insurance regulations, where you will get more prevention money spent by the federal government. you might think of them as a baby steps, peter. host: last call, san antonio, jimmy. caller: i wanted you to comment on a news article i heard from fox news this morning about the irs went t-- wanting more funds to train irs agents to administer the health care. guest: sure. we were talking a little bit earlier in the program this morning -- the irs is another agency that will have an important role going forward in this health-care law, because beginning in 2014, every american, virtually every american, with a few exceptions, will have to cover some health insurance. it is known as the individual mandate, a lot like a driver who wants auto insurance. that will be enforced largely by the irs.

you will, on your tax return, have to submit some indication, some prove that yes, indeed, you have some health insurance coverage, and if you do not, there will be penalties. able start very small, i think around $90, in 2014, but they will rise if you do not get health insurance. that is where the irs will come in. host: ceci connolly of "the washington post," thank you for being on "washington journal." she is also co-author of this book, "landmark." i believe your web site is landmark.com. guest: i believe, yes. it's also on "the post" home page. host: on sunday, you can watch one of her co-authors, alec make alec mcgill is, talk

about the book. booktv starts at 8:00 a.m. and one of the highlights this weekend is a replay of bill bennett's "in depth," and also, and drew an appellate tain -- andrew napolitano of a fox news channel interviewed by ralph nader. this program would -- and this program will be back tomorrow at 7:00 a.m. enjoy your weekend. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] .

>> by the way, an old sage saying, "this is my creation of this it sounds very authentic -- "this is my creation." it sounds very authentic. a lot of people say there is any change, but the promise is not change. the change that is predicted does not happen.

sometime ago, we heard that japan would be the no. 1 country in the world. i wish that was true. but it did not really happen that way. the circumstances change. maybe the cristobal is somewhere -- to the crystal ball is somewhere in oberhausen, but not here. i'm talking about the optics. so japan is facing many challenges as well. there are changes. there are some things that look like change but not really change as well. what we have to be doing is identify what is the real change and we have to decide how

to cope with it. that is exactly what governments are around the world, i think, is doing, and our government in tokyo as well. i would like to talk about security area, economic area, and social issues, quickly. starting from security area. people say that after the cold war, and stability persists in the asia-pacific region. -- instability persists in the asia-pacific region. look at what happened to bo months ago. north korea sank south korea's ship, and also, we do not forget

that only last year, the country has fired at a typo dong -- a taepodong missile at the country, and also, there was nuclear testing as well. so the situation is far from stable. china is our important partner. i have to say, those of us in japan to not know why they have to continue their military revitalization the budget has increased annually for the last 20 years. in japan, it is 0.9% annually. that is a huge difference. against such background, some

academics would say that japan has three choices. one, to increase defense spending and increase the terrance -- t he deterrence capability. second, tried to depend on the goodwill of the neighbors. third, to continue on with the security alliance with the united states. in any school -- any pool -- newspaper reporters here, or television -- people choose this third option, to continue with

the alliance with the united states, first because japanese still remember the world war ii experience. they do not think that the capability would bring in peace and stability in the region. second, people think that in view of the situation, we cannot just leave it to and have no alliance. third, if you have the alliance, united states is seen as the most credible partner with principles and capability. so japan has continued to ally -- depend on the alliance with the united states.

but japanese think that the u.s. presence in the asia- pacific and japan is indispensable. we are grateful to the service of women and men in uniform of this country. although i have to make two preconditions. one is that both the u.s. government and japanese government will continue the effort to lessen the burden of the bases. this is a treaty obligation. we will have a basis, but we have to be always mindful about people -- will have bases, but we have to be always mindful about people surrounding the base. it makes the surrounding people

problems, and we have to lessen that. the most important issue here is okinawa, where 75% of the u.s. bases is concentrated. we have to continue to alleviate, lessen the burden, on the okinawan people. there is a marine base. we are now agreeing to move it to north of the island, and also to leave other burdens as well -- impacts as well. remember, prime minister

hatoyama said that he will try to come up with a conclusion by may 31. a lot of people said that this was very difficult, but he tried his best and made an agreement at least with the united states on may 28. the japanese cabinet endorsed it. there is an agreement, and the prime minister who succeeded prime minister hatoyama said that he will work on the basis of the agreement made may 28 and will continue to ask the united states to cooperate to lessen the burden on okinawan people. the u.s. base issue -- i would

like to just make one point about this. towards the beginning of this year, there were some people saying that, hey, this is one base issue. it is not of primary importance. there are a lot more important issues to discuss as well. i don't agree with that view. first, this involves basic elements of the security arrangements. .

and until they reach agreement, they may not be able to come out publicly, but once it is agreed, i think they will come out. and that attitude has been there and i think that is important to honor as well.

these relations with these people is the first business i wanted -- premise and wanted to make. the second premise is credibility and deterrence. it is important that leaders give assurance of deterrence. but it is most important that in case some incidents happen. what attitude, position will be taken from that point. the u.s. position toward the

south korean issue is very clear, very strong. to stand by the republic of korea, that is exactly the same position that we are taking as well. i think it would not be an understatement if i said that all of asia, the whole world is holding their breath and watching over how the leader country will be conducting itself. and i think both the united states and japan will continue to take the same course as it is taking. regarding iran, that is a different story. we have been cooperating with the united states on this issue as well.

we cannot accept iran to possess nuclear weapons. there is not only the government's view. that is the people's view. we will continue to cooperate with the u.s. in this regard. on security issues, there are changes, as i said on -- in circumstances, but all in all, this alliance will be honored and we will continue to put importance on this alliance. it was very reassuring that less than two weeks ago i was in toronto sitting in a meeting between the prime minister and president obama. they discussed north korea, but best of all, they agreed that our alliance, the japan-u.s.

alliance, will continue to be the cornerstone of peace and stability in the region. it was a very good meeting. so, what about security issues? i would like to touch on the economy. in 1990, the aggregation of china and india's t.a.r.p. share in the world was 3%. -- the aggregation of china and india's gdp share in the world was 3%. now it has tripled.

clearly come emerging countries are emerging. there are three conditions that we think have to be fulfilled for this to continue. one, countries will have access, free access to the world market. two, they will have continued to have access to results around the world. third, they will continue to have a society that they are now having, the stability of the country. i will not go into that issue. today, i'm only talking about japan. but i sometimes feel debt as as

for -- i sometimes feel that as for resources issue, i wonder why we only discussed tariff issues, but no resource issue. that is my personal view, but not a government view. talking about economy, i will talk about japan and i will talk about japanese experience. when japan came into the world economy, that was in the 1960's

and 1970's. japan was the only country which you would call nouveau reacrich. how would you say? the newly arriving rich country in the world. so, japan alone had to deal with their own and establishing it in the world. the was the first issue. of course, we had to adjust our policies in order to meet with the international situation. one example is currency. japanese yen was 360 yen.

with the trade surplus accumulating [unintelligible] in 1991 at the smithsonian conference we agreed to change it to 308 yen. in 1995 in the plaza accord in new york it came down from two wondered 40 yen to 140 yen. -- 240 yen to 140 yen. it is not a drastic concentration of yen in that time. japanese countries, however, adapted to that situation. they thought, rather than just

exporting goods they would invest in to this country. japan is now the no. 2 country to invest in this country. number one is the united kingdom. the japanese countries -- the japanese country has created 600,000 jobs in this country. you can say that we are not exporting all the goods -- not exporting only good, but jobs now. this was an adjustment that we very successfully made as well. the second issue is that japanese companies were caught

up by newly emerging companies. and in order to go with that situation, a lower wage was not possible. so, the japanese companies invested in that situation as well. talking about that, i sometimes talk about a japanese novel, a short story called "a spider's read." -- thread." one day he looked down from

heaven and he looked on the pond and he could see down to hell. it held, as you can predict, a lot of criminals -- been held, as you can predict, about criminals were being -- in hell, as you can predict, a lot of criminals were being tortured. he saw one and he put down a thread to save him. the criminal seeing the thread coming down to him grab on and started to climb. halfway up he saw and has seen thousands of other criminals coming up the same thread. fear that it would be cut off, he shouted down, hey, do not come up. i want to be the only one.

it of course, when he lost all said the, the thread was cut off. and everyone went to hell. and buddha just continue his role as if nothing happened. an inning, but never one wants to come up. this is inevitable -- meaning, everyone wants to come up. this is inevitable. we can accommodate. the third issue that we met was the accumulation of wealth. this accumulation of wealth was translated into inflation of assets, and eventually into bubble. this made a lot of bad weeks

into institutions. the turning of the century in order to meet globalism, reforms were introduced. the economy began to catch up a bit. but there was a political impact as well. there will be winners and losers. it is like wall street and main street. of course, only a few people are winners, like wall street. a political frustrations -- political frustrations together with the financial shocks?

-- shock stocks start of in this country brought a huge political change in japan as well. now it is continuing on to the u.k., turkey, correkorea. i will point out just two big problems the japanese economy is facing. these are the same with other developed countries. one is a balance between growth and the fiscal situation, how to strike the right balance. in the japanese case, is -- it

is our rear of that is close to 2 under% -- it is our government that is close to 200%. tax revenue was 40% of government spending. a lot of people say america, the tuition is very bad. -- the situation is very bad. but the tax revenue is still 60% of government spending, so it is worse than your case. the gap is filled by government bond. the difference with this country is that here, 50% of government bond is sold to other countries, bought by other countries. in japan, 95% is consumed in japan. however, that is a debt futures -- a debt to future generations.

this cannot be continued. that is why the prime minister has said this cannot be continued. we have to change the tide. we are aiming at reducing the primary balance deficit to half. -- to half what it is now by 2015. and his philosophy is that by meeting challenges, such as environmenta, with the countries in asia and the need to create

jobs there are local, you can create jobs and growth. that is what we should be doing squarely. also in japan now streamline the government budget and try to cut off the unnecessary budget. i agree it is important to do that. of the same time we have to remember that unassertive budget is not the same as low-budget.

for example, exchanges we have with this country. these exchanges are very important. the second economic issue is how to keep a technological lead. it is easy to say, but not easy to keep as well. about 35% altogether of foreign manufacturing is automobile and electronics. this will continue to be an

important pillar o japanese industry. japanese country -- companies lead in some areas. for example, japanese companies have is a xtra -- 6% share certain areas. we have an 8% share in [unintelligible] you have to be engaged in manufacturing and production to have this leave. there are many ways in which japan and the u.s. can cooperate. i will just name some. one is the energy efficiency. as you know, japan is the most

energy-efficient country for more than two decades. in order to produce $1 of gdp, if japan needed one unit of energy, i'm sorry to say, but duty twice. china needs nine times. -- you need twice. china needs nine times. however, through research and development and public financing, it is done by to both countries. 30 set -- toward% by japan and 3% by the u.s. -- 30% by japan and 30% by the u.s. will work on this margaret, electric cars and other -- we've worked on the smart grid,

electra cars and other things together. carbon capture as well. the second thing i would mention is the nuclear department. the u.s. is by far the number one country. but the u.s. has made no power plant in 30 years. japan has made 29 in the last 30 years. and now japan and the united states top companies are cooperating. obama started to give it insurance and the u.s. congress is approving this. i hope that the truth -- that japan and the u.s. can cooperate in this field.

only two weeks ago we had [unintelligible] and our minister was in charge there. i had the privilege of speaking as well. i said that you americans have invented cars, together with the germans may be, but you have made airplanes, television, computers. you are making the kindle and ipda as well -- and ipad as well.

why can't we are for one thing, and i would be high speed or -- high-speed railway. we have experienced the lowest passenger casualty in 46 years. the second "e" is for exactness. and the average delay time is minimal. here i was going to take the amtrak, but my train was canceled. [laughter]

i hope my friend and director not see this c-span. third efficiency. for this environmental friendliness. fifth is employment creating. the sixth is earthquake proof. as a country with a lot of earthquakes, we note to stop the car as an as there is a seismic wave. -- we know to stop the car as soon as there is a seismic waves. that is maybe not as useful here, but it would be in california. we can also cooperate to apec and others as well. lastly, i think i have spoken a

little too long, but let me touch upon social issues as well. here again, we are facing a similar issue as other countries, other developed countries. the birth rate dropping and life expectancy is prolonging. the birthrate is now 1.37%, the lowest among developed countries. in order to have production, you need to 0.08%. in the u.s., 2.12%. -- unique 2.08 you -- you need

2.08%. in the u.s., 2.12%. the average age of 65 is 20% in japan compared to 13% in the united states. i am approaching that age and it is good, but still, it is not too good for the social security system. i know that this is a touchy area here, but still tuttle, health care. -- but still attachabltouchableh care.

it is 8% of gdp. that is one half of the ratio in the united states. nationwide the long term care system, a senior people can stay home and get treatment. 10% of the cost a senior has to bear himself. the rest will be borne by the insurance premium of those people between 40 to 64 and government subsidy. i was very gratified for that because my father passed away four years ago at the age of 91.

because those people came to my house every day to take him for a walk to let him take a bath, change, he was able to stay at home until his death. and my mother was so grateful for that social service system, too. however, this will not be possible for too long, i think. because if this tendency continues, people over 65 will be 40% of the population by 2055. in that case, people under 65 have to take care of those over

65 at a nearly one-to-one ratio. that is a very difficult project to plan. we have continuously putried to lessen the burden of this, but these benefits have outpaced national income. and it is about one-quarter of national income now. this is why the prime minister has said this cannot continue. we have to create new ways, new * to change the system. -- new times to change the system. and it was predicted that will make a $500 billion market, 2.8 million jobs for this care.

and in order for that to be based on the birth rate as well, this is a government plan, the government is giving out $130 monthly per child. this is a lot of money. but in order to lessen the burden on the house will. -- households. talking about changes in education, the government is making high-school tuition-free now. i think what is also needed, in my personal view, is that we have to improve english-speaking capability in japan.

english has become the international language. my plan, and eventually i hope some time it will happen, is that we will send off all of the junior high school teachers to this country to go to college for a year or two. if you take everyone, it is a lot of people, but i think is possible. that is my dream eventually. i think relations with local governments and the central government, it is true that if you go to -- this is japan --

the smaller cities, smaller towns, it is becoming deserter. people are moving out. we have to give more authority. decentralize the government. this is exactly what the government is looking at, and trying to but -- to balance all of the budgets, which is given piecemeal to all of the governments. this is what government is trying to push. these are part of the changes that are disappearing in japan. -- that are appearing in japan. as i said, they are changes, but not really changing. you have to fortify what we're doing as well. this was just a rough sketch and i was told -- and think i have

spoken about 50 minutes or so. still 30 minutes or so is left. this is a barbecue day to grow the ambassador. so, i think i am ready for that. thank you for -- very much. [applause] >> thank you, ambassador, for there's very thoughtful amar -- remarks. i think the subject you address, the repeating prairies of growth, security and welfare, particularly -- repeating priorities of growth, security and welfare, particularly in a time of debt is one of the challenges facing all of the world's countries and is a challenge that our two countries share. i would like to open of the discussion to questions from the audience. what i call on you, if i do not identify you, please identify

yourself. please wait for the microphone. >> i think a lot of my good old friend, academics, exit diplomats, diplomats, journalists, and business people as well, please, do not be shy. i will not be offended. thank you very much. >> michael from george washington university. >> thank you very much. it has been a pleasure to sit here and learn from you. there is one area i would like to hear you address more fully. that is the relationship with china. you mentioned very much the issue of the importance of the alliance with the united states. and you mentioned problems with north korea.

>> china is a very big partner for us. it is the biggest training -- trading brawner and one of the closest -- trading partner and one of the closest as well. in dealing with issues such as north korea, such as iran, we need china's cooperation. we need the security council's as well. we have to continue engaging china. we have to continue having the partnership, and that is exactly what a lot of the japanese are thinking. at the same time, it is true that there are issues as well. these issues arise between partners and what is important is we should not try to make it

too enthusiastic. but we should do it squarely as well. i think we're doing a good job. thank you. >> mike billington. >> thank you. mike billington with the executive intelligence review. i saw your three leading electricity companies and three leading construction firms have come together with some sort of government backing to try to overcome the gap, or the failure of japan posing nuclear experts -- of japan's nuclear experts in their recent years, perhaps spurred by korea's aggression. i wonder if you could comment on the developing nuclear sector in africa and asia. >> thank you very much. yes, you are right that the

japanese bank was allowed to give coverage for this gap that was just referred to. i really hope it will help japanese and american companies get projects because it is very important. not only for the united states, but for japan as well. and for other countries that have nuclear appointments that they have these sort of insurance banks as well. as for other countries, we

cannot just say how we should go. it has to be dealt country by country. as a member of the iaea, will have to examine the issue case by case. thank you very much. >> this gentleman right here. >> i am with asahi, a japanese newspaper. my question is about fda. obama announced his intention to have free trade agreement -- a free-trade agreement with korea by the end of this year. in the light of his announcement, i think japan's

dpj, their intention last year was to have a free trade agreement with the united states. since then, we have not cleared from the ministers in japan. what is the position of the japanese government on the issue? and in the context of that, i would like to ask about an issue between the two countries. one is the importation from the united states -- important issue from the united states and the other is the privatization of the moscow service. the second is on the biggest picture -- the bigger picture. we know that the japanese economy has been suffering for almost two decades. and our strategic power and influence has also been declining.

what will help japan get out of that situation? can dpj change the tide, and how can they do that? the prime minister it says that he will have more tax and create more jobs and that will fuel economic growth. but that does not release down persuasive for -- really sound persuasive for the rest of the world. >> before privatization what did you say? beef? what extensive and intensive questions. can i have about 60 minutes? [laughter] as for the fda, i do not think

any negotiations have been started. i have not been involved in this study of japan-u.s. fda. but i was involved in the fda negotiations with other countries and korea. when i was deputy minister about five years ago, i negotiated all of those negotiations. the conclusion i have personally, maybe this is not a straightforward answer to you. the we ought to have a lot of preparation -- we have to have a lot of preparation. both sides have to be convinced of the merits and demerits and

we will see what kind of agreements will become a win/win. we can say win/win, but we have to identify it very carefully. in order to do these important negotiations, i think corporations are necessary. two, about beef, i think this issue has to be discussed between governments. you know better than i do, but we often focus on beef. because of bse we are not importing as we used to. however, the united states remains the no. 1 agricultural

exporter in our market. your sharing our import market is 33%. the u.s. is number one in bold soybean, coal and calling -- corn. the u.s. is by far the most important agriculture country for us. and except for naphtha -- nafta with canada and mexico, japan is number one customer for the united states. privatization of the system, this is -- this will be discussed in japan and i will not go into that at this stage.

this is what has to be discussed politically. . . >> that means public and private

together. japan no. 1 in the world, is two. if you look at patent applications, the rights to international patent applications, u.s.'s no. 1, japan is no. 2. our business still is strong, and i think it will be sold. thank you very much. >> i would note as a practical matter, the united states does not have trade promotion of authority right now. negotiating nafta is not feasible until it has it. >> that is what i said. >> you invited me to --

gentleman over here. >> you mentioned north korea. what steps have been taken by the japanese government to deal with -- what would you like to see the u.s. do in that capacity? >> the japanese position is three issues -- namely, nuclear issue, abduction issue -- have to be solved comprehensively. position has not been changed. this is the national consensus. we are grateful for united states to be supportive of our position.

at the same time, it is important that we should not really rush, and we continue with north korea and make our points. we are very appreciative of u.s. cooperation and that regard. thank you very much. >> another question? gentlemen right over here, then i will come to you. >> just an interested american. i noticed that you made many references to a people, and you seem to have a lower level look in society. as i look at the japanese movies and the news, there is a big shortage of doctors in japan, it seems, or the doctors are being overtaxed. are you aware of anything that is going on to correct that

shortage, or to give them a normal family life so that they don't have to work very long hours? >> are you talking about medical doctors? >> yes. >> some of us here, journalists, bureaucrats, business people, think that you would pieces of that to them as well -- that you would be so sympathetic to them as well. there are some cases that medical doctors -- there is the issue of discrepancy. in some areas, big cities, there are not enough doctors as well. this may be a universal issue.

i think this issue as to be really addressed it i agree with you that this is a very important issue. >> right here. mike is coming. >> i wanted to ask about japan's interest in a dissipating and the chances of a partnership negotiations -- interested in preserving in the trans-pacific negotiations that are going on right now. and if other countries could be interested in joining that. >> yes, we are watching negotiation -- watching this negotiation carefully. one thing i may point out is that japan has fta with asean,

is negotiating fta with korea, australia, and we already have -- mexico and chile, too. but one thing maybe you would like to know, and maybe you know already -- do you know how fta started? when gatt was concluded in 1947, a former countries wanted to help some exceptions --

luxembourg wanted to compete with larger countries. i don't know, middle eastern countries, some of them, wanted to have fta, free-trade area. in 1947, or 1950, and 1960's, 1970's, no one thought the country like -- big country like canada, mexico, would try to conclude such our use of -- such a use of fta. everyone until that it was thinking that gatt was sufficient. now people are rushing. it started in 2000, started with the singapore, and went to other

countries -- in the beginning, there was a philosophy in japan to stick to gatt, that would start -- fta would have too negative effect. it would be left behind. but now there is no more of that. we are very forthcoming tho fta. looking back at history sometimes is interesting as well. thank you. >> rand corporation. thank you very much for your remarks today. i would like to hear your thoughts on how to strengthen

the images of japan and the united states and the united states and japan. in particular, you know that americans consume enormous amounts of japanese cultural products, japanese exports of computers, technology, automobiles. and certainly in japan, there are large numbers of americans living, working, studying. the societies are heavily inter-penetrated, but we hear talk of the u.s. and china and east asia, but not so much about the important role that japan place in our culture and economy and foreign relations. and just an aside on that -- i wonder if you could give us thoughts on the impact and understanding of the impact that japan's participation in international whaling is having on the image of your country. second, if you could address ways in which the united states

could help improve its communications and collaborations with other u.s. allies in asia, including the republic of korea, the philippines, and out defense cooperative efforts with taiwan, such that japan can play the maximum call it can to preserve the security we all benefit from in asia. >> thank you very much. this is, again, a very extensive area that i will try to answer. japan-a u.s. relations -- 150 years anniversary of the first diplomatic mission. this is very important. two years from now -- a very important -- do you know? 2012?

that is 100 years anniversary of cherry blossoms. now, two weeks, march and april in cherryof babsorbed blossoms. people are very unhappy. -- are very happy. we are trying to work on cherry blossoms of 2012, nationwide as well, not only here. there are a lot of opportunities. if i may say, japan-u.s. relations are unique. first, security arrangement, as you know. second, economic relations, as i said. global issues -- for example,

reconstruction of iraq, afghanistan, pakistan, number ributed isy contra united states, no. 2 is japan. third, we share democracy, freedom of speech, human-rights. fourth, most important, 80% of americans say they like japanese, 80% of japanese say they'd like americans. if you look around the world, if there are any two countries like that, there are not too many, i think. so it is very, i think, unique and important. in order to have good relations

-- i am repeating the same -- we have to keep in mind three nos. i am sorry to those who love heard it too hard times. the first is -- i am sorry to those who have heard 200 times. those who can be this greeted -- those who can be treated discretely should be treated accordingly. the third note -- the third is no taking for granted. after years of marriage, you take each other for granted sometimes. maybe not in your home. we have to be very careful about that. now, wailing -- whaling -- we

have to take issue from scientific point of view. i know that there are issues involved in some places as well. but research has to be seen from scientific view. we appreciate u.s. stance on this issue. lastly, on relations between other countries in the region, i think you are from rand so you know very well. japan has an obligation. we cannot defend other countries, so we cannot be in collective security like nato or other institutions.

the only security arrangement we have is united states. of course we have good relations with korea. but as for security, i think some sort of arrangement is not foreseen at this juncture. thank you very much. >> gentlemen right over here. -- gentleman right over here. >> thank you, ambassador fujisaki. vhac. i would like you to follow up on your very welcome statement that japan will not accept iran with nuclear weapons. i would appreciate it if you could comment on what steps or actions japan could do to help ensure that iran does not get a clear weapons.

-- that japan does not get nuclear weapons. more specifically, the u.n. resolution, as welcome as it was, had to be watered down to assure passage, and as a result, the u.s. and some european countries that have not acted or looking at enacting additional unilateral sanctions, the south koreans have not canceled a major deal with iran. i want to know the prospects of japan taking similar actions with unilateral sanctions or actions. thank you. >> thank you very much. the u.n. security council resolution will be abided very faithfully. we look at it but we have not made any decision from this issue.

about investment -- you asked about investment into iran. a few years ago, japanese companies share in one of the oil fields, 75% bid now is down to 10%. -- japanese companies that share and one of the oil fields, a 75%. now it is down to 10%. the reason why iran cannot possess nuclear weapons is that we go all the countries should become members of npt, nuclear non-proliferation treaty, iaea. if major country like that starts to have, there will be

followers. countries surrounding them will think they have to have them as well. i don't think that is what a lot of people in the international community would like to see. i think this is a watershed period. we have to be firm. thank you. >> i have a follow up. mr. ambassador, as japan been concerned that although it has shown restraint on energy investment in iran, other countries might come in behind japan and exploit your departure? >> i think that should not happen. thank you very much. [laughter] >> the gentleman in the back, and then i will come back here. >> i am from denmark. just an interested pers -- just an interesting person --

interested person, sorry. i want to ask about immigration policy and what will that will play in the japanese economy -- what role double play in the japanese economy. does that play any role in the japanese government? >> it is true that we have not had immigration as much as other countries like the united states. there are some criticisms about that as well. one very small opening that is occuring is through free trade area agreement, fta. some nurses, caretakers are coming. but i admit that this is a very, very narrow, very small. but eventually, there will be more understanding on this issue.

but at the moment, there are people who think that what we have in doing should be continued -- who think that what we have been doing should be continued as well. let us see. thank you very much. >> u.s. chamber of commerce. first of all, i'd like to, as a former exchange member, thank you for your support of such programs. my question is about japan and china. i think china's trade agreements and the last few years are in the triple digits. what is japan going to do to for the take advantage of its position as the most developed country in the region close to the expanding chinese economy? >> i have no clear a figure on

that issue, but it is true that japanese economic growth now, recovery, is thanks to chinese economic growth, because we are exporting to china. we need both the united states growth with china, because we are not depending on trade as much as, for example, countries like germany, which has about 40% of gdp shares trade. about 10% or show -- ours is about 10% or so. however, there are a lot of trade areas as well. we hope that the coexistence

between chinese industries and japanese industries -- of course there will be competition, and that is why i said that japanese companies need to keep the edge and lead in industries, the areas they have. as i said, those coming out of the latter -- coming up the ladder will be a threat and we will have to see a way to incorporate -- see a way to cooperate. for example, 20 years ago, when japan was coming up the ladder for the first time, some of the countries in europe did not like that too much. and they closed the market to us. some countries open up.

our companies want to that country and invested from them to european countries. those who did not accept i think have lost a great opportunity. i think we ought to adapt to the new situation. thank you very much. >> i spent seven years in okinawa, so i can talk about the okinawan position, but really, india is coming out and is becoming industrialized. how do you see the japanese- india relationship, the triangle of japan, india, and the u.s.? >> india is also a very important partner. i think that is one of the

biggest recipients of development assistance. i've got myself and discussed the possibility of -- i have gone myself and discuss the possibility of large-scale projects as well. ofre talking about the plan transportation between mumbai and those places as well, and they are important to connecting -- india has huge potential, and we think that, like china, we want to cooperate with india. it is the biggest democracy in the world and we respect the country very much.

thank you. >> thank you, mr. ambassador. a brief follow-up on iran. i know that japan was attempting to make an offer, or did make an offer, to iran similar to the original russian proposal and the like that now being pursued by turkey and brazil to facilitate taking in that nuclear material and reprocessing and returning it. can you comment on that, where it stands, or how you view the current turkish proposal? >> as for the turkish-brazil proposal, we think that was a significant step. so we commend the efforts of the two countries. however, while 20% in richmond

is continuing -- 20% enrichment is continuing, we need to show that the international community is not accepting that. we support this resolution in the u.n. security council. it is a different story, but still, we think that the upper done by those countries should be commended as well. thanyou very much. >> mr. ambassador, thank you for exposing yourself to some 90 questions. i hope the flames of the barbecue were not too hot -- that you for exposing yourself to so many questions. i hope the flames of the barbeque were not too hot. >> can i take a few more hours? >> join me in thanking the ambassador at this time. [applause] and if i could ask the audience remained seated said that i could get the ambassador

fujisaki out and onto his next meeting. thank you again, ambassador.

governorstional s association meeting gets under way shortly. our live coverage is beginning with a look at achieving a sustainable health-care system. the guest speaker is ceo of ibm roughly 40 governors are attending the conference, and california gov. arnold schwarzenegger and colorado gov. bill ritter and maryland gov. martin o'malley will make presentations over the weekend.

governors are starting to gather in boston for the annual meeting of the national governors association. the theme for today, achieving a sustainable health-care system. we will also have live coverage of an event talking about childhood nutrition and obesity. we will hear about the senate races in indiana and arizona.

hat is and that is with curtis dubay of the heritage foundation but first this campaign 2010 update. >> today we are looking at two competitive senate races and joining us from the politico is a reporter to talk about indiana where brad ellsworth is out with a new ad the democratic candidate running against the republican candidate dan coates. why is ellsworth spending in july, some of his money, on a new ad for this general election? >> he is from the southwestern part of indiana, and if you remember how this went down he was a le entry in the race because of the retirement of edmond bye. coates was a long-time nor, been there -- senator and has much higher name identification in the entire state. ellsworth really only known in the one district, that one pocket of southwest indiana, the

eighth congressional district so he is not in the media markets of fort wayne and indianapolis, the bigger portion. so he needs to get on the air t basically introduce himself to voters. that is what he is doing in this first ad, really running against washington even though's two-term congressman. >> let's look at the new ad and talk about it. >> one thing 25 years as a sheriff teaches you is zero tolerance for voting. it is like they live an breathe the stuff. they waste money, take care of special interests and don't care if lobbyists write the laws. i approve this message because the special interests and lobbyists already have enough senators on their side. >> david, you wrote about this new ad. how much is he spending and why has the dan coates campaign

taken a look at that spending? >> we know he isn't spending that much. they put out a release saying it is covering about 66% of the state. but if you go into the details of the ad buys like most campaigns do, there is not a lot of ads that people are going to see on the air, at least in this initial buy. it is not a big ad buy for indianapolis which is the most populous part of the state. so the coates campaign immediately pointed out to us this is his first tv ad but how many will see it. really a lot of times campaigns release ads and put them out to members of the press and media because they want to be able fund raise to show how much that will be on later. that is what we saw on this case. >> one of the other ones is arizona where also a lesser known candidate is running in the primary against john mccain known across the country when he

ran for president. let's look at the new ad. >> i'm mary hayworth and john mccain is hiding his record behind false attacksn my husband. john mccain has sold out the people of arizona on immigration, bailouts and tax increases. 0 now he has embraced character assassination to keep his job. he should be ashamed. j.d. is not perfect. >> i'm j.d. aworth and i approve this. >> this pmary is august 24. what has been the tenor and what is the latest as far as money raised and polls? >> the first thing that hayworth has to go on with his first ad with his wife defending his own record. that shows you the barrage of attacks that j.d. hayworth has had to sustain from theccain

campaign and the mccain campaign has been very aggressive. some almost feel like they never got out of presidential campaign mode going after him realizing the environment is tough and they were going to get hit for mccain's questionable conservative record on things. j.d. hayworth trails in financ. he has not put out the second quarter fund-raising numbers that were due at the end of june. mccain is expected to have a huge cash lead. but this is another example of an ad on the air but the mccn campaign did the ad tracking and said it is only a few thousand dollars being spent in one market in the state. the hayworth campaign sd that is not true and, you know, we are going to put this ad up in a wider area and put it out for a much longer time but right now there is no evidence of that. >> what are the polls saying? >> right now mccain has been holding a doub-digit lead.

some are close to single digits but he has held a consistent 10 to 12-point league. he is protecting in because he has been one of the most aggressive campaigns in the country this cycle. >> >> we are back live in boston for the national governors' association annual meeting, which is starting in just a few minutes. you see governors gathering to hear from the ceo of ibm talking about achieving sustainable health-care system. later on today we will have more live coverage from the governor's association meeting, talking about childhood nutrition and obesity, starting at 3:00 p.m. eastern with live coverage on c-span. >> to have adequate opportunity to our guests to make presentations on health care

reform. ask my colleagues and everyone else to find a seat so that we can get our session underway. the governors and guests, good morning, and welcome to the 102nd annual meeting of the national governors association. we will begin with the color guard. i asked everyone to turn off your cellular phones and rise at this time for the presentation of the colors by the 54th regiment ceremonial unit, a massachusetts army national guard, and then and remain standing for the pledge of allegiance that will be led by operation iraqi freedom veteran, marine sgt liz thompson.

>> i pledge allegiance to the flag of the united states of america, into the republic for which it stands, one nation, under god, indivisible, with liberty and justice all. -- with liberty and justice for all.

>> let's thank our color guard, sergeant hopson, and all of those who serve our great country. [applause] well, please be seated, and welcome again to our annual meeting. rst, i would ask for a up motion to adopt the rules of procedure for our annual meeting. gov. manchin moves, gov. patrick

seconds. any discussion? not all in favor of adopting the procedure say aye. any governor who wishes to submit a new policy for adoption at the meeting must meet a vote to suspend the rules and must be submitted no later than 5:00 p.m. tomorrow. i want to appoint the members of the nominating committee for next year's executive committee and officers association -- gov. gov. ann to chair the committee, gov. bb. guests fromumber of des outside of our nation. over the years, we've had the privilege of having representatives from the canadian parliament, and we're delighted to have them with us again today. will our canadian guests please rise? thank you very much for being

with us again. [applause] members of parliament, and also the consul general for new england is with us as well. we have a delegation of arab ambassadors organized by the chamber of commerce. i had the pleasure of meeting some of them last evening and i am sure you did. what our -- would our arab guests please rise? thank you for being with us today. [applause] finally, for the past 11 years, nga has been working with governors of the 36 democratically elected chief executives in nigeria to form a forum similar to ours for the exchange of ideas, and we are delighted to have played a role in that success. they perhaps help police did not

collect the -- perhaps calle helpfully did not call it to the nga, but the ngf trade with our nigerian guests please rise? welcome. [applause] i want to thank our hosts for this annual meeting. as i have noted on several occasions, it is no easy task to host a meeting of this magnitude. i want to thank all of our colleagues, gov. patrick, his wife diane, for the standing job. posting the nation's governors in this city is a great privilege for all of us. deval, come on out. [applause] >> thank you, jim, and it gives me great pleasure and honor to

welcome all of my colleagues, my fellow governors, and your spouses and families and staff, all of our guests, the members of the diplomatic corps, guests from around the country and around the world, to this summer's nga meeting in boston. we have done a lot of good work with you and with the nga staff to prepare with you and to make sure that the program under jim and joe's leadership is a rich and substantive, and that the time outside of our meeting time is fine. there is a lot to like about boston and the commonwealth, and we invite you to take advantage of it, consistent with your responsibilities inside. i know who you are. i invite you, as i have on more than one occasion, to take advantage of the many restaurants and shops and other attractions historic and cultural that we are famous for enriched in here in the

commonwealth. we're looking forward to a terrific series of conversations, both in the plenary sessions and our private conversations which are always so great, and welcome to let us know if there is anything at all that you need great great to be with you. [applause] >> thank you again, deval, for your willingness to host this annual meeting. it will be a great success, i am confident, and we appreciate your hospitality. along with hearing our distinguished speakers on the topic of achieving sustainable health-care system, we will recognize our award winners at our corporate fellows. i'm excited again at this meeting to chat briefly about the challenges and opportunities that we have in our nation's health-care system. it has been an active year, to say the least, in held policy, and we need to tackle this critical issue for our states. over the past year we have made

real progress in moving the rx for health reform forward. our goal was to give you the tools you need to implement aspects of health reform while continuing to pursue your own state based delivery system reform efforts. in front of you a report we are releasing today as the capstone for might year-long initiative, a report that uses the of militants -- uses the evidence available for quality improvement and care ordination and primary care prevention and payment reform. it is a thorough and comprehensive review of the options available to each state to move towards a more efficient system and improved health outcomes. activities would not be possible without the great support of the governors on the task force. i want to thank governor is manchi -- i want to thank governor manchin and others for their support, and also our initial funders, without whom it would not have been a success.

as we are poised to make substantial increases in the number of people who have health insurance, these changes will increase the need to improve performance, and we have a great opportunity in critical need to drive efforts as the reforms are implemented. we need to tailor reformed implementation in ways that focus on containing costs and improve the quality of care. to be successful, these reforms must be based on state experience in planning and oversight and innovation, and wild states face significant challenges in implementing a federal reforms, especially in the current budget situation, we have the experience and insight to push forward if given the appropriate flexibility. i hope he will build on the information and guidance we have provided over the past year. nga will offer opportunities for information-sharing and advice as state's move forward to it and to help us continue the dialogue on health care in our country and the

possibilities for achieving a sustainable system, we have well-respected and knowledgeable speakers on the topic this morning. they have significant expertise with the effects of the health- care system on our country and the best ways to accelerate improvement. while they come from different perspectives, my guess is that you will hear similar themes and new ideas for progress in this important area i would like to first introduced sam palmisano, the chairman and ceo of ibm. it is the largest corporate employer in vermont, and i've had the pleasure of working with the company and with him and members of his team at many times. the company is a key supporter of our blueprint for health program, which is changing the way we provide and pay for health care in vermont. as someone who has watched ibm over the years, i know that this is the kind of forward-looking project that sam would champion. he was best known for the leading one the biggest transformation in the company's history.

under his leadership on ibm has made tough calls to get out of legacy businesses that the company itself invented and enter new ones, leading to future growth and innovation but he did this out by the quick and flashy path of an egg, but by the far more difficult and lasting path -- he did this not by the quick and flashy path of m & a, but by a former difficult and less impact. -- difficult and lasting path. four years ago, he rode a forward-looking piece in " foreign affairs" on a globally integrated enterprise. ibm has become the premier example of this form in the 107 markets in which it does business. the results speak for themselves. ibm has delivered record performance for the past six years. today, we will hear about his latest vision about how the

world is working now and how can work better, especially in the complicated area of health care. i am delighted he is able to be part of our program. let us all welcome sam palmisano. [applause] >> thank you, governor. i was very flattered by the introduction. it is quite humbling for me to be here good morning -- good afternoon, i should say, to everyone. it is an honor for me to speak to you. we come together at an interesting and consequential moment, as you all know. i think he would agree that the states at the center of all of this. if we believe "the new york times magazine" cover story a couple of weeks ago, we are now the broken at states of america. i will talk a little bit about that. but without question, governors and ceo's must be laser focus on the near term issue -- we

face a severe fiscal crisis. everyone understands that we confront an historic moment, and nothing more needs to be said. the question is, what do we do about it? that answer depends on your understanding of the present moment in time and how we got here. because if you think about it as a cyclical economic slump, which happens in a capital-based democratic society all the time, you ride out the storm, hunter down across the board, spread the pain, you get through it. if you believe the crisis was not cyclical because of growth in balances in our system, you might drive our reform agenda -- more regulation and oversight, rebalancing who pays and who benefits. but if you believe that this is a turning point, not only in the united states, but in the context of what is happening

across the world, he would take a different approach. i happen to be of the lack of perspective -- happen to be of the latter perspective. i believe that what is at stake is not just next year's budget, which is certainly very important -- we all live by budgets and we have to accomplish those goals -- but america's long-term global competitiveness is at stake. this will create winners and losers, and i believe that the losers will not be those who played duck and cover, those who concentrate on repairing the current system -- i believe the winners will not be those who played out and cover, those who concentrate on repairing the current system, but those who look to the future. i see it in the trajectory of a global economic growth, i see it in all the market data, and i see it firsthand.

i just got back from africa, the middle east, and before that, i was in china, and you see it, and you see it throughout the world. in fact, last month we were in shanghai. ibm convened a forum with 100 civic and business leaders from around the world and a large concentration of our guests were from china. all the mayor is in china were told by the central government to attend. but we also held 100 of these conferences around the world. we did berlin -- chancellor -- we did thereupon boston and a bunch of cities across the u.s. if you look at the innovation that is driving china and other emerging markets, it is breathtaking. the investment, the build of infrastructure, the modernization of entire societies and academies,

expanding electrical grids, wireless capacity, water management, and more is attracting people, business, and capital flows, and creating a formidable force in the world. it is no longer the low-cost manufacturing capital of the world, and if you assume that is, that is a mistake. i know that this is not news to you, but i would like you to think about it from a personal standpoint. what your peers anin all those nations are doing, what the leaders of those provinces and municipalities and cities and states, whatever jurisdictional definition you select, what are they thinking about? this came from a conversation we had over there. what is the agenda? what switches are being made today? as i said to the mayors that date, what is your value

proposition? why will people live in your city, invest in your city, and stayed there? now, that is the reality. your counterparts are making decisions with an eye towards the global marketplace. they are leapfrogging over legacy systems and legacy approaches. they are not just repairing what is broken, and yes, there is a lot to be done, but they are preparing for what is coming. if we want to remain competitive, we must do the same. now, i understand -- believe me, this is very easy to separate in some of the meetings i have had with a -- this is very easy to say. in some of the meetings i had with the administration and with colleagues, "you have had record years." it is hard to talk about, and we are doing more doing than

talking. i also believe that the opportunity is there, because i see it and i see it in a lot of initiatives that many of you are working on. the american states can use this crisis to take transformational steps, to make your states and our society, as we would say, is smarter. in that, i believe that you governors are absolutely critical to make this happen. you have more impact on america's future standing than any leaders in the federal or local government. you sit were all these things come to gather -- you sit where all these things come together. you operate the systems that make things work for our people or businesses. that is where they all intersect, in your city, your state, where it all happens.

you are in the position of transforming all that because you have to govern. if you use a term we use in business, you have to operate the company. you just cannot give speeches about the compelling vision. you have got to run at the playscript you have got -- you have got to run the place. you have got to make ends meet. the subtext to me of the magazine story is that the states where the action is, and therefore were the greatest opportunity is to facilitate much of this change to capture this moment, though, we need to look at companies, organizations, states, in some new ways, cannot see them as isolated entities but as part -- to not see them as isolated entities but as part of a broader system. at ibm we know about systems, and i am not talking about

computer systems. economic and logistical systems in how the world operates. we have design and build most of the social security systems of the world. the central banking systems of the world. we are doing russia's central banking system at this point in time. retail, transportation, space -- apollo 13. we have learned a lot about what is required to do a system that is a well functioning, resilience, and reliable. first, i will find a system that i want you to think about this in the contact -- i will define a system and then i want you to think about this and the context of health care. it must serve a purpose or goal -- but a man on the moon. second, its elements must be connected. third, it must be able to know the status of itself and its critical components.

finally, the system must be able to adapt as conditions change, often in real time. viewed against these four simple characteristics, every well functioning system looks about the same. an atm system looks like a public safety system, or like the apollo mission that set the astronauts to the moon and brought them back safely, even though they called houston with a bit of a problem. from a system point of view, the a very similar. it becomes clear what other systems are in crisis -- why other systems are in crisis, like the one we are focusing on today, the american health-care system. when it comes to health care in america, we need to put the word system in quotation marks. it is not a system. it is a collection of cottage industries coincidentally running into each other from day-to-day.

in theory, everyone would agree on the purpose -- if we said that the purpose of the health- care system is to provide patient care in a high-quality, affordable way for all of our constituents, at your citizens, my employees, i think there is instantaneous agreement. we can argue how much time it is about the quality of care for our constituencies. a system design point matters. you optimize around the design point. in the spirit of economics, we all have to pay. you will hear later, i am a very big payer in the health-care system. but you need to envision the end state, because that is where your design is, in the end state. the governor mentioned the

blueprint for held in a in vermont. there is a patient centered medical home that we were proud to be a participant in, it is free to everyone. people are healthier. costs are down. and ibm benefits because we have a healthy work force and our costs go down. it makes a lot of sense. we are happy to be participating in those kinds of partnerships. the services are free to all of the patients in the system. the key to patient-centered health care is wellness and prevention. i will repeat that because it seems like many days we forget. it is all about wellness and prevention. at ibm, we have substantially reshaped our health care program. we provide health care coverage for 450,000 employees, retirees

and their families in the 50 united states. we're one of the few employers that still provides retiree health care, at a cost of $1.2 billion annually. in 2004, we pioneered a wellness incentives for employees. ibm has several wellness program rebates available to the work force and retirees. they focused on exercise, eating, of weight-loss, smoking, risks and children's health. as a result, ibm employees have become healthier, our costs are rising more slowly than other corporations in the public sector, and up, by the way, we saved about $190 million. do i have to worry about this?

[ringing noise] there is a lot of security around, so i think i am ok. it is easier to get into the giants stadium. i think no matter how much we improve the care in the system, as a company, as a community, or as a state, it will always be limited because it is not interconnected. the system is interconnected and to end. in many areas of life, this kind of connectivity is so basic that we simply take it for granted. consider banking. we take it for granted that we can transfer funds and make payments between institutions. in retail, we take it for granted that we can use the same billing and payment system whether you are in a store, on the website, or anywhere in the

the world. that is because the information flow -- when i talk about information flow i am not talking about bits of wire. i am talking about the processes and protocol that allows information to flow freely and be shared. health care in america, you would agree, fails the test of a well functioning system. many of the components of health care were not instrumented. from insurers to doctors, to employers, it is impossible to know what complement's what the current status is. it could be a procedure, a payment system, you just do not know. there is a colossal waste of time and money. there are also inconsistencies

in quality. if you ever see someone who comes out of surgery, they have a magic marker on them. a friend of mine had a mark on his leg. i said, "that is very sophisticated, to have to use a magic marker to make sure they operate on the right leg." i mean, you cannot make that up. i know you're asking yourself this. is the health-care system in your state ready for what is coming? because demand is only going to increase. population growth, aging baby boomers, and urbanization continuing to march on, will require far more digital capacity than we have. it is not of a call to see why

we find ourselves in the current crisis regarding health-care costs. its the state hardest of all, as you know. health-care costs are expected to explode by 70% in the next decade. that outpaces any form of gdp assumptions one could rationally make. if you agree for the need for a true health care system, how do we get there? a little statement on why a computer guy is talking about this stuff. ibm works with the top 10 hospitals in the united states, the top 20 health insurance companies, the top 30 pharmaceutical companies, and 18 of the top 20 biotech spirit we have a similar relationships in western europe, canada, singapore, china, indonesia, and i could walk you through latin

america. we have a validated much of what is required from a smarter health care system. this is not about a computer chip. it is not about a server or a router. it is not even about the electronic medical record, which everybody wants. that is not enough. it is important, but not enough. it is about the data. on this planet, it is becoming increasingly more interconnected. we are capturing data in unprecedented volume. in just three years, the traffic is expected to be one zeta bite. that is one followed by 21 zeros. we are capturing it from every kind of system or event

imaginable, supply chains, and traffic flows, weather patterns, water systems, individuals using social and media networking every day. the most important point about this is not how much data that there is. the important point is what the data can tell us. to capture that, we need to dive deeper. we need to move from big data to smarter data. that is why analytics are so key. analytics are mathematical algorithms. they detect patterns, patterns and health care, patterns of fraud. it is the context of the data. in need to see what relates to, and you need to see it in real time so that you can make the necessary adjustments, not do so after the fact.

what health care information technology will do for doctors' minds is what the x-ray did for their vision. it is going to change the way they look at things pinpointes. that is the promise of a smarter planet and a smarter health-care system. instead of employing 15 tests, do the analysis and do the right test. let's talk about smarter health care, and let me give you some examples. i would like to do this by example purses droning on from a systems perspective. let's talk about -- verses drawing on from a system perspective. let's talk about pennsylvania. they have reduced the cost of care and improved the quality of care. they have an innovative approach in the community.

there interconnected care units that were extremely well. in north carolina, the university of north carolina used analytics to improve the quality of patient care, support research, and manage chronic illness. in massachusetts, the university of massachusetts is building external healthy information exchanges that will centralized patient animation and provide a registry -- patient information and provide a registry that will allow doctors to improve care and reduced costs. i can give you tons of examples here and around the world. at ibm, we are working with the major primary-care societies, the american medical association of colleges, the ama, and many fortune 500 companies to

improve efficiency. visits to the emergency room were down 50%. there was a 40% reduction in hospitalization for individuals with chronic diseases such as asthma. as you know, one of the biggest cost to the system is people randomly going to the e.r. to receive primary care. there are tons of examples of this, but it is not just in health care. governors, you have to deal with all of these things. i will give you a couple of examples of where it things are becoming smarter in your state and in yours cities. government services, something you have to do every day. in california, alameda county is

using analytics to find the immediate data on children. instead of taking weeks, it takes a minute, and they saved $11 million. the washington, d.c. metropolitan transit authority is managing all of its assets, bus stops, buses, railcars and elevators, they're managing 187,000 change orders and repairing the system before it breaks. in singapore, there is an effort to get people to use public transportation instead of cars. they connect everything and to end, taxis, light rail, bus as

cars -- buses, and cars. the use of analytics monitors traffic flow, contestant, all of those sorts of things, to allow you to get to where you need to be in a timely manner. this is also used in public safety. in new york, the real crime center contains millions of pieces of information on previously announced relationships, leading to a 20% drop in crime. new york has now been classified as one of the safest large cities in the world. let's talk about smarter educational systems. alabama has the largest school district, in a mobile. they are identifying students to are at risk and adjusting curriculum so that they can improve in a real time way to

give children the skills that are required in the 21st century. the list goes on and on. leaders are seizing upon new capabilities that are available and building coalitions and partnerships to get a lot of this done. by the way, smarter systems can help with the nation's economic recovery. there is a recent study published that found that for every 1.2 $5 billion put into smarter transportation, it creates 35,000 jobs. putting it into the smart grids will create jobs. putting it into a broad band could create or retained 500,000 jobs. this creates economic development in areas that do not have the same advantages as many metropolitan areas.

yes, these are challenging times, but i would make the argument that whether it is health care or elsewhere, we need to invest in the future. it may be surprising to you to hear from a mid-sized company that this is not really about technology. this stuff is readily available. is it just readily available. this is about leadership. of would like to close by seeking your help in four areas. first, we must establish data standards for health care, and also other systems, but let's focus on health care. this is long overdue. you cannot have things connected if the information cannot flow. you cannot have the knowledge of a patient between primary-care and the clinics and hospitals if the information does not flow. there have to be standards. standards have to be established. it is time to stop arguing about

it. i have been to the meetings. it is a 99.7% accurate. we can deal with the 0.3% exceptions. of course, people argue on and on, and nothing gets done. we need to let information flow if the system is actually going to work. you know that the obama administration has pledged $34 billion into incentivize health care providers to digitize a record. -- digitize records. but if these are not based on standards, if they are isolated islands, in municipalities, in states, maybe a region, maybe the country, we will have wasted the money. wasted the money. it is not about giving doctors iphones so that they can call their patients. it is about dealing with the problems in the system so that

we can take the redundancy out of the system. it would take the costs down, and the insurance goes down, which pairs of love. -- payers love. on the question of open standards, you need to take an active of voice. when they tell you it cannot be done, remember, 99.7% of the information can be standardized. that is more accuracy than anything we do in business or government. second, we need to build smarter systems by design. anything as complex and dynamic as 21st century america -- in the qualities of a well functioning system, you cannot build it on afterwards. it has to be in the design. remember, the purpose, the vision, the end state has to be designed initially.

it cannot be made up for later in an appropriations bill, to use your terminology. you have to deal with enter connectivity, analytics and security. -- inter-connectivity, analytics and security. and there will be one year immediate payback. there are lots of examples. new york is convinced i have an apartment in new york, because of my own system, so i cannot complain about it. i am not talking about just a private/public sector thing.

this is really getting shoulder to shoulder, working together to solve these problems, i e r vermont. work together to solve the problems in new york, north carolina. our interests are truly a line when it comes to the types of challenges we all face. yes, we all h have particular responsibilities to our partners, our shareholders, our customers etc. but we need to take a systemic review in order to be transformational. that will require a change. finally, where we need your help is on policy. there is increasing pressure on all of us to be individual citizens or employees concerned with sustainable living. guidelines are being established and.

think about cameras. yes, crime goes down. the first responders get information more quickly and accurately. they are effective. but the real question is, what will you do with all of that data. who will have that? what will they do with it? do i trust them? it is the same with health care. clearly, everybody understands that if you could digitize and the medical records -- digitize the medical records, we could reduce our footprints. everything is electronic, no paper. but then the question is at the same. what is the privacy? what is the impact on the individual? will i be covered? these are vital questions that need to be addressed. security is another one.

we talk about building smart grids and smart grail, smart sewers, smart buildings, but do we want the security of a web page or a smart phone for your electrical grid or facility as you interconnect all these things? i do not think so. these are all very serious issues, and require serious work from all corners of society. we need to build support of constituencies, yes constituencies. we have to come together, work on policy free-market that addresses these very real concerns -- a policy framework that addresses these very real concerns, or we will not have security and a smarter system. i do not think that a smarter state is some grande, a futuristic vision. i think it is very pragmatic. nor do i think that making a ibm

a global enterprise is all about vision without operational execution. there are many examples of this being employed by governments all over the world. the smarter state is very practical in its refreshing -- and it is refreshing because it is not ideological. there are going to be debates about health care, anergy, security and climate change. that is necessary in a democratic society. but wherever the debate comes out, we still need these types of systems. we still need smarter systems to address these kinds of problems. they have to be more transparent, more efficient, more accessible, all of those things, but regardless of where the public policy debate comes down, it has to be done.

i believe that we in this room and our peers across the public and private sectors must take a leadership role. to me, that is the good news. it means we do not have to wait. we are not dependent on anything other than ourselves. we do not need the federal government. we can do this ourselves. we do not need anyone else. someone is going to do it, by the way. someone is going to turn health care into a true system, and we are working with very smart people that know this field, that have billions of dollars in backing. they are going to go on and fix the problem, because they do not want to live with not fixing the problem. some are going to put in place the key building blocks for smart education to prepare our kids for the future jobs, not prepare our kids for jobs that are not going to exist when they are in their '30's and 40's. someone is going to institute standards that allow for into

connectivity. -- enter-productivity. -- inter-connectivity. someone is going to go build the capacity to identify the key patterns of all of this data. this is what happens. someone is going to drive a progress in their region and across this country, and when they do that, there aare going to unlock economic growth. my suggestion is that someone be you. you're going to have to solve these problems. in a way, whether you want it or not, congratulations, you won the election. [laughter] the conditions for change are

there. you do not have to sell the point that i am making to your constituency and citizens in need. you need to be candid about the way, not the need. they get the need. i would argue, when it is articulated properly, when constituents see the benefits, they buy in. if you are transparent about the result, they buy in and they supported. despite the litany of challenges we face, i am confident that the states across america will do what leaders do. that is a lead. we will make societal progress, and this is going to be a great place to continue to have a wonderful future. thank you for your time. [applause]

>> thank you. we really appreciate your perspective and your time today. we have a lot to learn from the experience of ibm and other major employers who are working to hold down health-care costs. we are grateful to have your thoughts at this meeting. our next speaker is a health economist with a great deal of experience in the delivery of health care across the country. he is a professor of applied economics in the department of economics at the kennedy school of government at harvard university. he was the senior health care adviser to president obama's presidential campaign and served on the council of economic advisers and economic councils during the clinton administration. he has held positions with the national institutes for health and the national academy of sciences. he is now a research associate at the national bureau of economic research and the institute of medicine. he is the author of a, "your

money or your life: strong medicine for america's health- care system." let us welcome and dr. david cutler. [applause] >> thank you for the introduction. thank you to my own a wonderful governor and to everyone for having me here. it is a privilege and honor to be here. i suspect, given the health reforms to date, over the past year or 18 months, you feel a bit like -- a friend once told me that if you took all of the health-care economist in the world and lined them up and to end, that would be a good thing. [laughter] so i will try not to be the usual health-care economist and tell you what should be done, but rather, give you a sense of

what might be done, and how to make it happen in a productive way. i will follow along some of what the last speaker was telling you in terms of how to make the system work and how to get it to drive toward a better results. let me say, there are several challenges that are going to come out of health care reform. one of the things is that of course, they will all happen at the state level. i do not know many things for sure, but one thing i know for sure is that if we are going to make the health-care system work, that is work for people as individuals, work for state governments, work for the federal government, for the rest of the country, it is going to be because the governors make it work. there is no group more important to making it work again that. there is going to be a huge issue of regulating insurance. most of you have some familiarity with that. covering people under medicaid

and other exchanges -- a number of state here have begun that process. perhaps most important in health care reform is what i think of as improving the value of care, making care at both higher quality and less expensive at the same time. that, i think, is going to be the goal, because without that, nothing else will work. if we cannot deliver better care cheaper, then all of the commitments we have made wie'll turn out not to be able to keep. we will not be able to keep our commitment to medicaid or medicare either. that is the bad news or the good news. the better news is that we know that there are an enormous amount of wasted resources. we are starting from a place where we really can make enormous progress. spending on health care is probably about $70 billion per year above what it needs to be. that is from a situation where

health care is a roughly 1/3 of the budget. we are probably wasting about 1/3 of that. i do not mean waste in the fraud or abuse sense, but in the sense that the system is not working and is delivering outcomes that are inferior, of lower quality. we have the potential, under the next couple of decades, to save over what we arela currently spending per year. we need a better solution here. otherwise, people will move to china. maybe china will not be the solution to two decades from now. i believe that you have the

tools at hand it to really push the system in the right way. those jewels are -- and those tools involved collaboration, as we have used in massachusetts between the public and private sectors, changing the way we operate by changing the information and the rules through which money flows. i will explain each of these. third is encouraging innovation, the right kind of innovation, that says we are going to figure out how to do better, cheaper, not how to do more in a disorganized way. let me start off by talking a little bit about, where is that $7 billion? where are we wasting so much money? a part of it -- where is that $70 billion? where are we wasting that money? a part of it is administrative.

it is clerical work. duke university has 900 hospital beds and 1300 billing clerks. i feel like if i am admitted there, i should get 1.5 and billing clerks in bed with me. what are they doing? toy're figuring out how bill, how to deny bills, how to get them resubmitted, how to get approval for what needs approval, all things like that. it is huge amount of administrative waste that goes on. a battalion how i think we can drive it out, how you can -- i will tell you how i think we can drive it out, how you can lead the effort to drive it out. people do not like going into hospitals. it is a default activity. people go into nursing homes when they ought to be able to stay out. people do not get the care they

need. they often have repeat episodes. anyone with a chronic illness will know about tests being repeated or services being redone because they're not available the first time. medical errors, just to give you one example -- as a country we spend about $30 billion fixing medical errors every year. all of that money, if you think about it, could be used for much better things. so, what is the common denominator? i think this really goes to what sam was saying as well. it is a lack of organization, a lack of a way of making the system work. you have people who are healthy who sometimes gets sick and then oftentimes need various medical services. the services they need are completely disorganized. but to a primary-care physician who does not talk to a specialist barrett you go to the hospital. one in five people to go to a

hospital come back within 30 days. a very large share of those people never see a doctor or nurse between hospitalizations. the failure to keep track of people probably cost $10 billion-a $15 billion per year that we do not need to spend. there is no organization to the heth-care system. if there is one that theme about the future of health care, it will not get better until it is better organized. until there is some central organization, and i do not mean government-controlled organization, i mean something that says our job is to take care of patients in the right way and in a way that works for them. if you actually look, not health care, but at every other industry in the economy, every firm that you admire from walmart to amazon to ibm, what do you think they do that makes them successful?

kind of like every happy family is happy in the same way, what is it that makes them a success? number one, they get the information right. name an industry that ever got better without knowing what it was doing. in health care, we do not know what we are doing. if you want to find out which doctor is better than what other doctor at doing surgery, there is almost no way to find of aith esthe exception couple of states, new york, pennsylvania and massachusetts. get the information right. that is what every bit firm does. they know who is doing what, why they are doing it, what the cost is, how to make it work. number two, make doing the right thing the profitable thing. if you ask any doctor right now

what incentives if they operate under, it is and do more, get paid more. do it fancy, get paid even more. so, of course, that is what we get. we do things often times without any appropriate medical documentation, and then we get in cycles where someone tries to say no, the doctor says this is what i need to do, and it is all because we do n give them the right information. we do not give them the right incentives. when we tell doctors, we want to help you do the right thing, we want to help you prevent people from getting sect -- from getting sick, they say thank you, i would prefer to do that. and around the united states, the best health care systems integrate, coordinate, pay the

doctors a better way, and they get savings that are millions of dollars per year from doing so. they have figured out how to make the money and information flow, and they empower workers, and often consumers to figure out how to do things better. this is not top-down management. this is limiting -- this is a liberating innovation. you walk around hospitals and ask nurses if there are ways to make the system better, andhey will give you 25 always. you ask why they do not do it, and they say no one ever asked them. go to any industry anywhere and stick the work force in a box and have them do a job -- by the way,1/3 of what a nurse does each day is take information from a computer and put it on a

piece of paper. we take the most productive work force, the most dedicated work force, and stick them in a box and say, do not think innovatively, just do stuff, and the results turned out to be a huge waste. so let me tell you what steps i would encourage. number one, pushed down the administrative costs. i believe that in the u.s. health-care system, the administrative waste is up to $300 billion per year, and that we should be able to cut that in half in the next five years. we should be able to save the country $150 billion per year just by streamlining the system. how do you do that? a lot of that is going to come from getting people together and making it work. talk to any provider group, they will say it is so complicated that they need hundreds of people in their billing system just to submit bills. insurers will tell you the same thing.

when we had the debate in the last year, we did not agree on very much. one thing that everybody agreed on, left and right, democrat and republican, doctors, insurers, providers, everyone agreed that now is the time to tackle this issue. if we get together at a state , we can figure out how to make this work. one of the hospitals here in massachusetts is spending $200 million to put in a new billing system that they think will help them get their bills submitted and paid quicker. that is something concrete that can happen at the public sector level. it will be an enormously valuable thing for everyone in the system to get rid of that. that is the first thing i would do, i would push on that quite strongly.

the second thing, you cannot do better unless you have the right information. information is key. you have the capacity to do this. you have the capacity to assemble all of the data. remember, in most of your big cities, you probably only have five insurers. across the state, you have maybe 10. medicare, medicaid, maybe three or four private insurers in every big city. there is a small group of folks now. you can get that. you can learn what is working. it is doing more and who is doing less? we know how to analyze things like that. what is the best way to care for people. the way i like to think about this question is, we have about 1 million people in the united states to analyze which stock prices go up, which could down, did they go up on tuesday, fall on monday, and so on. we have no one who analyzes medical data who says, which

works best for that particular patient and what is the way of treating them better? some of that can happen at the state level by getting together and saying, we are going to learn about this. this will help people get better, but they have to come along too. they have to tell us how we can help them get better. there is money from the federal stimulus funds for health i.t. i would encourage all providers to apply for that. get that money. you're never going to get better if you do not know what you're doing. that is the second thing i would do. the third thing i would do is make the money follow the value. we have things that are very uncoordinated because that is the way we pay for it. we tell doctors, see a patient in your office and you get paid for that.

that is what works so well. in reality, people are not concerned about who sees them where, but whether the patient as a whole is doing well. what has come out in the past year and a half during the contentious fight over health care reform that nobody wants to areased is steppthat -- where there were agreements or in fixing the system so that doctors are paid to treat people well. find a way to take care of the patient who needs it. find a way to do that, and we will make it worth your while. take your dual-eligible populations. they are probably the most expensive people in the health- care world. if i were giving you advice of what to do, i would say, whoever

can manage these people well, save us money, we will share the savings with you. the cost is 20 allyson dollars per person now. find a way to do it for 50 -- the cost is $20,000 per person now. find a way to do it for $15,000, we will share that $5,000 with you. find a way to do it better. that is what really can happen. in the best health care systems, that is what they do. they think about the patience that way. how can we do better by them? care for the patient as a whole. we will not pay you for every individual thing. there are different things that would be appropriate in different regions of the country and different parts of the state. the key is going to be starting the process of reform. duquesne started best? i think the best answer is the people in this room -- who can

start it best? i think the answer is the people in this room. you have medicaid beneficiaries, state employees who are an enormous group -- in many states, the single biggest group of people buying insurance, you have the chip population, the exchange population. you have an enormous share. private insurers are actually eager to work with the public sector in making this happen. if you ask why they have not innovated this, they will say because there was no government there to work with. partly they were complaining correctly about the federal government. partly they were hoping that there would be a time when after reform they could work with big government as well. medicare, by virtue of the new legislation, is now able to do this.

we are pushing on the federal agencies to make this happen where medicare can work with the private sector to make these systematic changes in payments with the informational filtering through. again, go back to amazon, southwest airlines, a ibm. what all of those folks to do is get the right information and the right incentives. that is what this is about to get the right information and the right incentives, and then tell people, go ahead. go do it. i would be open to new organizations helping out. this fall, the government will launch council care organizations. this takes medicare beneficiaries, it takes care of them better, it takes part of the savings and gives it to the federal government. it will set up the homes like the ones sam was talking about

in vermont and other areas. a private firm is partnering with the largest hospital in michigan. a lot of innovation can be about how you actually run something well and how do create and take care of a complicated relationship. one other example of how to think of this. i have shown you, and i can give you a list, all the people who are billionaires' out of health care. everyone who is a billionaire in health care, with only one or two exceptions, everyone on this list made their money by inventing something you do to people.

you stick something in them. devices. they make drugs. you stick it to them. let me show you a different list. the people who made money off of retailing. walmart, home depot, the gap, best buy. in the rest of american industry, not a single person makes a product you use. every single person on this list made their money by changing the way that you buy things so that it is higher quality and cheaper. in health care, you make money by inventing something you do it to something. everywhere else, you make money by figuring out how to make the system work better. if we get it right, our best guess is that the waste and

health care in this country as a whole is $700 billion per year. you could completely overwhelm that list with people who could figure out how to better coordinate care, streamline the process, overhaul administrative procedures, ensure that people get the right care management and information flow. that is what we are waiting to do. we have not invested in administration and we have not gotten the payment systems set up right. i think if we can find a way to do this right, we will unlocked a health-care revolution over the next decade that will completely transform the way that we see health care, just as it will change the way people think about their relationship with health care and as society as a whole. i want to talk about one other thing quickly which is tackling

the obesity issue. what we do know is that if you make fattening foods be more expensive, people use less of it. there are a variety of ways, i do not want to spend too much time on it here, because i want to do more with the things that are immediately affecting in, but there are ways to think of dealing with that either at the level of tax support or wellness programs that i think along on people's agenda. i keep in mind the words of the famous philosopher jerry garcia, "somebody has to do something, and it is just incredibly pathetic that it has to be us." [laughter] so, what is it that we have to do? we have to start with the easy money, the administrative expenses, and then we have to set up a learning, innovative, dynamic system.

the way that i think about it is our jobs over the next 5-10 years is to set up a process by which the health-care system is completely reborn. if the health-care system looks the same in 10 years as it does now, then we will have failed at our effort. if it looks different in the way that everything -- this is what people want is happening, then we have a chance of making this the most productive thing we have done in the economy in the past 30 years. i will stop there. thank you so much for having me. [applause] >> thank you very much. we appreciate the information and guidance you have presented to us. as many of my colleagues know,

this afternoon the health and human services committee will focus on childhood nutrition and obesity. that is an important objective of any reform effort. we have gotten a lot of thoughts from our two speakers. we have the new report. obviously, this will consume a lot of our time and attention for a number of years to come. let us think our speakers again for joining us this morning. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> live coverage of the governors' association as they hold their meetings over the next couple of days. we're going to leave as they move on to administrative business. we will be back as they reconvene later today to talk about childhood obesity. that will be live at 3:00 p.m. eastern here on c-span. we will cover the governors

meeting tomorrow in boston, when they focus on the redesigning government. live coverage starts at 1:00 p.m. eastern, 10:00 a.m. pacific, here in c-span. sunday, they will talk about the federal budget deficit. we will hear from former wyoming republican senator alan simpson to co-chairs the committee on fiscal responsibility and reform. this meeting has been focusing on health care. we talked about the recently passed health-care law on washington journal this morning. this is about 45 minutes. " continues. host: on your screen is ceci connolly of "the washington post." it has been about 100 days since the president signed the health care legislation. what has happened? peter, thank you for

having me. it is always a treat being here. 100 days -- time flies. they are trying to staff up. they need a lot more people in that department and the various agencies to figure out regulations and implementing this complicated new law, as well as the irs. we have seen some immediate changes in the health insurance marketplace. the one that a lot of people are familiar with, and frankly, i hear excitement about, is the idea that you can keep a child up to age 26 on a parent's health insurance policy -- host: that has happened? guest: that has happened, and what we heard from the insurance companies, after some initial blocking over materials, -- initial balking over the materials, they realized it was

an opportunity to do something popular so everybody got over that quickly. another one that is pretty darn popular, and the administration and president obama likes to talk about when they get that chance, are those rebate checks that went out to many senior citizens who fall into the doughnut hole, the coverage gap that we hear a lot about. host: said the initial $1,500 medical and drug expense and then they go into the doughnut hole -- they got their rebates already? guest: many of them have received this checks and many more are in the mail as we speak. that is another popular item that we have seen. the states, as well as the federal government, are moving forward in setting up this big reinsurance pool. that is a tricky one. about $5 billion is set aside for the next several years, and

it is essentially for people who, because of a pre-existing medical condition, have difficulty getting insurance on the open marketplace. as you know, that has been a big problem for our great deal of time. you might think of this as something of a stop-gap measure, peter, for those and it is officially hope that in 2014 that they will be able to go to the insurance exchanges and shop for what they want. this reinsurance is a way for them to get coverage in the intervening years with some money from the federal government to help pay for them, because everybody recognizes that because of their existing conditions, they tend to be more expensive and need more care. host: is that state-by-state? guest: yes, that is correct. we saw a couple dozen states that quickly said, yes, we would like to participate in this and design our own state program with the federal money.

other states have not been so it is asked about doing that, so there will be the federal. -- there will be the federal reinsurance program or state governments are not doing that. host: how much of that has been implemented? guest: implemented is a little bit tricky. i don't think there are many people getting their health insurance yet because of that, but i would say that probably by the fall, you will see a good number of people that are eligible. some of the estimates i have seen are that by january you will have gotten about 1 million additional people covered through a number of these things that we're talking about right now. host: ceci connolly is our guest, a longtime health care reporter for "the washington post," and co-author of the book "landmark." one of your to what this will be

featured on booktv this week, alec mcginnis -- one of your co- authors will be featured on booktv this week, alec mcinnis. guest: yes. host: any question you have, ceci connolly can probably answer it. please allow 30 days between your calls. what else has been implemented at this point, or what else is scheduled to be implemented in 2011? guest: in 2011, through the fall we will see more of this activity continuing -- the high insurance risk pool, as we mentioned. there also be about $51 million in grants that states will be eligible for so that they can do reviews of insurance

premiums in their states. this is another thing that is not contingent in a couple of stage, such as teleport -- another thing that has gotten attention in a couple of states, such as california. we want a 30% premium increase next year, and this money will hold the state's review with the those increases make sense, are legitimate, it justified, etc. that will be another big help. the other thing i should mention is that small business tax credits are becoming available. these are for companies that are, i believe, less than 25 employees, workers up to about $50,000 a year. they are now eligible for some tax credits to help cover their employees. it is interesting, peter -- i don't have anything to scientific, but certainly anecdotally, we are hearing from insurance companies around the country, especially some of those that cater to that small

business market, that they are getting a lot of increased business and a lot of interest in this because of those tax credits. that is something that does seem to be sparking some interest and some movement. i will say that a lot of this is balanced by the ongoing terrible economy. even as we sit here and speak, there are other people who continue to lose their jobs and health insurance. it will be very tough to make forward progress in this economy. host: do you have any estimates of how much federal dollars have been spent so far since the bill was signed towards this healthcare bill? is there any figures out there? guest: no, not that i have seen, i don't think there is a lot of money going out the door at this moment, per se. it is more about opening at some of these progrs and changing some of the insurance regulations that we've been talking about. another one that has gone into effect is the idea that