Market vs. Government: Two Ways Inevitable Recession May Change Healthcare

The United States spends 3.7 trillion dollars a year on healthcare, more than all but three nations’ entire gross national product. UT Dallas and UT Southwestern professor John McCracken, speaking at the North Dallas Chamber of Commerce’s Healthcare Conference, says that economic recession could be what forces the U.S. to change its healthcare spending habits.

McCracken noted that the U.S. debt is 108 percent of its gross national product, and with the unfunded pension liabilities, it creates a precarious situation for the economy where a recession could force a massive change. “Time is running out, and there is  potential for significant financial crisis,” he says. “Eventually those chickens will come home to roost.”

Healthcare is 29 percent of federal budget, McCracked noted, with it being the largest single expense on state budgets as well.  He says an inevitable recession will cause major changes for the healthcare market. “Sometime in the next decade the financial market reset will put healthcare spending right in the bullseye.” McCracken says. “We need to change if we want to maintain a market-based solution.”

McCracken described how difficult the healthcare system will be to change. “It’s a huge, complex, adaptive system that no one understands,” he said. “Traditional industry participants are committed to the status quo and are resistant to change.”

He gave three options for the future of healthcare in America. It could continue on its current course with healthcare spending growing faster than the economy, there could be a market-based solution that lowers cost, of the federal government could step in with a heavy hand and implement top-down solutions.

McCracken noted that just five percent of the population spends half of all healthcare dollars, and how the market could make a correction. He emphasized a reorganization of the entire system, where practices move from craft-based, or focused on what each practitioner does, to a team-based model organized around the disease or patient. He could also see charges based on outcomes, rather than fees for certain procedures, tests, or operations. Either way, he says, “Market-based reform will be slow.”

McCracken says the government imposed solution isn’t ideal either. He predicts that in the case of a financial crisis, the government will suppress provider payments, which will have unintended consequences of its own. Providers may not be able to afford to treat government-sponsored patients, individuals would have to pay more, and insurance may become more expensive than it already is.

Lastly, he stressed that any legislative healthcare overhaul needs to be bipartisan, unlike the Affordable Healthcare Act. When a law is passed with bipartisan support, legislators are more likely to open up the law to make tweaks and changes. With a law that only has the support of one side or the other, the passing side is afraid to bring it back to the table for fear it will be removed.

In either case, he knows that a crisis will not result in a change that will be beneficial in the long run.  “The government never acts so badly as when it acts in haste,” he says.