how do we want to structure regents in the world in a globalizing economy? how'd we pool our resources to do with problems that go beyond us such as climate change or the financial economy? we need to work together -- we need to manage the planet. what kind of governance do we need? i am not saying that european governments is always as quick and efficient as one might want, but it is a new model of government that deals with the world. the importance of the enlargement -- it sounds very neutral -- but, in fact, in large net is about sharing the

held values -- enlargement is about sharing deeply-held values. . would be like, let's say, mexico or some other smaller, they want to apply to become a state in the united states. well, what would be the rules and the prerequisites for that kind of a change? well, this is what europe has been doing. i have been a proponent of moving ahead, both with the western balkans, countries like albania, former soviet, croatia, serbia, bosnia-herzegovina, so serbia, bosnia-herzegovina, so that we move and they most of them candidates are potential candidates.

they are -- i have proposed that we put a date to their accession which would be 2014, 2014, 2014 happens to be 100 years after the beginning of world war i, which began in the balkans in sarajevo. closing a circle of violence and instability, and again, showing how europe is a piece project. i also see that what turkey and i've been a proponent of turkey becoming, having the capability and becoming a member of the european union of course having to fulfill its copenhagen criteria as we call them, and a number of criteria which have to do with good neighbor in his. obviously, cyprus has relationship with greece. now that has been, i have been a proponent of this and this was a major change, as you remember, and policy 10 years ago increase when we said we had locked the possibility of turkey being a

candidate. and the we said we change that policy and said, make turkey a candidate and have full capability of becoming a member of the european union. saying that that in fact would be a stabilizing for our region. that would be important message for the world as a europe is bringing in a country which is predominantly muslim. and showing that the values we share have nothing to do with what religion we may believe in. and thirdly, in doing so we would solve problems such as the cyprus problem, but also issues that have to do with bilateral relationship in greece and turkey. so i am continued to be strong opponent of this proposal, and i do hope that a meeting with the prime minister of turkey we will be able to make more moves and

issues, that have be lead us and held us back over the many years, the last decade. >> make you very much, and i hope the crisis will end soon so that more of your time will become again available for these important regional and peace issues. i do remember your visit i think in israel and palestinian territories and how together as greed for mr. and a turkish foreign minister you gave the message to israelis and palestinians that one can work together and go forward together. so let me now open the floor to questions from the audience. please do identify yourself briefly so that we all know where the question is coming from, and please make sure to address the question to the prime minister.

[inaudible] >> thank you, prime minister, for that very eloquent rendition and also best of luck on the tremendous challenges that you face. i wanted to bring back a little bit to the economics. you mentioned the budget deficit. according to numbers where been looking at, greece has lost 30% competitiveness against germany in the last 10 years. costs have risen by 30% relative to those of germany. and by more than 50 or 60% relative to those of the united states, in terms of the fall of the dollar, et cetera. now, my question is, how it do

you gain that competitiveness in a situation where you have no control over your currently, you're part of a concurrency, no control over monetary policy. is a realistic that greeks will take 20, 30% wage cuts in order to establish competitiveness? or that they will increase their productivity? thank you. >> i think what i will do is take three questions in a group, and then let the prime minister answer because there will be overlapping parts of these questions. >> abdullah representing the policy orienting turkish organization here you can be see. mr. preminger, thank you for your remarks. your election as prime minister was as you know very well, was very well received and turkey. and never -- there were high

hopes your election would bring impact of the ongoing cyprus negotiations. and casual remarks such as you have to spend a great deal of your time and energy in tackling with his economic crisis, and i know how much you're willing to go back to your foreign policy issues, but my question is, what do you think about the cyprus issue? and where is this issue headed, as it is a major issue portioning turkey's relations with the e.u. as well. thank you. >> yes, in the back there. >> mr. prime minister, it is a pleasure to welcome you back to washington. i want to ask you --

>> could you identify yourself. >> john. if i can ask you, mr. prime minister, much of the speculation about your policies over the last several weeks pertain to the amount that greece might be asking of the european union are whether or not an imf package might be put together. we are done of this in your remarks this morning, and none of this seems to have come of your visits to germany and to france. can you please specify for us what it is that your government is requesting, if anything, from either of these governments or international institutions? thank you. >> thank you very much. >> i will take one more. yes. >> executive director of the institute. welcome to washington, mr. prime minister. mr. prime minister, just want to pick up on your discussion had with kemal regarding that greece is looking more and more for private direct investments. it's that point want to talk

about or ask a question to get this was a will of american corporate executives rather than diplomats and reporters, what would you tell them right now in terms of trying to entice them to say why greece is still a good investment opportunity? if you could speak more specifics to greece's investment laws regarding in reforms that are taking place there in any incentives that would be forthcoming from the greek government regarding to entice foreign investment. >> mr. prime minister, i think we will turn to you to answer these for question. spectacular much that i will start with the economic questions. first of all, we said we're not asking for money. as with most countries are many countries, we go on to the international market to borrow for our needs. and what we are saying is that since we now are putting our finances into order, making our long-term economy viable and making the necessary changes, we should be able to borrow at rates which are comparable, if

not exactly the same, as other countries in the european union. as i said, if you had state, different states in the united states borrowing at different rates, that would make it very uncompetitive for different regions in different states in the united states. that's what's happening now. we go out to borrow and have double the rates of other countries. so what we are saying from our european counterparts is, we're not asking for money. we are asking for the types of instruments which are necessary that if we seek speculation, and if we see the markets not responding to what we have done, and would have done even if we were under the imf, that there be a contingency plan which make sure that we can borrow at normal rates. that's what we're asking for. we're not asking for free money. we're not asking for bail outs. we are asking for the right to

have similar rates of borrowing as other countries. that is what we need coordinate action, and that is where the european union now is moving in that direction in a positive way. and as i said, with both chancellor merkel and yesterday with president sarkozy, who are also truly ready for systematic action as they have called it, ordinate action if the euro zone is in a financial stability, the euro zone is threatened. and that's what would happen. if greece would not be able to borrow, it would have to borrow at very, very high rates. so what i've said about, what i've said about the imf is that in a different situation, if we didn't have the euros zone, this euro group, a country like greece may, may not, but may at some point if it couldn't bar would have to go to the imf.

we haven't had that problem because we can borrow. we have been overly subscribed when we go out to the market. but we've been borrowing at a higher rate. so again, that at some point we may have to, we may have had to go to the imf. since this seems to be a developing european contingent plan, and this is what i've been working on with my partners in the european union, i think that lowers the possibilities that even if there is a problem we would have to go to the imf. so again what we're talking about now is creating at this point an ad hoc estimate which will help the greek economy, if it needs when we want to borrow. and in the medium term look at the necessary institutional changes in the european union, such as for example, eurobonds or for example, a european monetary fund or european guarantee which would mean, of course, possible changes in the

treaty. but that would be and therefore it wouldn't be an immediate response. but that now would become very central in the discussion and europe. so i would like to see the european union now because of the great crisis and i am trying to spearhead this, that we went through is something which we can make an opportunity to strengthen our coordination and create the necessary institutions in the european union. what we can do right now is take an initiative on dealing with speculators, and that's why we're taking some joint political action from myself, angela merkel, nicolas sarkozy and others, and i will be able to give and it is also to president obama tomorrow because i believe this needs coordinated actions throughout the world. secondly, the issue of greek

competitiveness and what we would say, what i would say to you as business people, if they were here, first of all, greek competitiveness, yes there is a question of wages. but that's not the only factor core competitiveness. i know there's been a lot of emphasis on wages increase, but we have to also differentiate between public wages and private wages. there's a big difference there. and investors come in, and when they come and they want to look and see what private wages are and the private sector and not the public sector. sometimes the public sector will set the tone for the private sector. what happens with the public sector is the fact that we have a bloated public sector, and a much larger public sector than necessary. and somewhat chaotic salary scale where you have some very, very high wages, which are

exorbitant and the public sector and very, very low wages also in the public sector. so that's another area where we will spend money. now what we will be doing of course is creating other types of incentives which will also be much more helpful. s+'2@ @ @ @ @ @ @ @ @ @ a$a' in greece, simply by going by the book. it may take five years just to get the investment ready to be implemented -- to be developed. we will try to cut that down to eight months. it depends on the bureaucracy. we are more than head and now

and making it much more simple and so that we can get it through the red tape. company and get through the red tape. so bureaucracy and red tape is one issue. the second is transferred to and corruption. i was another problem, sometimes often for investment. that's another area we are cutting into. and that is going to make much more lucrative. thirdly, we are also opening up professions so that there is greater competition. and there is which we are closed professions and that will be much more important i think both for investment but also bringing down the prices in certain areas. fourth, we are creating incentives for specific areas of greece, taking for example, the items which have great potential, actually greece has the biggest when potential per capita in europe. but we have to do all of that. so we will make the possibility

for investment in this area very simple. also like a one-stop shopping of investment. these types of areas, these types of changes we're making, i believe, going to create an are creating because we're doing this already, are creating the environment for a much more, much more effective system of economic development and investment. i would just add one more major point, which we're doing in our administration. we now have five levels of it administration from center to local. there are five levels. that's a huge bureaucracy. we now are, have proposed and in the next few weeks we will be putting it to parliament, a major revolution administration. we will be cutting it down to three levels. central regional and local. we will be cutting down the number of cities from something

like 3000, to 350, unified local government in many areas. and we're also cutting down about 6000 local government businesses that have been creating huge bureaucracies there. so there is a huge change is now been made in greece, which never would have been made before. i think the fact that we are in a crisis has also helped not only me but our government, and i would say a wider consensus in greece say yes, now is the time. we reached the bottom. now is the time for us to make these big changes. someone i think said here, someone, one of obama's aides i think is well known, will quoted to say you shouldn't miss a crisis, if such an opportunity to make changes, and that's what we're doing in greece. now, on cyprus, well, this has been around with us for many, many years. i felt we came somewhat closer

to a solution in 2004. as you know, the solution had to have a the green light from both the communities. and we have come back to this, and are re-examining this question. but it really needs strong political will. now, this is not something from the side of greece. we feel that we want to interfere in a direct way, because we see cyprus as a sovereign nation, even though it is divided because of the invasion in 1974. and we see that the community has all its rights to decide what the solution will be. that's why what i can do is

certainly support this process. and certainly in my relations with turkey, to create the necessary atmosphere, if turkey is also responding in a positive way, so that we help things happen on the ground. but in the turkish, on the turkish cypriots community, you have 3000 troops. you have much more direct involvement. i would say more of the turkish army maybe less, the turkish government, i would rather see the turkish government being more involved rather than the turkish army in the cypriots problem. and this is were i think you need a real political will from turkey to move ahead. now, prime minister tayyip erdogan did show this in 2004. i believe he can show his will again. but what we also need to take into account is we need to create a functioning cyprus, a

cypriots republic which is something we have to communities which will not be be doing one and another in every decision, which the type of governance is there which allows for a smooth functioning and a smooth function within the european union, don't forget cyprus is now a member of the european union, even though de facto the turkish because of the situation better, don't have their full participation. although cypriots citizens have all the rides as european citizens. but there are very big issues here that we need to make sure that as cyprus is a member of the european union, we must make sure that it is going to be able to fulfill all its obligations as a full and functioning and democratic country in the european union. so that's why we're talking about a federation by zone and by communal. which can be, which can be

functional and therefore, as it is functional it is also something which will be european. i would also add to this, finally, that the european is something we need to follow as cyprus is part of the european union. and the solution should be colored by the european, we should make that it is applied to cyprus and to the solution of cyprus. if these elements follow, i believe we can find a solution. and i do know that both the present and tayyip erdogan our old friends, and if they are really allowed to move ahead and particularly, i would hope that we find a solution. as soon as possible. >> thank you very much. and i think we will have to close it now. the prime minister has as you might imagine an extremely heavy

schedule. please, everybody be seated, because the delegation, the prime minister and his delegation will the first. so may i please ask you all to remain seated. thank you very much, mr. prime minister. [applause] [inaudible conversations] [inaudible conversations] [i

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> next on c-span, the economic -- economics of health care. and later, president obama talks on the topic. we will have a 2010 election outlook after that. >> john adams, herbert hoover, ronald reagan, gerald ford, find these and other residential facts in our newly updated book. >> a guidebook, a travelogue, if you will. it is also a biography of each of these presidents. you can tell a lot about people at the end of their lives. >> the story of their final moments, and insights about

their lives. he was buried in grant's tomb? that is the title of this book. it is available at your favorite book seller or through the internet. >> next, part of an association dealing with economics. it is a little over one hour. chair of the nabe economics roundtable. welcome, especially to new members and those who don't

>> welcome. sincere thanks to the health policy forum. institute and the health policy forum. my superb employer for sponsoring. they strive to achieve its mission of systems research for better health by analyzing three strategic areas. culture of health, health equity and innovative models of care delivery. the health policy form is an excellent source of objective policy information and can you go there online. what's the nabe version of be careful what you wish for or predict? as the session was being gleaned last october, health reform passage appeared certain. though, of course, details cornhusker kickbacks, louisiana purchases, winter blizzard votes in the dead of night and quantity tum mcnicks all lie

ahead. seemed reasonable to charge the speakers with unfinished agenda. many now are lamenting the very unintended and totally unfinished. illustrating the analytical flexibility always on display at nabe. we have pivoted to the productivity theme and the changes ongoing with hospitals regardless of major reform. these topics are critically important given the budgetary pressures almost exclusively due to growing health expenditures. a/k/a, the last presentation. and our two superb speakers here to discuss these issues. david cutler is the professor of applied economics department of economics in kennedy school of government at harvard university. i know the name auto -- resonates for many in this room. professor cutler served on the council of economic advisers and kmashl economic advisory dur the clinton administration, advised

bill bradley and senior health care adviser to the presidential campaign of barack obama. held positions with the national institutes of health and the national academy of sciences currently a research associate at the national bureau of economic research and a member of the institute of medicine. prolific writer is today's over used academic accolade, but in professor cutler's case, the environists a ban on printing his cd, by my likely out of date count shows 8 edited book, 187 books and chapters and acclaimed book "your money or your life." and finally i should note he is a trailblazer on the construction of a health care satellite account to enhance gdp measurement. please welcome.

>> thank you for the -- for the too kind introduction and the invitation to be here. i suppose being here reminds me of what my former dean once said. said about economists to the economics department. he said, it's well known if you took all the economists in the world and lined them up end to end, that would be a good thing. everyone is wondering what is the latest from across the river. i have the latest for you. this was from last week's summit. i am sure you got a headache. here are some aspirin. as a result of various cost- cutting, we have figured out how to reduce that. it will now be $1,100 for the two aspirin.

you want to know what are the odds that it will pass tax here are the official, and odd onlin. [applause] -- [laughter] the odds are about 50% now. you can see a little bit of movement up over time. it is traveling around 30 or 35%. you need to know how to gauge these odds. other odds that you can bet on online, u.s. and or israel, capping trade in, 21%. an sarah palin to become the republican presidential

nomination is 23%. health-care reform is twice as likely to happen as sarah palin is to be the presidential nominee. at first, you may say why is all of this so hard? should not be more easily? the reason why this reform is hard is because we are trying to do a few couple of things. eason it's hard is we are trying to do a few different things. the first is we are trying to get everyone covered or most everyone covered so that is about 30 to 45 million people or so we would like to get covered. second and it's the that i and the other speaker will speak about is the value of care and third is addressing the u.s. physical situation. of these, the sing e8 most important is improving the value of care. the reason for that is if we can't figure out how to do that, we can't afford to cover

everybody and can't do anything about the federal deficit. one way or the other, health reform will blow up if we can't figure out how to do number two. put another way, if you can't make medical care system work better and save money, all the stuff about getting people covered is taking money from one person and giveing it to another person. that's a loser thing and always falls apart. you wouldn't have addressed the u.s. fiscal situation at all. the central challenge in reform is to figure out how to improve the value of care. i want to talk about that and i want to start off with an observation and that's that productivity increased everywhere except for health care. these are the statistics and you can see enormous improvement overtime. very rapid productivity in the postwar period and the slow down as everyone knows in the 1970s to mid-1990s and a rapid

increase after. it varies by industry and the most productive industries are information technology and agriculture is productive and retail trade that we used to think of as fairly similar that is one off purchases from small local providers with uncertain quality has had enormous improvement. it's not the case that it has been in goods producing introduces and not service producing industries although there is a bit of an industry. they had rapid growth and health care which is combined with education and social assistance actually shows in the official data negative productivity. that's not right because it doesn't predict quality. still nobody thinks that health care belongs at the top of the slide, but below that. i want to think about two dimension although they turn out to be related. the first is service productivity, the experience of

receiving care. the second is clinical quality. do people get quality and do so at minimal cost. what people want when they go to the doctor is they want to get better and want to enjoy the service or at least not hate the experience of having gotten better. someone once noted that only an economist thinks a colonoscopy is a benefit. people want to get better and they want to enjoy it. what do we know about each? the service quality is very, very poor. there lengthy wait times and most people would like to interact with their doctors. how many of you can e-mail your doctor? how many cannot? name two other people in your life that you cannot e-mail. is your pet probably. more people e-mail their priests than their doctor. in fact as best i can tell, more

people e-mail the lord than their doctor. a third of people say they lost test results and had to repeat it because it wasn't there and got different advice from different doctors and don't think the advice should vary. the common denominator behind this is that the medical system is not coordinated in any way. most people are essentially their own primary care doctor when they think about using the system. most people are pretty bad at it. that is even with a lot of training with a college degree and with some kind of ph.d. as i suspect most people have still don't know how to manage the medical care system and that is the task that we have with most people and it's not surprising people are upset by the outcomes and the outcome are worse than we think. not to say people couldn't provide this coordination. you can think of any number of actors who ought to be able to

provide coordination. the primary care doctor in principal is the who should be guiding you, but in practice they don't know when you have been in the hospital. seriously, they don't. most don't tell them. pharmaceutical companies could be doing coordination and they rarely do. they will have the information to do so, but they don't. google and microsoft would like to and i'm sure there will be an iphone application to help you coordinate. all of this is designed around the quality that is extreme le poor and an area in which if we actually made progress, we would see a huge increase in value. i want you to hold that in your mind for a second. related to that is the issue of clinical quality and cost. i want to give you a premises. here's my premises. it is inefficiently provided. this lowers quality and drives up cost. how many of you agree with this?

how many of you disagree? this underlies everything going on in health reform and the idea that we can. it's interesting when the president gives a town hall, the first question he is asked, if your daughter is sick wouldn't you want her to have the best care or if your wife were sick and why is it you think about rationing? what you agreed to is that well before we decide whether 88-year-olds should get chemotherapy with advanced cancer, we should think about all the ways in which we are wasting money and not improving health. let's put aside the issue of whether your mother or my mother or anyone else's mother deserves intensive treatment when they get very sick and where is the money going that doesn't need to that is both higher cost than it has to be and lower quality than it need to be. the implication of this is that we should be able to improve quality and save money at the same time. how are we going to do that?

let me give you a few examples. the first thing we could figure out how to do is reduce administrative personnel. the employment in the health care industry, the leading employment is not physicians. nor is it nurses. it is office support. remember the middle managers who were fired from american business? 10 or 20 years ago? i figured out what happened to all of them. every single one of them is working in health care. i know personally about duke university hospital where senator kennedy went when he had brain cancer. 900 hospital beds at duke university. 1300 billion get admitted to the hospital. what are they all doing? imagine the last time you went to the store. nine customers and 13 sales people. might be nice, but a little bit

expensive. in addition that, all the other people are doing clerical things as well. the most common activity that a nurse in a hospital does? documenting things. one third of her time is spent do you meaning things. another 10% is spent running around the hospital finding supplies that are not where they are supposed to be or getting lab results or picking up medications or something like that. way too much administrative personnel because we haven't matched the people to what's need and do the supply chain. too much spending on acute care. when medicare beneficiaries go to the hospital, 20% come back in within 30 days. in a fair number of those cases, the person never saw a doctor or nurse between discharges and we know from the best systems that you can get that 20% down to 6%. how do you do it?

have the nurse talk to the doctor. what the nurse does is explain when the doctor said you should take this medication every day, what the doctor meant was take this medication every day. that will help to keep you out of the hospital and the recommendation was go-go to the doctor and talk about the condition. go to the doctor and talk with the doctor about your condition. what's interesting is we leave that in the hands of the patient to do. there is no system activity associated with doing that. that sort of reinforces the issue of the system i want to keep coming back to. the third area is medical error. it's estimated that that is the 5 fifth or 6th cause of death. we decided we ought not to pay for medical errors because most

of the rest of the world gave it up about three centuries ago. so how are you going to take this and do better. here's what we know. productive enterprises have three big features to them. number one, they have a lot of information. they use information technology a lot and use it well. in health care of course there is a full time person in every doctor's office whose job it is to pull paper from a filing place and bring it to the doctor and put it back at the end of the day. i can't think of any other industry where that is the full time occupation of someone to do that. in addition not knowing who you are supposed to see when you have a condition how good they are and the various treatment options other than the last four patients i saw did better than on this and this. the first is information and the second is appropriate compensation arrangements.

no industry does well by paying people to do stuff independent of whether it's really needed or not. health cares to doctors and hospitals and the way you make money is by doing more stuff. don't think about ways to reduce demand. the easiest way to go bankrupt is to make sure your patients are healthy. seems like a bizarre way to do things. empower the workers and consumers to help you out within hospitals since we have been picking on hospitals, i will pick on them more. the nurses who are spending 10% of time looking for things that are not where they are supposed to be, when asked do you think you could organize the system better, they say absolutely yes. how come you haven't done that? no one has ever asked me. we throw away billions of dollars that way. a year ago in the federal stimulus there was $30 billion to wire the medical system. every medical practice will be wired, but that won't solve the

information issue. 10% is having computers and 90% is what you do with the information. that will at least lay the foundation and part one was to do that. part two of the strategy is to degree compensation and in the 2700 pages of health care bills that the republicans want to everybody about, the most common activity happening is changing compensation arrangements. almost exactly what that is about. a little bit of pages and a fair amount of money associated with covering people and with dealing with other consumer issues. basically part of a well thought out two-step process to get the information technology and the arrangements to work to improve the system and increase the value. we will need an enormous amount. one of the huge industries that will have to be created by health care reform or by the system in absence of reform will be the industry for collecting,

analyzing, retrieving, making in realtime and the right data available. health care is and ought to be a wash in information. the issue is not to produce the information. it will drown people in the information. the issue is to use it right. there will be a huge industry associated with it and just as there is productivity enhancing with everything which is about using information well. if you ask what the most productive firms do, many of them are using information well. that's the first part. the second part that is more fundamental is changing compensation arrangements. we pay for medical care based on where the care takes place. does it take place in the hospital and does it take place in the physician's office and does it take place in the pharmacy and a lab and does it take place in a nursing home or the patient's home through a home health base? there is nobody that i know of who cares where they get their

care. they care only did they get better. the fundamental conception did it get better and when it gets better, what you need to do is orient the information and the compensation around the patient. not around the patient@@@@@@@@ár in the way that is best and most efficient for you. no one here has done that yet. whoever does that will figure out how to get the input in a way that is most productive and most profitable in every sector that has done it. as a result, they will get all the benefits and bonuses that come along with that. how are we going to do that? i do not mean we in the sense of reform. i mean what will happen in the medical system. payments will be made on the

basis of performance where they determine if the doctor or hospital is doing a better job, not just doing their job. and not just doing a job. paying for care coordination and the transitions and coordination aspects that are underdone and bundled payments that is don't give a separate payment for each admission each when wasn't necessary, but one thingle payment for everything that come along so they have incentive to figure out the best ways to do it and improve the experience of the patient and also improve the value of care. and lower the cost of care. fundamentally what's going to have to happen and what i believe will happen easier with reform and will happen in either case, we will have a revolution associated with the figuring out what do people need and how to get it to them when they need it and not what do they not need.

to me that will be the essential thing. i will note on the organization aspect of this, in every industry where the transformation has taken place and in every one, use of it and productivity improvements have associated with firms getting bigger. i will not at all be surprised to see health care firms get bigger as opposed to smaller. you are already seeing this and see this in the hospital industry in the typical american city. one quarter of the hospital admeigs are accounted for by the biggest health care system, one third of all profits. bigger is grar at the ability to econ myself and take advantage of economies of scale and bigger is more bargaining leverage and going to be a lot of things. it will surely be -- it will surely be the outcome in health care. a number of friends will be very, very happy to see the

single or small group doctor disappear over the next decade. completely disappear. about three quarters of all patient interactions are in small provider groups now. people would love to see that disappear. i want to give you an analogy for what success would mean. how much could you save? most guesses are that you can save at least 25% in the hospital industry. not by cutting product lines, but by doing stuff more efficiently. about 10% of total spending. that's more than the president promised people. unitedhealth group thinks we can save $300 million through administrative interchange between providers and insurance. the potential is enormous and we waste about a third every year or about $700 billion a year.

what the president promised people is not a third, bi8%. i think he was way understating what is possible and what we know we have to achieve. i want to give the example of other industries. i have a quiz question for you. what do these people have in common? who will venture a guess? what do they have in common. a few are related. three strikers and out. a few of them are related. these are all the health care people in the forbes 400. here's how they earn their

money. what do you notice about how they earn their money? with only one exception, with only one exception, every one of the people earn their money by something you stick in a body. he made money by organizing hospitals. i want to show you a different. every is stuff you use. these are the retailers on the forbes 400 list. six wal-marts, five home improvements including three home depots and best buy and super markets. some of them you have to be in the midwest to use. what do you notice about the folks? not a single one made a thing

that you stick in you or physically consume. they made their money by changing the organization of how you buy things. the health care and the rest of the economy and the health care that has been no organizational innovation associated with figuring out how to bring you a better product cheaper despite the fact that every other industry has created billionaires that way. whoever figures out how to do that in health care will be the next billionaire. how to coordinate care and stream line practices and overhaul the procedures and ensure proper care and manage the information structure. we do that because they will drive costs out of the value and the supply chain and figure out how to improve value. that will be the single biggest thing to happen to health care ever. that's what will allow us to cover everybody and put a dent

in the deficit and bring health care from something people dread into something people feel better about. that is my own personal forecast about what we can do and that's my sense about what's at stake associated with both passing reform and also making whatever passes or doesn't pass actually work to the benefit. thank you very much. the development at american hospital association. she plays a central in developing the association's advocacy agenda in educating policy makers and hospitals about the implication of legislation and regulations have on hospitals and the patients they serve. before joining ha she served as the director of the office of ledge slagsz for medicare and medicaid services and

represented the policy physicians to congress and also served in staff leadership positions for the senate finance and the house ways and means and is an adviser to the cms administrator. she was a key contributor to three pieces of medicare legislation in 2003 where she was held to charles grassley. the act of 1999 and the medicare and medicaid benefits in the protection act of 2000 when she served as professional staff to then chairman bill thomas and also want to point out with the association of the american medical college that we are fond of. please welcome her. >> thank you.

>> thanks very much for inviting me today. i have to agree with what david said. a lot of random thoughts came into my head as you were speaking. if i run through the slides, we can have a discussion about that. i'm sure you have a lot of questions to ask of us. i would say that there could be a productivity revolution in health care if in fact we changed the delivery system like david suggested and we created environments in which the changes can take place. my association that represents all the hospitals and represent on over 5,000 of the hospitals

ranging from the teaching hospitals and v.a. hospitals and belong to v.h.a. we have been working for several works about a framework that would not necessarily be a hospital framework for change, but for everyone for the health care system to change. we call that at the a.j. health for life. this is a scheme attic for what we call the five pillars or central elements of health reform. in the efficient affordable care, we already had a number of task forces since david suggested in administrative simplification an area in which there can be savings. and we think more than 300 million.

about how things can be changed to deliver more efficient care and a task force coordination and recognize that care is not well coordinated. for example, since we represent post acute care hospitals as well as general acute care hospitals, the transitions or handoffs are not necessarily well thought out between and among various types of facilities so we have a set of recommendations about that. interestingly, we also have and are having a task force on spending which did not come up. if we get them into a political discussion after my presentation, we can certainly talk about that. finally we had a task force on payment reform. they have made the series of recommendations that i am going to present today that gets us to where david is going.

it can result on an increase in health care. we have to align across providers so that care can be accord and we call this integration. we have been on capitol hill talking about the need to make changes that would help coming to and clinically integrate to deliver more efficient higher quality care and lower cost. we had a little bit of difficulty on capitol hill because frankly some of the members of congress as well as staff don't quite understand the kinds of things we need to change in the legal system to facilitate care coordination and here i show you what we call the big five. changes that we need in antitrust law and the law that

deals with patient referral and a physician referring to a particular hospital that he owns or not or has a relationship with. anti-kick back law and civil monetary penalties that can be applied if you tried to deliver less care than what a patient feels he or she needs. those kinds of issues. irs tax exempt law that has to did with that. we have written an integration trend watch and i have a few copies on the table and i will show you a web address where you can get them. we have this trend watch monograph, if you will, places that have gone ahead and started to clinically ind grit on their own to provide better care. a as david said earlier, many of these tend to be in systems.

that seems to be able to do a better job of getting at these things than the stand alone hospital that among our membership there is significant worry among the stand alone independent hospitals about whether or not or how they are going to survive in a health reform environment that demands more accountable care and more integrated care and more financial risk. that was the topic of the retreat at the end of january and we from have to agree that this is how hospitals will be asked to behave. we need more regulatory reforms and this is sticky about all the rules and govern. skilled nursing a

going to get out of the way and let us manage the care with respect to perhaps not abiding by these kinds of rules and regulations that exist. interestingly, in the legislation before congress, -- there are demonstrations unbundle payments and of the things i will show you -- and other things i will show you. the secretary has the ability to waive regulation and necessary to be able to conduct a demonstration. we presume what they are talking about are these particular clinical integrations. we are not really sure how they will proceed in this legislation passed. with respect to payment reform, these were some of the findings that came out of our task force.

virtually all of the participants in our task force, there were about 25 ceo as representing a wide spectrum of hospitals -- which i said, hospitals are very diverse. . diverse as well. in addition rural pop eulogies that are far scattered in frontier areas. everyone pretty much agrees that fee for service is on its last legs. also that incentives for payment methods and that they have to change in ways that we can align the incentives and provide a significant time frame for transition so that payment reform can lead to the means to the end of delivery system reform. payment systems create incentives.

that was pretty obvious. in 1983 when diagnosis-related groups were implemented and reports were told and it was questionable how they would respond and they did to the incentive to receiving a bundle for a group of services. they reduced length of stay and turned it out to make a large profit in the early years. i want to say they respond to incentives and it's important to get those right. at the retreat as i said, we talked about accountable care and readmissions. i will talk a little bit about it. this came up in the retreat. the hospital leaders tried to improve care and the profit margins go down. the whole system is built on getting more and more admissions. we have to flip that on its head and change that kind of

incentive so that people can try to deliver the right kinds of care. another set of findings is that we are going to focus on medicare first. even though medicare is far behind the private sector in payment in a patient, it is our largest payer. it's easier for the national association to focus on medicare first. increasing the size of the unit of service, as i said they are kind of a small inpatient hospital bundle. we would like to see bundling of payments that might go across physician hospital payments or physician hospital and post acute setting payments. align the units of service across providers. that's easier said than done given the mish mash of payment systems we have and i'm not sure if you asked me how to do that, i may not be able to tell you that we can could that quickly, but we need to do that.

political integration, i talked about stripping the providers of the ability to make these up front investments. several said a lot of these kinds of things like seth up accountable care organizations, for example, which is say highly sophisticated reform will take a lot of money. if you are going to cut the payments in the early years, we won't be able to generate the capital we need to make the changes. of course we need to accommodate the different types of hospitals and different paths and i will talk about that in a minute and holding us accountable for quality efficiency. these are the proposed reform policies that are in the legislation that is before the congress. as i said, i think there is a good chance it will become law. david talked a little bit about value-based purchase ing and

paying for hospitals based on quality. we report quality information to get what we call a full market basket and inflation update. this is a more elaborate system, if you will. currently it's considered to be budget-neutral. it moves money around among hospitals and doesn't save money for the program. bundled payments are demonstrations and pilots in the legislation. we have a number of people, a number of members who are interested in going forward. many of them are already the bigger systems. they are already doing this in the private pay areas with places like wal-mart, i believe. in minneapolis where he was doing that. several people are doing that and accountable care organizations, there a number of pilot programs currently in play where we have several members

who are interested in becoming accountable care organizations right away once the legislation is passed. infections, there is a policy not to pay hospitals for hospital acquired infections and obviously we support that. i think that's pretty hard to argue against. the way the policy works in the legislation is not something we agree how it's done, but we agree with the principal. readmissions, david talked about readmissions and that saves about $9 billion over 10 years the way it's currently written. we have done a great deal of work on this issue. i would submit to you though that not all the admissions are the same. what we are trying to tease out is policy and to separate those that are unplanned, but related

to the initial admission. those are the ones we should be held responsible for. however there readmissions for which the hospital is not responsible. for example, my mom gets a hip replacement. she is discharged from the hospital. on the way home to her house, she is in a car accident and has to be readmitted to the hospital. that is a readmission for which the hospital does not feel it should be responsible. we have to tease out those kinds of exceptions to the policy. we also feel that all other providers at the same time should be held responsible. figures, nursing homes and so on and how that gets applied is important. i was at a meeting and they were talking about how they reduced

their rate considerably simply by insisting the primary care physician called the patient within 24 hours of discharge from the hospital and they can see the dramatic drop in the numberreadmissions they had in the hospital. the issue is trying to get the system set up and communicated and shared among all the hospitals. these can make impacts on the kind of care delivered. this is a little bit hard to see, but it's out of the trend watch that shows you some of the examples of our systems that are doing things ranging from bundled payments for a single episode of care ranging to the more integrated members at the right hand side of the slide where the medical staff includes only mostly fully employed

physicians. as david said, many of his friends said the monday and tuesday practices should go away. several people in my organization that feel the same way. effectually perhaps all physicians should be employed. that's not an organization policy, but there is definitely that feeling that physicians would be better off to prepare the deliver fe physicians were employed or in a large specialty group. this is our scheme attic from our payment reform task force. i'm not going to go over it, but it shows that payment reform, we see it as an evolutionary path. you will notice that in stage one, it's about aligning hospital infacient patient payments. it is test and we gather data and we eliminate the barriers to

clinical ipt grigz that i talked about. it proceeds to stage three. accountable organizations. that's not for everyone. some of our members would like to go to stage three and they are ready to do it. those in large systems. we created also the alternates. the one i showed you is for low volume rural hospitals. those with less than 2,000 discharges per year. an interesting statistic is with the medicare program. for those of you who follow this, there many classifications are rural hospitals. critical access, sole community, medicare dependent hospitals. all of them are small and sometimes relatively low volume.

it's about 9 percent per of medicare spending. it's not a lot of money. the amount of regulation and level of effort that maintained to keep these categories going is not particularly effective. what we have proposed is to get rid of them and critical access helps which are hospitals of less than 50 beds or mileage considerations and so on between hospitals. pay paid 100% by medicare program. what we proposed is paying 100% of the kofs and extending that to other types of hospitals and we decrease friday 101 to 100% and proposing the 2% bonus and

certain types of quality measures and so on and getting rid of the sdirchgs to make it more efficient. that has actually been met with favorable feeling or thought from some of our members. we are trying to get nads get us to a rational kind of organization. i want to finish up. i have given you our website where you can pull off the integration watch and i think it's really something on the information. with that i will stop and maybe we have time for questions. thank you. >>are we have time for questions. yes. this is where i get to be mildly insulting and say make sure to be clear and try to be brief and

remember a question ends with a question mark. the different incentives with an hmo provider and publicly traded hospital with activist investors and go in both companies and say this is how we want to work together. contact me and i can help you. a lot of the hospitals are not for profit. there is a related version which is if you ask why they don't push for these things, they say i'm small in the market between medicare and medicaid and others are small and i can't do it.

if you ask the hospitals, we need up front money to undertake the investments. if you agree to do investments, you can get savings and there may be less of a strategy and more on the close crabration. >> what are the concepts of the organizations and how do you handle the risk? right now the way it is, if a hospital wants to assume that risk, it has to start through an hmo. some of the hospitals have that. the accountable care organization model allows potentially for assumption of partial or shared risk. in a way that might make it and i think that is what the intention is of those who want

to drive us in that direction. >> thank you. your presentations, and particularly the analogy with the retail sector, is very apt. there has been organizational management often defeated by the lack of price competition due to the inherent price fixing and the system, particularly emanating from medicare. my question is, the president's proposal proposes cash subsidies for younger people, while maintaining this incredibly complex payment system you have just outlined for older people. why not just convert the system to cut subsidies and let it work as it did in the retail sector -?

>> i am pleased to hear your analogy. i think what the president has proposed is what will be over the next decade a complete transformation of the program, but because the pop -- the program is very up there, he wanted to go there insteps rather than all at once, which seems perfectly a acceptable. steps rather than to do it all at once. i keep a list in my mind of the elements of reform no one has heard of. let me give you one example to show you. it proposes $10 billion for medicare to experiment with ways to have coordinated care that would prove the value of the cost and quality of anyone successful. it's a way of stream lineing it

and saying look, whoever finds a way to make this work and will be happy it go along with it. nobody -- you don't see those and people are missing what is there to do the biggest transformation of the program ever. >> i would like to build on that. we are very excited about the centers for medicare innovation and we are supportive of that, however how the medicare office runs the effects. frankly, i was there and i think those people are great and they do a wonderful job and work hard. they will often saddle these experiments with a poison pill or some kind of mechanism that makes it not work or it takes years to evaluate the yoit come

and years to design the project. this is a way for them to get things out there kwikly. we are nervous about it. to give me the med. we are not groups that have basically restricted the ability of doctors and hospitals to give medications to patients on the way out, which means stay then

have to get it on a separate trip. have to go and get it on a separate trip that increases the likelihood they won't get the meds. how do you propose dealing with that professional licensing protection that seems to be pervasive in health care? >> i think it's going to be difficult and you hit on an example of the kinds of things that need to be done and that are in the care coordination. everyone to some extent including my association of hospitals has skin in the game and they don't want to give it up. somehow we need to get over that. to get to the place where care can be deliver in a better way. i don't know. >> in the short run, they have been describing them as helpful. i think we are going to need a

third part of health reform. the part one was it and payment systems. part three will have to deal with a variety of the legal issues where we slept on all these regulations to cover up the incentives of the system that were going the wrong way. when you get them right, you can care them down like the wallpaper when you fixed the crack in the wall. the start rules and the prohibitions on the practitioners and the pharmacy things. >> the corporate practice. >> all of those things. >> the medical education. >> fidelity investments, when i purchase a car, i go on the internet and i look and i look at consumer reports and find out how good the various cars are. i go on kelly blue book and find

out how much the cars have been selling for and how much i can trade in my own car, etc. for anybody else in the country, they have to make a massive life decision. they have no information. if medicare is the biggest consumer of medical services in the united states, why can't medicare commoditize information from the health care system? >> it's interesting because during the entire bush administration, they said let's let the providers deal with the information stuff and we will pay them what they pay and they should have inceptives to do that. the obama administration said enough of that. we are going to pay for it. we are going to cut the information and make sure it's directed the right way. we embarked on a crash course to do that. it would have been better had we

in the 2000 or 1990s or 80s like everywhere else in the economy decided to do that. there is no excuse for it not having been done. >> i was going to ask the question, have you been on hospital compare? there is a fair amount of information on the internet and for several different kind of procedures, i don't know if they are replacements, but you can go to hospital compare and look at the relative quality and information of the hospitals in your area by zip code. it's questionable how many seniors actually do that. in thinking about how you make these decisions, you tend to ask your relative or a family member or friend where did you get your hip replacement? i don't know that consumers do that as much as people think. for example, in california they

publish charges. i think there is a law that hospitals have to publish every charge that they have in their institution, but there is a question as to how meaningful this is to consumers. the area of research needs to be what kinds of things can be put on the internet that help make these decisions? i'm not sure we have it right yet. >> pennsylvania too. >> rick o sullivan changed management solutions and helped at round table. my question is about the environment in which patients function and there is no mention of that when when we talk about quo holding physicians and environments accountable. when you look at childhood asthma, it is 10 times more prevalent in low income areas

mostly because of the dust created and i have yet to see the policy that lists the owin man as a preferred provider. when you talk about holding them accountable and looking at the environment accident, are there sidewalks and places that support a healthy environment that is outside the health care facility's control and specifically we talk about improvements in productivity, i was excited. a decade ago with assisted living facilities because it shifted the dynamic instead of having providers all in one spot in the hospital, you now had the biggest consumers all in one spot in the assisted living facilities and the hospitals have not shifted care out to take advantage of this. how you make those things happen.

>> i have actually -- i think there is a good point. i think about it this way. in a lot of cities in the u.s., there isn't an organization that has more money than the public health department. that is the big hospital system. they are also caring for a lot of those folks. i wouldn't be surprised or hopeful if we involved in the next few years something to where the states through medicaid or the cities go to the providers and said look, we will free you up, but you effectively will be the public health department in those areas and figure out how to work with people and improve their health and guarantee it's worth your while. you can do that because the amount of money you save us on acute care and the ed. endo.

>> they are a situation in which the entity takes responsibility for the health of a population. you could invasion, for example, one hospital in new york i know has gone into homes and removed lead-based paint for pediatric patients. those are the kinds of things we are talking about and they take on -- they just do it. it's part of the public service. to get tax-exempt status, you have to provide a community benefit. that can count as a community benefit. >> professor cutler, i suppose that they were to show up to create a large firm like wal-mart and a network of hospitals and pharmacies that provided exactly the kind of

revolution that you are talking about and made $50 billion off of the process like the original. i worry that in congress, not just this congress instead of being hailed as innovator, you be condemned as a profit ieo there seems to be the existence of using a profit motive to drive innovation and revolution in medical care unlike other industries. what can we as economists do to address that demonization and prejudice in the public sphere that said all the motive is illegitimate? >> i guess i -- there certain ones that way and i am struck by the number of democrats than to the republicans.

i am struck by the number of democrats who say look, we have to innovate our way out of this. this is not going to get us anywhere. let's innovate our way ought of this crisis. when i looked at the bills being put forward, far more than regulation, there was a bit more here and there and totally understandable and some of it is icky and who cares, but basically it's about incentives to drive change and people understand that will create a lot of winners and people are comfortable with that. that's just not to say that nobody would complain, but people understand what they are getting themselves into. >> real quick, the last word. >> both of you focused quite a bit on the quality of care and i'm somewhat confused about how you define that and how do you

measure that and particularly with regard to geographical area and differences in population and how efficient that could be once you have framework that you can work with. >> right now medicare drives the quality measurement process by holding hospitals accountable for certain we have a stake holder group of entities that assemble periodically and work on various quality measures, and they submit them through their process. we have an organization that endorses them, and they find their way into the medicare payment system, where we have to report on those measures in order to get our inflation updates, and we see those quality measures expanding over time, and certainly in the health information technology

polls that came out, which comments are going to be finalized in coming months, there is off hold elaborate mechanism for quality information -- there is all hold a love -- a whole elaborate mechanism for quality information. the question is how many quality measures are too many. when you talk about what the people do, eventually you have to extract all the quality information from patient records and that kind of thing, and is that going to lead to a bunch of people working in the hospital. >> i will leave you with one example of where i think the road will be very difficult. in the course of this bill, there was a discussion between

the is this roundtable and a.m. en -- the business roundtable and the ama over whether claims record should be made available so corporations can put it together and find out who is providing good quality care and high quality care. . and the business round table was insisting on access to the data and the ama was insisting that the data longed to the doctor and, lfr, they couldn't be given out without permission of the doctor. and one way or the other we'll have to decide issues like that. which is sort of -- comes dreblg directly to your point, which is over the next decade, with or without reform, we'll have to decide whether we want to take steps to improve the value of care or we don't. and if we're going to fight it every step of the way, then it will be a god awful decade. and if we don't, then it will be a wonderful decade. and i actually want -- i think

if you listen to what lip today is say, it's exactly right because it's helpful because what she's saying is, look, all of my members, even the ones who are most vulnerable, know that the world has to change and we're going to do it, we just need to make sure that we do it in a way that makes sense. that's where most of the providers are now, which is what makes me hopeful that we will get there. they're not saying, no, this is too fast, we have to slow it down. they're saying we know this is coming, we've got to do it. >> i just want to make a last plug. our association has a separate initiative that's run out of a whole other branch of the aha called hospitals in pursuit of excellence. and it is part of our extra teenlgic plan to reduce things like blood line infections and utis, urinary tract infections, and readmissions. we actually have that written

into our strategic plan as a peeled with percentage goals to meet over the coming years. so i would tell you that -- and this is totally a vol unarea thin voluntary thing. the government has nothing to do with this. we're educating members on how they can achieve those goals. we feel at the end of the day this is coming at us and we should take the initiative and be aggressive with solving the problem. >> just so that you know, slides are put on the website very shortly after the meeting so you don't have to ask to get the slides. join me in thanking our excellent speakers.

>> a little bit later, the prime minister of greece talks about his country's debt crisis and the relationship with the united states and europe. on tomorrow's "washington journal," a look of the obama administration's efforts to reduce foreclosures. john taylor will -- we will discuss gris's debt crisis with peter eavis. live at 7:00 a.m. eastern on c- span.

>> over 1000 middle school and high-school students entered this year's student documentary competition with a short video on one of our country prosperous the strengths or a challenge our country faces. we will announce the winners on march 10 and show you winning videos. >> president obama had a meeting on health care. this is about 40 minutes. >> hello, pennsylvania. thank you. thank you very much.

what a wonderful crowd. i love you back. i am kind of fired up. [applause] i am kind of fired up. this is just an extraordinary crowd. i love you back. there are some people i want to point out who are here and have been doing great work. give leslie a great round of applause for her wonderful introduction. [applause] somebody who has been working

tirelessly on your behalf doing a great job, the secretary of health and human services, kathleen sebelius, is in the house. [applause] one of the finest governor is in the country, ed rendell is in the house. [applause] everybody noticed how good it is looking, by the way? he has been on the training program. [laughter] eating a whites and keeping his cholesterol down. [laughter] [applause] your senior senator who has been doing outstanding work in the senate, harlan specter is in the house. [cheers and applause]

one of my great friend, somebody who supported me when no one could pronounce my name, bob casey. [cheers and applause] your congressman, the person who gave me confidence that i could when even though nobody could pronounce my name is in the house. [cheers and applause] i figured if they could elect a shotguchaka, they could elect a barack. allison schwartz is in the house. [cheers and applause]

someone new rendered outstanding service to our nation before he was in the congress is in the house. [is and applause] technically not his state, but he is right next door at the new jersey. we got some jersey folks here. rob andrews is in the house. [applause] and the the great mayor of philadelphia -- [cheers and applause] i am a little warm here, so -- [cheers and applause] all right. it is a little hot up here.

and the two arcadia university -- and too murky university -- and to arcadia university -- [cheers and applause] i thought the white house was pretty nice, but that campus -- [cheers and applause] it is great to be back here in the keystone state. it is even better to be out of washington, d.c. [laughter] first of all, the people of b.c. are wonderful. they are nice people. they are good people.

i love the city, the monuments, and everything. but when you are in washington, folks responded to every issue, every decision, every debate, no matter how important it is, with the same question -- what does this mean for the next election? [laughter] what does it mean for your poll numbers? is this good for the democrats or for the republicans? who won the news cycle? that is how washington is. they cannot help it. they are assessed with the sport of politics. -- they are obsessed with the sport and politics. that is the environment in which elected officials are functioning in a point you have seen the pundits and the cable networks.

that is what they do. but out here and all across america, folks are worried about bigger things. they are worried about how to make payroll, how to make ends meet, what the future will hold for their families and for our country. they are not worried about the next election. we just had an election. [cheers and applause] they're worried about the next paycheck for the next tuition payment that is due. [cheers] they are thinking about retirement. [laughter] you want people in washington to spend a little less time worrying about our jobs and

little more time worrying about your jobs. [cheers and applause] despite all the challenges we face, two wars, the aftermath of a terrible recession, i want to tell everybody here today that i am absolutely confident that america will prevail, that we will shape our destiny as past generations have done. [applause] that is who we are. we do not give up. we do not quit. sometimes we take our lumps, but we can keep on going. that is who we are. but that only happens when we are meeting our challenges squarely and honestly. i have to tell you, that is why we are fighting so hard to deal

with the health care crisis in this country. health care costs are growing every single day. i want to spend some time talking about this. the price of health care is one of the most punishing costs for families and for businesses and for our government. [cheers and applause] it is forcing people to cut back or go it forces small businesses to choose between hiring or health care. isn't plunging the federal government deeper -- cds plunging the federal government deeper into debt -- it is plunging the federal government deeper into debt. some of the highest on insurance rates are among young people, and it is getting harder to find a job that is going to provide you with health care.

a lot of you feel you are invisible, so you do not worry about it, but when you hit 48, you start realizing things start breaking down a little bit. [laughter] and the insurance companies continued to ration health care based on who is sick and who is healthy, who can pay, and who cannot pay. that is the status quo in america, and it is the status quo that is unsustainable in america. we cannot have a system that works better for the insurance companies than it does for the american people. [applause] we need to get families and businesses more control over their own health insurance, and that is why we need to pass

health care reform -- not next year, not five years from now, not 10 years from now, but now. [applause] since we took this issue on a year ago, there have been plenty of folks in washington who said the politics is just too hard. they had warned us we may not win. they have argued now is not the time for reform. it is going to hurt your poll numbers. now how is it going to affect democrats in november beaumont do not do -- in november? do not do it now. my question is, when is the right time? [cheers and applause] if not us, who?

think about it. we have been talking about health care for nearly a century. i am reading a biography of teddy roosevelt right now. he was talking about it. teddy roosevelt. we have failed to meet this challenge during times of prosperity and also during times of declined. some people say don't do it right now because the economy is weak. when the economy was strong, we did not do it. we talk about it through democratic administrations and republican administrations. i have all of my republican colleagues out there saying that we want to focus on things like costs. you had it 10 years. what happened? [cheers and applause] what were you doing? [cheers and applause]

every year, the problem gets worse. every year, insurance companies to deny more people coverage because they have pre-existing conditions. every year, they'd drop more people coverage when they get sick, right when they need it most. every year, they raise premiums higher and higher and higher. just last month, anthem bluecross and california try to jack up rates by nearly 40%. 40%. has anybody paycheck gone up 40%? [laughter] why is it that we think this is normal? in my home state of illinois, rates are going up by as much as 60%. you just heard leslie who met

with more than a 100% increase. one letter from her insurance company and her premium doubled. just like that. because so many of these markets are concentrated, it is not like you can go shopping. you have a choice, either no health insurance, where you take a chance that somebody in your family, if they get sick, you will go bankrupt and lose everything you have or you keep ponying up money that he cannot afford. these insurance companies have made a calculation. listen to this. the other day, there is a conference call organized by goldman sachs. you know goldman sachs. they're organized a conference call in which an insurance broker was telling wall street investors how he expected things

to be playing out over the next several years. this broker said that insurance companies know they will lose customers if they keep raising premiums. but because there's so little competition in the insurance industry, they are ok with people being priced out of the insurance market because a lot of people will be stuck. even if some people will drop out, there will still raise premiums on the customers that they keep. and they will keep on doing this for as long as they can get away with it. there is no secret. they are telling their investors, we are in the money. we will keep making big profits even though a lot of folks will be put under hardship. some -- so how much higher do premiums have to rise before we do something about it? how many more americans have to lose their health insurance?

how many more businesses have to drop coverage? all those young people out here, after you graduate, you will be looking for a job. think about the environment that will be out there when a whole bunch of potential employers tell you, you know what? we cannot afford to point where we will take thousands of dollars of your paycheck because the insurance companies to just jack up our rates. how many more years can the federal budget handle the crushing cost of medicare and medicaid? that is the debt you have to pay, young people. when is the right time? is it a year from now or two years from now or five years from now or 10 years from now? i think it is right now. that is why you're here today. [cheers and applause]

leslie is a single mom, just like my mom was a single mom. she is trying to put her daughter through college. she knows that the time for reform is now. a self-employed cancer survivor from ohio wrote us a letter and said that her insurance chargers $6,000 with the premiums, paid $9,000 worth of care, and now they want to raise rates for next year. she wants to drop her insurance because it may coster the house that her parents built. she knows that it is time for health care reform. a friend that i meant when i was campaigning in wisconsin is a

young mother with two kids. she thought she had beaten her breast cancer, but then found out that it spread to her bones. she and her husband had medical insurance. but her bill landed her with 10 thousands of -- tens of thousands of dollars worth of debt. all she wants to do is spend time with her children. i spoke with her this last weekend. she knows that the time for reform is right now. so what should i tell the americans? that washington is not sure how it will play in november? that we should walk away from this fight? or do something like someone the other side of the aisle has suggested, take baby steps? they want me to pretend to do something that does not really

help these folks. we have debated health care in washington for more than a year. every proposal has been put on the table. every argument has been made. i know well lot of people view this as a partisan issue. but both parties have found areas where we agree. what we have ended up with is a proposal that is somewhere in the middle. it is one that incorporates the best from the democrats and the republicans, the best ideas. think about it along the spectrum of how to approach of care. there were those in the beginning of the process that wanted to scrap the system of private insurance and replace it with a government-run health care system like in other countries. [cheers] it works in places like canada, but i did not think it would be

practical or realistic to do it here. on the other side of the spectrum, we have those who believe that the issue is just to loosen regulations on the health care companies appeared but if we had fewer regulations on insurance companies -- health care companies. but if we had fewer regulations on insurance companies, somehow, market forces will make things better. we have tried that. i am concerned that that would only give insurance companies more leeway to raise premiums and denied care. [applause] the bottom line is that i do not believe we should give government or insurance companies more control over health care in america. i think it is time to give you, the american people, more control over your health insurance.

[is and applause] that is why my proposal is on the current system, where most americans get their insurance from their employers. if you like your plan, you can keep your plan. if you like your doctor, you can keep your doctor. as a father of two young girls, but i do not want a plan that interferes with the relationship between a family and their doctor. we want to preserve that. the proposal would change three things about the current health care system. first, it would end the worst practices of insurance companies. within the first year of signing health care reform, thousands of uninsured americans with pre- existing conditions would suddenly be able to purchase health insurance for the very first time in their lives. [applause] or for the first time in a long time. [cheers and applause]

this year, insurance companies will be banned forever from denying coverage to children with pre-existing conditions. [cheers and applause] this year, they will be banned from dropping your coverage when you get sick. [cheers and applause] and they will no longer be able to arbitrarily and massively hike your premiums, just like they did to leslie and antoma and too many other americans. those practices will end. [cheers and applause]

if this reform becomes law, all insurance plans would be required to offer free preventive care to all of their customers starting this year, free checkups, so that they can catch disease quickly. [applause] starting this year, there will be no more lifetime or restrictive annual limits on the amount of care you can receive from your insurance companies. there's a lot of fine print in there that can cost you people hundreds of thousands of dollars because they have a limit. if you are a young adult, which many of you are, you will be able to stay on your it -- on your parents' insurance policy until your 26 years old. [] cheers and [ -and -- [cheers and applause]

and there will be a new independent appeals process for anyone who feels they were unfairly denied a claim by their insurance company. you will have recourse if you are being taken advantage of. that is the first thing that would change and it would change fast. insurance companies would finally be held accountable to the american people. that is number one. the second thing that would change about the current system is this. for the first time in our lives, or often in a long time, uninsured individuals and small- business owners will have the same kind of choice of private health insurance that members of congress get for themselves. [applause]

if it is good enough for congress, it should be good enough for the people paying congress's salaries. that is you. the idea is very simple -- i am sorry. go-ahead. let me explain how this would work. it is an idea of lots of republicans have expressed in the past. my proposal says if you're not part of a big group, if you do not work for a big company, you can be part of a coschool that

gives you bargaining power. it is very straightforward. u.s. an individual or small business owner -- you, as an individual or small business owner, could be part of this school that would give you a better deal. -- pool that would give you a better deal. . insurance that is offered, even if it is a better deal than you can get on your own, we will give you a tax credit to do so. these tax credits add up to the largest middle class tax cut for health care in history. [cheers and applause] the wealthiest among us, they can already afford to buy the best insurance there is.

the least well-off are already covered through medicaid. it is the middle-class that gets squeezed. that is who we need to help with these tax credits. that is what we intend to do. [cheers and applause] i am going to be honest. let's be clear. this will cost some money. it will cost about $100 billion per year. most of this comes from the nearly $2.50 trillion per year that america already spends on health care. right now, and a lot of that money is being wasted or spent badly. with this plan, we will make sure that the dollars we spend will go to making insurance more affordable and more secure. affordable and more secure. i will give you an example. we will eliminate wasteful tax subsidies that go to insurance and pharmaceutical companies.

they're getting billions of dollars a year from the government, from taxpayers, when they are making a big profit. i would rather see that money going to people who need it. [applause] we will set a new fee on insurance companies that stand [unintelligible] they will have 30 million new customers. there is nothing wrong with them paying a little bit of the freight. [applause] the bottom line is this. our proposal is paid for. all the new money generated in this plan goes back to small business owners and individuals in the middle class who are having trouble getting insurance right now. it would lower prescription drug prices for seniors. it would help train new doctors

and nurses to provide care for american families and physicians assistants and fare best. there are great programs right here in arcadia. [cheers and applause] i was hearing about the terrific programs you have here in the health care field. we are going to need more health care professionals of the sort that are being trained here. we want to help you get that training. that is in this bill. [applause] i mentioned two things. insurance reform and making sure that people who do not have health insurance are able to get it. finally, my proposal would bring down the cost of health care for millions, families, businesses, and the federal government.

[applause] as i said, you keep bond hearing from the critics and some of the republicans on the sunday shows saying that they want to do something about costs. we have now inc. almost every single serious idea from across the political spectrum about how to contain the rising cost of health care, ideas that go after waste and abuse in our system, including in programs like medicare. but we do this while protecting medicare benefits and we extend the financial benefits of the program by nearly a decade our cost-cutting efforts -- nearly a decade. our cost-cutting efforts reduce most people's premiums because we're spending our health care dollars more wisely. [cheers and applause]

those are the savings determined by the congressional budget office, which is the non- partisan, independent referee of congress for what things cost. so that is our proposal. insurance reform, making sure a that you can have choices in the marketplace for health insurance and making it affordable for people, and reducing cost. [cheers and applause] how many people would like a proposal that holds insurance companies more accountable? [cheers and applause] how many people would like to give americans the same

insurance choices and that members of congress get? [cheers and applause] and how many would like a proposal that brings down costs for everyone? [cheers and applause] a that is our proposal and it is paid for and it is a proposal whose time has come. [applause] the united states congress owes the american people a final up or down vote on health care. [cheers and applause] it is time to make a decision. the time for talk is over. we need to see where people

stand. and we need all of you to help us win that vote. i need you to knock on doors, talk to your neighbors, pick up the phone, when you hear an argument by the water cooler and somebody says this is bad guys, said, hold on the second. we need you to make your voices heard all the way in washington, d.c. [cheers and applause] they need to hear your voices. right now, the washington echo chamber is in full throttle. it is as deafening as it has ever been. as we come to that final vote, the echo chambers telling members of congress to think about the politics instead of

thinking about doing the right thing. that is what mitch mcconnell said this weekend. his main argument was that this will be really bad for democrats politically. first of all, i generally would not take advice about what is good for democrats. [laughter] [applause] but setting aside that, that is not the issue here. the issue here is not the politics of it. but that is what members of congress are hearing right now on the cable shows and the gossip columns in washington. it is telling congress that comprehensive reform has failed before. remember what happened to clinton. it may be too politically hard. yes, it is hard. it is hard. that is because health care is complicated.

healthcare is a hard issue. it is easily misrepresented. it is easily misunderstood. so it is hard for some members of congress to make this vote. there is no heart -- there's no doubt about that. but you know what else is hard to? what leslie and her family is going through, that is hard. [shoes and a plus] -- [cheers and applause] the fact that natomas may lose her house, that is hard. [applause] my friend in green bay having to worry about her cancer and her debt at the same time, trying to explain that to our kids, that is hard. [applause] what his heart is with millions of families and small businesses are going through because we allow the insurance industry to run wild in this country. [applause]

so let me remind everybody. those of us in public office were not sent to washington to do what is easy. [applause] we were not sent there because of the big fancy title. we were not sent there because of the big fancy office. we were not sent they're just so everybody can say how -- sent there just started can say how wonderful we are. we were sent there to do what is hard. [applause] we were sent there to take on the tough issues. [applause] we were sent there to solve the tough challenges. [applause] that is why we are there. [cheers and applause] in this moment, we are being called upon to fulfill our duty to the citizens of this nation and to future generations.

so i will be honest with you. i do not know how passing health care will play politically. but i do know that it is the right thing to do. [cheers and applause] it is right for our families, for our businesses, for the united states of america, and if you believe that, i want you to stand up with me and fight with me. the opportunity is here. let's seized what is within our grasp. thank you. [cheers and applause] ♪

["stars and stripes forever" playing] ♪

[cheers and applause] ♪

>> soon after the president's speech, centers responded to his remarks on health care. we will hear first from mitch mcconnell, and democrat arlen specter. this is about 20 minutes. been focused, some would say fixated, on making dramatic changes to the american health care system as we know it. now it's an open debate as to whether spending so much time and energy on this issue was in the best interests of the public at a time of record unemployment and a need to address jobs and the economy. but what's not open to debate is that the plan they came up with was fundamentally flawed, that

it focused too much on expanding the size and cost of government and not enough on the core problem with our health care system, which is cost. this is why americans have been telling democrats in washington to scrap their plan and start over, and this is why so many americans are so frustrated with government right now. the administration says we need to pass its health spending bill to show americans that government still works. americans are saying just the opposite. they're saying that the first thing washington can do to show it's working is to listen to what the public is saying: to scrap this bill and to start over. unfortunately, democrat leaders in congress aren't interested. they're still clinging to the same old bill and the same old process americans rejected last year. they're more determined than ever to jam their bill through congress by any means necessary.

so over the next few weeks, we're going to see a replay of the same kind of arm twisting and deal making we saw in the run-up to christmas. i say we're going to see it, but in reality we won't see any of it. we'll have to read about the deals and the arm twisting only after the final bill hits the floor, because all of the arm twisting and deal making is going on behind closed doors, and it's already started. somehow the administration seems to think all this arm twisting and deal making will prove to the american people that government works. i should think that americans will draw the opposite conclusion. americans don't like this bill any more today than they did three months ago. they don't like the frantic, backroom deal making any more now than they did then. in the midst of all this, it's

understandable that a lot of democrats are on the fence about whether to vote for this bill, about whether to vote for this process, as well. but the reasons they're giving for being on the fence really don't square with reality and they're not going to fly with the public. some say they like the current bill because they say it reduces costs. it doesn't. the administration's own experts say the bill increases health spending by $222 billion more than if we took no action at all. in other words, this bill would bend the cost curve up, not down. others say they like the current bill because they say it reduces the deficit, but even if you grant that highly speculative premise, the one bill that the senate will be voting on tomorrow would wipe away every dime of those projected savings with one stroke of the president's pen.

if you believe that the health bill will save $100 billion, then you have to also acknowledge that the bill the senate will pass this increases it by $100 billion. so far from moving in a more fiscally responsible direction, the health spending bill that the white house now wants congress to pass before easter would move us in a less fiscally responsible direction, and this undercuts the entire point of reform. the administration recognizes the weakness of its argument. that's why it's trying to create a sense of inevitability about this bill. once again, it's impose not an artificial deadline to put pressure on members. it's talking about how we're in the middle of the final chapter of this debate. the administration wants -- the administration wants members to believe they're characters in a screenplay and that the ending

of the play is already written. this is an illusion. house members aren't buying these arguments any more. in fact, many of them are already walking off the set and my guess is that a lot more are about to. they know that we may be nearing the final act for this bill and the legislative process but that it's just beginning for those who support it. americans do not want this bill. they're telling us to start over. and the only people who don't seem to be getting the message are democratic leaders in washington. but they can be sure of this -- absolutely sure of this -- if they cut their deal, if they somehow convince enough members to come onboard, then they'll get the message. the public will let them know how they feel about this bill.n. the presiding officer: is

there objection? without objection. mr. johanns: mr. president, i rise today to speak for about ten minutes to talk about the health care debate that continues to be in front of us. for much of our country, the health care debate has been a long and confusing trail. as details have emerged over the last weeks and months, constituents ask me what's going to happen to my health care? will i be able to continue to see the doctor that i have always seen? they've heard both sides argue the merits and the detriments of various pieces of legislation. citizens are understandably skeptical and perplexed by the debate that has transpired. one of the things i would suggest, mr. president, that is very clear, one situation that is clear as a matter of policy

and conscience is this, and that is that americans are against the federal funding of abortion, whether they support or oppose the bill. unfortunately, the senate-passed health care bill allows taxpayer funds to fund abortion. the current senate language does this: it says people who receive a new government subsidy could enroll in an insurance plan that covers abortion. stphog would stop them from -- nothing would stop them from doing that. some say, well, yes, but states could opt out. what i point out is that those states that opt out, in those states the taxpayers would still see their tax dollars funding elective abortions in other states. additionally, the office of personnel management can provide access to two multistate plans

in each state, and only one of them would exclude abortions. o.p.m.'s current health care program, the federal employee health benefits program, now prohibits any plans -- any plans -- that cover elective abortion. so for the first time a federally funded and managed health care plan will cover elective abortions. those who have looked at this language have said very clearly that it's woefully inadequate. i say that. it does not apply a decades-old policy and agreement really that was reached many, many years ago that was embodied in the hyde amendment. the hyde language bars federal funding for abortion except in the cases of rape and insist or where the life of the mother is at stake.

the public has clearly rejected advancing the abortion agenda under the guise of health care reform. yet, as we have seen, the language of the senate bill proceeded, seems very, very clear that my colleagues are refusing to listen to that. they seem bent on forcing this very unpopular bill upon us via a rather arcane process called reconciliation. the important point to be made today is this: reconciliation will not allow us to fix the egregious abortion language. mr. president, this is not the first time that i have come to the floor to speak about this issue. last november, i came here to urge pro-life senators to vote "no" on cloture if they wanted

any chance to address the federal funding of abortion in the senate bill. i said then that if the language wasn't fixed before the debate began, there would be no way to fix it. we would not have any leverage to fix it. mr. president, i wish i were here on the floor today to say this, to say that i was wrong about that. unfortunately, though, i was not wrong. unfortunately, when an amendment was offered to match the stupak language in the house bill with the senate bill, only 45 senators supported it. the sad reality is this, this senate as a matter of the majority is not a pro-life majority.

there are not 60 senators who are willing to vote for that. back in november, some of my colleagues disagreed with my assessment. there was a big debate. they said wait a second here. we can fix this provision via an amendment, they said, but they were wrong. when the dust settled, we were left with a senate bill that allows federal fund of abortion. the house is now being asked to vote on the senate bill. you see, that is going to be the pathway. vote on the senate bill so any fix on other provisions can come through a reconciliation side war. now, korgs national right to life committee, the senate bill is -- and i'm quoting their language -- the most pro-abortion single piece of

legislation that has ever come to the house floor for a vote since roe v. wade. unquote. they go on to warn -- and i'm quoting -- "any house member who votes for the senate bill is casting a career-defining pro-abortion vote." unquote. there is talk that democrat leaders might try to appease pro-life house members by promising to change the senate bill through a separate bill or the reconciliation sidecar that i mentioned. i urge pro-life supporters and pro-life house members to think through this very, very carefully. don't be food. don't be lulled into thinking that there are 60 votes in the is that

senate that will somehow rescue the situation. there are not. you don't have to take my word for it. it's in black and white in the "congressional record." it's the same situation we faced in november. the senate specific economy rejected the amendment that would have blocked federal funding for abortion. nothing has changed to suggest that the senate would have anywhere near 60 votes to support it now. it was recently reported that some of the pro-life community support adding pro-life language into the reconciliation sidecar, or maybe a separate bill. with the hope and the promise that some of the senate will swoop in and waive the rules and

keep that language there. let me be abundantly clear -- as much as i might want that to happen, it will not happen here , as demonstrated by november's vote. so with the senate rejected again, the language in the senate bill would become law, and taxpayer >> -- and taxpayer dollars what in fact fund abortion. there was recently a column in the "washington post" telling democrats to be wary of this strategy and imploring them, the only way they can insure that the abortion language in the other provisions they opposed are eliminated is to reject reconciliation entirely and demand that the house and the senate start over with clean legislation. mr. president, i come to the senate floor again to encourage

my pro-life colleagues in the house to recognize the reality here in the senate. i tell them what they know already, and that is that many innocent lives are depending upon their courage. issue of political gamesmanship, especially when the game is so rigged against pro-lifers. this is an issue of conscience. on this one, you are pro-life or you are not. agreeing to a strategy that is guaranteed to fail, one that has failed already in this health care debate in november, in my judgment, is not leadership at all. it's surrendering your values. i leave the floor today, mr. president, and i pray that my house colleagues will have the

wisdom to understand this in their decision making. thank record. the stage is now set where we have gridlock on the issue of comprehensive health care reform. and in this situation we have had the bills pass by both the house and senate. and we're now looking to use reconciliation, a procedure which has been employed some 22 times in analogous circumstances, ill husband triive of the analogous circumstances is the medicare

advantage, the passage of koab, a the passage of schip, the passage of the welfare reform bill in 1996. in a learned article in the -- in th the "new england journal f medicine," dr. henry aron, an expert on budgetary matters had this to say -- "cloture can be used to implement instructions contained in the budget resolution relating to taxes or expenditures. congress created reconciliation procedures to deal with precisely this sort of situation, referring to what we have with the senate passed bill and the house passed bill. the 2009 budget resolution instructed both houses of

congress to enact health care reform. the house and the senate have passed similar, but not identical bills. since both houses have acted, but some work remains to be done to align the two bills, using reconciliation to implement the instructions in the budget resolution follows established congressage procedure." i ask consent, mr. president, that the full text of this article be included in the record following my statement. the presiding officer: without objection. mr. specter: so what we have here, essentially, is gridlock created by the composition of the two houses of congress. we have a situation where not one member of the other side of the aisle voted in favor of the health care bill. in the house of representatives the vote was 176-1.

that is among the 177 republicans voting only one out of 177 in the house. hard to say a more precise definition of gridlock than what appears here. it would be my hope that we would be able to resolve the issue without resorting to -- to reconciliation. if there's any doubt about the procedure, our institutional integrity would be enhanced without -- without going in that direction. but if you have to fight fire with fire, and if it is legitimate, and since it is a legitimate means, then we can use it. five years ago in 2005, the senate faced a somewhat similar situation when the rules were reversed.

when it was the democrats filibustering the judicial nominees of president bush. and we find that so often that it depends on whose ox is being gored as to who takes the position. some of the objections on reconciliation on comprehensive health care reform have filled the congressional record with statements in favor of using reconciliation in analogous circumstances that would help their cause. in the year 2000, it was the democrats stymieing republican judicial nominees. during the clinton administration, it was exactly reversed. it was the republicans stymieing the clinton nominees. in 2005 we were able to work out the controversy. we were able to confirm some of the judges. some of the judges were

withdrawn and we did not move what was called the nuclear option which would have confirmed judges by 51 votes. and the procedural integrity of the senate is really important. without going into great detail, it was the senate which saved the independence of the federal judiciary when the senate acquitted the supreme court justice chase in 1805. it was the senate which preserved the power of the presidency on the impeachment proceeding of andrew johnson in 1868. congress sought to have limited president's power to discharge a cabinet officer in absence of approval of the senate. well, the senate has to confirm, but the senate doesn't have standing to stop the president from terminating the services of the cabinet officer. and there the senate saved it through the courageous vote of a

single senator, a kansasan, i'd like to mention, being one originally myself. so it would be fine if we could find some way to solve the problem. but absent that, this senate reconciliation procedure is entirely appropriate. we have gotten much more deeply involved in the research and analysis as this issue has come to the floor on comprehensive health insurance. comprehensive health coverage. the gridlock that faces the senate and country today has profound implications beyond the -- the legislation itself. it's hard to find something more important than ensure -- insuring the millions of americans now not covered. hard to find something more important than stopping the escalating cost of health

insurance, driving many people to be uninsured and raising the prices for small business where it cannot be afforded. but the fact is that this gridlock is threatening the capacity in this country to govern. really threatening the capacity to govern. secretary of state hillary clinton was before the appropriations subcommittee on foreign operations, and i asked her about this issue. i asked her about the president -- quote -- -- not being able to project the kind of stature and power of a year ago because he is really hamstrung by congress, and it has an impact on foreign policy which we really ought to do everything we can not to have partisan influence. secretary of state clinton replied as follows." senator, i think there is certainly a perception that i encounter in representing our country around the world that

supports your characterization. people don't understand the way our system operates, and they just don't get it. their view does color whether the united states is in a position, not just as president, but our country is in a position going forward to demonstrate the kind of unity and strength and effectiveness that i think we have to in this very complex and dangerous world. "she continued a little later --" we have to be attuned to how the rest of the world sees the functioning of our government because it is an asset. it may be an intangible asset, but it is an asset of great importance, and as we sell democracy, and we're the lead democracy in the world, i want people to know that we have checks and balances, but we also have the capacity to move, too."

so that what we really find here is a diminution of the authority and stature of the president, a diminution of the authority and stature of the presidency, and ultimately a diminution and reduction in the stature of our country and able to deal with these problems. so it would be my hope that we could yet resolve this issue with a little bipartisanship. it wouldn't take a whole lot, but at the moment there is none. with 40 senators voting no, all of those on the other side of the aisle, 176 out of 177 republicans in the house voting no. that simply is no way to govern. i thank t

>> coming up on c-span, and analysis of this year's congressional elections. then the prime minister of greece talks about his country's debt crisis and the relations with united states and europe. -- with the united states and europe. tomorrow, the food and drug administrator testifies before a senate appropriations subcommittee about her budget request and medical devices. live coverage of this subcommittee hearing begins at 10:00 a.m. eastern here on c- span. >> a look now at how the economy might affect this year's

midterm elections peer panelists include charlie cook, the editor of "the cook political report." this was for the national association of business economics. >> i would like to introduce the next session being sponsored by a mesirow financial. diane swonk, please bring your panel up. >> i have often been criticized for wearing my heart on my sleeve, and when i was asked to moderate this session on the political environment in washington today, i decided to wear what i see and feel, and that is red. i get very angry about the election process because election years have a way of taking our debate down to the

lowest common denominator. and it was not that high to begin with when i hear things like ron paul asking chairman bernanke about the role that they played in watergate and iran-contra scandal, i wonder about the intelligence whatsoever of people elected to congress. i know there are some intelligent people there, few and far between -- between, and when senator bunning comes out and compares bernanke to hitler , these are clearly biased remarks at protecting the fed independence on my part. a lot has happened in a very short period of time, complete gridlock to mop talking about two major reforms, bring -- being brought to a vote before

the summer break. i think that is extraordinary. i will turn over this podium. we have a full hour, so we will do 50 minutes with charlie cook, extraordinary in terms of the macros of the situation concerning the elections in november, i think it will keep you very busy. and greg balliere is back in washington, we missed you. welcome home again. both charlie and greg have incredible breath of information and knowledge about what is going on. i tune in to watch what is happening, although i remember when sheila bair had given that speech in october, all of us were consuming heavily, and the one thing i have been tracking consumption of is alcohol. in good times, we popped

champagne, and in bad times, the generic beer apparently. it is a quality trade-off. other countries drop consumption and we just figure out other ways to consume. with that, i will welcome charlie to the podium. hopefully he will not fill me -- leaves me feeling so read, thank you, charlie. >> this is a great panel with diane and greg and i have been looking forward to this. i think the whole country owes all of you a debt of gratitude because in these turbulent times, policy makers, business

leaders, everyone is looking to you for guidance in terms of what is going to happen. you are really smart and you have your pencils really sharp. change was the watchword in 2006 and 2008, and it looks like it is the watchword now was well, the dominant term in american politics. you remember in 2006, we had the war in iraq at its lowest point going into the midterm election. u.s. series of congressional scandals under the republican control of congress. president bush's numbers were just in the toilet. everything that could possibly go wrong for republicans did in fact go wrong in that period leading into the 2006 election, and sure enough, they lost their majorities in the house and senate. in the case of the house, a majority that they had won 12 years earlier.

and then in 2008, when iraq had gotten better but as you well knew -- as you well know, the economy had gotten a lot worse. president bush's were still in the toilet. while republicans have been swept out of the house and senate, voters were still angry at republicans and wanted to sweep them out of the white house as well. and then you have all of the new voters that were so excited about barack obama, and young voters and other voters coming in, they just took the majority's up to i higher level. in both of these elections, he saw two things. democrats were really motivated while republicans were lethargic. the second thing you saw was that independent voters swung over heavily. in 2006, they voted by an 18 point margin for democrats in the house of representatives. they gave barack obama and eight-point win.

that was then this is now. now democrats have to defend the majorities that were created in those optimal conditions elections in 2006 and 2008. i think changes the watchword again in the sense that the circumstances would have to change to change the trajectory of the selection -- right now you hear health care experts talked about bending the cost curve on health care to keep it down to a sustainable level. looking back at the last month, where things are higher and higher on the democratic majorities, something will have to bend that curve or if it continues at the current trajectory, it will go over 40 seats with control of the house turning over. something would have to change. in terms of the senate, if things do not change, you'll see

democrats lose excess of five senate seats. the odds are probably 95% that democrats will retain their majority in the senate, but it is significantly diminished. i am not saying that it is there now, but we are on a course that appears likely to go over that point between now and november, and may be on the near side. let's talk briefly about the house and senate pictures. in the house, all 40-seat majority for democrats right now, and to put that into context, democrats have 53 seats right now that were held by republicans just four years ago. thus, in varying degrees, enemy territory. they sit in seats that john mccain just one back in november 2008.

47 house democrats sit in seats that not only went for john mccain, but also went for george w. bush in the 2004 elections. they really are in enemy territory. when we go through and start with the first district of alabama and go through all for under 35 districts and end up in wyoming, looking at them district by district, using the zero tip o'neill added -- ashley his father that said that all politics is local. when we do the right now, about a week or so ago, we had a democratic loss of about 28 seats. subsequent events, it is probably closer to 30, and that is all politics is local. one normal elections, that works fine. but when you have the sort of way you elections, an abundance

of indicators that this is not a normal election, but one of those nationalized wave elections, and that macro approach, it always underestimates what happens when you have a wave election. i learned that painfully in 1994 when republicans won control of congress. we can count up very large republican gains but we could not quite get that number up to the 40-seats that republicans needed to get control of the house. not only did they get that 40, heck, they hit 42. and then the next wave election, you have to do a hybrid approach of the micro and overlay a macro.

then you take that microanalysis they get you to 28 or 29 seats, something like that, then starting looking at the macro. democrats have 59% of the seats in the house of representatives. 50 &. usually the relationship between the number -- the percentage of seats that a party has and a percentage of the major parties , we throw out the wacko vote -- that is a political science term. i will get some mail from c-span on that one. [laughter] when you factor that out, there is good linkage between the popular two-party vote, generally between two or three percentage points. and the last election, democrats at 56% of the popular election for the house of representatives.

if you took a poll nationally -- the last gallup poll, would you go for the democratic candidate or republican, they had 46 and -- 46% apiece. but when you then look at the polls that are looking for likely voters, and the nbc-wall street journal poll that asked for how interested are you in the upcoming election, when you take the 9's and 10's, that parity starts to look like a republican advantage of into the double digits. that intensity that democrats had in 2006, their voters have

now become lethargic. republican voters lethargic in the last two elections, they are suddenly very motivated. look at that gallup poll where democrats won their majority, they had an 8-point lead in the exit polls on election polls. in the new gallup poll, independents are voting for republicans by 17-point margins now. we are seeing in the old "lost in space "television show, danger, will robinson, danger, danger. it has just been building and building and building. i talked about the curve. what could bend that curve? the first thing -- when you talk to democrats and say, and they admit, there is no question whatsoever that this is really looking ugly for democrats. the only question is how bad is it.

some of my friends in the political science world, they do not quite see the apocalypse for democrats that i do. my biggest competitor is between me and others. we are at varying degrees of how bad this thing is going and how awful it is for democrats. i am out wire -- an outlier here. but what could change things and save the democratic majorities? you would generally here two things. one is unemployment. unemployment getting verbetter. i am not going to talk about where unemployment is in front of a number of economists, without it getting better, it seems pretty dismal. while democrats will say, the

question is not what the number is below what is the direction, it is the direction getting a lot better? to make, you got to get about a point up or so before you can hang and a -- hang a mission accomplished banner out. i frankly don't see that happening, but you know more about this stuff than i did. i think democrats getting a lifeline on an unemployment rate -- and job creation, it is unemployment for political purposes. that is the key one. the second thing we talked about is health care. they get a health care bill through, that could be the shot in the arm that they needed. well, maybe, but the way that i looked at it, they have three options on health care. and i tried a look at this from the non-ideological, nonpartisan, non-judge panel --

looking at it straight up. it seems that democrats have three options. they could quit. well, basically we wasted the first year that we were in office. gosh, that is not a great option. or they could fail. ok, see explanation one. that is not much better. or they could jim something through -- jam something through that people today say they do not like and do not want, jam it through and hopefully people change their minds at a later date. clearly that is what they are pushing to do, and may do, although the vote in the house will be very close. but the thing about it, since democrats have lost -- lost the messaging battle on health care for the last year, if they had not happened in the past, you know, i don't know what

democrats will starts winning the messaging battle when a lot of opinions have already formed on this. you may look back on this proposal and think it is a great proposal, and even if they did, giving democrats every bit of the doubt, i am not sure will be between now and november 7. but a friend of mine on wall street used ask me, charlie, if you are wrong, why are you wrong? so if i had to pick an argument and god told me today republicans are not going to get a majority in the house and they are not going to get -- when six or more senate seats, i think what i would say is, unemployment is the explanation. i don't think health care suddenly becoming popular is the answer. ihi