Newt Gingrich

Address at the National Press Club:
Transforming Medicaid

August 21, 2005

MR. GINGRICH: I didn't quite expect the memories were going all the way back to the Jim Hightower debate. That was pretty good.

And I know that this is a city where it's very hard to talk about ideas because of the automatic reversion to talking about ambition and races and things that the city finds so much more comfortable than ideas. But despite your president's request, I am not going to get involved in a long tour of explaining to you how wonderful it is to be in Des Moines, Manchester, Concord, Cedar Rapids. (Laughter.) Instead I want to talk about ideas today.

And I want to start with a couple of our largest. Let me say, as the former teacher in me, there is a handout outside. Those of you who didn't get it can get it on the way out. It's also available at healthtransformation.net, or at my first name, newt.org. And it's a vision for a 21st century Medicaid solution, and that is what I want to talk about today. But I want to put it in context, and I want to talk about some things that I think Washington finds very hard to deal with.

And let me start with the notion of why I called my most recent nonfiction work "Winning the Future," because I think for our generation that's our challenge. I don't think we're going to be given the future. I don't think it's going to come automatically. And I think if we want to give -- I have two grandchildren -- Robert, who just turned four, and Maggie, who will turn six in October -- and if I want them to have the kind of freedom, safety and prosperity that my parents and my grandparents worked and literally fought to give my generation, then I think I have to be prepared to roll up my sleeves and win the future because I don't think it's going to come automatically.

And as I've tried to wrestle with this and to try to think through what do we really need to do as a country? Not as Republicans, not as Democrats; not as liberals, not as conservatives; but as Americans, what do we need to wrestle with? What kind of a dialogue do we need to really fix things?

The simplest phrase I can give you to capture all of it is that real change requires real change. And I want to start with this, and I'm going to come back to it because when I get to Medicaid, I want you to understand the context with which I'm thinking about Medicaid.

This is a city where everybody jumps up in the morning and their idea of real change is whatever the gossip is that relates to the politics of the personalities who are maneuvering to occupy seats. But if you come in and say now let's talk about real change, they rapidly shrink the concept to the smallest, narrowest, and, frankly, least relevant component. And so my underlying theme -- and you'll see it in this paper when you get it -- is to think of this city today as trapped in a box of 19th and 20th century institutions.

Remember that the Civil Service laws were originally passed in the 1880s when male clerks used quill pens sitting on high chairs while dipping the pen into inkwells. These laws have been codified for 125 years while the world changed. So to expect the current structure of government to match UPS or FedEx or Google or eBay or Amazon or Travelocity with e-ticketing is just impossible. It won't happen.

And you know, what do we normally do in both parties? Whoever gets to be in charge thinks they have to pretend the system's working because, after all, they're in charge. (Laughter.) But they're not in charge. They are actually not in charge. They are presiding over a series of mechanisms that are totally beyond control.

I want to talk today about Medicaid. If you combine Medicare and Medicaid, there are at least 39,000 pages of regulations, not counting what we believe are 15,000 pages of waivers at the Medicaid level, and not counting 50 states full of laws and regulations.

And one of my challenges to the Congress is to get all the documents together in one room -- (laughter) -- because it will make the case on the -- you'll look at it and you'll say this is silly; it can't possibly work. We told the Soviets this for 70 years: large centralized command bureaucracies don't work. Guess what? We were right, they were wrong. They disappeared. (Laughter.) But we won't take our own medicine.

So I want to talk to you today about real change, which will require real change.

I'm also going to suggest to you that actually as a country we have no choice. The politicians have a choice, the lobbyists have a choice, but the country doesn't. So eventually the country will just keep replacing politicians and lobbyists until we get to real change, and the reason is several fold.

The first is the threat of terrorism. We face the existential threat that terrorists are going to end up getting nuclear or biological weapons and literally eliminating freedom as we've known it. And this is a threat we grossly understate, and it has a very direct health care implication. How big a health system do you need if you lose a city with a nuclear event? How big a health system do you need if we're hit with an engineered biological and 55 million Americans are sick in a week? Now nobody is doing that level of planning, and yet that's reality. Neither of the things that I just said are unthinkable; they're just outside the political context of Washington.

So the sheer reality of the long war -- and I call it the long war deliberately. We're going to be fighting the irreconcilabe wing of Islam for at least 50 to 70 years. And that war is dangerous to us because it's not about an occasional car bomb, it's not about an occasional sniper; it's about the absolute danger that sooner or later they will get chemical or nuclear weapons, and then -- or biological weapons -- and then all of your freedoms will be at risk.

The second reason you've got to change is China and India. And let me be clear about this; again, unlike a lot of our politicians. They're a fact. Get over it. There are billion 300 million Chinese. They actually want the right to pursue happiness. They would like to be middle class. They'll all like to drive their own car. Guess what that's going to do to the price of oil? And there is nothing illegitimate about that. Why shouldn't they have every right to pursue happiness? That's what we favor for them.

But a good friend of mine, Bill Lockyer of Scientific-Atlanta, said to me, you can capture this reality in a very simple formula. He said we have a ten-seven-three-one problem. And I said -- I said, what are you talking about? He said, China grows at 10 percent a year, India grows at 7 percent a year, the U.S. grows at 3 percent a year, Europe grows at 1 percent a year, and our policymakers would like us to be more like Europe.

Now if you want to talk about how the baby boomers can retire happily with enough retirement money, if you want to talk about how my grandchildren can have the best jobs on the planet, if you want to talk about how we can afford to deal with energy and the environment and national security as a single topic, if you want to talk about how we're going to go into the future, you want to be growing more like China and India, less like West Germany.

And to show you how important policy -- here's a number to take home. Twenty years ago -- I'm half Irish; I'm an O'Dougherty (sp) on my grandmother's side -- 20 years ago, the average German earned 26 percent more than the average Irish. Today, the average Irish earns 28 percent more than the average German. That is a change of relative income of 54 percent in 20 years. And it's a sign that good policies work, and people have more money and more happiness and more take-home pay; and bad policies fail, and people are more miserable and more unhappy.

And so if we're going to compete with China and India -- and I think my grandchildren have no choice. If we want to be the leading country on the planet, we have to transform litigation, regulation, taxation, education and health. If we don't transform those five, we will not compete.

One single example. China graduates over 600,000 engineers a year; we graduate about 60,000. We graduate far more lawyers, so we then get to sue the handful of engineers we graduate. (Laughter.) That is not a system that is going to be leading the world in 50 years.

Now, in that framework, one last big -- or two last big areas to think about. Science is going to change at a rate of about four times the rate of the last 25 years. This is a real number. There are more scientists alive today than all of previous human history. They are connected by cell phone, e-mail, and they are then connected by venture capital and licensing. And so literally the period 2005 to 2030 is going to equal the period 1905 to 2005.

Now imagine you are sitting in 1905 in this room trying to describe in your own lifetime the world of 2005. Yet that is what's going to happen to us. It's the reason why Andy von Eschenbach, the head of the National Cancer Institute, can post on his website we could eliminate cancer as a cause of death by 2015, 10 years from now. And for the life of me, I do not understand why the Congress and the White House don't take that seriously because von Eschenbach's a very serious man. And he literally believes if you get early testing, early intervention, if you can move -- he has a very elegant model of discover, develop and deliver. If we can move the discovery from the lab, get it developed as fast as possible and deliver it in real time, he believes we could eliminate cancer as a cause of death by 2015.

Well, that's the impact of science, and yet we're totally unprepared for it. Instead, the Institute of Medicine reports it can take up to 15 years for a doctor to learn -- or 16 years for a doctor to learn a new best practice, so we could eliminate cancer in 2015 and your doctor could learn about it in 2031. (Laughter.) All of the intervening deaths are totally unnecessary. All the intervening suffering is totally unnecessary.

So science is going to drive us to change. And it's going to lead us to very bold, very dramatic changes in math and science education, which is absolutely inevitable if we're going to survive as the leading country in the world.

The Hart-Rudman Commission that I was on, that President Clinton and I created, that looked out for national security in 2025, said the number one threat to the United States is a weapon of mass destruction going off in an American city, probably from a terrorist event. We advocated a department of homeland security, and we advocated preemptive strategies. When we announced that in March of 2001, we got almost no press coverage. On September 12th people thought we were very prescient.

Nobody looked at the number two finding of the Hart-Rudman commission, which is the second greatest threat to the United States is the failure of math and science education. And we went on to say it is a larger threat than any conceivable conventional war. Now you look at the amount of effort we put into trying to win a conventional war, and you look at the total failure to be equally aggressive and serious about math and science education, and you'll see how big the gap is.

The last thing that's going to drive real change is the baby boomers. Now I want to sound very unconservative. I know after having done things recently with Patrick Kennedy and Hillary Clinton this will lead to speculation. (Laughter.) But nonetheless, I want to risk being unconservative.

It is not a problem to have people live a long time. It's a good thing. It's very important. You hear about the crisis of aging. This is not a crisis. If we were all dying, that would be a crisis. (Laughter.) I'm 62 this year. I'm a grandfather. I find this idea of active healthy aging more and more interesting. (Laughter.)

So the question is -- and I think we just have to have an adult dialogue about this. And I think it's very unfortunate that we've gotten off on the wrong foot on the whole Social Security debate because the truth is we need a comprehensive dialogue about the nature of aging.

Remember that when Franklin Delano Roosevelt created Social Security, the average person died two years before they were eligible. If you think about that, it's is one of the great political achievements of all time. (Laughter.) But today you're going to live on average 20 or 30 years after the date of retirement. Furthermore, Social Security's not the big economic challenge; Medicare is. Medicare is six times the size of Social Security. And finally, you don't want to be trapped into a system of dependency where you have a very limited future. You want to have the widest range of health opportunities with the widest range of technology supporting you so you have the fullest possible life, and you want long-term living a lot more than you want long-term care. And that's why Senator Kerrey and I agreed to co chair the project that's looking at quality long-term care, because we think it's really important.

So take the things I just said -- the need to rethink our health system in order to deal with potentially catastrophic attacks, the need to change our health system so we are capable of competing with China and India, the need to change our health system so we can keep up with the rate of scientific opportunity that will give all of us better lives -- at lower cost, by the way -- and the need for us to meet head-on the challenge of the baby boomers retiring and the whole scale of Medicare and Medicaid. That's the framework.

At the Center for Health Transformation, we have created a 21st century intelligent health system as a model of the future. And the essence of the model of a 21st century intelligent health system all of you can go out and apply yourselves.

First of all, it's based on the idea that the 21st century is really different from the 20th century. So however good your local institution, let's talk about what it should be like in the 21st century. And you know what that means. It means ubiquitous computing. It means wireless. It means massive databases. It means expert systems.

I have a very simple slogan, "paper kills." (Laughter.) You show me a paper prescription, and I'll show you the risk of medication error. You show me a paper record, I'll show you the danger of somebody dying. You how me a system that doesn't have any ability electronically to track expert behavior and to see what people are doing, I'll show you a system that's killing people. Not an idle statement. The Institute of Medicine says between 44,000 and 98,000 Americans die every year from medical mistakes in hospitals.

Now if that was happening in civil aviation, we'd rip the system apart to fix it. And yet we're told we can find $4 million to pay the parking lot for a hospital in the transportation bill, but we can't find $4 million to help them buy an electronic health record. And that's just a sign of a Congress and an executive branch that haven't been serious about saving American lives.

And we should ask the question, how many more Americans need to die to get to an electronic health record? How many more Americans need to die to get to electronic prescribing? Because that's what it's about. It will save money; it won't cost money.

There's no other industry in America that believes going to computerization and going to accurate data costs money. Look at your automatic teller machine where you get cash. Look at the cell phone you carry around that takes pictures and sends them electronically. Look at the e-ticketing you now get off of Travelocity or Expedia because you looked up your own travel time, you picked your own place to sit and you picked your own flight.

All these things are happening all around us. UPS and FedEx actually exist. I keep trying to get this across at the Congressional Budget Office and the Office of Management and Budget. These are not theories. (Laughter.)

And let me give you this one set of numbers about the opportunity. If we went to a Travelocity model of purchasing drugs, where you knew every possible drug you could buy, including over the counter, if we went to an after-pay rather than a co-pay so that you understood what was possible, and I would argue we could pay for the least-expensive prescription drug because we actually want compliance, we want you to have the drug. But we should incentivise you with a health savings account or a health reimbursement account so that you then have an incentive.

Let's say you bought the over-the-counter and you saved money. Half the money ought to go back to your employer, or to the government if it's on a Medicare or Medicaid; the other half ought to go to your health savings account or health reimbursement account so you have an incentive.

Now, let's say that last night you saw the perfect commercial. The most expensive, newest, most fabulous drug. It went from black and white to color, the music came up, the woman was beautiful; this is your life. (Laughter). I don't believe in closed formularies. I think they're destructive. Closed formularies are written by politicians and bureaucrats whose life isn't on the line. And they're wrong. They're profoundly un-American. So I'm for an open formulary. You write the check.

So we gave you the base amount for the lowest-cost prescription drug, you want the most expensive, it's $246 extra; fine, write the check. All of the sudden those commercials will diminish dramatically, because it's a really good commercial if it gets 246 bucks when it's your own money.

Now, what I just described is real change. But it's totally doable. Here's the numbers. Combining information to you, the consumer, with an open market, with open pricing, airline cost went from 23 cents per passenger mile to 12 cents per passenger mile in constant dollars, 1978 to 2003. Now, if you had a similar drop in the price of drugs -- and we've worked with Medimpact, which believes we might be able to take 40 percent off the cost of drugs; eliminates the entire donut in Medicare. But it's real change.

Let me now apply that to Medicaid. I believe we need to have introduced this fall a 21st century responsible citizens Medicaid Act. It's a very bold concept. There's a 40-year-old program totally mismanaged with 39,000 pages of general regulations along with Medicare, 15,000 pages of state waivers and 50 states worth -- plus D.C. -- worth of detailed law and detailed regulations. Utterly hopeless. Don't try to fix it. Go to a new, improved 21st century model.

Second, I'm prepared to have the debate we had on welfare. It's a responsible citizen's Medicaid Act. Don't permit things that say you can go to the emergency room six times in one week because you have a hangover, and nobody's going to charge you anything and we're going to pay for it. It's absurd. There's no reason we as a country have to tolerate irresponsibility.

Also, by the way, have a system where you can have an open assessment for fraud because there's no reason we have to tolerate the doctor -- the dentist, rather, in Brooklyn who charged for 991 procedures in one day -- (laughter) -- and was never caught by the state of New York until The New York Times had two reporters and a laptop computer. That's all it took. The estimate is that in New York State alone there is over $4,400,000,000 of pure fraud and another $12 billion of waste and abuse annually in Medicaid.

So I'm going to talk briefly about short run and then long run and then take questions.

In the short run, the reason I'm doing this is I'm very disappointed in the Medicaid commission recommendations that were sent up yesterday, because they are banal and lack any effort to get out of the box of the old order and do something for the future. And they assume that any kind of drug pricing in the current system has any meaning. All current drug pricing is in fact mythical. It makes no sense at all. I mean, nobody knows what AWP is because it's a non- number. So to say -- I mean, that's just equivalent to one more round of government manipulation of the market.

There are a couple things they could do immediately. And we outline them in here and I would strongly recommend you look at them, and I recommend frankly that the Medicaid commission look at them.

The first is waste, fraud, and abuse. If New York State -- if all they're trying to find is $10 billion over five years, and New York State alone is averaging over $4 billion a year in fraud, why would you take money away from honest doctors, honest hospitals and honest patients without first getting the money back from the people who are committing fraud? Four billion dollars a year in New York State means that New York alone if it was managed correctly would give you twice the savings they're trying to get over five years. Just in that one state.

So we don't have to do dumb things or destructive things in order to save money.

Second, the Bridges to Excellence program has a business-led program which has gone to diabetes education and diabetes management in Cincinnati and Louisville; they pay the doctors $100 extra; and they're saving an average of $350 per diabetic. If you did that for every diabetic in Medicaid in the country, you would save vastly more than the amount they're trying to save, and and you would do it with better care, with happier doctors, with people living longer, with fewer people needing kidney dialysis, heart disease. Largest single cause of adult blindness. Now, that would be a smart move.

You can also look at other things. Electronic health records. According to recent studies, they'll save $350 billion over the first 10 years years and then about $112 billion a year after that. The Medicaid share of that would be about $12 billion a year. So just going to electronic medical records over the next five years in the first year would save 2 billion (dollars) more than they're trying to find over five years.

Electronic prescribing. The estimate is that electronic prescribing could prevent more than 2.1 million adverse drug events and 190,000 needless hospitalizations annually, saving about $29 billion a year. The Medicaid share would be about $5.2 billion.

If you look at the development of palliative care, where people are getting better care for the pain they're in, they're getting better care for adjusting to whatever their circumstances are, the estimates are that palliative care saves 50 percent over the cost of acute care for exactly the same characteristics. If you look at a brand new thing we're looking at, which is HealthPia's diabetes phone, this is a phone designed as a glucometer, it's a cell phone, and it actually sends all your data to the doctor's office or to your site. It also calls you to remind you to check your blood sugar. It clearly has a dramatic impact on how well off people are, and it's stunningly inexpensive. And I would encourage everybody to look at the HealthPia diabetes phone.

And there's a brand new breakthrough in home kidney dialysis. Kidney dialysis for years has been one of the most expensive parts of the federal government, and we now have new systems that allow people to have dialysis at home with a dramatic improvement in quality of life and, we think, savings in money.

So I'm just giving you an overview. In the long run, I just want to suggest three -- that we replace the entire current system with three breakthroughs. And I believe if you did this, you would dramatically impact disparities and outcomes for Hispanic Americans and African Americans because a significant part of the reason you have the disparities is the current structure of the current Medicaid system, which I think has actually led to substantial increase in disparity for African Americans and Hispanic Americans.

We need three programs, not one. First, we need to turn disabilities into capabilities. And I would combine both the current disabilities programs and workers comp into a single program designed to maximize the ability of people to get early diagnosis, early intervention, early rehabilitation, and then to use modern technology and modern computers and modern information systems to give them the maximum possible life.

The current federal laws all in fact are biased and in favor of dependence and actually make it difficult for people to lead full lives if they have disabilities. We should be emphasizing capabilities and we should have workers comp as part of the same pattern, because most of the workers comp problems are rehabilitation problems, which because of the history of workers comp, became litigation issues rather than health issues, and that's exactly the wrong way to treat people who have situations where they need to be rehabilitated.

Second, I think we should integrate the healthy poor into 21st century health care. You know, we created, in order to help the poor buy food, we created food stamps, but we did not create 39,000 pages of government regulations on food purchasing. We said, here, now you get to go to a grocery store. Now you get to participate in everything everybody else is doing. Now you get all the range of choice other Americans get.

For the amount of money we are currently spending on the total bureaucracy relating to Medicaid, we could in fact give a voucher so that the poor could buy health savings accounts, and you could have virtually everybody who's in the healthy poor totally integrated into the modern health system, which we ought to do because our goal should be to have all 290 million Americans with insurance in a health system. If you voucherize the poor, you then have a tax credit for the working poor and small business, you then have a regular tax deduction for everybody who's above that level, you automatically create an environment in which you can move towards 100 percent insurance. I am against a single-payer system, but I'm very much for a 290 million payer system.

And lastly, we need to really deal with the challenge of long- term living for the frail elderly.

And I just want to point out here, I just described three totally different topics that we currently lump under Medicaid: people who have long-term challenges, where we have to focus on capabilities because they have either disabilities or workers comp issues; people who are actually pretty healthy but they happen to be very poor; and people who are in fact frail elderly, dealing with a totally different set of challenges.

If we redesign Medicaid into those three programs, we provide better outcomes at lower cost for more people; we do so in a way which dramatically changes the current trajectory of state budgets, we do so in a way which actually leads people to live longer while being healthier, which means they're less expensive, and this is the great -- this is why I talk about real change.

The current mind-set in Washington is I can either give you health or I can be cheap. It's exactly backwards. If I help you deal with your diabetes, you are less expensive. If I help somebody else in here deal with their cardiovascular problem, they're less expensive. If I have people with disabilities and I help them have capabilities so they can work part time, they're less expensive. If I help the frail elderly so they can live on their own in an assisted living environment with expert systems, they are much less expensive than putting them prematurely into a long-term care facility.

And so the new model has to be to have real change that maximizes Americans' ability to live as long as possible, as healthily as possible, with the highest possible quality of life at the lowest possible cost. And that's the goal we have at the Center for Health Transformation. And as I said, you can get all the details by either going to healthtransformation.net or by going to newt.org. And I look forward very much to your questions.

(Applause.)

MR. DUNHAM: Thank you very much. We have a wide variety of questions, some very long policy questions. So let me just jump in on it.

On Medicaid, you talked about waste and abuse. What is the solution for solving that? Do we hire a lot of New York Times reporters with laptops to check out the records? Or who should be hired or redirected within the system to get some enforcement?

REP. GINGRICH: Well, let me say first of all that for those who wrote really complex, technical questions, Jim Frogue is here from the Center for Health Transformation, and Jim is our expert in Medicaid, so everybody owes a big -- where's Jim at? He's over here somewhere. Stand up for a second. All the really hard questions go to Jim. (Laughter.)

But let me start with the core model again, because I keep talking about real change. Have you noticed that we have never had a study of fraud at McDonald's? Think about it. You show up at McDonald's, you order a quarter pounder with cheese; they don't give you the quarter pounder with cheese, you don't give them the money. (Laughter.) It's very straightforward. I mean, think about a system so whacked out that a dentist could submit 991 procedures for one day. And in the New York Times story they actually say they have people standing out in front of her office saying, if you have a Medicaid card, come inside and we'll give you your free CD player. (Laughter.) Because they just want your name long enough to start filing.

So start with the idea -- Conrad Burns, the senator from Montana, called me one time and said in cattle auctions, they have a procedure where if the bank has loaned you money on your cattle, when you sell the cattle, the auction actually provides a check that requires two signatures, yours and the bank's. So it doesn't go straight to the bank and it doesn't go straight to you. You could almost imagine a circumstance where you start by recentering the system back on you actually signing the bill, which means you'd actually know what the bill is, which means you'd say to that particular dentist, "Are you nuts?" (Laughter.)

But I'm not for saying all we need now is three more layers of bureaucratic oversight, you know. I think you have to really at a profound level rethink this. I would say to you, if the Congress this fall were to incentivise the states by letting them keep 10 percent of the money they found in fraud, you would save so much more than the $10 billion you're looking for in the first year that it would be unbelievable.

But that would be in -- and there's a paper we wrote called Entrepreneurial Public Management As A Replacement for Bureaucratic Public Administration, we recommend to all of you because we're trying to lay out this notion of what if we actually use common-sense incentives, free market principles, entrepreneurship, and applied it to governments? Maybe a little too radical for this city, but it's a start.

(Laughter.)

MR. DUNHAM: There are a lot of states trying to experiment with Medicaid getting waivers. I was wondering which states do you think have proposals that seem the most promising? What do you like out there that you see?

MR. GINGRICH: Well, I mean there are a number of governors who've shown enormous leadership. Certainly Jeb Bush in Florida has initiated a number of changes on Medicaid. Governor Romney, who we're delighted to have represented here today, has certainly done so. I think you have to look also at the program Governor Vilsack is following in Iowa. You've got to look at the program Governor Perdue, for example, has been very deeply involved with us in Georgia on applying Bridges to Excellence and beginning to develop a whole new approach on diabetes.

I think you can go around the country and you'll see that there are really a surprising number of governors. Governor Fletcher in Kentucky, for example, who again brings the great virtue of being a medical doctor and coming to the whole question of rethinking the system from the standpoint of caring first about the patient and caring first about the health outcomes.

Let me also say, Governor Sanford in South Carolina has introduced a very bold proposal for waivers. I mean, I sense that there are -- there's a lot of bipartisan movement -- Governor Bredesen in Tennessee. So I look around, I see a lot of bipartisan movement. And Governor Huckabee certainly has initiated this.

I'd also say in the area of aging that we have Governor Warner of Virginia and Governor Kempthorne of Idaho played a very real role on the quality long-term care task force that Senator Kerrey and I chair, and they've been deeply involved. Governor Kempthorne actually made it the leading topic when he was chairman of the National Governor's Association.

So -- the -- (inaudible) -- have, though, is this. And this is what's wrong with the current structure. Somebody out there in a state capitol is sitting around today, trying to figure out what it is CMS might say yes to, how write it so they'll say yes to it. And the process -- entrepreneurs make -- they make quick mistakes; they make quick mistakes, and they learn from them, and they make a new decision.

Public bureaucracy involves such a long cycle that sometimes if you were to track how often the state Medicaid director has departed between starting a project and getting it approved, so by the time it's approved you could be on your second, third or fourth Medicaid director, who doesn't actually remember why they submitted that idea. (Laughter.) This is a very, very serious problem in the structure of the current Medicaid program.

MR. DUNHAM: Electronic records seem to be vulnerable to individuals with access to the databases. We've seen it with some of the financial records, and issues in recent months. What needs to be done to keep health records protected from that kind of identity theft and misuse?

MR. GINGRICH: Well, let me say first of all, that if somebody wants to get your personal paper records, they're easier to xerox today than it is to hack into an electronic health record.

HealthPeace (sic/PeaceHealth) in Oregon, Washington and Alaska has 1,400,000 electronic health records. Kaiser Permanente nationwide has about 13,000,000 electronic health records. In Northern California alone, they have 51,000,000 years of electronic health records. Three million people times 17 years. The Cleveland Clinic has health records. The Mayo Clinic in Jacksonville, Florida is totally paperless.

So there are a substantial -- the Veterans Administration was one of the great pioneers at inventing electronic health records. There are over 13,000,000 veterans with electronic health records.

So these systems already exist, and they're already turning out to be pretty safe. But I would propose -- I would actually propose a federal law that's very tough, that says one, it is a real felony with, like, 20 years in jail if you hack into medical records. Two, no employer and no insurance company could use the records. And three, it is slander automatically if the news media or a blog site posts your record.

Now I would just say, in order -- it is in the national interest to ensure that health records, including DNA records, are kept private so that people are comfortable allowing them to be electronic. And I would put very substantial prohibitions against anything being done with them, other than the use by you and medical personnel, either with your permission or in an emergency having left a track record -- either a thumbprint or an iris scan so you know who they are.

MR. DUNHAM: We were talking about drug pricing. A coalition of employers has certified three pharmacy benefit managers to bring more transparency to pricing mechanisms. Do you think this kind of concept will work? What kinds of ways do you see out there that could work to hold down the prices?

MR. GINGRICH: Well, you know, it's very interesting. Again, it's a sign of the lagging indicator between the common sense of the American people and the political system.

Ninety-three percent of the American people believe they should know cost and quality before they have to make a health decision, whether that's their doctor or it's their hospital or it's their drug company. So start with that.

The Travelocity model I described earlier we know works. Everybody who's hearing me, you can go and go to Expedia or Travelocity right this minute. You can pull up almost every scheduled airline in the world, to almost every city in the world, with virtually every price. It's not totally technically true because JetBlue and AirTrans and Southwest require you to go to their sites. So those of you who are really good at saving money know you first benchmark the flight, and then you check out the really cheap ones.

But think about the scale of information flow. Go on eBay. Go to amazon.com. And this is not magic. And so I believe -- and again, I'm against closed formulators. I think closed formulators are very dangerous models from a health perspective.

But I'm very much in favor of posting price, and I would, frankly, allow off-label information to be posted so doctors could say this is what they actually prescribe it for. I would allow the full range of information. Think of it as a Zagat for pharmaceuticals.

And what you would find is over a very short period of time, people would learn an immense amount, and the doctor and the patient, or the pharmacist and the patient, would have dialogues, and people would make informed choices. And we know this is true everywhere except health and education.

I mean, if it's about your house, if it's about your car, if it's about getting a job, if it's about buying clothing, if it's about going on vacation -- it's amazing how complex Americans can be. They only get to health and education and think you're really stupid, you're really passive, and how could you possibly be expected to know anything? This is all an artifact.

In 1958, we required auto manufacturers to post prices. In 1999, 14 percent of the country went online to check prices before they bought a car. On average, they saved 2 percent. With no federal program, no mandate, no federal training, last year 64 percent of the country went online to check prices before they bought a car.

So it can be done. And I would urge that large manufacturers -- and I'd urge the 50 state governments -- form a single purchasing system online, allow people to go online, and you will drive prices down, because as people see their choices, they will make quality decisions with their doctor's help, their pharmacist's help and by reading the material. And within a year, the Canadians will be asking if they could join the American system to get access to that kind of pricing. (Laughter.)

MR. DUNHAM: To create transformational change, how do you overcome the influence of status-quo industries, which are such large donors in congressional and presidential elections?

MR. GINGRICH: You know, I was thinking about -- the other day I was trying to explain why I believe real change is possible.

I was an Army brat. Many of you may know. I was born in Harrisburg, Pennsylvania. Grew up at Fort Riley, Kansas; Orleons, France; Stuttgart, Germany. I arrived in Georgia as a junior in high school at Baker High School at Fort Benning in Columbus, Georgia. I arrived into a state which was segregated legally, and was a one-party Democratic state. And I arrived at a time when the New Deal and the Great Society and the building of an even bigger welfare state was still on offense. And five years after I came to Georgia, we passed the Great Society.

Now if you had said, in 1960, in my lifetime, the Soviet Union will disappear, you'll a Republican governor, Republican House, Republican Senate, two Republican U.S. senators, a Republican majority in the congressional delegation, and an African-American mayor of your largest city. And you then said, this will be in a country which will have passed welfare reform and had 60 percent of the people on welfare go to work or go to school. And, by the way, while you're on the way through as an Army brat, you'll be given an opportunity help balance the federal budget for four consecutive years, and pay off $405 billion in debt, while ending a 64-year Democratic domination of Capitol Hill, and creating a Republican majority, which will last at least a decade.

I think that would have seemed whacked out. (Laughter.) You know, I think people would have said, that's not possible.

So I start with two basic principles. Now one of them formed by Joseph Napolitan who was a great Democratic consultant in the 60s. He wrote a wonderful book called The Election Game and How to Win It. And he said, never underestimate the intelligence of the American people, nor overestimate the amount of information they have. I think that explains Ronald Reagan's entire career. That he believed if he went around the country, and he gave people information, they'd eventually take care of the lobbyists, and they'd take care of the Congress. And I don't think Reagan ever once tried to win a fight on Capitol Hill. He tried to win the fight at the grassroots, and he figured the American people would win the fight on Capitol Hill.

The second is a wonderful quote from then-Prime Minister Margaret Thatcher who said, first you win the argument, then you win the vote.

I don't worry much about big industries. I don't worry much about big interests. I worry about figuring out whether or not we can have this kind of a dialogue and this kind of a conversation as adults, and collectively decide what our country needs for our children and our grandchildren. And if we make the decisions, they'll all fall in place. That won't even big a very big problem. It will be easy to ultimately get these things done if the American people decide they're right.

MR. DUNHAM: We have four different questions on immigration. I'll boil it down. First, what is the best way to handle the legal immigration in the country? Secondly, as a political issue, it obviously splits both parties. What do you foresee immigration being as a political issue in 2006-2008?

MR. GINGRICH: It's a great question. I'm glad somebody asked it. The fact is, I don't know of any area where Washington is further apart from the American people. I mean, the American people get it, and this city just doesn't. And I don't understand why.

Let me start with the basics. After 9/11, we should be worried about security. After London, we should be aware that this could be really serious. Porter Goss, the director of Central Intelligence, two months ago went to Capitol Hill, testified publicly on the record, that he is genuinely worried about a nuclear weapon being driven across the border.

Now the next time when we have a 9/11 commission looking back at a nuclear event and they say, gee, why didn't anyone know it? Well, we know it. I'm here telling you now. So what does that mean? It means you had better have absolute control of your borders, and you'd better have absolute control of your coast. Period. Unless you're willing -- I mean, why are you building a $9 billion-a-year ballistic missile defense system when they can drive it across the border? (Laughter.)

Okay. Second -- in order to have absolute control of the border, you have to have a blue card temporary worker program. And I will debate anybody on the right about this. The idea that you're going to replace 11 and a half or 12 million people with the economic differential between working in the U.S. and working in Latin America, and you're not going to have a temporary worker program, and you can make it work is, I think, a fantasy. And I think we have to confront that head on. And we have to win the argument in the Margaret Thatcher tradition.

So what would I require? I would require that you give us a thumbprint and an iris scan. I would require that you sign a document that says you will obey the law and pay taxes, and if you don't, we can remove you from the United States in 48 hours. I would have every one of those people in a computer. I wouldn't dream of having immigration service run it because it's incompetent. (Laughter.) I would hire people that all of you know personally can do this. They're called Visa, MasterCard and American Express. (Laughter.) And I would have them run the computers. I would produce documents that are extraordinarily hard to counterfeit. And I'd have the documents matched up in real time.

Now, in order to do that, I would do two more things about immigration. I would say to every illegal immigrant in the United States, you will go home and apply for a blue card. Period. And don't tell me they can't do it. They were able to get here illegally. They could get home legally. (Laughter.) And if the business wants them to come back, they can pay for the roundtrip.

But I do not want anyone entering the United States as a career having first broken the law. It is a very sick process to have amnesty for people who knowingly and willfully broke the law. And it also says to their honest cousin back home who's been waiting three years for a visa, you're stupid.

So if we're going to enforce the law, let's start by enforcing the law.

Finally, I would say on this front, once you have a blue card temporary worker program, any business that hires and illegal will get hammered, because the dirty secret of American government today is that we have 11 million people being hired with willful law breaking on the part of American citizens who are paying them. And it's wrong. And so you ought to have a straightforward ability to define who's legal, who isn't legal, and to make the businesses absolutely responsible for doing it.

Lastly, I'm an American. And by the way, this program is not -- doesn't split the country. Time magazine in a poll last week -- overwhelmingly Americans of Hispanic descent agree that illegal immigration is a problem, and overwhelmingly Americans of Hispanic descent believe their children should learn about the United States. It's only the ethnic politicians who try to make it into an issue.

And so finally, I'd say to you, I am for people becoming legal citizens. One of the great genius of America is our willingness to be open to talent from the whole planet. But I would require them to pass a test on American history in English, and I'd be quite clear that they are becoming American (emphasis added) citizens; they're not becoming dual citizens. But I'm happy for people who want to become American, want to learn about America and want to participate in America, becoming American citizens. That's what I think you should do.

MR. DUNHAM: On a different subject. You once suggested that the Pentagon be turned into a triangle. Do you still believe that? And what do you think of the management of the Iraq war and the transformation attempts of the Pentagon?

MR. GINGRICH: Well, that's covering about three different topics in one. (Laughter.)

Let me say first of all, I do think in terms of downsizing, in terms of going to entrepreneurial public management, in terms of using logistic supply chain methods. We still have a Pentagon that is vastly archaic, industrial and old fashioned in its purchasing system. We can still take a lot of cost out of the system. And I still think it would be useful for us to think that way.

I said years ago, I'm a hawk, but I'm a cheap hawk. I'm still a cheap hawk. There's no reason wasting money in uniform is any better than wasting money anywhere else. And I think that's a different question than what do you do about the war on terror and the war in Iraq? So let me separate those two.

And I think on balance, most of what Secretary Rumsfeld has tried to do on transformation is right.

We have a real problem in discussing the Middle East because we don't understand how to put it in context. We are faced with a long war with the irreconcilable wing of Islam. And it's irreconcilable because, for example, it would not allow any woman to be here. So unless you're willing to give up appearing public, having a job, having your own checkbook, driving a car, voting, you name it, we're not going to negotiate.

So if we're not going to negotiate -- and these people are quite -- if you go to their websites -- many of them in English -- they're quite straight about this. And so you start with the idea -- they really do want a different than we're going to live in. And therefore, one side is going to win because it's not negotiable.

Second, the Middle East is a subset of this war. This war is going on in Holland, where a Dutch television producer was killed. It's going on in London where, remember, the people who did the bombing were British citizens, speaking English, with every right to vote in an election. So democracy is important, but not sufficient.

And so this is going to be a big war. In the Middle East, the Iraq campaign and the Afghan campaign are subsets of this war. And unless you understand it in this framework, unless you understand that Syria, Saudi Arabia, Iran and Pakistan are all dangerous places and could blow up, you can't appreciate how hard this is going to be. And that's my biggest complaint.

Nobody is yet prepared to stand up and say, this is going to be really hard. This is going to take a long time.

Now the lady who is in Crawford, I sympathize with her. I'm an Army brat. My father served this country in the Infantry for 27 years. But the question we have to have an honest, national dialogue about is simple. If we leave Iraq, do you really think Zarqawi is going to retire? (Laughter.) Do you think after the victory parade of the people who hate us, they're going to have fewer recruits? Do you think they're going to be less dangerous? Do you think Madrid, Amsterdam, London, New York, Washington were accidents?

I think that's why we need this dialogue. But we need to elevate it to a level that's serious. And it raises just one other example. People who want the folks in Guantanamo to be suddenly be treated like they're normal Americans, you have to ask them a question. These are people who have said as a matter of their religious faith they intend to kill us. We may end up discovering we have to keep them locked up for their entire lifetime. We haven't been in this kind of war. We don't have ground rules for this kind of fight. And we need a much more substantive, much more serious discussion of the reality of the world we're in, and therefore, putting Iraq inside that discussion is the only way to really talk about Iraq rationally.

MR. DUNHAM: We have 10 questions on 2008. I will ask a simple question.

On a scale of zero to 10, zero being no chance, and 10 being absolutely, what are the chances that you will run for president in 2008?

MR. GINGRICH: Zero is -- I want to make sure I get the numbers right. (Laughter.)

I would say there's somewhere between one and 10. I mean, I don't think -- (Laughter.) You know -- I mean, who knows? It's a long way from here, you know.

But I just want to close and say, I've always enjoyed coming here and sharing ideas. I really think that for most Americans, the 40- year, angry, hostile process we've been through, starting in the mid- 60s, has worn out. They are tired of the negatives. They are tired of the attacks. They are tired of traditional debates. They are tired of all the baloney by which consultants look at focus groups to get 40 seconds to be memorized so candidates can pretend they're actually answering.

And I think the country -- most people I see -- I give 250 speeches a year. Most of the people I talk with around this country have a much better sense of how much trouble we're in than Washington does. Most people are prepared as adults to really have a dialogue about it. And most people are prepared to put almost everything on the table to talk through how we give our children and grandchildren a better future.

I appreciate your giving me an opportunity to come here today and to share those kind of ideas. And I hope you'll look very seriously at our proposal on Medicaid, because I think that's the right scale of change if we really want to have better health outcomes and do so at a price we can afford.

Thank you, all, very, very much.

(Applause.)

MR. DUNHAM: I want to say thank you to Speaker Gingrich, and add to his collection of certificates of appreciation from the Press Club and Press Club mugs. You can have a party. (Laughter.)

MR. GINGRICH: Thank you, thank you.

MR. DUNHAM: Now, the traditional last question. This is the Texas reporter in me, and I apologize. But do you ever look back at your old nemesis, Speaker Jim Wright, with fondness, or do you think he got what he deserved?

(Laughter.)

MR. GINGRICH: Well, I think both. (Laughter.) Jim Wright, when I was a very junior member and he was the majority leader of a party which had been in charge for a long time, he always dealt with me with professionalism, with courtesy and was helpful. He's also one of the strongest men to serve in the U.S. House in my lifetime. And in that sense, he was a very, very worthy advocate and adversary.

And I think I look back with sadness at how his career ended because, in fact, he had done many things for this country, and in a lot of ways it was sad to see how it happened. But I don't look at Jim Wright with anything except a sense of respect and sadness.

MR. DUNHAM: Great. Thank you very much to Speaker Gingrich. Thank all of you for coming today.

I'd also like to thank National Press Club staff members Melinda Cooke, Pat Nelson, Jo Ann Booze and Howard Rothman for organizing today's luncheon. Thanks to the Press Club library for its research.

And we're adjourned