his position. >> thank you very much for being with us today. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> the former governor of new mexico, gary johnson, declared his candidacy thursday for president in 2012. he served as a republican governor from 1995 to 2003, advocating for the legalization of marijuana and gay-rights. from the steps of the state capitol in concord, new hampshire, this is about one hour. >> thank you and good morning. i am here to introduce bill i hope will be the next president of the united states. gary is a former to term governor from new mexico. during that time, he cast more vetoes than any other governor in the country. he was not willing to compromise on core principles like taxes.

he is more than just an ax governor. he's a former businessman and employed over a thousand people. he has climbed many high altitude peaks, including mount everest. he's a new type of leader we need in the united states. he maintains core republican principles like smaller government but also believes in personal responsibility and personal freedom. it gives me a great pleasure to support someone for president who i can say is not the lesser of two evils or not as bad as the other guy. i hope he will be the next president of the united states, gary johnson. [applause] >> this is the first time i get to say this. i am running for president of the united states [applause] .

to do that, i think you have to have a certain resume and i like to think i do have that. i have been an entrepreneur my entire life. ever since i was 13 years old, throwing newspapers, mowing and lawns, i have paid for everything i have had in my life since i was 17 years old. when i was a junior in college, i started a one-man handyman business in albuquerque. 20 years later, i employed a thousand people. american dream come true. naively, when i was elected governor of mexico, being in business was not a plus. we were not getting the work we should have. in 1999, i sold the business.

nobody lost their job and that businesses doing better than ever. i ran for governor of new mexico. i had never been involved in politics prior to running for governor. i introduced myself to the republican party, much like i am doing right now. i introduced myself a couple of weeks before i announced. the chairman of the republican party in new mexico's said i like you, the republican party is going to love you, we are an open party, so it's going to be an open process and it will go on statewide. i am thinking this was all i could ever ask for. then, he says i think you're great, but you need to know you will never get elected. it is not possible to come from

completely outside politics and the elected governor in a state that is two-one democrat. i got elected, and i would like to think it is based on what i had to say. everything should be a cost- benefit analysis. what are we spending money on and what are we getting in return? i was very outspoken regarding school choice. i believe in free markets and i believe bringing educational entrepreneurs to bear would it make a difference. i did that in mexico. it may be a bit of an embellishment, but i may have vetoed more bills when you consider the line items i vetoed, i'd have vetoed more legislation than the other 49 governors in the country

combined. it was not just saying no, it was looking at what we were spending money on and what we're getting for the money. i really believe in smaller government. i believe there is a consequence for the legislation gets passed and maybe it is not in our best interest to pass all of the legislation repass. that it layers of bureaucracy on the transactions that are not made any safer by you or i. and in that making it so much more cumbersome and burdensome and and that adding a lot of money as opposed to the notion of liberty and freedom and personal responsibility that goes along with it. i raised a dialogue regarding the war on drugs. it was an extension of

everything i did as governor of new mexico, which is what are we spending our money on and what are we getting for the money we're spending? i am outraged over the fact that this country is bankrupt. how did we get ourselves into this position? my entire life, i've watched government spend more money than it takes in. i always thought there be a day of reckoning with regard to spending and i think that day is here. it needs to be fixed. who is responsible? one week ago, i was asked should president obama's health care plan be repealed? yes, i think the health care plan should be repealed because we simply cannot afford it. but what i said then and what i will say now, i think

republicans would gain a lot of credibility in the argument if republicans would offer a repeal of the prescription health-care benefits they passed when they controlled both houses of congress and ran up record deficits. that spending pales in comparison to today but both parties can share in where we have gotten to right now. i think we are on the verge of a financial collapse in this country. the writing is on the wall. this is not fear mongering. this is we are going to encounter a financial collapse because quite simply, we cannot repave 14 trillion dollars in debt when we are racking up 1.65 trillion dollars in debt going forward. it is just not going to happen. i am advocating balancing the budget tomorrow. i do not have a 20-year plan.

the plan for balancing the budget is tomorrow. that is $1.6 trillion in reduced federal spending. the debate and discussion regarding government-reduced spending was we need to be cutting government spending by 43 cents. it was about less than one penny. after some analysis, it was less than one one-hundredth of a penny. we need to play out what happened in washington a couple of weeks ago hundreds of more times if we are actually going to bring this to bear. when you talk about balancing the budget, it is important to talk about medicaid, medicare,

social security, it is really about making social security solvent, and it is a defense spending. i think the federal government could block grant the states a fixed amount of money which would be 43% less than we're spending and do away with the strings and mandates and give states the ability to get health care to the poor and those over 65. that would be 50 laboratories of innovation. i will be talking about this the whole time running for president. this is about 50 states. we have 50 laboratories of innovation all out in the notion of best practices which gets emulated. there will be failure, but the notion washington knows best has us in the position we're in

right now which is bankrupt. when it comes to social security, social security is pale in comparison to medicare. medicare is going to engulf the entire federal budget and a short time if it is not brought under control. social security needs to take in more money than it is paying out. you could raise the retirement age, have means testing and change the escalator from the wage index to the inflation index, the third item would make social security solvent into the future. when it comes to defense spending, can we cut 43% of the defense budget and maintain a strong national defense? i believe we can and we have an

obligation to do that and provide ourselves with a strong national defense. i think strong national defense is way different than we are currently engaged in which is nation-building all across the world, when we have our own nation to build. i would have been opposed to iraq at the get go. i thought we had the military surveillance capability to see iraq rollout any weapons of mass destruction. if they would have done that, i felt we could have militarily addressed that situation. i thought if we would go into iraq, we would find ourselves in a civil war to which there would be no end. i thought afghanistan was totally warranted initially. we were attacked and we attack back. we are at war with osama bin laden and al qaeda and we should remain vigilant to terrorist threats.

but after being in afghanistan for six months, we would have affectively taken out al qaeda. that was 10 years ago. we are building roads, schools, bridges in afghanistan and borrowing 43 cents of every dollar to do that. in my opinion, that is crazy. we should get out of iraq and afghanistan tomorrow. [applause] for all of the debate and discussion we will have over that issue, all of which will be warranted, i suggest to you we will have that same debate and discussion 25 years from now if that is when we finally decide to get out. in the meantime, we will continue to spend more money we do not have and a lot more men and women will end up losing their lives.

libya -- in the environment i am in right now, i have to issue an opinion on everything right away, so libya, i am opposed to what happened in libya, starting out with where was the constitutional authority? where was the congress check off on that? where is it in the constitution if we don't like a foreign leader, we should topple the foreign leader? who are the rebels in libya? have we not injected ourselves into a civil war? are there not five countries that would qualify for the same military intervention we have implemented in libya? under the umbrella of a no-fly zone, saddam hussein existed for 12 years.

under a no-fly zone, the atrocities in bosnia occurred. when do ground troops become committed? i think we've already seen that. the unintended consequence of government and its actions -- we take out saddam hussein, and there goes the check for iran, which may be a threat -- which may in fact be a security threat to the united states. i do not believe it exists at all, but we should remain vigilant toward. it goes on and on and on. i believe in free markets. what i am going to embark on, the debate will be over government, government regulation, and free-market. i am always the one that will defend free markets.

when free markets are talked about in terms of here are the root of our evils, i would point out that it is there reason we don't have free markets is the result of the problems we end up having. it is a government and the unintended consequences of government picking winners and losers when it comes to business, picking the winners and losers when it comes to foreign governments, the unintended consequence. having been the governor of new mexico and the telling 750 pieces of legislation, i tried to put myself in the position of what is going to be the unintended consequence of this legislation? was it going to make a difference in anyone's life or were we just going to end up spending more money?

looking at health care in this country, believing in a free- market and the government could provide solutions by just eliminating impediments for health-care entrepreneurs to enter into the health care space to deliver better products and services at lower prices. health care in this country is about as far removed from free- market as it possibly could be, but always in this process in this upcoming discussion which i relish, i am going to be the one that takes on the defense of the free market system and how if it were applied, it would make a difference. immigration right now is a hot- button issue. it is a discussion that should take place. i happen to think immigration is a good thing. i think this country is based

on immigration. i view immigration as a job creator, not a situation that takes away jobs. because of our convoluted immigration policies, kids from abroad are coming and getting educated but because of our policies, we are sending them back to their countries of origin where they will ultimately employ tens of millions of indians as opposed to tens of millions of americans with businesses that would have been nurtured here in this country. i advocate elimination of the corporate income tax, recognizing it is a double tax and by eliminating the corporate income tax, that would create tens of millions of jobs in this country. this would be the place to start up, build, nurture businesses that are currently taking place

in other countries. this corporate income tax started as zero in this country. get back to that and we will really see some job creation. immigration should be about work, not welfare. we have issues in this country regarding welfare. immigrants coming across the border and taking entry-level jobs for americans? absolutely not. we as americans can sit at home and collect a welfare check that is the same amount of money for doing nothing. i think we should make it as easy as possible for emigrants to get a work visa. i'm not talking about citizenship or a green card. i am talking about a work visa which would entail a background

check so that applicable taxes would get paid. regarding the 11 million illegal immigrants in the country right now, this is one of those unintended consequences. government has made it impossible for those who want to work to come in and get a work permit. if they get across the border, they know they can get a job because they have hundreds of friends and families and they can come across and get that same job. when ron reagan set up amnesty in the 1980's, he coupled it was putting the government in charge of quotas. do not get the government in charge of quotas. let business determine whether or not there is a need for labor. if not, emigrants will go back to their country of origin. there needs to be a time when

the illegal aliens can get a legal work visa, background check, social security card, so taxes get paid. the notion of building a fence across 2,000 miles of border and putting that national guard across the border would be a lot of money spent with very little, if any benefit whatsoever. regarding drug policy, legalize marijuana. legalize marijuana and arguably 70% of the border violence with mexico goes away because that is the estimate of the drug cartel activity engaged in the trade of marijuana. 28,000 deaths -- if we cannot connect the dots between violence and prohibition, i don't know if we ever will be able to. these are disputes being played

out with guns rather than in the court. let's take a new look at these issues and now back to my announcement here i am seeking the republican nomination for president of the united states and i look forward to the debate and discussion that will take place. this is a great country. we went to the moon. we can solve these problems we have right now which first and foremost is insolvency. i would not be here right now if what i was saying was being said. the idea here -- what i am posing here is to take part in a contest to be the spokesperson for the republican party. if the republican party does not have options, perhaps the republican party checks off a name that is not all that

representative of what republicans might believe. i happen to believe i speak on behalf of the majority of republicans. i look forward to the debate and discussion that will follow and if i did not say it earlier, i had a mr. smith goes to washington experience as governor of new mexico. i recognize there are a lot of mr. smith's they go to washington, but i was one of them and i felt like i made a difference and feel i could make a difference in this process. thank you. [applause] i will take some questions, comments, insults' --

describe my approach in new hampshire? i have been to 34 states and one of the places i enjoy more than anywhere is new hampshire, which is good because new hampshire is key in this whole process. i want to do really well in new hampshire, so i'm going to spend a lot of time in new hampshire, where you can go from obscurity to prominence overnight. i'm going to go out on a limb and say i will not be out worked when it comes to going to new hampshire and talking to people. >> it is a key to the equation to do well in the early primary states where you can go from obscurity to being in a place

where the lights don't shine any brighter. i love retail politics. i love the fact that it is a one-on-one discussion and debate. i love the fact that -- what do you think about nit romney for president? i'm having him over for dinner on thursday night, but i need to meet the mall. i like that. i ran to campaigns for governor were i did not mention my opponent. the idea was to present ideas and give people a choice as opposed to the lesser of two evils. when it comes to comparing myself to others, i'm not the

person to talk to. i will let you draw those conclusions. >> [applause] >> bypass the exploratory committee? i'm committed to doing this, so why have the exploratory committee. fund-raising is part of this. we intend to have a very aggressive online fund-raising campaign that the website would have gone up 20 minutes ago. when it comes to gun control, i support the second amendment. as governor of new mexico in 1995, concealed carry was being

hotly debated. i saw that as an issue that would lead to less gun violence. in mexico, i would have been able to sign legislation believing it would lead to less overall gun violence. i think we have seen that play out since so many states have passed it. >> how can you compete in a market that takes so much money? we believe we will raise enough money to be competitive and to raise enough money to be

competitive, that is going to involve a lot of work and a lot of entrepreneurship are part to do things in a more effective way. i have no complaints about the process. having run for governor of new mexico -- i have no complaints. the rules are what they are and i accept that. i expect to do well in this process. how do i feel about unions? i just have one issue. that is that let's use it to hypothetical numbers of the union. of those two hypothetical

numbers, one is the worst worker i've ever seen in my entire life. the other is the best worker i have ever encountered in my entire life. cannot reward the best and i cannot fire the worst. i have to accept them both as equal and i don't think that works. thank you very much. [applause] >> on friday, former house speaker, newt gingrich, outlined his plans to improve health quality and reduce its cost. he called paul ryan's budget proposal historic for its efforts to reduce health-care costs and the overall deficit while criticizing president obama for not doing the same in his budget request. these comments were at a forum for health care cost held at the

brookings institution in washington d.c.. this is 35 minutes. [applause] >> thank you. i am delighted to be at the brookings for what i hope is a very useful conference in beginning to set up a new set of ideas and talk about the current state of the art of people working on this. we are always delighted to have a chance to work with mark because he is one of the most awful innovators in the country. i also want to mention our vice- president for public policy is here and we're both delighted to be here. i would like to commend jim pinkerton, who has done as much riding on the potential for fundamental breakthroughs in health as anyone i know. i

i really believe we want to reset as opposed to how we currently think. imagine we had a 1904 conference on transportation opportunities in which we had a sig -- significant amount about improved wagon design, some improved stage coach management and a fair amount of concern as the railroad as the center piece of long distance traveling. imagine that i had come to that conference and said this is all very useful and in the short run will be very important. but the two things i think you should look at are two bicycle mechanics who in december of last year flew at kitty hawk and an edison electric supervisor who is in the process of designing mass produced cars.

now i guarantee you -- in 1904 the wright brothers and henry ford would have been laughed out of any washington gathering of experts because it was clearly pie in the sky irrelevancey. by 1918, in planning the campaign for 1919, virtually every aspect of modern warfare is in the campaign plan. by 1908, the army has signed its first contract with the wright brothers which is for one airplane for $25,000. by 1909, the first group of large people see the wright brothers fly in the island of manhattan and 19 people see them. in 1916 when pancho via -- villa goes across the border, john j. per shing -- per shing

when he leads the expedition the aircraft are underpowered and can't get through the passes because of wind. now all that changes literally over night in world war i. and the great innovations, trucks, tanks, airplanes by 1919, are the beginning of what became the 20th century warfare. so i want to share with you a similar model which is if you think about post obama care solutions which is clear from the ryan budget, which i think is a courageous effort to get to the right frame of thinking is you can't solve the health care within the aging population -- it's literally impossible. you can ration. you can allow people to die earlier. you can minimize treatments. but let me give you one example that mark referred. to and we watched the

alzheimer's study group. it's probably the largest pain and cost center in the next 30 years. the federal cost alone between now and 2050 of alzheimers is one and a half federal debts. the federal zet $14 trillion. alzheimers is protected to cost the government $20 trillion. now you would think that a serious country with serious leaders would look at a $20 trillion cost center which implies an enormous amount of human pain. families are fundamentally displaced. yet there,'s no serious conversation. they called it a cartoon that had a desk that had an indoor

and a out drawer and a two heart. it's a huge challenge. so i want to stouth you the bureaucratic cost controls will fail. they will lead to rationing. this is a 50-year cycle. we really got into this in the 1960's. we keep doing things we don't work and what happens is we grind down the system. more and more people refuse to go into medicine. it's less and less fun. we're now about to see hospitals about to go through very ruthless cost approaches. i know two sthams will analyze health care and will analyze every procedure. humans react rationalely to the signals that are sent. can we invent an alternative. what i want to suggest to you is a paper that will be suggested to you. it's going to billion electronically available both at healthtransformation.net and

it's going to be available at brookings. there's a paper arguing health solutions for longer lives, lower costs and more american jobs. i want to be quite clear. this is a deliberate attack on the delivery system, it's an argument of how we approach thinking about health and health care. some of you may be able to help me. i actually want to find an iron lung. i want to use the iron lung as the center piece of this whole new approach. in 1952, there were 60,000 polio cases in the united states. the projected cases cost would be that it would cost $20 million a year. and in 1945, 1.2 million people

were vaccinated. at the center we don't have the staff for this. but it would be great to find an intern and say lay over the development and implementation of the polio vaccine, the current f.d.a. model. and figure out how many additional people would have gotten polio during the 15 years that we went through the process of checking it out. let's go comback and look at i. once a upon a time we were a country that made sense. we won the entire second world war in the first few months. they had a fifth runway in the atlanta airport. if we determine to be willfully stupid, we can be. so take that model. i want to outline for you, seven major steps to recentering the entire health system, starting a comment by

elios when he was head of n.i.h. and he said, i think this is worth debating. this is the kind of debate we need the presidential campaign and it's the kind that we ought to have in academic centers. we saved approximately $1.4 trillion in health costs plus an enormous amount of pain, loss of life. he estimated that it was a 40-1 ratio. it is vastly more than what we got out of the stimulus. we're in position of people who decided and in a congressional budget -- well, i strongly applaud paul ryan to offer the right size, argument. felt very sad that the president failed to respond with the same amount of

seriousness. it's essentially like saying we're going to save money in your car. we're not going to change the oil. for about a year i can get away from that and then the engine will freeze up. but if i have a c.b.o., i can actually replace ten gin for free because it won't count as a budget cut. so here are my seven proposals as a major step for a health solution-based modelless cost and we're going to hear about marginal fixes. drucker says if you aren't already doing it, we'll just start. and if answer's no, why are you doing it? what you want is a very scientifically oriented, very collaborative system that starts in the laboratory is

nonadversarial, has a free flow of information and is continuously modifying and improving itself. when i go for example to the united states of pennsylvania and have someone say they have a bioengineering device which is the term that pennsylvania is opposed to regenre active medicine. they have a bio engineering device which is a biological breakthrough and a device. it goes to two different departments and doesn't talk to each other. when i go to georgia tech, i have a computer specialists working on brain wave patterns so stroke victims can think and therefore move a robot and do certain behaviors. they asked the f.d.a. to give away their initial noninvasive breakthrough device. they can't find anyone that can say, yes, it's ok. three years. this is just crazy. so fundamentally rethink food

and drug administration was the beginning. and here's the center point i want to debate. anybody in this country, we're going to have the next 25 years, four to seven times as much new scientists. there are more scientists today than in all previous human history. they have better computers, instructions. you can have literally four times as much new science. 64% is going to be outside of the united states. nour that implies the rate -- if you would to try to tange it in current analogue, we were in 1880 trying to understand 2011. we have no institutions, not medical schools, not continuing medical education, not the bureaucracies like the f.d.a. we have no institutions to

continually adapt it on a scale. we have no payment models that are innovation, encouraging models. what we do is we become more and more out of touch and more and more out of touch with things out of doctrines. we can't bridge the gap. that's how fundamental is this. we insist that it both have a cost benefit analysis of saying no. saying no has to have a cost attached to it. because today you can say it's free to say no. if you make a mistake you're going to have a tray. if you say no, you just kill people. and since they die quietly, it's not particularly barsing to d barring to that.

i did two conference calls of of whom believe all major breakthroughs will be implemented outside of the united states. every new job, patent, royalty will be on america. science will be america. second, we should dramatically increase the national science foundation. the biggs mistake as speaker in budgeting we doubled the size of n.i.h. we should have tripled the funding to them. they're all central to what n.i.h. does. n.i.r. we shall see them in a combined state as we continue working on the study group. it probably requires two cycles of development in computation

power to be able to flow with the data floor. about the same number of your brain are the stars in the universe. so the scale of sorgeexapssi that's going to be generated by the brain. n.i.h. needs to be funded better and rethought. in 1991, i helped with the military caucus. i wanted to see the pentagon get bigger. i would tell people i'm a hawk but i'm a cheap hawk. i think we should fundamental challenge two aspects of n.i.h. they are much more inclined to be very limited in their breakthrough capabilities. the second is that the entire model of using the taxpayers

research noun subsidize academic bureaucracy sbhowled fundamentally challenged. there is zero reason to pay the overhead we pay. it's terisk for the united states. but i don't think the taxpayers should billion told they are funding research when they're funding deans. -- dreams. but one of the major problems is to agree that the self-serving bureaucracies have gotten bigger, deeper and in fact, they're providing value. just look at the overhead in the private sector and look and explain to me why we should tell the taxpayers that's their job. i think that's worth hearing. it's a legitimate question. there are no sacred cows in a time of dramatic change.

you have to be prepared to look at everything simultaneously. you to look at things like the apollo project, the radiation lab at m.i.t. and world war 2, the way in which the evolution of the project began at the department of energy because n.i.a. wouldn't do it you have to say to yourself, what do we learn from those? whoa what do we learn from the national canceriness institute and the way it's organized? what does that tell us about how we shoy should rethink and restructure n.i.h. the facting is that brain since is the area that will have the greatest breakthroughs if we're going to have 50 to 100 in brain research. we still don't have the kind of data we have in 10 or 15 years.

it mazz the poe ten torble have the large oast return in investment on anything in health. if you simply postpone the onset of alzheimers you cut the cost. before they get it, they don't have it very long or they never get it. >> every time i talk to brain scientists they say the odds of post poning it is very high if we have the rightry search strategies and the right investments. it's about a $10 trillion training. go to any private sector group and say, what would $10 trillion be worth in current investment? there's a way to mon ties this. well it is radically more than we're currently spending. so i have a very, very bold

proposal. take all of brainl sin. move it out of n.i.h. go to the brain science community and say what's the highest. have a commitment that once you get the breakthrough the government pays off the bonds. it's something that would make perfect sense for british who had sinking funds all the time. it makes no sense at c.b.o. and o. and b on the system. but i think this is a very important idea. if we could eliminate alzheimers, move out of the way -- i say all of brain science because in order to get breakthroughs, you have to study the whole brain. you also get schizophrenia,

parkinsons, bipolar, whatever. so what would the return be on that scale? it would be vastly more than the investment. and the return in human happiness, the return of people living full lives, it's just irrational that we don't do it. fifth we the need to create entrepreneurial start-ups. companies have developed by 24% in four years. i'm for 100 years of that. i'm for the repeal of czar bains-oxly. but we need to think about the context which is if you want a large start-up. six, the congressal budget office should billion challenged to have an

intellectual form comparable to what i'm describing. it would be impossible to score the airplane -- someone from c.b.o. to o. and b and they score going by stage coach. so while they're on the 747 sthare explaining to you, this trip requires 40 days in various stages. >> you say well, we're fine. yes, but it's a theerret krall point. go ask them to post post alzheimer biss five years, they can't do it. i got a know from david camp. last year they started a new -- sblused the concept of going after fraud and we have evidence from i.b.m., in american express, vissavement they have a 1.3% fraud rate.

as a taxpayer you are 3408 times more likely to pay a crook through c.m.s. the proposal was costing money. now, this is maniackl stupid. our major reaction nair impediments maintaining the stupidity of current policy. they should be challenged head on. they should be formed to score breakthroughs. and say this particular project if it works would lead to this. and they can't today. they have no model of dynamic scoring. finally both c.m.s. and pry value vat insurance companies should develop new models and pry -- private funding and say, if 10% of your kidney cells work, you do not need kidney

dialysis. through degenerative medicine, you have no problem of rejust and that model you could take dialysis head on. it is growing pretty rapidly. it will pass the n.i.h. see, you can't go out and raise the capital because no one who has capital wants to risk it to go through the f.b.i. to get into a system they probably won't pay for. now that's just foolish. one is money and two, the quality of life. i had an uncle who spent two hours on dialysis, every week. we'll like them to fully earning a living. that's the kind of payment

reform we need to have lots of small projects underway which probably require litigation reform because after all if you got involved in a small pilot project anything went wrong, you probably would be prupted by project -- produced by the project. i appreciate the chance to talk about these ideas. [applause] >> thanks very much, mr. speaker. against, it's been -- it's always interesting to hear your ideas. i see if in the next few minutes we can draw you on on your have modest proposals there. i want to talk about the health solution based model. this solution for brain science which in your view sounds very transformative. come back to a cup of the obstacles to getting there. you highlighted the importance

of some substantial increase and funding. and that's not really what's on the agenda in washington right now. we've got real concerns about deficits and concern about whether even the current level of research funding ask continue. talk how we get from that view to where you think we need to be? >> this is part of why you have to really challenge the whole congressal office. in the provide sector if erp in a recession, the company that was in a high-tech area would dwibedwenal research and investment which is expensive. there is no model for saying this is an investment. this is a cost. and so it starts there. i mean -- i realized having served for 20 years and led a

fairly significant amount of change. speakers this is going to be a real fight. their first reality with to say no. go back and look at the rise of the wright brothers who got in such a big fight with the smithsonian they wouldn't give them their vehicles back. they had done it. what i'm proposing is a fundamental rethinking at the level of the budget economy, proachtses, committee, the corporate, at the level of the white house and say we're not going to establish between investments and investments which is what we do. when i was speaker we decided to balance the federal budget. we consciously said thanks a lot to johnny porter.

we're actually going set appropriates. i think the country will support a smart effort to the country almost not support a cheap effort because it they will set out in the future on behalf of current interest groups. >> and to nol up on the that with more -- to follow up on that, there's still more support and a number of teps to get that to head off the brain diseases. you talk about some of challenges and it seems to me there is just as much a need, the collaborations that you talked about, finding ways to shorten at the process of getting good ideas in the lab to treatments that can be used against patients. that would be something that would need an investment. the demfsments involves the --

>> i'd say the same thing here. i don't know if a 209 century affecting the f.d.a. would be more offensive or lesser fencive. i want to back up to make this point. two of the most effective systems approaches in human history were world war ii and the cold war. both were characterized by very large scale planning and an ability to lay ute perk system or might being called a gant system but looking at all testimony lineage points and understanding how they feet together. the reason i give you seven steps, there is no legal step that is designed for the breakthrough. designing a heelt care solution would be aner demor mouse

athlete. let me give you a couple of quick examples. kaiser permanente have used vo yules of elect dronic data which is not used by the f.d.a. you can vm much higher ressks by improving things because you have do have real classes of people. you said every drug company -- you never again have to do a special class follow-up study because we're going to drack every especial demology. and you can have realtime data every night. mcdonalds gets 4,000 stores. i'm not describing a distant future. now i don't know dep that f.d.a. would be cheaper or more

expensive. what we currently say is in order pay for current bureaucracy and add so% we need a lot more money because we refuse to become more efficient. they produced a report saying if you ran the federal government as a multinational high tech company you walledsay $150 tchourks million a year. it is so different. it's s -- flying. well, the cost in dollars it may or may not be less expensive. burr certainly human costs is radically less expensive. >> i think we have time for one question from here. you want to go ahead. >> wait for the microphone, please. >> i run the v.a. medical research program and i want to make three quick comments. one is you should mention that sometimes.

you know, as much who -- researchers we think about top down programs. it's important to remember that the man ha tan project was developed after the atom was split. the resick research was investigative type research. when you design a large program and give a lot of money to an area, you have to consider how you're going to do it and how the guidance is going be. the third thing is while we talk a lot about the problems with the f.d.a. and the problems related to that, researchers talk a lot about research bureaucracy and what it has to go to. i don't think it enters into the public conversation enough. i think it's going to be very important in the future. you look at the bizarre consent forms that people -- i hate to

say this. somebody's going to probably fire me for that. you look at the consent forms that i don't understand. but just take it from there, sometimes has to be done in that area. >> let me do it at two levels. i agree entirely that unless you have it, you can't get to a nuclear program. the pilot project is engineering. i agree with that. i believe we've crossed the proof of concept in brain science and it's clear if you dramatically accelerate the rate of scory and the rate of integrating knowledge, you would have enormous payoffs in brain science. i would not have said this, i was active in 1980, i wouldn't have said in 1980, let's focus

on brain science. we didn't have the technology, it wouldn't have been worth it. but i want to talk about something more fundamental. when we figure out the big projects which are necessary and good and when we redo, and i think you raised a good point, congressional hearings on laying out the current foolishness of all the layers of research application, all the players of filling out forms, a very senior person, the number of documents we get that are never read is amazing. we ought to have the courage to look this stuff in the eye an the truth is, if you don't need it, don't do it. and go back and apply lean manufacturing in a sense. but there's one other piece you raise, i have to say, not a scientist but a student of history, clark had a great rule,

he said if a senior scientist tells you something can be done, it's almost certainly true. if a senior scientist tells you something can't be done, you have no idea. the example is einstein and plank. so what's difficult to figure out, the politics and culture of science are very parallel to every other human institution. they become very conservetizing, very group think, they -- go back and look at plate tectonics, first developed in 1915, totally ridiculed, accepted by every paleontologist as the world as obvious and doesn't become common sense in geology until 195 -1959, when it becomes impossible to reject. you see some of this with

alzheimer's, there are certain ones who believe, this is the right solution, why are you wasting money over here. you have to figure out, how do you run big projects, how co-you -- how do you continue to increase the other projects, and how do you allow the bike rider to -- the jute liar to go on with their project. >> one more word. i absolutely agree and something we worry a lot about, this is one of these things through our peer review system, and i think that's something if we're a millimeter ahead of everybody, you're a genius if you're five miles ahead of everybody, you're crazy. >> as someone who is often five miles ahead, i sympathize with that. >> thank you. [applause]

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> speaking at the same event, former obama administration white house budget director peter orszag criticized how budget chairman paul ryan's budget proposal's impact on the health care system and its negative impact on the deficit. this is 25 minutes. a couple re about the broader context in which we face ourselves. think it is now >> thank you. it is great to be back at brookings. it is now well known that the rate at which health care costs future in what's shown on this chart between now and 2050. social security is expected to rise from 5% of the economy to 6.

medicare, medicaid and other federal health expenditures are projected to rise from 5.5 to 12. so our success or failure at containing future cost growth will be a much more important determinant of our long-term fiscal future than either the deal that was just reached on discretionary spending or, frankly, the other measures that are under discussion now, important though they are, what you're struggling with in this room is the crucial long-term fiscal problem facing the united states. and more specifically with regard to the topic of this conference, most of the analyses that have been done on past cost growth in the united states suggest that a very large share comes from technology-related changes in the health sector. and as you can see across the bottom row there, on the order of magnitude of about half of the cost increases historically, a continued crucial role on a

going-forward basis. but if that's all -- the only story that was out there, this would be a very easy conference to attend and it would be very clear what should happen. the complexity comes because many of those technological advances have significantly improved health outcomes. and as this chart shows, which tries to account for the decline in mortality from coronary disease in the united states over a two-decade period, about half of the decline and very significant declines were experienced, about half of the decline occurred because of changes in health risk factors and in particular declines in smoking and so on and so forth, more than offsetting the increase in obesity rates. but the other half came from medical devices and technology. and therein lies the central tension that is the focus of this conference. we cannot afford open-ended continued cost increases driven

largely by technology or primarily by technology. but on the other hand, we don't want to lose the advances in health outcomes that are associated with a variety of technological improvements. . there's a new book out called the big short, documenting we are increasingly moving into politically segregated neighborhoods, republicans increasingly moving into republican neighborhoods, all the social psychology shows when you put like-minded people together, they go to extremes. s that exacerbated by jer i mandering and exacerbated by the blog steer and the cable news cycle and the result is an

increasingly dysfunctional political process. democrat votes with republicans and by that measure of polarization we were abormally low levels post-world war ii. started to increase in the late 1970s. now higher basically than its ever been. that is a fundamental problem facing a system that relies, to a significant degree at its heart on medicare and other federal programs. so in the face of these various challenges there are basically two conceptual approaches. you heard a bit about one of them this morning, a more consumer-directed approach. you certainly hear a lot about that from representative ryan. i will come back to him in a moment. and the other approach is focused more on providers in trying to drive value in terms of incentives facing providers. i want to immediately say these two approaches are not necessarily income patable

and they could be done in concert but there is a question about relative emphasis even in a combination approach and let me talk about both of them. the fundamental theory of the case behind the consumer-directed approach the fundamental reason we don't have more value driven even through technological changes, that consumers do not have enough skin in the game and if they did they would drive increased value. the fundamental limitation however is that even under a consumer-directed approach we would still have very deep third party insurance against high costs. for example, under a health savings account which is one of the most salient manifestations of the consumer-directed approach you have full insurance above some threshold and then the majority of overall health care costs are driven by those high-cost cases. and the combination of those two, so for example, this chart shows that the top 5% of medicare beneficiaries if you rank them by costs account for more than 40% of

the costs. top 25% of the beneficiaries, account for 85% of costs. consumer directed approaches have their biggest effect on the other 75% of beneficiaries who are disproportionately below the threshold but they only account for 15% of costs. so you get some traction but not as much as is often promised. now there's been a lot of discussion of mr. ryan's approach which embodies this consumer-directed plan for the future of medicare and i want to be very clear. mr. ryan's plan does reduce federal expenditures on medicare and it not only does that but it provides greater certainty around that federal path at least on paper but it is, i don't think any of us would view as a great accomplishment if all we did was reduced federal expenditures and shifted costs on to beneficiaries with no impact on overall costs. the whole theory of the cases that to be reduce

overall costs. that is the rhetoric that you hear. because of the consumer choice, you bring down overall costs. what did the congressional budget office find when it analyzed mr. ryan's plan? the first thing i had did find a reduction in medicare expenditures relative to the baseline, from $8600 to $8,000 in 2022. that part is clear. now again if all we were doing shifting on to beneficiaries, no great shakes. what cbo found however, you had some benefit from increased consumer choice against a small base. so you didn't get that much traction being more than offset by higher administrative costs through private insurance plans and less negotiating leverage than medicare. with the result being that it was not that you just shifted costs on to beneficiaries with no, with no reduction in overall cost it's much worse than that you are shifting costs on to beneficiaries in overall costs go up, not down

because those two final factors dominate any benefit from increased consumer-directed behavioral changes. and to a shockingly large degree that grows over time. so this plan, which is often being held out as reducing overall costs at least as evaluated by the congressional budget office does not reduce overall health care spending on the backs of seniors, it raises overall health care costs on the backs of seniors. and i don't think that has gotten as much attention as it should. now speaker gingrich would presumably say based on what i understand his comments have been this morning that that just demonstrates yet again how silly the congressional budget office is. what i would say is two things. first, i actually take his criticisms quite seriously. i did when i was the director of the congressional budget office. i invited him in to actually present what his approach would mean because it's easy to say we should take into

account new developments in scoring. it is harder to know, what exactly does that mean? that meeting never took place. i think it is easy to critique omb and cbo. they are not perfect but the relevant question is what's the alternative? what is the specific credible alternative to the system we have in place? and that i have not seen. okay so if the consumer-directed approach has a vast limited benefits and maybe actually some harm in terms of overall costs if you believe the most recent congressional budget analysis, what are we left with? fundamentally we are left with a provider-value approach in which we recognize that those high-cost cases, the top 25% of beneficiaries are where the money is and we also recognize that in those cases to a first approximation the health care delivered for most americans is what the provider is recommending. therefore, if you combine

those two observations, the only way you're going to contain health care costs over the long term is by affecting what the providers are recommending and what does that then entail? i think entails two reinforcing things. the first is much better information flow. over the next decade, next five to 10 years we will have a significantly expanded health information technology backbone in the united states. that, health i-t backbone will throw off a lot more information than what is currently available even through registries. and if used well in a comparative effectiveness research setting could then feedback on to clinical decision support software built into the hit systems, so what i would want in five or 10 years to be able to walk in my doctor's office, not having to fill out annoying paper forms. give the doctor permission to access my records and have the doctor have a set of best practice guidelines pop up from one of the professional bodies that going to see a doctor about

a heart problem, american college of cardiology and so forth, and frankly be able to click through the underlying information behind those protocols, to see whether my individual circumstances varied from that best practice protocol. that should be feasible to do in the united states. i think it would be reinforced in one of the things that was left out. i think unfortunately from the health act is a change in our medical malpractice system, not along the lines that are typically proposed where all you're doing is reducing, imposing caps on liability, but instead getting us a fundamental premise of the medical malpractice system which is based on a best practices methodology. or a common practices methodology, i'm sorry. so you have in order to avoid liability you have to basically do what the guy down the hallway is doing or woman down the haul wray is doing because that defines common practice. the common practice standard however is nebulous, often

not fully scientifically informed. it would be much better to have a safe harbor for evidence-based guidelines put forward by professional bodies. if my doctor is following an evidence-based protocol put forward by an accredited professional body and can show he or she did that i shouldn't be able to sue the doctor. in obgny settings where 80 or 90% of the problematic babies are not because of mistake by the doctor or hospital but because sometimes births are complicated, if you can show that you were following the best practice guidelines, you wouldn't be liable for medical malpractice that would reinforce this flow. the other thing that needs to happen is a change in the payment system where we're currently paying for quantity. we need to move to pay for quality. easy to say. hard to do. and what i would say in just to close on that is given that we need to take politics out of the equation under mr. ryan's approach, he is trying to take politics out of the equation

by just empowering consumers but without really giving a lot of specificity how we would alter the payment system towards value instead of quantity, except for a bank shot from consumers which may not work and cbo has suggested would not work. indeed, also in mr. gingrich's comments this morning i had a chance to look over the written comments, there was basically nothing on, there is a lot on let's put more money into research. not very much more how do we make sure the research is oriented toward value and not just more? except in paragraph seven or item seven, a bunch of pilot projects and experimentation at cms which is exactly the approach adopted in the affordable care act ironically. so where does that leave us? i think the key issue at this point is much of what was being discussed in the previous panel that i had an opportunity to hear which is, what do we mean by value?

how do we measure it? there are different approaches that exist abroad and there may have been discussion of that earlier. for example, as you know in the pharmaceutical setting in france there are five different categories based on the degree of advancement or the degree of improvement in a new drug. in austria there are three different categories for the same topic. there are variety of proposals floating around to move in that direction in the united states and frankly i don't see, i don't see a significant alternative. it's hard for me to argue against either patent life or reimbursement rates depending on whether there's a significant advance or a trivial advance from a new technology. doctors pierson and bach at sloane kettering have an idea that has been proposed to reimburse new technologies drugs in the united states for some period of time. they said three years. and if after that period they have not shown improved

medical efficacy relative to existing technology, it is not that you wouldn't allow those technologies, the new ones to be reimbursed. just that they would be reimbursed at the rate of the old technology. so getting at the same concept which is that if you have not actually improved medical efficacy you don't get paid more than a existing technology. we'll not have new technology just for new technology sake. we'll have you new technology to improve out comes and improve value of the just to close on this, if you tried to get that proposal through the normal legislative process in the polarized political environment that i mentioned i don't think you would have a very good chance. one of the reasons that the administration put so much weight on trying to make more of the politics out of this system, including through the independent payment advisory board, which very importantly in this kind of polarized environment changes the default so that proposals are adopted unless they are

specifically overridden as opposed to opposite. one of the reasons it did that to precisely try to encourage innovative, new, value-based or payment systems that are oriented towards value into the system in a more facile way than our current system. so i guess i would just close by saying this. there have been many criticisms of that fundamental approach. some of them warranted. some of them exaggerated but given the absence of a clear pathway from an exclusively consumer-directed approach to any significant cost reductions, let alone actually avoiding cost increases, i think the question we always need to be asking is, what is the plausible alternative? we, it is easy to keep talking and talking but it's hard to actually move forward. we need to avoid just spinning around in circles

because that entails a future that is utterly unsustainable, and i think we need to be moving a aggressively towards a new health care system, backed by much more intense health i-t, reinforced by comparative effectiveness research and with an evolutionary approach to a better payment system that emphasizes value and not quantity. thank you. [applause] >> peter, thanks for the comments. move over toward the middle a little bit here. >> i like being in the middle. >> that's right. i know you do. we have just a few minutes for a little bit of a wrap-up discussion here and i wanted to start that out with picking up on your comment about the politics and also about the approach to reform being kind of divided along the side of providers side incentives and consumer side incentives and reforms and you mentioned briefly in passing, well, maybe they're not

really all that in conflict and maybe it is a more of an issue of emphasis. i was wondering if we can build on that more. it seems like some earlier panels, reed and other payers in particular they do see these reinforcing each other. in particular they're trying to set up health insurance plans where if you have a serious chronic disease and you go to providers do unmeasureably better job getting better outcomes, reducing complications using all the evidence-based medicine you describe they would get substantial savings. just because they're high-cost individuals doesn't mean they can't get a big financial benefit from making the most of the evidence that's out there and taking advantage of information in particular on providers that are in turn using this better evidence on what's available on medical technologies to get the most benefits for patients at the lowest cost and think that's some of the reason behind the emphasis that paul ryan and others

have put on the consumer side. they think that can actually be a fairly powerful force. is that really that much in conflict with the provider side reforms that medicare and other payers might undertake directly? >> if all you do is bank, put all your chips down on consumer-directed health care which is effectively with respect to my friend mr. ryan, what his budget does, the probability that you succeed strikes me as exceedingly low, given, and cbo analysis underscores the risks involved. it is not like it's a risk-free thing to do. and that's by the way even if you continue to implement the program and you don't have such backlash what is written on paper is not what's implemented. in order for the combined approach to work, you need two things. you need more comparative effectiveness research. it is hard for me to know how a consumer, under a pure consumer-directed approach

would really know whether that mri is worth it or not worth it without more of that public good. and yet that has become so politicized. the irony, comparative effectiveness research should be among the only things among one of very few limited number of things, that both the pure provider perspective and the pure consumer perspective agree on because you need it for both to work. the second thing is, again, as you move away from the pure consumer-directed approach, all we're going to do is set up premium support approach and assume that will then feed through into better incentives for technology and for utilization, you do need to worry about, assuming again you're not in that extreme, incentives under medicare. so how are you going to take incentives built into the fee-for-service system and start migrating them towards fee for value? if you kind of dial back

those two key things i think you're then in a world where, you know, both the consumer side and the provider side come into play. so for example, on the pierson-bach approach, not only would the reimbursement rate be effective but presumably you also want co-payments to be affected by the degree of advance of a new technology. and that they would reinforce each other. >> that is something medicare should potentially thinking about too? >> in my view, yes. >> okay. let me open up, we have time or maybe one or two comments from out here so, nancy, you want to start? >> one of the problems with the poe lit at that says -- politicization, that the comparative effectiveness research written into the legislation no decisions on coverage could be based on that comparative effectiveness research. really stunning actually. and made some people happy but clearly didn't serve the needs. how are we going to get beyond that?

>> i think that's, look, there are a whole variety of manifestations of the polarized environment which we find ourselves and i don't have -- this is a much broader problem. i don't have -- you're asking a narrow question but it is reflective after much broader problem. i do not have an answer because the pole laization is reflecting tom deep structural changes i mentioned. it is frankly at this point the technical debates about how you measure value, which by the way remind me of economists debate about the right discount rate which can become, you know, it becomes philosophical at some point and at some point you just need to decide move forward recognizing everything is imperfect in life. in any case those issues strike me, while important, as much less challenging than the fact that our country has increasingly become averse to dealing with gradual long-term problems before the crisis. we'll deal with the crisis but we don't deal with

anything before it's a crisis. that is a fundamental problem. the point you're making is just one reflection of that deeper problem. >> doug, i think we have time for one comment in the back. that was the next hand up. >> thank you very much. i just want to mention, there tends to be this fallacy that medical technology and medical devices are driving the cost growth and we all recognize that health care costs are growing and they're forecast to grow at greater rates in the future yet i think it is very important to add to that discussion the fact that analysis of national health expenditures by the former chief actuary of cms found that medical devices represented five to 6% and that was constant over a decade. with respect to pricing, the device growth, device growth pricing was lower than cpi, lower than medical cpi and other measures. so i think that the benefits

of technology, which are tremendous both within the health care system it telephone as procedures have moved from long, in-patient stays to brief outpatient visits as patients gained new abilities to live independently on their own without the resources of their spouse or their family members, i think in the broader context the vast improvements in health care or health status of seniors in particular is underrated and not considered to the full extent it should be. i think those are important when you consider these recipes for reducing the cost growth. thank you. >> well, again, look, you mentioned medical devices. we can parse, i mean medical devices are a small share. pharmaceuticals are only 10% of the total health care spending. you can keep walking through the array of what at least most people describe as devices and technology and medical innovation and indeed if you look at the

cross-country comparisons it's not like one area has higher costs than the united states. one subsector has higher costs than the other countries and that explains the whole delta. instead it is spread throughout different components of the health system. yet again, and that is by the way why i put up chart on improvements in mortalty from coronary disease showing benefits of some of the technologies. the question becomes whether we're getting as much for that spend as we can and, as long as the payment system remains oriented towards just more and not better, i think the clear answer to that is no. >> the payment system and even some of the consumer incent activity as well. >> thank you for bringing that in to. >> great. that's a very nice point to end on, peter. thank you for joining us today. it's been a terrific >> next, "q&a"