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Effective Health Reform and the Sacred Cows of Health Care

By:
Date:
Location: Washington, DC

Remarks by Newt Gingrich
American Enterprise Institute for Public Policy Research
Washington, DC
November 3, 2000

[TRANSCRIPT PREPARED FROM A TAPE RECORDING.]

MR. GINGRICH: Thank you, Chris [DeMuth].

Let me run through a bunch of stuff because this is fairly complicated and I want to have lots a time for questions or disagreements, But let me suggest you start by going to the back of the paper, to the booklist, because the framework, I think, is really important to understand.

I believe that health policy is mired down in its own minutiae, and that most of the solutions that will make a dramatic difference in how we approach the issues of health and health care in the 21st Century are in fact growing up in the society at large, but those who understand the solutions spend almost no time on health and health policy.

Those who really have a very solid grip on health policy debate spend almost no time looking at these outside models, and so what I want to try to do today is, first, create a framework of understanding, then apply it to twelve sacred cows, and I got to thinking about sacred cows for reasons that'll become obvious in a couple minutes.

Let me just skip the very first one at the top, and which I'm going to refer to in a minute, but let me start with The Wealth of Choices.

Alan Murray, The Wall Street Journal Washington bureau chief, wrote what I think is a terrific book, on the notion that the Internet creates a bargaining society in which people have dramatic increase in their choices and a dramatic capacity to lower the cost of doing things, both because they have a more efficient way of using the market and because they can aggregate purchasing in ways that were historically not possible because they were too inefficient.

It's a terrific book and when you start to apply it to health care, the first thing you learn is that the government and the various guilds block you from implementing. But it is absolutely right about the world at large.

So the second [book], I want to recommend, Peter Drucker, The Age Of Discontinuities, now almost a third of a century old, basically describes the world we're entering, and that is a world of changes so large, that it is discontinuous. That was his point. That we understood the world from about 1865 to about 1965 because it was the world of steel, of chemistry, of radio waves, and we've gradually gotten used to it.

That we were entering a whole new series of technologies, and it was a discontinuity because you didn't know what would come out the other side. The book was so prescient, I think it actually makes more sense today than it did in 1968.

His other work is The Effective Executive. I simply recommend it because I recommend it to every audience. It is the best single book ever written on how to be effective, and because, if you apply the rules in that book to the debate on health policy, most of the current debate just falls out as being irrelevant. , It's really a powerful work, which he originally wrote, when asked by the Kennedy administration, in 1961, to give a lecture on effectiveness, and he discovered that, in fact, people don't spend much time on how to be effective. They talk about efficiency, they talk about a lot of other things, but the act of affecting your will, of getting done what you won't to get done is understudied.

New Rules for the New Economy. Kevin Kelly is the editor of Wired magazine. I find this to be the best brief introduction to the difference between the pyramid of the industrial era, the notion of the General Motors corporate structure with somebody on the top, and then the vice presidents, and then the general managers, and so forth, which was an enormously powerful model, but which, in fact, is directly challenged by a network society which is very fluid, in which people form partnerships. If you think of AEI, it is much closer to the Kelly model of a networked institution than it is to the General Motors model, and it's really worth looking at because he then lists ten principles which, if you apply the thinking about the health debate, lead you in very different directions than the current structure.

My own paper is immodestly in there because it's the easiest place to access the general idea that the scale of change we're going to live through is so large, that the next 50 years are an Age of Transition. That we will, in fact, never stabilize, because every time we learn something new, something new will be invented, and so we'll be constantly evolving, which is, by the way, a real challenge for bureaucratic structures because it takes them so long to adapt something new that, by definition, it's almost always obsolete by the time they approve it.

It's a very large challenge for the Pentagon, for the Health Care Financing Administration, and I would argue that it is factually almost unavoidable. We're going to go through enormous waves of change.

My secondary point in this paper is that, historically, large-scale periods of change are periods of declining cost, and that periods of declining cost can be characterized as periods of rising purchasing power.

Example. 1865 to 1905, oil went from 58 cents a barrel to 8 cents a barrel. John D. Rockefeller got very rich because he was able to lower the cost of production and marketing even faster than the cost to the consumer, and because a lot more people bought oil at 8 cents a barrel than at 58 cents.

Steel went from $120 the ton to about $18 a ton, and freight went from $20 a ton-mile to about $1.80. This is a period that invented the phonograph record, the electric light, the motion picture, radio, modern chemistry, the airplane and the automobile, and the telephone.

So if you'd been an adult in 1865, and somebody had said to you, "In 1905, you will get in your mass-produced Ford Model A--or Model T, you will drive to the motion picture theater where the electric light will be turned off so they can run a movie, and you will listen to the phonograph record playing, and then you will leave the movie to call your friend on the telephone," none of those things would have made any sense in 1865.

So when we think we're going through a lot of change, so did they, and the normal characteristic of a period of that kind of change is a declining cost, which means that, in theory at least, the notion that health care will become unaffordably expensive almost has to be wrong, unless Government artificially makes it true.

To Err is Human, is the report which said--and this is what got me to talking about sacred cows-- that in their [The Institute of Medicine] professional estimate there were possibly as many as 98,000 people a year dying in hospitals by medical error.

Now I used to serve on the Aviation Subcommittee. I was the ranking Republican. The idea that an airline would show up and say to us, you know, we lose, oh, 40-, 50,000 people a year, but, hey, I mean life's hard, our pilots don't like to change, the mechanics don't like learning new things, and you can't actually expect us to be serious about safety because, you know, the stock market wouldn't pay for it.

You'd close the airline down. You'd lock 'em up. You know, one plane in Taiwan takes the wrong runway and it's a worldwide story.

Firestone has an average of ten people a year dying, and we're going to bankrupt the company, recall 6.5 million tires, and change federal law.

There's an article I saw, the day before yesterday, that the Consumer Product Safety Commission is now saying that because we lose something like 17 children a year under two years of age to the blinds on curtains, we're now going to recall 800 million blinds.

Meanwhile, in the hospital nearest the Consumer Product Safety Commission more people will die this year of medical error than will die from Firestone tires and window blinds combined. In one hospital. That doesn't count, by the way, medical error in doctors' offices or medical error in nursing homes.

So I began to get fascinated. When this first came out in December, I thought to myself, (having been the ranking Republican on Aviation and knowing what our hearings were like), wow, this is really amazing. We should really change something. You know, 60-, 70-, 80,000 lives a year begin to add up. It's more than died in the entire Vietnam War.

And the attitude of course is, well, you can't do that because, after all, doctors would be unhappy, hospitals would be unhappy. So it just sort of gets pushed over. We talk about "minor palliatives," but they're more appropriate to the Firestone tire ten deaths a year than they are to the Institute of Medicine. So that report's worth your looking at.

Lean Thinking is James Womack's translation into a more modern version of Edwards Deming's concept of quality. You cannot have quality if you do not have a system. You cannot have quality if you don't have data. It's not possible. And if you study Juran, Deming, and, and Womack, you'll understand how powerful it is. Out Of The Crisis" was Deming's most important work on explaining the quality concept which he learned at AT&T in the '20s, and which he then taught the Japanese in 1951.

The Innovator's Dilemma makes the following, really important point. This is a very profound book, in this sense. All great breakthrough innovations, what Christensen describes as a disruptive technology, start weaker than the current dominant technology, and big companies, or big systems, that are using the current dominant technology, correctly reject the new disruptive technology because the customers tell them they don't want it.

The easiest example. When steam shovel manufacturers learned about the concept of hydraulic shovels--hydraulic shovels were very weak, lifted very small amounts of dirt, and when they went to their customers and said, "Would you like one?", they all said, "Are you crazy? We like giant steam shovels that are very powerful and that help us strip mine, or help us make the Panama Canal."

However, if you dug local water pipe ditches with a shovel and a pick, a backhoe with a hydraulic shovel was a fabulous improvement, and so the entire first phase was creating a brand new market among people who had never bought a steam shovel, and as companies built more and more backhoes, they got bigger and they got stronger. In one week they were strong enough, they started to absorb the least expensive part of the steam shovel business and the steam shovel manufacturers couldn't make the transition, because by then, the backhoe operators had a lot of experience.

Well, Christianson takes you through disk drives and computers, mini mills and steel, a whole range of these things. But here's the point. In a large bureaucratic structure like modern health care, all of the real breakthroughs will be people who don't get invited to Harvard. All the real breakthroughs will be people who don't make any sense at the bureaucracy at the Health Care Financing Administration. All the real breakthroughs will be too small for Aetna to figure out why to pay for them, and yet, in the open market, Christianson proves, again and again, that's where the real changes are.

Example. In the Government. The Langley was the first aircraft carrier. When it was built in 1919, it was too small. The airplanes on it were too slow. The weapons they carried were too weak, and it would have been a joke to suggest that they could sink a battleship. By 1938, that had all changed, but it changed because visionaries imagined the future that could be. They didn't worry about the present that existed. Because the natural use of aircraft in naval ships was to put one aircraft on a ship to be a scout to find the other fleet, to go sink it with your guns, and that's the natural incremental change, and that would have made perfect sense up to about 1937, and after '37, there was a catastrophic change in the balance of power.

Finally, I recommend you read Ray Kroc's Grinding It Out, and Sam Walton's Made In America, because if what you're interested in doing is inventing the lowest cost, best health, highest satisfaction system of the 21st Century, these are two of the greatest entrepreneurs of the second half of the 20th Century. Kroc invented McDonald's, and Walton invented Wal-Mart.

When you read their personal stories, they're always a mess. They always go out and say, "Let's go do this," and then it doesn't work, and then they've got to do new things. In the case of Kroc, he goes to the McDonald brothers who have two hamburger stands in Bakersfield, California. He's selling ice cream, milk shake machines.

He wants them to expand so he can sell them more machines. They tell him, "We don't want to expand. We like being a family business."

After six months, he begs them, will they license for him to go and franchise it, and they say no, we don't want to license. This is our name. You're going to take our family name.

Finally, he begs them long enough, they say, all right, here is the contract. Signs it, he goes to Chicago, he calls in a contractor to build the very first McDonald's in his hometown. The contractor looks at the contract and says, "You have a problem." In Bakersfield, there's no basement and there's no furnace.
You can't build a building in Chicago with no furnace if you want to operate it as a commercial store in the winter. So he calls the McDonald brothers who say to him, "You're really dumb. You shouldn't of signed that. But we're not going to change it."
He spends eight more months changing it. Now what's the point of the story? The point is when you insist that entrepreneurial start-ups meet the standards of an existing bureaucracy, they will always fail, because the nature of an entrepreneurial start-up is to solve problem after problem, which you only discover while you're doing it.

You can't plan it; you have to live it. And to the degree that we bureaucratize and politicize the health system, we minimize the capacity for entrepreneurs to invent a better future, and both those books, I think, give you that vivid understanding of how big the systems are they created, and how hard, in the early days, it was to predict what wouldn't work, and to fix what wouldn't work.

Now, in that framework--let me go back to the first book which is Ambrose's Nothing Like It In The World. Two examples there, that I think are perfect to frame. If what you want to do is not focus on micro managing the current politics of health, or figure out what's wrong with the current system, but if what we want to do is think about the future and invent a future that's very different, and much more powerful, and much less expensive, and much healthier.

The first is his description of Abraham Lincoln. In 1829, Stevenson invents the railroad. Remember that the steam engine is from 1720 to 1850, the great engine of modern change. It is, to the modern world of that 150 years, 130 years, what the Internet is today, and the computer is today, and it changed things all over the place. Textile mills, pumps for coalmine to get water out of them, the railroad, the steamboat--all these things are happening.

1829, Stevenson applies the steam engine to a railroad. 1830, the first engine is built in the United States. 1831, the second engine is built in the United States; both in the East. 1832, Abraham Lincoln, at 23, runs for the state legislature, and part of his platform is to build a railroad in Illinois. He has never seen a train, but he is instinctively convinced that in a large country railroads will matter.

By 1856, both parties are in favor of a transcontinental railroad. When Lincoln campaigns in 1860, having gotten wealthy as a railroad lawyer, he is committed to building the transcontinental railroad, which is an enormous undertaking.

Second part of it, which I think is very appropriate to the health debate that I'm trying to start. One of the observers of the rise of the American railroad said that the key was the contempt the engineers had for authority, because the engineers would go out and solve problems.

They were told, well, you can't make an all-steel rail. They did. They were told you can't invent the cowcatcher. They did. They were told you can't take trains around very sharp curves. They invented floatable wheels to be able to take a sharp curve. They were told you can't go up steep hills. They built engines that could go up steep hills. Every time they were faced with a problem, they were classically American. They were pragmatic. They didn't say what does the engineering school say? They didn't say what does the three senior English engineers say? They said, "Can I get it to work?" And because they invented and invented and invented, between 1830 and 1869, 40 years after Stevenson builds the first engine, the United States finishes the first transcontinental railroad, and it is an enormous achievement for its generation.

Now, in that context, my point is simple. We need a pragmatic approach to developing an entirely new vision of health based on what will work. Now, we need to understand when we're dealing with a problem in health and when we're dealing with a sacred cow.

We need to understand, also, all implementation has to be incremental. If you don't have a vision in which you're implementing, you're just wasting your time. You cannot distinguish between activity and progress without a vision.

So you jump in the car, you don't know where you're going, you run around the perimeter for five tours, you've gone a lot of miles, you haven't gotten anywhere. And I would argue that an amazing percent of the current debate on health is running in circles, inside a system that, by definition, won't work.

So let me just walk you through this, very briefly, and then I'll take questions.

In that larger framework, here are my observations about the health system.

The current system is a historic accident with layers of protected inefficiencies and with basic flaws in the very design. I do not believe, theoretically, you can take the current system and design a way for it to work, because I think it violates fundamental principles of how economics works and fundamental principles of how human organizations work.

I also want to suggest to you that the goal has to be transformation rather than modification, and the goal has to be replacement rather than repair.

I don't think you can repair the Health Care Financing Administration 132,000 pages. I don't think you can ultimately repair a third-party payer system which has no economic reality for a person who gets everything for free, and which has, by definition, a third party controlling the health you get and the health care you get.

I think those are, by definition, profound structural flaws in the current system. I also think, frankly, you cannot make the Information Age medical system work if it is a doctor-centered system. I think it has to be a patient-centered system in which the doctor is a partner, but in which it is in fact the citizen, the customer, the patient, who is the central point of activity and who bears the central responsibility.

That's a very different model and it's certainly not taught, to the best of my knowledge, in any medical school in this country today.

But as long as you have a doctor-centered model, where it makes perfect sense for you to show up and wait two and a half hours for an appointment, where the doctor has seven minutes to talk to you, and where, in fact, the doctor will have inadequate information, inadequate time, and will hand-write a prescription for you, you are not going to solve the system. It's just not going to work.

So in that context, I suggest twelve sacred cows, you could get to a few more but I thought this was more than enough for one day. I'm just going to walk you through, very quickly, and the first one is simple.

The first obvious step, if you want to reduce the total number of deaths a year by medical error, is to require an electronic medical record, and to require that every single prescription be electronic, and, in that context, the Federal Government is the largest purchaser of health care, has a legitimate role to play in providing its percentage share of capital for every doctor, office, hospital, and nursing home in the country.

But for us to tolerate, not knowing, not having--by the way, there's no question that you will save a significant number of lives just by going to electronic prescriptions and to having electronic medical record, so the doctor, for example, knows what your allergies are.

And those of you who have been to enough doctors' offices and filled out the same paperwork enough times know, it is a little weird, that in this day and age, you can access your record on an airline, you can access your checking account at an ATM, and you're expected, while you're sick with a fever, sitting in an office, to remember your medical record and write it down. It just tells you how obsolete the current structure is.

Second, there isn't any managed care in America. It took me a year and a half of interviewing people. I was a student of Edwards Deming. I have a pretty good sense of what "managed" means. There is no managed care; there's managed cost. There's not a single managed care company that gathers the kind of data that a serious manager would require in order to manage care. What they manage is the cost of procedures.

And you find that if you go and just ask them to show you the data. They don't know. They can't tell you about the outcomes. They can't track the information.
In that context, I would really suggest that people who do this for a living, and do it very well, I cited a couple examples--General Electric, Motorola and Ford--but there really ought to be an effort to think through--what would the information systems look like, if we were going to try to get in health at least the level of efficiency and at least the level of accuracy that you get with a Six Sigma system in Motorola, or at Ford, or somewhere else.

Third. Managing chronic disease may be the single biggest cost saving in the next 40 years. We know that we can reduce the cost of diabetes, which is either the largest, or second largest cost in health care, because it leads to kidney disease, to heart disease, to loss of your feet and to blindness. The leading cause of adult blindness in America.

We know that with good disease management we can reduce the cost of diabetes by at least 50 percent. The current system is peculiarly suited not to do it. Diabetes has to be managed every day. The average diabetic sees a doctor two and a quarter times a year, and doesn't talk about diabetes in either visit.

Now we know that by using the computer, by having an Internet-based system, by using phone call, there are a whole range of things we can do that transform managing diabetes, cardiovascular care, respiratory disease--there's a whole range of these--and they are, by the way, the fastest-growing single component in health care.

Fourth. The true patient protection is you control your health. The idea that by adding another bureaucrat to watch the insurance bureaucrat who watches the doctor, or that by allowing the trial lawyer to sue the bureaucrat or the doctor, I mean, this a model designed for maximum frustration. The truth is, and I mention a specific example in here--by simply making flexible spending accounts carry over, by allowing them to earn interest, you begin to recreate an economic interest for 80 million people currently covered.

You begin a first step, incrementally, towards the only model we know of that really works, and that's a marketplace in which the payer pays the provider, and the two of them know what each other's doing, and, by the way, you think about this in your own life. You go to McDonald's or you go to a store--we don't need a third-party gatekeeper to check, to see whether or not you got the right bill. You do it.

In fact, I don't know of any place, other than defense and health, where we assume that the person doing the purchasing isn't smart enough to purchase, so another person that doesn't know them will check the person that the other person's never met, to find out whether or not the procedure they weren't part of was actually appropriate.

Just think about that model and say to yourself, Why would anyone think this would work? The next point I want to suggest to you is we were right when we told the Russians centralized command bureaucracies don't work. Therefore, by definition, the Health Care Financing Administration's the wrong model, and any further debate on that's just--I mean, I would challenge anyone. I'd love to debate this point with almost anyone. How can anybody, with a straight face tell you, 132,000 pages of regulations in a centralized bureaucracy, is a plausible design? It's obviously an anachronism from an earlier era, and therefore, what we need is something where--Breaux-Thomas was a good first step--you need to move towards a system in which seniors have control of their health care, seniors have responsibility for their health care, and I think the numbers for the federal employee health insurance system is that there is something like a 100 pages of regulation, and then federal employees have a fairly wide range of choices.

By contrast, seniors have very limited choices in very controlled environments, in a price-fixed setting, in which there are 132,000 pages of regs. That's clearly wrong.

Sixth. This will be more controversial with people who already have good health care but--or good health insurance. You've got to have a co-pay. If you do not have an economic interest in what you're doing, you don't pay attention to it, and you guarantee overuse, and I would argue, even for people on Medicaid, there ought to be a co-pay, even if it's only a dollar, and I think this is as profound a change as welfare reform. But remember the base of welfare reform. We said yes, people can be responsible for their lives, and there was a big fight and it took us 20 years to win it.

Today, there are 50 percent fewer people on welfare than when I was sworn in as Speaker, because it turned out, when you give people a chance to be responsible for their lives, they go to work, they go to school, they get off welfare, they start earning a living, and, similarly, I would argue, any system which does not have some form of co-pay doesn't have an economic rationale built into it, and people will always abuse it, and there will always be a heightened inappropriate use of it.

Seventh. I think you've got to shift from a doctor-centered model of very limited information to a patient-centered model, where the patient actually has access to costs. I mean, why is health one of the very few things in American society, you call and say, "I need to come and see you, I think is what's wrong, what do you charge?" and the answer is we don't tell you. What were your outcomes like last year? How many times did you do this operation? Have you ever been sued for malpractice? We don't tell you. Why? This is a mythological environment. I mean, the fact is you deserve to know about hospitals, about doctors, about nursing homes, about pharmaceuticals.

What are the good things? What are the bad things? What are the costs? You can't have a marketplace without information and you can't have market decisions without information.

Eighth. I really believe we're having totally the wrong debate about drug benefit. Why would you want to design separate budgets for medical therapy?

We ought to have a single budget. The doctor ought to prescribe the most efficacious, least-expensive solution. If that means it's a drug and we're not going to put you in to have surgery, then you ought to get the drug. If it means you ought to have surgery, you ought to get the surgery.

I happen to be a big fan of Dean Ornish who has a lifestyle intervention change for cardiovascular [disease] that seems to work and save money. I think people should at least know about that option. But the idea that we're now going to have three pots-- a hospital pot, a doctor visit pot, and a drug benefit pot, is nuts; it's just crazy.

It'd be much simpler to just say let's have medical care and then let's find the savings by actually having better care at lower cost and by eliminating the administrative overhead.

One estimate is that the nonmedical administrative cost to health care today is $240 billion. That is more than any conceivable drug benefit. I just think that this whole debate's wrong and, with one single paragraph, you could allow drugs to be prescribed for, and then let's find ways to truly change the cost of health care by truly improving health and by truly applying quality systems that work in every other system I know of in the country.

Ninth. I really believe that the concept of cost containment, third-party gatekeepers and paperwork, are impossibilities. I don't know of any system where cost containment, in the end, contains cost, because it focuses you on the wrong half. What you want to focus on are what are the things I can do that dramatically crash costs?

I'll give you an example. I work with a firm called Metiom, which has one of their clients Texas Instruments. Medium is a business-to-business electronic purchasing system.

Texas Instruments has lowered the cost of a purchasing order by 75 percent, from $140 to $35. Now that's not cost containment. That's saving $105 on every purchase order. It's a totally different way of thinking, and I would just suggest to you that if you study people like Deming or Womack, or Juran. What you discover is the companies like Ford Motor Company transformed itself. A book I didn't cite is by Pete Peterson at Ford, called A Better Idea where he talked about how they were getting beat by the Japanese in the late '70s. They brought Deming in and they transformed the culture of the Ford Motor Company. By the end of the '80s, they were competitive with Toyota as the most efficient car producer in the world.

Now that's a totally different model and one which this city has almost no understanding of, although in American business, in fact, it enabled us to come back in the '80s and '90s and be the best competitors in the world.

The tenth one, I just want to suggest to all of you, think about this notion that doctors fill out paperwork to wait 60 to 90 days to get paid for something they already did. They charge you the cost of the paperwork, the cost of the administrative personnel, and, ultimately, they charge you the cost of the time-value of money. The insurance companies of course don't want to pay instantly because they want to live off the time-value of money. You end up paying for that.

I don't know how many of you go pump your own gas, where you put your credit card in. The fact is it's paid instantly, and we should be able, in the next two or three years, to set up a system where there's instantaneous payment, you sign, you indicate yes, I was here, yes, this was a doctor visit, it's paid immediately. If they want to audit after the payment, that's fine. If there are enough errors or ways to recover--but you would find, automatically, a drop of 10 to 20 percent in cost by simply going to an electronic fund transfer model, and I talked to companies that do that.

They get, sometimes, 20 to 40 percent reductions, if they walk in, and say to the doctor we'll pay you every day--you'll get the money by the end of the day. Very different model than the current system.

Eleventh. If we're really serious about taking care of the small businesses and the uninsured, extend ERISA to them. I mean, why is insurance more difficult to get if you're a small business? Because you don't have any of the advantages General Motors, IBM, and Microsoft have.

The fact is if we extended ERISA and allowed national pooling of small business and national pooling of individual purchasing, you'd have a dramatic drop, and if we allowed sale on the Internet, you'd have an even more dramatic drop, and you'd have much cheaper insurance available to a lot more people.

And twelfth, almost every savings I've described will not be scored by CBO or OMB, or HCFA, because they just bureaucratically say no. Even if you walk in and say here are seven companies in the private sector that just did it, here are the facts of their experience.

Last comment. A lot of people who know a lot about health will explain to you what I just outlined is impossible, it's much too radical, it can't be done. I'm going to give you three test cases in your own life. How many of you pump gasoline into your own car?

In the late 1960's, that was a very radical idea, and gas station operators argued, seriously, in the newspapers, and in state legislatures, that citizens would start fires, that they'd burn down the gas stations, that you could not trust them to pump gasoline. Those of you who are from New Jersey know, it is the last state in which they still pump gasoline, and the swap they have is real simple. There's no self-service in New Jersey but they have a much lower gasoline tax, so the price of gasoline is consistently below Pennsylvania and New York, so there is no pressure for self-service gasoline.
It's the last state which still has the old order, which is you're not allowed to get out and pump your own gasoline.

Second example. When automatic teller machines first came in, most banks didn't want them. They didn't think their client, their customers wanted banking outside of banking hours. They weren't sure their customer could keep track of their PIN number. They weren't sure their customer could keep track of how much they had in their account.

And you may think this is all exaggerated. By definition, if I talk about going from a doctor-centered to a patient-centered information system, you just know people [inaudible].

Last example. How many of you have ever gone on the computer and ordered an airplane ticket, all the way through, by yourself, on the computer as opposed to--okay; almost half the room.

Go back and look at what travel agents said when that first became available.

Now my only point is this. Every vested interest in health has a good reason for protecting its sacred cows. They will use every argument that gas station owners used. They'll use every argument that conservative banks used. They will use every argument that travel agents used.

And then remember, if we tolerated the same level of technology avoidance in aviation, that we tolerate in health, none of you would be willing to fly, because there'd be too many airplane crashes. The fact is in aviation we have very tough standards, we enforce the standards, and an airline that doesn't meet the standards we close down. And if I had had a meeting, and we had a hearing, and they brought in brand new technology that would save lives, and somebody said, well, you know, the pilots really won't feel comfortable with that, [unintell.] and say, What do you mean, they won't feel comfortable with a technology that saves lives? Then they're not going to get to be pilots, are they? Because we have a standard. You can't go out--and this, by the way, is not new.

The 1920's, the barnstormers who came out of the First World War, bitterly resented setting standards. A big fight in the 1920's. It wasn't obvious that we'd require safety. So the next time you get in your car and you put on your seatbelt to save your life, you might ask yourself, why is it we go through all that trouble, when the hospital you might be taken to has a fair chance of killing you with a medical error?

And why aren't we making the same requirement of the hospital, that we make of the automobile company or the tire company or other parts--or the airlines?

So that's a sweeping overview. I appreciate your tolerating that long a presentation. If we have some time, I'll be glad to take questions, comments.

Yes, sir?

MR.: In my book, anybody that starts out citing Peter Drucker on the right track. You give us a big plate. What is the first bite, and who should take it?

MR. GINGRICH: I think the first bite is to win the argument, whether it's a transformation or it's a repair, because once you win the argument, you're then into a very different way of judging what you're doing, and I think you've got to argue, we can tolerate 50- or 60,000 deaths a year in hospitals, or are we going to insist on a level of change that stops it?

Are we going to allow doctors to continue to hand-write in a way you cannot read, requiring 40 percent of all prescriptions to have a callback from the pharmacist? Or are we going to say, here's a Palm, here's a Casio, order electronically or you're not allowed to order anymore. Those are very direct, big decisions. Are we going to say patients have the right to know? You ought to know, before you go to a cardiovascular surgeon, how many times a year do they do bypasses? What's their record? How often do they have a problem and what do they charge?
You ought to be able to look at that for every cardiovascular surgeon in the country. And then you get to choose, and you'll find, very rapidly, people tend to migrate away from the ones who have very few surgeries and lots of malpractice suits.

But I think until you make the first test, which is are we really about fixing the old system a little bit while not affecting the centers of power, or are we about developing a brand new system? Until you make that decision, everything else just stays a muddle.

I think that's the first argument that has to happen in the next two or three years.

MR. : And that's a political argument.

MR. GINGRICH: Political and cultural. It's the country at large talking to itself. Remember, the e-voter is the e-customer is the e-patient. Every time people use an ATM, they're one step further away from tolerating the idea that they're going to go sit in a doctor's office for two and a half hours.

There's no reason you couldn't make a reservation on the computer for your doctor exactly like you make for an airline, and there's no reason we couldn't have a culture that said if you wait more than 30 minutes, they start reducing the amount you pay.

But that would imply your time was valuable. That's a revolution.

Yes, sir?

MR. : Thank you. What is your theory of these 40- or 50,000 hospital deaths, that lets you argue that they can be eliminated, because one has to suppose that a great many of them were inevitable, in some sense. Some people just will die, and some doctors make mistakes. People make mistakes. What is your theory of these deaths?

MR. GINGRICH: Let me say, first of all, Anne Beighey, many of you know her. Anne helps me with research on health here. She and I met with Lucian Leape yesterday, at Harvard, who has probably been the leading student of this issue, is a surgeon, by background. We're not talking [about] people who will die anyway. These are medical errors.

And he would argue that, clearly, 80 or 90 percent of them are avoidable. But you start with things like having records that are accurate.

You also I think have to have--and as I mentioned in the paper, you have to have liability reform, because people--you know, airline pilots would not turn in information if there was a trial lawyer waiting to sue them, and I think doctors and hospitals are very frightened of giving information accurately because they think they're so vulnerable to law suits.

But there's no question, if you talk to the people on the Institute of Medicine panel, they believe these are errors, that most of them are avoidable, but that it requires a systemic approach that is totally different than we've had up till now, where you actually deal with health as though it were a system, much the way you deal with manufacturing.

Yes, sir?

MR. : Thank you for a very interesting and vigorous presentation.

Why did you not mention medical savings accounts as an instrument for achieving or going towards many of the recommendations that you put to us?

MR. GINGRICH: Well, I favor medical savings accounts, and I think in referring to the idea of making the flexible spending account carry over, that is a major step towards making it a medical savings account. In a longer presentation, I would have made that point.

I think medical savings accounts are, in fact, a very useful step in the right direction.

Yes, sir?

MR. : Mr. Speaker, then for the Medicare or Medicaid recipient, would you advocate for vouchers?

MR. GINGRICH: Well, I think the Breaux-Thomas report indicated, clearly, a move in the direction of vouchers of some kind, and I would recommend the same thing for Medicaid, because you think about the logical argument on welfare reform, all American citizens can have responsibility for their lives, and I think this idea of a bureaucratically--this is another thing I didn't put in the paper that I probably should have, or I would in a longer version.

That is, I think what conservatives have to decide is they'll accept some redistribution if it isn't bureaucratic, and the challenge you have to say to liberals is, look, we'll take care of the poorest Americans but we're not going to do it through a large bureaucracy. We're going to do it by transferring assets in a way that they have control of their lives, that they're making purchases, and that they're involved in having choice in an active way, which is very different than the current Medicaid model.

Yes, sir? I'll take one or two more. I don't want to wear you all out.

MR. : Just a couple things, if you could help us connect them. One is you said the first bite is to change the thinking that it's a transformation, not a repair.

Conventional thinking now is, following the Clinton health care disaster, that incremental reform is good, and even Al Gore advocates incremental reform, although it's incremental under national health insurance through expansion of CHIP and buying into CHIP and buying into Medicare.

So how do you--well, are you saying that just over time, because of the use of ATMs, that'll change?

MR. GINGRICH: I'm saying, first of all, that you can have a very dramatic change in vision, but all implementations, by definition, are incremental. I would be opposed to trying to leap from the current muddled historic accident to some kind of rationalized system. I think that would be a disaster, just as it was for the Clinton.

But notice what the left has done. The left didn't give up on the direction they were going in. The left decided they could get to a national single-payer system by incrementally, every year, eroding, and I think the right's at a huge disadvantage, because the right does not have an alternative destination.

So what you get out of the right is let's do a little less of government this year, and we'll do a little less of government next year. But you don't get the argument that says, look, you want health care in which it is run by a bureaucracy, which will be even bigger than HCFA. It will be, by definition, obsolescent. It will, by definition, be fraud-ridden. So you'll get slower scientific progress, fewer new technologies, and fewer new medicines, and, presently, you can be like Canada, where you have all sorts of built-in problems, because those systems naturally erode over time.

Or would you rather go to the kind of system we know works?

MR. : One other comment. In '93, when the Republicans had an alternative to the Clinton plan, which was basically tax credits for the uninsured, for individual uninsured, the argument was they're too expensive to market to.

That has fallen away since the Internet, obviously, and it's interesting, the comment you made, that in previous revolutions, people saw the solution even though there were problems that they didn't know how to address yet.

MR. GINGRICH: But notice, you know, 50 states--in some states they actually tax the insurance premium. In some states you can't market over the Internet. So I mean you're talking about--I mean, this is why I do think--I think Government can be powerful in blocking the future, in some ways more powerful than necessarily creating it; but that's why I suggested that if you had an ERISA nationwide pool, that allowed the same kind of insurance to be offered to any individual person, that is currently offered at General Motors or General Electric, you could lower the cost of individual and small group insurance, dramatically, overnight.

You'll have all 50 insurance commissioners mad at you. You'll have all 50 governors mad at you. But you'll have about 25- or 30 million small businesses and individuals who will be thrilled because they'll now have the same price to pay that large corporations pay, and that single step would actually probably do more to eliminate the uninsured than any other step.

And by the way, the set of numbers--Airtran, they have an article in the Atlanta Constitution--if you buy your ticket from a travel agent, it costs Airtran $10. If you buy your ticket over the telephone by calling a reservation clerk, it costs Airtran $3. If you buy it on line, it's 30 cents. Now when you add in the cost of paying the premium, or paying the fee of the salesperson who sells you an individual policy, you can reduce all that and get down to what it costs, transactionally, on the Internet. You can, I think, dramatically lower the cost of individual insurance, small business insurance, while increasing the market.

I think you get to be--we've got two more. You and you. Okay. Then one person over here, and then we'll be done. Thank you all for being patient.

MR. : In your process of thinking and writing, I'm curious, how you came up with the religious symbolism of sacred cows. Did that come to you immediately, or how did you--
MR. GINGRICH: I didn't think of it as a religious symbol. It goes back to, I mean, sort of a standard American line, that something's a sacred cow and you can't touch it. And I got to that because for about eight months, I kept puzzling over--there were so many obvious changes in the world around us, that if you just common sense, you'd automatically apply to health, starting with the analogy of Firestone tires and the hospitals.

And the people will do it, are not stupid. I mean, people who are in health policy are among the smartest people in America. They're among the hardest working. They're among the most frustrated. You know, they spend endless hours fighting over this stuff and--

[END OF TAPE.]


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