Live from the AHA Leadership Summit

Philip Betbeze, for HealthLeaders Media , July 24, 2009

Robert Reich may be short in stature, but he's not above poking fun at himself, or the healthcare industry.

"The economy wore me down," said the diminutive former Clinton administration labor secretary, who now is professor of public policy at the University of California, Berkeley. "Eighteen months ago I was six-foot-two."

In one of the two keynote speeches at the American Hospital Association's annual Leadership Summit in San Francisco, Reich told the crowd of about 1,000 senior healthcare leaders that the economy's recovery will come soon, but it'll be shallow, and he's not ruling out a further dip later on, simply because the American consumer is tapped out.

"I wish I could be more positive," he said. "The banking crisis is not over. Rallies peter out because they're not based on fundamentals." He said the dominant view that the economy is recovering leaves out the fact that 70% of the economy is the consumer, and consumer spending isn't coming back anytime soon.

So regardless of whether a healthcare reform bill gets done this year or not, healthcare's in for a long period of likely declining reimbursements, so Reich told leaders to prepare to seek cost reduction through a program of cost reduction.

As healthcare spending by individuals goes up, consumers are burdened to a greater extent, he said. Healthcare eats into the pocketbooks to a greater extent than ever before. Now it's 16% of the GDP; 20 years ago it was 8%.

He predicts further stimulus will be needed, going so far as to predict that in 2010, as midterm elections approach, legislators fearful of losing will push through a tax holiday on the first $15,000 of personal income, giving a short-term boost to the economy. But don't expect that to help healthcare much.

Pressures to restrain healthcare costs and to improve quality are only going to increase, regardless of the way healthcare reform is enacted, he said.

"Families just won't be able to afford it." Capitation, even if it's called something else, is likely.

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