenditures in the economy overall would only be modestly lower than it is today," Greenspan said.

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The former federal reserve chairman implied the marriage of health care and information technology was a fairly recent one -- a theme echoed throughout the HIMSS show that the health-care industry as a whole is woefully behind the curve despite great advances in diagnostics and medicine.

"The demand for medical service generically was not all that great when I was a child," Greenspan said. "There was not terribly much the medical profession could deliver. High-tech medicine was my physician coming over to me and saying, 'Take two aspirins and call me in the morning.' "

Greenspan traced the U.S.'s economic decline from the stock highs of October 2007, saying that before the events of Sept. 15, 2008 -- the day Lehman Brothers defaulted and short-term money markets froze up -- the U.S. had a "sluggish, if not particularly weak economy."

The September events, however, meant economic activity "fell off a cliff in a very literal sense," and because exports declined, the world economy followed suit.

"Really, starting about Sept. 15 on, we have demonstrated unequivocally that we are a global economy," Greenspan said. "Everyone is interacting, and unless the global economy picks up, it's going to be very difficult for us to maintain a stable system. There are, I must admit, finally, some signs that things are getting a bit better."

The best sign of a turnaround for the broader economy, Greenspan offered, would be a stabilized equity market. U.S. homeowners alone -- a fraction of the overall equity pie -- lost $3.3 trillion in home value in 2008, $1.4 trillion of which came in the fourth quarter.

"Recovery of the equity market may well be a seminal turning point in the crisis," he said. "As best I can see, this is an extraordinarily dynamic process. We will continue to slide in this economy, but eventually, when home prices in the U.S. stop falling, that to me, is the signal, that the major turn is at hand. We're not quite there yet."

Greenspan also struck an optimistic tone on stock prices. He said 2008 looked a lot like 1907 and 1932, but that "as fear recedes, stock market values will rise."

"The current pace of deterioration is for one caused by a fear of uncertainty," he said.

Greenspan said the coming crisis for health care involves Medicare, or what he called "the aspects of medical care that are going to run into constraints in the amount of aggregated resources available to meet Medicare."

"Social security is a wholly different issue. Social security is a defined benefit program that you can solve with dollars," Greenspan said. "It's nowhere near the order of magnitude of Medicare. We are funding less than half of what the entitlement is, and that was before the crisis. I haven't the slightest idea what the services and cost of Medicare are right now, except to know that we're coming to the end of the seeming ease of meeting those [services and cost]."

"I hope that one of the avenues by which we'll seriously confront and improve these issues is in health-care IT," Greenspan added. "There are so many avenues there."

In an onstage chat with HIMSS President and CEO H. Stephen Lieber following the keynote address, Greenspan was asked if the U.S. had learned anything about recovery following the last big economic slowdown -- the dot-com bust earlier this decade.

"Are we doomed to repeat the same cycles we saw of boom and bust as we saw with the dot-coms?" Lieber asked.

"When we had an economy that had been doing very well -- which indeed we had before the dot-coms and before the housing troubles -- you would tend to get people who would ordinarily be cautious reaching out," Greenspan said. "It's not an issue of people being uninformed. The problem was and is that in these types of bubbles, risk is increasingly underpriced. You can't forecast when a bubble is going to burst. A financial crisis by definition is a discontinuity of asset prices from one period to the next, almost overnight. If you could anticipate that, people would take actions to offset it."

Greenspan last fall said to Congress that he had, indeed, put too much faith in the ability of markets to self-correct. Many economists have in the past year blamed Greenspan for keeping interest rates too low for too long of a time and standing aside while risky mortgages were approved.

Greenspan didn't directly address those thoughts Wednesday, but he did say he still believed the only regulation that works is "regulation that does not require a forecast of the regulating."

"You can't put a regulator out there who has to anticipate prices," he said. "If we are right 55 to 60 percent on that forecast, we're going to be very wealthy. But that also means you're wrong 40 percent of the time."