[Congressional Record Volume 141, Number 168 (Friday, October 27, 1995)]
[Senate]
[Pages S16067-S16084]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]





  THE BUDGET RECONCILIATION BILL--A Missed Opportunity to Make Smart 
                                Choices

  Mr. DORGAN. Mr. President, during the past few days, we have had 
extensive debate on the Senate floor about what this budget 
reconciliation package will mean for the Medicare and Medicaid 
programs. Now, as we reach the conclusion of this debate, I want to 
explain some of the reasons why I must oppose it.
  I want to say right off that I am deeply committed to ensuring that 
the Medicare and Medicaid programs will be here for the millions of 
older Americans, children, and individuals with disabilities who have 
come to rely on the services they provide. Thanks to Medicare, 99 
percent of senior citizens, who have paid into the program during their 
working years, now have affordable, guaranteed health care coverage. 
Likewise, Medicaid provides a much-needed safety net for 36 million 
low-income elderly nursing home patients, the disabled, and pregnant 
women and children.


                       What is this Debate About

  The debate on Medicare and Medicaid has centered not so much around 
whether projected spending for these programs should be reduced, 
because Members of both parties agree that this should be done. Instead 
the focus has been on how much spending should be cut. I believe we 
should limit the rate of growth of both of these programs to a more 
sustainable level so that they will continue to be here for the 
beneficiaries who depend on them.
  However, I am convinced that the bill before us--which will cut 
projected Medicare spending by $270 billion and Medicaid spending by 
$182 billion--goes far beyond what should be done to achieve this goal, 
and instead will jeopardize the very programs the reductions are 
intended to protect. This drastic level of cuts would require that 
Medicare spending per beneficiary be held to a growth rate of 4.9 
percent, while private health insurance will continue to grow at a rate 
of 7.6 percent per person. It is just not reasonable to expect Medicare 
to grow by such a small amount, especially when you consider that 
200,000 Americans become eligible for the program each month. Just 
within the 7 years covered by this budget reconciliation bill, Medicare 
will insure 3.7 million more people than it does today.
  We have been told repeatedly by the majority that these $450 billion 
in cuts are necessary, particularly to save the Medicare program from 
insolvency. 

[[Page S 16068]]
But according to Medicare actuaries, only $89 billion is needed to 
extend the Medicare trust fund for 10 years.
  So why does this bill cut Medicare by $181 billion more than the 
experts say is necessary--and cut Medicaid by $182 billion? Because 
this budget reconciliation bill also contains $245 billion in new tax 
breaks, which will largely benefit the wealthiest in our country.
  It is wrong to be making an unprecedented level of cuts to Medicare, 
Medicaid, and other critical programs while granting tax relief to 
people making over $100,000 per year and to large corporations taking 
advantage of tax loopholes.


                   The Impact of This Bill on Seniors

  Under this bill, older Americans will be asked to pay more for their 
health care but can expect to get less for their money. The premiums 
that seniors pay out of their Social Security checks for their 
physician services will double and could exceed $100 per month in the 
year 2002. On top of that, their deductible would also increase from 
$100 to $220.
  I fear that these premium and deductible increases could make 
Medicare coverage out of reach for some seniors. Most older Americans 
have very modest incomes. Seventy-five percent of seniors on Medicare 
live on less than $25,000 a year. And in North Dakota, older Americans 
get by on even less: 70 percent of our state's seniors have incomes of 
under $15,000.
  Already, seniors spend 21 percent of their income for health care. In 
1994, the average older American spent $2,500 for medical care, 
prescription drugs, and other health care expenses not covered by 
Medicare--and this figure does not even include the cost of long-term 
nursing home care, which averages nearly $40,000 a year.
  In addition to costing more, the quality of health care older 
Americans receive could very well decline. That is because the portion 
of the cuts that do not fall directly on beneficiaries will be borne by 
doctors, hospitals, and other health care providers, who even now are 
reimbursed at only 68 percent of the amount they get from private 
payors. As a result, these cuts could create a second-class health care 
system for the elderly.
  This budget bill, with its $182 billion cut in projected Medicaid 
spending, could force hundreds of thousands of middle-income seniors 
and their families to shoulder the substantial burden of nursing home 
costs also. It turns the Medicaid program over to the states in the 
form of a block grant and repeals the Federal guarantee for nursing 
home care for the 60 percent of nursing home patients who qualify for 
Medicaid--many of whom have already used up their life savings in 
paying for their care.


         Consequences of Medicaid ``Block Grant'' for the Needy

  Our Nation's seniors are not the only ones who are being asked to pay 
the bill for tax breaks for wealthy individuals and corporations. 
Children will also lose under this plan to turn Medicaid over to the 
States as a block grant. One in five children currently receive their 
health care through Medicaid. Their care is not expensive--they 
represent 50 percent of all Medicaid beneficiaries but receive only 15 
percent of the benefits--but it is important. The immunizations and 
preventive care that these kids receive help them to grow up to be 
healthy, productive adults. I think it is also worthwhile to note that 
fully half of the kids now covered by Medicaid are members of working 
families.
  Under the block-grant plan, North Dakota will receive 22 percent less 
Medicaid funding over the next 7 years than our State is projected to 
need. Cutting provider reimbursement rates and enrolling more 
beneficiaries in managed care simply will not generate enough savings 
to offset the loss in Federal funding, so States will have no choice 
but to terminate coverage for some current recipients or to reduce the 
benefits offered.


                    Impact on the Health Care System

  I believe cuts of the magnitude called for under this bill will also 
devastate the health care system, particularly in rural areas. The 
majority of the savings achieved in Medicare will come through reducing 
payments to hospitals, home health care providers, and other health 
care professionals.
  One-quarter of all rural hospitals are already operating at a loss 
and are in danger of being shut down if their payments are reduced 
further. Rural hospitals are dependent largely on Medicare and Medicaid 
patients for their livelihood. Between 1983 and 1993, the number of 
rural hospitals dropped by 17 percent, compared to a 2 percent drop in 
urban hospitals. Rural residents already suffer from a lack of access 
to medical care, and additional hospital closings in rural areas will 
further exacerbate this problem.
  Cuts of this magnitude cannot be absorbed within the Medicare system 
alone, so health care providers may have no choice but to shift the 
burden for their uncompensated costs onto their other patients in the 
form of higher fees. I do not think it makes much sense to force higher 
costs for medical bills and health insurance onto the rest of the 
population, thereby pricing health care out of reach for even more 
Americans.


                   A Responsible Medicare Alternative

  I believe it is possible to balance the budget and protect Medicare 
at the same time, and I supported Senator Rockefeller's amendment that 
would have accomplished this goal. Under Senator Rockefeller's 
amendment, Medicare's projected spending would have been reduced by $89 
billion, ensuring the solvency of the Medicare trust fund through 2006. 
This $89 billion is a far more reasonable reduction and could have been 
achieved without new increases in costs for people who simply cannot 
afford to pay more for health care and without damaging our world-class 
health care system.
  Senator Rockefeller's amendment would have been paid for by scaling 
back the tax breaks provided in this bill for wealthy Americans. I 
thought that was the responsible course of action, but unfortunately, a 
majority of my colleagues did not agree, and the Rockefeller amendment 
was rejected by a 53-46 vote.


                      A Better Choice for Medicaid

  As with Medicare, I agree that we must control Medicaid's rate of 
growth, but I cannot support the block grant approach provided for in 
this bill. As an alternative, I voted for Senator Bob Graham of 
Florida's amendment to reduce Medicaid's projected spending by a more 
reasonable $62 billion over seven years. This amendment would have 
maintained the guaranteed safety net that Medicaid provides for more 
than 36 million needy older Americans, the disabled, and pregnant women 
and children. At the same time, the Graham amendment would have 
restrained the rate of growth of the Medicaid program by placing a cap 
on federal funding based on per person spending, rather than by a flat 
block grant. But, as with the Rockefeller amendment for Medicare, 
Senator Graham's amendment was defeated by a narrow 51-48 margin.
  I am very disappointed that a majority of my colleagues have let 
these opportunities for responsibly controlling Medicare and Medicaid 
spending pass them by, and I simply cannot support the more drastic, 
and unnecessary, cuts to spending still called for in this bill.
  President Clinton has indicated that he will veto this bill unless 
these severe cuts are moderated before it reaches his desk. It is my 
sincere hope that, after this bill is vetoed, Congress and the 
President will be able to work together to achieve a reasonable 
compromise that will provide the fiscal discipline the American people 
want from the Federal Government without sacrificing the health 
security they deserve.
  Mr. ROCKEFELLER. Mr. President, in my view, every United States 
Senator will be making a statement about their fundamental priorities 
as they cast their vote on this reconciliation package. While each and 
every vote cast on this floor is key, today's vote on the 
reconciliation bill is a pivotal one about the future of our country, 
and the role that our Federal Government can and should play in the 
lives and well-being of American families.
  While most of our debates have focused on budget numbers, I have 
tried to talk about the families and the real people who depend on 
Medicare, Medicaid, student loans and all the other major programs 
affected by this legislation in many serious ways. The provisions of 
this bill will have enormous impact on children, families, and seniors 
in West Virginia and every State 

[[Page S 16069]]
in this Nation. We should be mindful of them as we cast our votes.
  I want to be clear. I believe we can and should balance the Federal 
budget and eliminate the Federal deficit. This is a vital goal, but it 
is equally important to ensure that the burdens of achieving a balanced 
budget are responsibly and fairly shared among all Americans. I 
strongly feel that we should not balance the budget on the backs of 
seniors, poor children, and working families.
  The programs that would be drastically cut and changed by this 
reconciliation bill often are the difference between security and 
insecurity, health and illness, and sometimes life or death for seniors 
and American families who depend on Federal programs for their health 
care security.
  I was proud to take the lead in offering the first major amendment to 
this budget, designed to save Medicare, a historic program that has 
provided seniors with health care security since 1965, giving them 
peace of mind and a higher quality of life. While some may cast 
aspersions on Medicare, I believe it is one of America's proudest 
achievements.
  Our amendment was not to retain the status quo. We know we must make 
changes in the system to restore the solvency of the Medicare trust 
fund. But the solvency of the trust fund does not require cutting 
Medicare by $270 billion. Such extreme cuts will threaten health care 
for 30 million seniors--330,000 of them living in West Virginia--and 
further erode our health care system.
  For seniors, the reconciliation package means that their Medicare 
deductibles will double and their premiums will skyrocket. When the 
average income of seniors citizens is $17,750, and they pay 21 percent 
of their income on health care, they are incredulous and petrified to 
hear that their Medicare is being used to pay for tax breaks and tax 
give-aways to far, far wealthier Americans and every imaginable kind of 
corporation.
  I cannot go back to West Virginia and hold town meetings in senior 
centers as I often do, and justify a vote to slash Medicare by $270 
billion in order to finance tax breaks for the wealthy. West Virginians 
believe in fairness and common sense, and this attack on Medicare 
flunks that test.
  Seniors will not be the only ones hurt by the budget's Medicare cuts. 
West Virginia hospitals are threatened with the possibility of losing 
$25 million in 1996 and more than $681 million over the next 7 years, 
and I fear that some of our hospitals may not survive such cuts.
  For real people in West Virginia who depend on Medicare for their 
health care coverage, the Republican rhetoric about Medicare reform 
rings hollow.
  And Medicare is not the only health care program slated for harsh 
cuts under this Republican plan. This reconciliation package also seeks 
to cut Medicaid funding by a whopping $187 billion over 7 years.
  People need to understand what such harsh cuts mean. Medicaid covers 
poor children, pregnant women, the disabled, and low-income seniors who 
need nursing home care. What happens to these people and their families 
when we slash Medicaid funding?
  Coming from West Virginia, when I think of a family, I think about 
children, parents and grandparents. What happens to parents struggling 
to balance raising children and caring for aging parents?
  If a working family gets a new child tax credit but loses Medicaid 
nursing home coverage for an aging parent, what is the overall effect 
on that family? The child tax credit is $500 a year for ``some'' 
families lucky enough to qualify, but the loss of Medicaid nursing home 
coverage will cost those same families $16,000 to $30,000 a year.
  For example, Julie Sayres of Charleston, WV cared for her mother who 
suffers with Alzheimer's Disease as long as she could at home. But as 
her mother's illness got worse, she had to move to a local nursing home 
where Julie can visit her daily. Julie may get a partial child tax 
credit of $500 under this package, but if she cannot get Medicaid 
coverage for her mother in the nursing home when her mother's meager 
savings are exhausted, Julie and her family with be much, much worse 
off. That child tax credit will not cover even a month of nursing home 
care for her mother.
  This is real story about a family hurt, not helped by drastic health 
care cuts in this package. In my State of West Virginia, over 21 
percent of our residents rely on Medicaid so their are countless more 
stories and fears about what will happen to aging parents.
  And it will not just be individual families hurt by the Medicaid 
cuts. The health care system in my State is fragile, rural hospitals 
are already closing, and West Virginia cannot absorb more than $4 
billion in cuts without cutting necessary health care services, 
including basic issues like infant mortality. A recent newspaper 
article made this point, clearly with a headline: ``[Medicaid] Cuts may 
affect infant mortality.'' The article reports that my State, thanks to 
Medicaid-funded programs, has reduced its infant mortality death rate 
from 18.4 deaths per 1,000 in 1975 to 6.2 deaths per 1,000 in 1994 
which is even better than the national rate of 8.0 deaths per 1,000 
births. As Governor, I helped start the effort to reduce infant 
mortality, and I must protest any action that turns back the clock.
  We should not tolerate backwards steps on basic health care 
objectives like reducing infant mortality.
  I understand that Medicaid needs reform and Democrats offered an 
amendment that suggested reducing the growth in Medicaid spending in a 
responsible way with a per capita cap. I truly want meaningful reform 
of health care, but I do not believe that creating a Medicaid block 
grant is serious reform, it is merely passing the buck--or actually 
passes far fewer dollars and far greater problems onto States. This is 
not fair to states or to the Americans who desperately need health care 
from Federal programs.
  The assault on families in this budget package is not limited to the 
attacks on federal health care programs. Republican rhetoric claims 
that this legislation will help families, because of its $500 child tax 
credit.
  As chairman of the National Commission on Children, I am clearly on 
record in support of a child tax credit, but it must be a refundable 
credit so that children in all families can benefit. Unfortunately, the 
child tax credit in this legislation is not refundable, and every 
amendment offered to make it even partially refundable was rejected. 
Consequently, over 20 million children are excluded from this child tax 
credit, and I do not think this is fair. These children are in families 
earning less that $30,000 a year and their parents clearly need and 
deserve a tax break.
  To add insult to injury, not only do Republicans deny the credit to 
such hard working, low-wage families, Republicans are paying for the 
credit by imposing a tax increase on working families by cutting $43 
billion from the earned income tax credit (EITC).
  There has been much debate about the EITC, and I want to clearly 
state that EITC is tax relief only available to working families, and 
it is designed to offset payroll taxes, which often are a greater tax 
burden for low wage families than personal income taxes.
  The Republican leadership dismisses these arguments, saying that 
their tax package helps middle class American families. And this sounds 
good, but I want to know how they define the middle class?
  In my State of West Virginia, we believe that parents who go to work 
every day and struggle to raise their children are middle class, 
admirable and deserving of support and encouragement. More than 65 
percent of our taxpayers are working hard but earn less--less than 
$30,000. For many of these families, they will worse off, not better, 
under this bill.
  Just 2 years ago, these working families were promised tax relief. 
Now Republicans are reneging on that deal and raising taxes on families 
earning less than $30,000. For families with two or more children, 
their taxes will go up an average of $483. For families with one child, 
taxes will keep an average of $410. This will hit more than 77,000 
families with children in my state of West Virginia alone.
  But such numbers can be numbing. We need to get beyond the rhetoric 
and look at real families.
  A real family, like the Helmick family of New Milton, WV, will be 
worse off, not better. The Helmick family has 6 children, ranging in 
age from 15 to four. Mr. Helmick works full-time as a 

[[Page S 16070]]
truck driver for a local construction company, and Mrs. Helmick is a 
full-time homemaker. In the past, they have used their EITC for baby 
furniture and to buy a used truck so Mr. Helmick has reliable 
transportation to get to work. Mr. Helmick will not get to claim the 
full tax credit for his children, and he will lose EITC benefits under 
the Republican plan.
  This is a real working family that will be hurt, not helped.
  Families like the Helmicks cannot claim all of the child tax credit, 
and they will be hurt by the cuts in EITC; and I doubt that they will 
be claiming capital gains tax breaks either. For them, this package 
does little more than renew their cynicism since it reneges on promises 
made just two years ago when we told families to play by the rules, go 
to work instead of on welfare, and we will offset your payroll taxes so 
that you do not have to raise your children in poverty.
  Mr. President, I am not against the idea of tax cuts. In fact, I 
would support a limited tax cut for the most needy families and some 
relief from burdensome taxes for companies that need it. But when you 
look at this bill, while it was artfully crafted to appear to have 
something for everyone, it is really a farce. It is full of tax pork 
for the wealthy and goodies for those who do not really need it.
  On the surface, how can anyone oppose tax relief for families? The 
Republican rhetoric is, as always, good--tax relief for families, and 
help for companies to create jobs. It sounds so tempting to give 
hundreds of billions of dollars away, but when you look at what 
Republicans are reality doing, and how they are doing it, you say 
``wait a minute.'' Their rhetoric is one thing, but reality is another.
  They say they are balancing the budget, but they will add nearly a 
trillion dollars to our national debt in the next seven years. They say 
the tax cut is ``paid-for'' by an economic dividend of balancing the 
budget; but the truth is, they are adding $224 billion to our 
accumulated debt over the next 7 years. In fact, if you add interest, 
the total is more like $268 billion. Republicans are borrowing money 
from the middle class they claim to be championing in order to give 
money away to their fat-cat friends.
  Think of it as a new credit card with a credit line of $1,000. Every 
month you take home $1,500 after taxes and spend $1,600. You can do 
that because you have the credit card. You are charging $100 every 
month to your credit line. Well, after 5 months, you owe the $500 you 
borrowed on your credit card, plus interest. Then you decide, you don't 
like spending more than you are making, so you force yourself to spend 
less. For the next 7 months, you bring your spending down from $1,600 a 
month to $1,585 a month, then $1,570 a month, then $1,570 a month, and 
so on until at the end of the year, you are spending $1,500 a month. 
You have a Balanced Budget. You are making $1,500 a month and spending 
$1,500 a month. Then you look at your balance you owe on your credit 
card, and guess what--you owe $800, plus interest. How did that happen? 
You went on a path to balance in June when you owed $500 plus interest, 
but in December you owe more than $800. It is because every month on 
the way to balance, you borrowed more to cover your over spending. You 
borrowed $85 dollars one month, $70 the next, $55 the month after that, 
and so on.
  That is what this bill does. Sure, it gets us to balance by 2002, but 
along the way, we are going to overspend what we take in by nearly $1 
trillion. Every year between now and 2002 we spend more than we take 
in. We borrow more to pay for this tax cut. That is $1 trillion added 
to our accumulated debt. And of that $1 trillion added to the debt, 
$224 billion is this tax cut ($268 billion, if you add the interest). 
If we got rid of this tax cut, or reduced the tax cut down to size of 
the real economic dividend, our deficit every year would be less, and 
the accumulated debt, the amount the American people owe, would be 
less.
  This debate is about priorities. Do we want to run up the bill on all 
of us in order to give money to the wealthy to buy goodies? We are 
running up our national credit card so the richest Americans--those who 
earn more than $350,000 a year--get a tax cut of $5,600. Do we want to 
spend $40 billion on capital gains tax cuts for the richest Americans 
and recklessly slash health care for the most needy and the elderly? Do 
we want to cut taxes by more than $1.7 million on estates worth over $5 
million by raising taxes on the working poor?
  Again, West Virginians have a basic sense of fairness. How can I tell 
them that families are helped, when the result of this whole bill will 
mean that poorest fifth of Americans would shoulder fully half of the 
program cuts with an average loss of nearly $2,500 per family in 2002.
  At the same time, the Treasury estimates that almost two thirds of 
the proposed tax breaks would go to the wealthiest fifth of the 
population, who would gain almost $1,400 per family.
  In fact, the top one percent of families--those with incomes greater 
than $350,000 per year, would get an average tax break of $5,600. The 
capital gains tax break will benefit taxpayers with incomes between 
$20,000 and $30,000 by about $5 on average. Those making more than 
$200,000 will receive an average cut of nearly $1,500. How is that 
fair?
  How can the authors of this bill look at themselves in the mirror, 
let alone look into the faces of the most needy in America, and say 
they are doing the right thing? I cannot go to town meetings in my 
state and tell West Virginians that I supported such an unbalanced, 
unfair deal.
  I could support tax cuts that were honestly paid for. I could support 
tax cuts that are fair. But I am not going to support tax cuts paid for 
by raising the money from those least able to pay. I even think we 
should consider giving some limited tax relief to American companies 
that need it. In fact, I am proud to be the author of a bill that helps 
capital intensive industries such as steel, chemicals and wood-paper 
compete in the international market place. That bill fixes something 
called the Alternative Minimum Tax (AMT) by changing the way companies 
calculate the value of their property. Unfortunately, even in this bill 
of tax goodies, and big corporate give-aways, the Republicans could not 
do it right, they only did a half measure.
  The problem these companies have is that under the AMT, the tax code 
does not recognize in any real-world way, how to depreciate their 
assets. Steel, chemicals, wood-paper, any capital intensive industry, 
where the costs are high and the margins are low, these companies need 
to change the length of time they have to depreciate their assets. This 
is known as lives. Under the current tax law, after 5 years, a US steel 
maker under AMT recovers only 37 percent on its investment in new plant 
and equipment, versus 58 percent in Japan, 81 percent in Germany, 90 
percent in Korea, and 100 percent in Brazil. This is largely a result 
of the AMT. It is my strong hope that conferees will look at this with 
an understanding eye. I am hopeful that they will. When you look at how 
the AMT puts our companies in such a competitive disadvantage, I think 
the need for corrective action is clear.
  Another disturbing provision tucked into this package is the proposal 
to eliminate the 50 percent interest exclusion on loans to purchase 
employees stock ownership plans (ESOPs). As Governor of West Virginia, 
I worked closely with the workers of Weirton Steel to establish an ESOP 
that kept the mill open, and the community alive. Weirton officials 
question if they could have secured the financing necessary in the 
early 1980's to create this ESOP without this tax incentive. Weirton 
Steel is the largest private employer in West Virginia in my State. 
Despite the rocky roads that the American steel industry has faced, 
Weirton Steel has not only survived, it has invested almost half a 
billion dollars in modernization so that it will be internationally 
competitive into the next century--and it remains an ESOP with involved 
employee owners. There are other successful ESOPs in West Virginia, and 
I hope there will be more in future. We should not slam the door shut 
on such future ESOPs by eliminating the incentives for start-up loans, 
in my view.
  Mr. President, this legislation is nearly 2000 pages long--I shudder 
to think about other provisions tucked quietly into this bill. It was 
presented to the Senate on October 23, 1995, and 

[[Page S 16071]]
we are expected to vote on the legislation with only four days of 
review. There has not been time to carefully analyze this massive 
legislation or to learn what is on each and every page--much less 
understand the complicated interactions of the policies and programs.
  I do know that on page 1851 there is a proposal that I cannot 
support. It is a secret deal in the Republican budget that 
fundamentally breaks the promise of lifetime health benefits to retired 
coal miners and their widows--nearly 30,000 of whom live in the State 
of West Virginia. More than 60,000 more older miners and their widows 
are living in almost every other State in this union.
  I am obligated to expose the secret and to call it what it is--a pay-
off for a set of greedy corporate interests that will not stop until 
they have bled the miners' health trust fund of every last dollar 
needed to protect miners benefits. Republicans say they will restore 
the miners' trust fund--the miners' only real guarantee that their 
health care will be there for them when they need it. I am not willing 
to gamble with the health security of 92,000 miners and their widows.
  I cannot abide such a tawdry provision in this or any reconciliation 
package. I appeal to whatever sense of justice my Republican colleagues 
have. I ask them to give up this corporate pay-off before any more 
damage is done.
  This cruel little provision might have escaped the notice of many. In 
a package that gives away billions, this provision only deals with tens 
of million of dollars. But these millions mean security to the older 
miners and their widows. This small trust fund is all they have, and it 
stands between their health security and a peace of mind, and financial 
ruin and destitution when illness strikes these aging miners.
  This is a complicated issue with a long history, and I could go into 
excruciating detail. But the bottom line is that Republicans want to 
hand over the money that is keeping the retired miners' health trust 
fund solvent to a group of special interests represented by high priced 
lobbyists.
  As I have said earlier, I want my colleagues to think about the real 
families that could be truly hurt by this package.
  The day after the Finance Committee reported out their handiwork that 
demolishes the health security of more than 92,000 miners and their 
widows for the sake of a few of the biggest and most profitable 
companies in this country, I went back home to West Virginia. I went 
back to tell miners and their wives what happened.
  The miners I met with were reserved, as many miners are, especially 
older ones who have seen it all, strikes and cave-ins, shut-downs and 
lay-offs. They have learned to accept a lot in life. They have seen 
their coworkers killed, or mangled, or dismembered. They have suffered 
the loss of their own lungs and limbs. They do not have a lot to pass 
onto their families in temporal terms, but they have good hearts and an 
incomparable work ethic. They have the values they hold dear--their 
emphasis is on community and family and caring. And until the Senate 
Finance Committee action, they had their UMW health card to get their 
health benefits and knew that it would protect their wives when they 
died too hard and too soon.
  One miner who worked for decades in the mines told me starkly, 
``We're worried to death.'' He said, ``Now it seems like the company is 
the one running the whole show. They want to do away with us when we 
were the ones that worked and built everything else.''
  His question was this, ``What's going to happen to me if I lose my 
benefits?'' And he answered his own question with, ``They'll probably 
put me in my grave before my time.''
  Another miner, characteristically, worried about his wife who is a 
diabetic. ``Gosh, if I had to buy her medicine, I do not know what 
would happen.'' Today retired miners' health benefits pay for 
prescription drug medication after they meet a modest deductible.
  Under this reconciliation package, on page 1851, we are taking away 
the health care security of these miners, and we are reneging on a 
promise made more than 40 years ago by President Truman and reaffirmed 
just 2 years ago and signed into law by an act of Congress.
  If this Senate and this society renege on this promise to a group of 
old frail miners, their wives and their widows, what are we worth?
  Does a promise have no meaning? Does a contract not matter? Can a law 
be repealed when it becomes inconvenient for a profitable, influential 
businesses?
  Promises do have meaning for me.
  When I was elected by the people of West Virginia, I made promises to 
West Virginians. I vowed to fight for their priorities and do my best 
to serve them and respond to their concerns.
  This reconciliation bill simply does not respond to the real needs of 
West Virginia families, or even West Virginia businesses.
  The Republican rhetoric is good, but the reality is that this bill 
will undermine health care for seniors, raise taxes on working 
families, and jeopardizes the health care for retired coal miners and 
their families.
  This is a harsh package that hurts real people, and I strongly oppose 
it. With this legislation, we are walking away from basic commitments 
to some of the most needy individuals in our society, and the debate 
over this package has saddened me greatly. We can, and we should, do 
better as public servants. I will vote no, and continue to fight 
against such unfair legislation.
  Mr. FRIST. Mr. President, before we vote on final passage of S. 1327, 
a historic piece of legislation, I wanted to submit for the Record 
materials presented to me by the United States Chamber of Commerce. The 
Chamber of Commerce is an ardent supporter of S. 1327 and believes that 
the time is now to balance the Federal budget, streamline Government 
programs and, importantly, save the Medicare Program. Included in these 
materials is a study prepared by the Chamber of Commerce regarding the 
economic impacts of Medicare. I commend this study to my colleagues and 
thank the chair.
  I ask unanimous consent that the material be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

     [From the U.S. Chamber of Commerce, Economic Policy Division]

          The Medicare Crisis: The Tax Solution Is No Solution

       The only solution detailed by the Medicare Board of 
     Trustees for achieving financial balance in Medicare Part A 
     is to raise taxes. Unfortunately, this is no solution at all. 
     Higher taxes will rob working individuals of their hard-won 
     dollars, significantly increase costs on small and large 
     businesses alike and bring the economy to the brink of 
     recession.
       The Trustees calculate that balancing the Medicare trust 
     fund for the next 75 years requires us to immediately hike 
     the Medicare payroll tax from 2.90% to 6.42%. While the tax 
     increase may seem to amount to only a few percentage points, 
     it amounts to hundreds of dollars to the typical worker, 
     thousands of dollars to the small business, and billions of 
     dollars for the economy. Analysis by the Economic Policy 
     Division of the U.S. Chamber of Commerce suggests the 
     following impacts on individuals, businesses and the economy:
       For a worker making $30,000 a year, total Medicare payroll 
     taxes paid would jump to $1,926 from the current $870.
       A small business employing 25 such workers would be liable 
     for an additional $13,200 tax payment per year.
       When aggregated across the entire economy, the effect would 
     be to lower real GDP by $179.4 billion within two years and 
     hold GDP about $95 billion lower 10 years later. This amount 
     to a 3.1% decline in GDP in the short run. With economic 
     growth projected to average less than 3% over the next five 
     years, this decline could easily result in a recession.
       These results are even more startling when you consider 
     that they represent an optimistic evaluation, not a worst-
     case scenario.

             overview of medicare: why reform is necessary

       Medicare is a nationwide health insurance program for older 
     Americans and certain disabled persons. It is composed of two 
     parts: Part A, the hospital insurance (HI) program, and Part 
     B, the supplementary medical insurance (SMI) program.
       Part A covers expenses for the first sixty days of 
     inpatient care less a deductible ($716 in 1995) for those age 
     65 and older and for the long-term disabled. It also covers 
     skilled nursing care, home health care and hospice care. The 
     HI program is financed primarily by payroll taxes. Employees 
     and employers each pay 1.45% of taxable earnings, while self-
     employed persons pay 2.90%. In 1994, the HI earnings caps 
     were eliminated, meaning that the HI tax applies to all 
     payroll earnings.
       Part B is a voluntary program which pays for physicians' 
     services, outpatient hospital services, and other medical 
     expenses for persons aged 65 and over and for the long-term 

[[Page S 16072]]
     disabled. It generally pays 80% of the approved amount for covered 
     services in excess of an annual deductible ($100). About a 
     quarter of the funding comes from monthly premiums ($46.10 in 
     1995); the remainder comes from general tax revenues and 
     interest.
       Medicare is not a means-tested program. That is, income is 
     not a factor in determining an individual's eligibility or, 
     for Part B, premium levels. Age is the primary eligibility 
     criteria, with the program also extending to qualified 
     disabled individuals younger than 65.
       Over the years, tax revenues for Medicare Part A have 
     exceeded disbursements, and so the remaining revenues have 
     been credited to the Medicare HI Trust Fund. At the end of 
     1994, the trust fund held $132.8 billion.

                       conclusion of the trustees

       Each year, trustees of Medicare's Hospital Insurance Trust 
     Fund analyze the current status and the long-term outlook for 
     the trust fund, and their findings are published in an annual 
     report. The 1995 edition, issued in April, demonstrated that 
     the Medicare system is in serious financial trouble. The 
     program's six trustees--four of whom are Clinton appointees 
     (cabinet secretaries Robert Rubin, Robert Reich and Donna 
     Shalala, and commissioner of Social Security, Shirley 
     Chater)--reported the following conclusions:
       Based on the financial projections developed for this 
     report, the Trustees apply an explicit test of short-range 
     financial adequacy. The HI trust fund fails this test by a 
     wide margin. In particular, the trust fund is projected to 
     become insolvent within the next 6 to 11 years. . . (HI 
     Annual Report, pg. 2)
       Under the Trustees intermediate assumptions, the present 
     financing schedule for the HI program is sufficient to ensure 
     the payment of benefits only over the next 7 years. (pg. 3)
       The program is severely out of financial balance and 
     substantial measures will be required to increase revenues 
     and/or reduce expenditures. (pg. 18)
       . . . the HI program is severely out of financial balance 
     and the Trustees believe that the Congress must take timely 
     action to establish long-term financial stability for the 
     program. (pg. 28)
       The Trustees believe that prompt, effective and decisive 
     action is necessary. (pg. 28)
       The same set of Trustees also oversees the Medicare Part B 
     program. In their 1995 Annual Report, they wrote: ``Although 
     the SMI program (Medicare Part B) is currently actuarially 
     sound, the Trustees note with great concern the past and 
     projected rapid growth in the cost of the program. . . Growth 
     rates have been so rapid that outlays of the program have 
     increased 53% in the aggregate and 40% per enrollee in the 
     last 5 years.'' (SMI Annual Report, pg. 3).
       ``The Trustees believe that prompt, effective and decisive 
     action is necessary.'' (pg. 3)
       Obviously, the Trustees believe that the Medicare program 
     deserves our careful, immediate attention. The following 
     pages present the figures that led the Trustees to their 
     conclusions.

                      where medicare stands today

       Medicare is a huge federal program. In 1994: Medicare 
     expenditures reached $160 billion, just over half the size of 
     Social Security; Expenditures grew 11.4% from 1993; Eleven 
     cents of every dollar spent by the federal government went to 
     Medicare; Medicare represented one-fifth of total entitlement 
     spending.
       Between 1990 and 1994, Medicare grew at a 10.4% average 
     annual rate, almost three times the 3.6% average inflation 
     rate over the same period and twice the 5.1% average annual 
     growth of the economy as a whole.

                    medicare and the federal budget

       Medicare spending must be addressed as part of the solution 
     to balancing the federal budget. That's because spending on 
     federal entitlements--such as Medicare, Medicaid and Social 
     Security--soared 8.4% annually on average between 1990 and 
     1994. Spending on discretionary, annually appropriated 
     programs--such as defense, education and infrastructure--
     increased 2.2%, which is less than the rate of inflation. 
     Coming decades will see even more pressure for entitlement 
     growth, as the leading edge of the Baby Boom generation 
     reaches 65 in 2011.
       Entitlements are not only the fastest growing portion of 
     the federal budget, they're already its largest component, as 
     shown in the accompanying chart. Just over half of all 
     federal expenditures is spent on entitlements; only a third 
     go to discretionary programs. If we are going to balance the 
     federal budget--and keep it in balance over the long term--
     entitlement reform must be part of the solution.

               where medicare is headed if we do nothing

       Under current law, Medicare is projected by the 
     Congressional Budget Office to grow at a 10.4% average annual 
     rate over the next seven years. In 2002, the CBO projects 
     Medicare spending will reach $344 billion, claiming almost 16 
     cents of every dollar spent by the federal government.
       Moreover, beginning next year, Medicare HI expenditures 
     will exceed the program's revenues. The HI Trust fund, which 
     at year-end 1994 held $132.8 billion, will have to be tapped 
     to cover the projected $867 million difference.
       However, according to the Trustees' Annual Report, this 
     shortfall isn't temporary. Instead, it will balloon to be 
     about seven times larger in 1997, which is just the following 
     year, and more than twenty times larger by 1999. Under 
     assumptions reflecting the most likely demographic and 
     economic trends. 1996 will be the first year of hemorrhage 
     that will deplete the entire trust fund by 2002--just seven 
     years away. The optimistic set of assumptions buys us only a 
     little time, with trust fund depletion projected in 2006. 
     Under the pessimistic scenario, the fund is exhausted as 
     early as 2001. In other words, within the next 6 to 11 years, 
     it's virtually certain that Medicare will be insolvent--
     unless we take action.
       The danger of inaction was made clear last winter when the 
     President's Bipartisan Commission on Entitlement and Tax 
     Reform, chaired by Sen. Bob Kerrey and then-Sen. John 
     Danforth, issued its final report. The focus of the report 
     was to look not years ahead, but decades ahead to assess the 
     impact of federal budget trends. The report is sobering: 
     Under current trends, virtually all federal government 
     revenues are absorbed by entitlement spending and net 
     interest by 2010, as shown in Chart 2. Deficit-financing will 
     be required to cover almost all of the discretionary 
     programs, including defense, health research, the FBI, 
     support for education, and the federal judicial system.
       Ten years later, the situation is worse. Growth in 
     entitlements is so explosive that not only would the 
     government have to borrow to pay for discretionary expenses, 
     it would have to borrow funds to pay the lion's share of 
     interest payments on the national debt.

                   medicare's impact on the pay stub

       In addition to detailing the projected dissipation of Trust 
     Fund under current law, the Trustees' Report also describes 
     the measures that would be necessary to shore up the trust 
     fund over the next 25, 50 and 75 years. If the expenditure 
     formulas are not altered, then preserving the trust fund can 
     only be done through increases in the payroll tax or 
     additional subsidies from general revenues. Table 1 
     illustrates the payroll tax increases that would be necessary 
     to balance the trust fund.

                              current law

       Currently, the combined (employee and employer) Medicare 
     tax rate is 2.90%, applied to all payroll earnings. A worker 
     earning $30,000 a year in salary or wages, for instance, is 
     directly taxed 1.45%, or $435 annually, for Medicare Part A, 
     the hospital insurance program. Employers then match that 
     payment with another $435, resulting in $870 of tax revenue 
     earmarked for the Medicare HI trust fund generated by having 
     that worker on the payroll.
       The Medicare contributions from both the worker and firm 
     don't stop there, however. Because two-thirds of Medicare 
     Part B (SMI) is financed through general revenues (the other 
     third coming from Medicare premiums and interest), a portion 
     of the worker's and the firm's general income taxes are also 
     financing Medicare. The Trustees reported that $36.2 billion 
     of general funds were used to pay Medicare Part B claims in 
     1994.

                               TABLE 1.--MEDICARE HOSPITAL INSURANCE PAYROLL TAXES                              
----------------------------------------------------------------------------------------------------------------
                                                         To balance the HI trust fund over the next--           
                                   Current  --------------------------------------------------------------------
                                     law            25 yrs.                50 yrs.                75 yrs.       
                                   employee --------------------------------------------------------------------
                                     plus    Additional   Total HI  Additional   Total HI  Additional   Total HI
                                   employer      tax        tax         tax        tax         tax        tax   
----------------------------------------------------------------------------------------------------------------
Tax rates (pct.)................       2.90        1.33       4.23        2.68       5.58        3.52       6.42
Pct. increase over current law..  .........  ..........       45.9  ..........       92.4  ..........      121.4
Payroll earnings:                                                                                               
  $10,000.......................       $290        $133       $423        $268       $558        $352       $642
  20,000........................        580         266        846         536      1,116         704      1,284
  30,000........................        870         399      1,269         804      1,674       1,056      1,926
  40,000........................      1,160         532      1,692       1,072      2,232       1,408      2,568
  50,000........................      1,450         665      2,115       1,340      2,790       1,760      3,210
  60,000........................      1,740         798      2,538       1,608      3,348       2,112      3,852
  70,000........................      2,030         931      2,961       1,876      3,906       2,464      4,494
  80,000........................      2,320       1,064      3,384       2,144      4,464       2,816      5,136
  90,000........................      2,610       1,197      3,807       2,412      5,022       3,168      5,778
  100,000.......................      2,900       1,330      4,230       2,680      5,580       3,520      6,420
----------------------------------------------------------------------------------------------------------------
Source (for all tables): 1995 Annual Report of the Board of Trustees. Medicare Hospital Insurance Trust Fund.   
  Table 1.D3, page 22, Calculations and macroeconomics simulations by the U.S. Chamber of Commerce.             


[[Page S 16073]]

       To Balance the Medicare HI Trust Fund for the Next 25 Years 
     (through 2019): According to the Trustees' analysis, the 
     hospital insurance payroll tax would have to rise from 2.90% 
     to 4.23% (a 46% increase) to keep the HI trust fund in 
     balance for the next 25 years. Further, the increase would 
     have to be made immediately and maintained through the entire 
     25-year period.
       For our $30,000/year worker for whom $870 is currently 
     provided to Medicare HI, this increase means an additional 
     tax of $399, bringing total annual hospital insurance payroll 
     taxes to $1,269. And that's before any other federal and 
     state payroll taxes (such as unemployment insurance and 
     Social Security) or federal and state income taxes.
       However, even this increase in payroll taxes still leaves 
     the trust fund exhausted in 2019, with the oldest of the baby 
     boomers just shy of reaching their life expectancy. Because 
     of this demographic bulge, balancing the HI trust fund over a 
     longer period would require even higher payroll taxes.
       To Balance the Medicare Trust Fund for the Next 50 Years 
     (through 2044): Balancing the trust fund over the next fifty 
     years--a span long enough to see most of the Baby Boomers 
     through their lifetimes--would require virtually doubling the 
     hospital insurance payroll tax from 2.90% to 5.58%. The 
     increase would have to be made immediately and remain 
     permanent through the entire 50-year period. Again, for the 
     worker earning $30,000 a year, the total HI payroll tax rises 
     from $870 to $1,674, an increase of 92.4%.
       To Balance the Medicare Trust Fund for the Next 75 Years 
     (through 2069): Balancing the trust fund over the next 
     seventy-five years--roughly through the life expectancy of an 
     individual born this year, and the usual period for long-term 
     fiscal solvency--would require an immediate boost in the 
     Medicare tax rate of 121.4%, from 2.90% to 6.42%. Total HI 
     payroll taxes for a worker earning $30,000 a year would rise 
     from $870 to $1,926.


                     medicare's impact on business

       Because it's levied on employment levels, not income, the 
     payroll tax due remains the same through both good and bad 
     economic times. This feature accentuates the pain of a 
     downturn on employers, who need to pay the tax regardless of 
     profitability. Consequently, relative to the income tax, a 
     payroll tax can be particularly punishing to start-up firms 
     or companies trying to weather a drop in business.
       Table 2 shows the liability for Medicare HI payroll taxes 
     that would be faced by firms of various sizes. Total 
     liability is shown under current law and under the three tax 
     rates computed by the Trustees to bring the HI trust fund in 
     balance over periods of 25, 50 and 75 years.
       For instance, a 25-person firm where the average worker 
     earns $20,000 per year is currently liable for a $7,250 tax 
     payment for the Medicare HI program (for their contribution, 
     the workers themselves would be taxed an identical amount). 
     To balance the trust fund over the next 25 years, the 
     combined employee and employer tax rate would have to rise 
     from the current 2.90% to 4.23%. Assuming that the liability 
     continues to be evenly split between the employee and 
     employer, the firm will face an HI payroll tax of about 2.11% 
     per worker. For our 25-person firm, the total HI payroll tax 
     would rise from $7,250 to $10,575 per year.

                 TABLE 2.--MEDICARE HOSPITAL INSURANCE PAYROLL TAX ANNUAL EMPLOYER TAX LIABILITY                
                                                  [In dollars]                                                  
----------------------------------------------------------------------------------------------------------------
                                                                Number of employees--                           
                                    ----------------------------------------------------------------------------
                                         5          10         25         50        100        500       1,000  
----------------------------------------------------------------------------------------------------------------
Average salary: $20,000:                                                                                        
  Current law......................      1,450      2,900      7,250     14,500     29,000    145,000    290,000
To balance Medicare HI over the                                                                                 
 next:                                                                                                          
  25 yrs...........................      2,115      4,230     10,575     21,150     42,300    211,500    423,000
  50 yrs...........................      2,790      5,580     13,950     27,900     55,800    279,000    558,000
  75 yrs...........................      3,210      6,420     16,050     32,100     64,200    321,000    642,000
Average salary: $30,000:                                                                                        
  Current law......................      2,175      4,350     10,875     21,750     43,500    217,500    435,000
To balance Medicare HI over the                                                                                 
 next:                                                                                                          
  25 yrs...........................      3,173      6,345     15,862     31,725     63,450    317,250    634,500
  50 yrs...........................      4,185      8,370     20,925     41,850     83,700    418,500    837,000
  75 yrs...........................      4,815      9,630     24,075     48,150     96,300    481,500    963,000
----------------------------------------------------------------------------------------------------------------

                    medicare's impact on the economy

       Raising payroll taxes to keep the Medicare Hospital 
     Insurance trust fund afloat imposes substantial burdens on 
     both workers and firms. To measure what that means for the 
     economy as a whole, we conducted several policy simulations 
     using the highly respected Washington University Macro Model 
     from Laurence H. Meyer & Associates of St. Louis, MO.
       The results are striking: The economy would suffer through 
     sharply slower economic growth and higher unemployment in the 
     near term. Over a longer period, the economy is saddled with 
     a permanent loss of production and employment. As shown in 
     Tables 3 and 4, the degree of severity for GDP and employment 
     depends upon the increase in Medicare taxes enacted.
       The tables compare each of three alternative tax 
     simulations specified in the Trustees' Annual Report to 
     LHM&A's June 1995 baseline forecast. To demonstrate the 
     policy change working its way through the economy, we display 
     the results for three of the ten years of our simulation: 
     1997, 2000 and 2004. This gives us snapshots of the short-
     term, intermediate-term and long-term impacts on economic 
     output and employment. In each case, the imposition of the 
     Medicare payroll tax increase takes place in the fourth 
     quarter of 1995.

                                   TABLE 3.--IMPACT ON GROSS DOMESTIC PRODUCT                                   
                         [Balancing the HI Trust Fund Through Raising Payroll Tax Rates]                        
----------------------------------------------------------------------------------------------------------------
                                                  Difference from baseline in        Percent difference from    
                                      Required    given year, billions of 1987        baseline in given year    
   Years to balance HI trust fund     Medicare              dollars             --------------------------------
                                      tax rate ---------------------------------                                
                                       (pct.)      1997       2000       2004       1997       2000       2004  
----------------------------------------------------------------------------------------------------------------
25 Years...........................       4.23      -68.4      -30.1      -36.1       -1.2       -0.5       -0.5
50 Years...........................       5.58     -137.1      -60.5      -72.1       -2.4       -1.0       -1.1
75 Years...........................       6.42     -179.4      -79.4      -95.6       -3.1       -1.3       -1.4
----------------------------------------------------------------------------------------------------------------

       As shown in Table 3, if the government imposed the most 
     modest payroll tax increase--enough to keep the Medicare 
     trust fund in balance for the next 25 years--production in 
     the economy would be 1.2%, or almost $70 billion, lower in 
     1997 than it would have been otherwise. By 2000, the 
     percentage-point gap between the alternative closes to within 
     0.5% of the baseline level of production, but that distance 
     is maintained even ten years after the tax increase took 
     effect.
       The short-term loss in output translates into 1.2 million 
     fewer jobs relative to what we would have had otherwise, as 
     shown in Table 4. While this decline, amounting to about 1% 
     of the economy's jobs, moderates over time, the economy 
     appears to have lost over 0.5% of its jobs permanently.
       Of course, all of this economic turbulence puts the 
     Medicare HI trust fund in actuarial balance for only the next 
     25 years. To generate long-term actuarial balance for the 
     full 75-year period, the Medicare payroll tax rate would have 
     to jump from 2.90% to 6.42%, triggering even stronger 
     economic impacts than those described above. Production in 
     the economy would be about 3% lower in 1997 than it would 
     have been otherwise, with the long-term loss in output 
     projected at 1.5%. Over 3 million jobs would be eliminated in 
     1997 relative to the baseline, with a projected permanent 
     loss of about 1.5% of total employment over the long term.

                                         TABLE 4.--IMPACT ON EMPLOYMENT                                         
                         [Balancing the HI Trust Fund Through Raising Payroll Tax Rates]                        
----------------------------------------------------------------------------------------------------------------
                                      Required    Difference from baseline in        Percent difference from    
                                      Medicare    given year, millions of jobs    baseline in given year (pct.) 
   Years to balance HI trust fund     tax rate -----------------------------------------------------------------
                                       (pct.)      1997       2000       2004       1997       2000       2004  
----------------------------------------------------------------------------------------------------------------
25 Yrs.............................       4.23       -1.2       -0.6       -0.8       -0.9       -0.4      -0.6 

[[Page S 16074]]
                                                                                                                
50 Yrs.............................       5.58       -2.4       -1.2       -1.6       -1.9       -0.9       -1.2
75 Yrs.............................       6.42       -3.2       -1.5       -2.2       -2.5       -1.2       -1.5
----------------------------------------------------------------------------------------------------------------


       As dramatic as these figures are, there's good reason to 
     believe that they are optimistic estimates. Because the macro 
     model used in these simulations treats the Medicare payroll 
     tax like the Social Security payroll tax, the increases in 
     the tax rates apply only to the first $61,200 earned (in 
     1995, and rising afterwards). That is, the model is not 
     picking up the economic impact of applying the higher tax 
     rates to incomes over the taxable base. Thus, these results 
     should be considered a minimum measure of the economic impact 
     of raising Medicare payroll taxes. Attempts to account for 
     this problem yield significantly greater job loss and lower 
     GDP. These results are available from the Economic Policy 
     Division of the U.S. Chamber of Commerce.
       It is important to note that, even with the set of numbers 
     presented here with its inherent bias toward underestimating 
     the economic impact, we can see that using payroll taxes to 
     balance the Medicare trust fund imposes severe costs on the 
     U.S. economy. These results clearly indicate that the 
     Medicare problem must be solved by fundamental program 
     reform, not tax increases.
                                                                    ____


          U.S. Chamber of Commerce--Medicare FAX Poll Results

       On October 11, 1995, the U.S. Chamber surveyed 9,700 
     business, chamber and association members on their attitudes 
     concerning Medicare reform and specific reform elements. 
     Responses to the Chamber survey (nearly 10 percent responded, 
     68.9% of which employ fewer than 50 workers) indicated strong 
     support for market-oriented Medicare reform comparable to the 
     House and Senate Majority plans for Medicare reform. The 
     complete survey and results are provided below.
       Medicare is ``severely out of financial balance and the 
     Trustees believe that . . . prompt, effective and decisive 
     action is necessary.''
       Medicare reform has become a focal point of the budget 
     debate. Medicare--the national health insurance program for 
     seniors--will run out of money in seven years, according to 
     the system's trustees. Spending on Medicare and other 
     entitlements threatens to crowd out all other budget 
     priorities and increase the budget deficit.
       Previous approaches to Medicare reform have failed to slow 
     Medicare's growth. Worse, these approaches have increased the 
     burden on businesses and their employees through higher 
     payroll taxes and higher insurance premiums.
       Since 1970, Congress has raised payroll taxes over 20 times 
     and the Trustee's Report pointed out that payroll taxes would 
     have to be raised by another 1.3 to 3.5 percentage points to 
     bring the system into balance. When you consider that many 
     small and medium size businesses already pay more in payroll 
     taxes than income taxes and that payroll taxes must be paid 
     regardless of economic conditions, it becomes clear why 
     Medicare requires solutions other than tax increases.
       We need your help. Please review the following questions on 
     Medicare reform and FAX back your answers by close of 
     business October 16.
       1. Medicare should be modernized by adopting the market-
     based strategies private employers and health plans are using 
     successfully to improve health care quality and control 
     costs. These strategies include improving the quality of care 
     provided to enrollees, increasing enrollee choice by 
     expanding health plan options, and reducing the rate of 
     growth of Medicare spending.
       Agree, 98.9 percent; Disagree, 0.6 percent.
       2. Two competing approaches to Medicare reform have emerged 
     in Congress. One more limited approach addresses the Medicare 
     Part A trust fund, delaying insolvency for an additional two 
     years through $89 billion in Medicare savings, primarily from 
     reducing the rate of growth in Medicare payments to 
     providers. A second approach is more comprehensive in nature, 
     addressing both Medicare part A (hospital bills) and Part B 
     (doctors bills). Medicare Part A would be protected at least 
     an additional 10 years through $270 billion in Medicare 
     savings achieved through increased competition and reducing 
     the rate of growth in Medicare payments to providers. Which 
     approach would you favor?
       Limited, 4.3 percent; Comprehensive, 94.6 percent.
       3. Do you favor or oppose the following elements of 
     Medicare reform?
       a. Provide seniors choices between competing health plans 
     including existing fee-for-service benefits.
       Favor, 97.4 percent; Oppose, 1.6 percent.
       b. Contain Medicare spending by increasing competition and 
     reducing the rate of growth in Medicare payments.
       Favor, 97.4 percent; Oppose 2.0 percent.
       c. Increase managed care options for seniors.
       Favor, 93.8 percent; Oppose, 4.3 percent.
       d. Provide seniors a medical savings account option.
       Favor, 88.2 percent; Oppose, 7.3 percent.
       e. Allow provider groups (i.e., doctors and hospitals) to 
     offer health coverage (similar to managed care networks) 
     directly to seniors--a new proposal known as provider 
     sponsored networks or PSNs.
       Favor, 91.9 percent; Oppose, 5.7 percent.
       f. Require managed care plans to provide out-of-network 
     benefits at a higher cost to the beneficiary.
       Favor, 72.4 percent; Oppose, 18.2 percent.
       4. For purposes of tabulation: Type of Organization: 
     Business, 93.2 percent; Chamber, 4.3 percent; Other, 2.0 
     percent. Approximate Number of Employees: under 10, 29.4 
     percent; 10-49, 39.5 percent; 50-99, 12.5 percent; 100-249, 
     8.6 percent; 250-499, 3.7 percent; 500-4,999, 3.7 percent; 
     5,000 +, 1.4 percent.

                        U.S. Chamber of Commerce


                  medicare reform--the right solution

       Medicare reform is at the crux of the balanced budget 
     battle. Medicare--the national health insurance program for 
     seniors--will run out of money in seven years, according to 
     The Board of Trustees. Spending on Medicare and other 
     entitlements threatens to crowd out all other budget 
     priorities and increase the budget deficit.
       Previous approaches to Medicare reform have failed to slow 
     Medicare's growth. Worse, these approaches have increased the 
     burden on businesses and their employees through higher 
     payroll taxes and higher insurance premiums.
       Since 1970, Congress has raised payroll taxes over 20 times 
     and the Medicare Trustees 1995 Report pointed out that 
     payroll taxes would have to be raised by another 1.3 to 3.5 
     percentage points to bring the system into balance. When you 
     consider that many small and medium-sized businesses already 
     pay more in payroll taxes than income taxes and that payroll 
     taxes must be paid regardless of economic conditions, it 
     becomes clear why Medicare requires solutions other than tax 
     increases.
       The House and Senate Majority has proposed market-oriented 
     alternatives to traditional Medicare reform, an approach that 
     modernizes the 30-year old Medicare program by increasing 
     competition while restraining the growth in spending. Key 
     elements include:
       New choices for Medicare beneficiaries.--Beneficiaries will 
     have the right to choose traditional Medicare, as well as the 
     right to choose from a range of private health plan options 
     including managed care and medical savings accounts. These 
     options will provide beneficiaries access to expanded 
     benefits--such as prescription drugs, preventative care, 
     vision and hearing care.
       Restrained growth in Medicare spending.--Increases in 
     Medicare spending are inevitable, given the growing Medicare 
     population and the advance of medical technology. However, 
     controlling the rate at which Medicare spending increases is 
     as important to our nation's future financial health as 
     Medicare itself is to seniors' health care. Introducing 
     competition to Medicare through beneficiary choice of health 
     plans will help control costs and allocate resources more 
     fairly and efficiently than Washington bureaucrats.
       Accountability.--The Republican plan allows seniors to take 
     responsibility for making their own health care decisions. 
     Instead of relying on a bureaucratic, one-size-fits-all 
     approach, seniors will decide which health plans are best for 
     them. Doctors and hospitals are also held accountable. The 
     bill rewards beneficiaries who report incidences of waste, 
     fraud and abuse, and strengthens penalties for anyone who 
     defrauds Medicare.
       By passing this legislation Congress will have taken 
     timely, critical action that will avert the program's 
     bankruptcy and preserve and protect it for current recipients 
     and future generations.

                            Medicare Reform


                            myths vs. facts

       Myth. The House and Senate Republican Medicare reform plans 
     will cut $270 billion from Medicare in order to finance a tax 
     cut for the wealthy.
       Fact. The Medicare Trustees' 1995 Annual Report urged 
     Congress to take ``prompt and decisive action'' to address 
     the solvency of the Medicare Part A (hospital insurance) 
     Trust Fund and the continued growth of Medicare Part B 
     (supplemental medical insurance).
       The House and Senate Majority has proposed market-oriented 
     alternatives to traditional Medicare reform, an approach that 
     modernizes the 30-year-old Medicare program by increasing 
     competition while restraining the growth in spending. Under 
     the Republican plan, spending per beneficiary will still 
     increase 40% by 2002 ($4,800 to $6,700).
       Tax cuts provided for in the budget resolution were 
     considered and passed independent 

[[Page S 16075]]
     of Medicare. Whether or not taxes are cut, Medicare will still go broke 
     in 2002.
       Myth. It's not fair for Congress to take away benefits from 
     seniors who have faithfully paid into the system.
       Fact. The average Medicare beneficiaries receive far more 
     than they put in. The average two-earner couple receives 
     $117,200 more in benefits than it contributes to the program. 
     The average single-earner couple receives $126,700 more.
       By encouraging competition among private health plans based 
     on quality and innovation, the Republican plan may lead to 
     increase benefits.
       Myth. The business community is a latecomer to the Medicare 
     debate.
       Fact. Medicare's influence is felt throughout the business 
     community--from payroll taxes paid to finance the system to 
     insurance premiums inflated by consistent shortfalls in 
     Medicare reimbursements to providers who in turn shift the 
     cost to private health plans.
       Myth. Medicare is in trouble because doctors and hospitals 
     charge too much. The Republican plan fails to address this 
     problem.
       Fact. Solving the Medicare crisis will require the 
     participation of all--doctors, hospitals, seniors and other 
     taxpayers--particularly the business community. Just as no 
     one factor led to the Medicare crisis, a single-minded focus 
     on providers won't get us out. Further, cost controls have 
     failed miserably whenever they have been tried--particularly 
     in the context of health care.


           economic activity and job creation in puerto rico

  Mr. DOLE. Mr. President, as the Congress moves toward final action 
non budget reconciliation legislation for this year, I want to call 
special attention to an initiative by Gov. Pedro Rossello of Puerto 
Rico which seeks to establish a wage credit-based economic program as 
an alternative to the current law section 936 tax credit.
  Neither the House nor Senate was able to give the Governor's proposal 
an extensive examination before either body adopted revisions to the 
section 936 credit. Together with my colleague from New York, Senator 
D'Amato, I was pleased to ensure that the Senate version more 
appropriately recognizes the positive impact that many U.S. companies 
have on the Puerto Rican economy and the jobs they provide.
  I commend Governor Rossello's efforts to enhance economic opportunity 
in Puerto Rico through the creation of new jobs, and I would hope that 
the Congress will continue to give serious consideration to the 
Rossello program as an alternative to programs such as under section 
936. It is important to ensure that any program focused on Puerto Rico 
will create new jobs and encourage self-reliance and economic growth.


                                  ANWR

  Mr. LIEBERMAN. Mr. President, the Arctic National Wildlife Refuge has 
been managed as one of the great wilderness systems on this continent 
since the Eisenhower administration. It is on par with other great 
places in our natural history, including the Grand Canyon, Yellowstone, 
Jackson Hole, the Badlands, Glacier Bay, Denali, and others. Opening 
the Arctic Refuge to oil and gas development violates our stewardship 
commitment to future generations, fails to use common sense about 
balancing the budget, and destroys a highly threatened piece of our 
American heritage. This is a unique and treasured land that must serve 
our entire Nation for the next century, not just a few for the next few 
years.
  Unnecessary development of significant Federal lands like the Arctic 
Refuge is not the way to balance the budget. The amount of oil that can 
potentially be recovered from the Arctic Refuge is simply too small to 
affect our energy security, and too destructive to the environment, to 
be worth it. The U.S. Geological Service estimates a 95-percent chance 
of only 148 million barrels of oil in the refuge. The Congressional 
Budget Office assumed 3.2 billion barrels in its budget scoring of oil 
and gas leases, more than 20 times this recent USGS estimate. Worse 
yet, CBO assumed oil prices of $38.60 in 2000, compared to Energy 
information administration estimates of only $19.13--less than half.
  And, it is possible that 90 percent of the lease revenues could go to 
Alaska instead of balancing the Federal budget. Under the most 
favorable scenario, only 50 percent of the revenues go to balancing the 
budget.
  Clearly, the $1.3 billion we have been promised by CBO in return for 
developing this pristine area is a massive fiction, like so many other 
bogus asset sales in this budget. The OMB has estimated oil and gas 
revenues more realistically to be between $750 million and $850 
million, assuming Alaska does not sue for a 90-percent split. If the 
State does, these revenues fall another 40 percent.
  We all hope for another strike like Prudhoe Bay. But the simple 
reality, based on the very best geological science and economics 
available today, is that the next Prudhoe Bay is expansion of Prudhoe 
Bay itself, and the continued implementation of national energy 
conservation programs. The next major source of energy is not a long-
shot wildcat strike in an undeveloped Alaskan wilderness area, and it 
is incorrect to suggest otherwise. And it is ironic that we would 
consider opening this refuge to oil drilling now that the oil export 
ban will be lifted, as the House and Senate have voted to do. If the 
ban is lifted, a substantial percentage of the oil that is recovered, 
if any, would be exported to Asia, according to the Cato Institute, the 
Congressional Research Service, and others. The Arctic Refuge oil 
supplies would do almost nothing to help our energy security.
  Make no mistake, environmental impacts to the refuge would be severe 
and irreversible. The Arctic National Wildlife Refuge includes the 
calving grounds for one of the largest caribou herds in North America, 
the porcupine herd of 152,000. It supports several thousand native 
Americans whose hunter-gatherer culture depends directly on it today as 
it has for 20,000 years. Over 200 species of plants and animals thrive 
in the refuge, including Muskoxen, Snow Geese, Arctic Foxes, Arctic 
Grayling and Arctic Char. It is the only natural area in the United 
States with all three species of North American bears--the black bear, 
the grizzly bear, and the polar bear. It is one of the most pristine 
areas in our Nation, untouched by development, and the last of its 
kind. Environmental studies repeatedly show that oil development is not 
compatible with the protection of these resources. Biologists from 
Federal and State agencies and universities conclude that oil 
development will harm the calving success of the caribou herd, and 
reduce its long term numbers very significantly.
  The remaining 90 percent of the Alaskan North Slope is already open 
to oil and gas leasing. Is it too much to protect what little we have 
left? Let us honor our history of conservation, and the future of 
generations to come, by protecting this last Arctic Refuge.
  I ask unanimous consent that a letter from the President on this 
subject be printed in the Record.

  There being no objection, the letter was ordered to be printed in the 
Record, as follows:


                                              The White House,

                                     Washington, October 26, 1995.
     The Hon. Joseph I. Lieberman,
     U.S. Senate, Washington, DC.
       Dear Joe: Thank you for your letter today seeking my views 
     on striking the provision in the reconciliation bill that 
     would open the coastal plain of the Arctic National Wildlife 
     Refuge [ANWR] to oil and gas drilling.
       Because you stated that the Senate is expected to vote on 
     that motion in the near future, let me be clear: I will veto 
     any reconciliation bill that opens ANWR to drilling. 
     Consequently, I strongly support your and your colleagues' 
     efforts to remove this provision from the bill. In my view, 
     this is one of the most significant environmental votes 
     facing Congress, posing a clear choice between protecting a 
     unique, biologically-rich wilderness and pursuing a misquided 
     energy policy.
       I appreciate and support your efforts to preserve ANWR.
           Sincerely,
                                                             Bill.
  Mr. LEVIN. Mr. President, I voted against the combined Harkin and 
Dorgan amendments. The constraints imposed by the rules under which the 
budget reconciliation bill is being considered create an absurd 
situation in which important, complex, and difficult amendments are 
decided without debate. In addition, because a long stack of votes are 
occurring at 7\1/2\ minute intervals, there is little time to properly 
consider each provision. This is exacerbated when amendments are 
quickly patched together with little warning on the floor.
  In this case, I oppose the capital gains portion of the Dorgan-Harkin 
combined amendment. While I do favor capital gains reform, focused on 
long-term capital gains investment, in my view, the provision goes too 
far by imposing a lifetime limit of $250,000 on capital gains 
deductions. The Tax Code 

[[Page S 16076]]
is complex enough without adding a restrictive difficult to administer, 
lifetime provision such as this.
  I do support the Harkin portion of the amendment which attempts to 
further restrict the so-called Benedict Arnold loophole.
  Because the two amendments were joined together on the Senate floor, 
I could not vote on one and against the other. Therefore, I voted no on 
the amendment.
  Mr. FRIST. Mr. President, I would like to speak briefly in support of 
the antitrust reform provisions of section 15021 of the House Medicare 
bill. While these provisions are not in the Senate Medicare bill, they 
are important, because they permit doctors to form Provider Service 
Networks without having to go through an institutional intermediary 
such as another HMO or an insurance company. I urge my colleagues to 
support the provisions when this bill goes into conference, as they are 
modest antitrust law reforms that will improve the quality and lower 
the cost of our health care system.
  I would first like to discuss how the House Medicare bill defines a 
Provider Service Network (or, as it is more commonly known, a ``PSN''). 
In the House Medicare bill, a PSN is one of the new organizations that 
provides Medicare beneficiaries with an option called MedicarePlus. 
That option allows a beneficiary to select a health plan called a 
MedicarePlus Product that would be offered by a MedicarePlus 
Organization. A MedicarePlus Organization is a private sector 
organization, such as an HMO, that offers a health plan that meets 
Federal Medicare standards. A Provider Sponsored Organization is a type 
of MedicarePlus Organization which is owned and operated by affiliated 
providers, such as hospitals and physicians. A PSN is an organization 
owned and operated by providers that contract with a Provider Sponsored 
Organization to provide services to Medicare beneficiaries.
  Current antitrust law effectively makes it automatically illegal for 
a group of physicians to set up a PSN or Provider Sponsored 
Organization, yet permits insurance companies, HMO's and other 
nonphysicians to do so. This does not make sense.
  Why do we want to reform the antitrust restriction so that physicians 
can form PSN's and directly compete with insurers and HMO's for 
Medicare beneficiaries? Because permitting physicians to do so will 
bring physicians to the table and will encourage increased competition 
that will provide Americans with better quality health care at a lower 
price. By permitting physicians--rather than just accountants--to 
oversee the treatment systems, Medicare beneficiaries will receive 
better quality care. By removing an insurance company's significant 
administrative costs from the picture, Medicare beneficiaries will 
likely see more of their health care premium dollars go to patient care 
and less to overhead.
  It should be made clear that section 15021 of the House bill does not 
exempt physician networks from antitrust law. I, for one, would oppose 
it if it did. I too believe that physicians must be held accountable 
under the antitrust laws if they in any way engage in anticompetitive 
price fixing.
  Under the House Medicare bill, physician networks would remain 
subject to all of the antitrust statutes that currently exist. The only 
limitation on antitrust enforcement is that physician created networks 
which meet the standards for PSN's (as set forth in section 15021(b)(6) 
of the House bill) would not be considered automatically unlawful. If 
the formation or operation of these networks can be shown to harm 
competition, then the DOJ, FTC, or a private party could challenge 
them. This is precisely the same rule which applies to the formation 
and operation of joint ventures in other industries in America. This 
provision does not exempt physician networks from the law. It holds 
them accountable for their actions, while giving them the opportunity 
to compete.
  I again urge all of my colleagues to support the antitrust provisions 
of section 15021 of the House Medicare bill.
  Mr. HATCH. Mr. President, while we are considering the manager's 
amendment to S. 1357, the Balanced Budget Reconciliation Act, I want to 
take this opportunity to comment on the health provisions contained 
within the bill and on some of the changes made therein.
  First of all, I know there is a great deal of consternation about the 
impact of the reductions in spending growth for Medicare and Medicaid 
contained within this bill.
  Medicare and Medicaid have been tremendously successful programs by 
anyone's measure, providing life-saving and life-sustaining services to 
literally millions of persons over the last three decades. These 
programs need to be continued.
  What we cannot continue, though, is the high rate of growth in these 
entitlement programs. This growth, quite simply, is contributing 
significantly to the deficit situation which is bankrupting our 
country.
  Mr. President, there is no disagreement on either of these points.
  As I see it, the question before us today is not whether to act but, 
rather, how to act.
  The question is not ``Why?,'' as some assert, but rather the more 
critical ``Who, what where, when, and how?'' we bring these programs 
under fiscal control while preserving vital services for the people who 
need them.
  It is clear that we are poised to act on a bill with very far-
reaching ramifications. This is not a responsibility I take lightly.
  Indeed, the prospect of reforming programs which have become such an 
integral part of America's health care delivery infrastructure over the 
past 30 years is a daunting one. The implications are enormous--
enormous for all participants in the health care system, be it patients 
or those who provide services to patients.
  Consider how intertwined the Medicare and Medicaid programs have 
become with our health care delivery system.
  A whole generation of facilities has been built based on funding from 
the Federal Government. A whole generation of health care professionals 
has been trained with funding from the Federal Government, with many 
academic health institutions continuing to rely heavily upon Medicare 
graduate medical education funds for their viability. Facilities 
providing care to the underserved in both rural and urban areas count 
on Medicare revenues to keep from closing their doors. And, coverage 
policy in many private health care plans and our military health care 
system have been designed around Medicare policy.
  Viewed from another perspective, more than a generation of Americans 
has come to rely on the vital services provided under Medicare and 
Medicaid. This is true for our seniors and disabled who are eligible 
for Medicare, and for the pregnant women and children, the aged, the 
blind, and the disabled who receive services under Medicaid.
  The prospect of the reforming this system can be threatening to all I 
have mentioned, because it represents a change, a change from the norm 
we have all come to accept.
  But I ask you to consider how different the America of 1995 is from 
the America of 1965. The health care of today is very different from 
that of 30 years ago. We have come a long way. Life expectancy has 
improved dramatically thanks to the fruits of medical research and 
technology. Fee-for-service medicine is no longer the only option for 
delivery of services.
  But we have paid a heavy price for those improvements. Continued 
increases in health care costs run rampant have fueled the deficit, and 
have priced health care out of the reach of many, with a concomitant 
impact on the Medicaid roles and the States' ability to provide 
services.
  I implore my colleagues to see the changes in this bill today as an 
opportunity to make the system better and more responsive to our 
national needs, needs which extend beyond health care services to, 
indeed, the health of our country as a whole.
  The deficit situation cannot be ignored any longer. It is unfair to 
our children, and to their parents and grandparents.
  The alternative to change is foreboding. The costs of these 
entitlement programs is running out of sight, endangering the future 
viability of the programs as well as the Federal and State budgets. By 
all recognition, Medicare's hospitalization trust fund could go 
bankrupt, starting as early as next year. The work of the Medicare 

[[Page S 16077]]
Trustees, reinforced by testimony the Finance Committee heard from the 
former Chief Actuary of Medicare, Guy King, indicates that we will need 
at least $165 billion for the hospitalization fund alone to stave off 
bankruptcy by 2002. Payment for physician services under Medicare, 
funded 68.5 percent from tax revenues, is rising in double digits.
  Medicaid spending also remains troublesome.
  The Congressional Budget Office has estimated that the Federal share 
of Medicare will grow over 10 percent a year between now and 2002, 
about three times the projected rate of inflation.
  The changes made in S. 1357 are a good start to resolve these 
problems.
  For Medicare, the bill provides greater opportunity for seniors and 
the disabled to participate in innovative coordinated care programs, 
many offering the possibility of benefits beyond the traditional 
Medicare package such as preventive services, eyeglasses, and 
prescription drugs.
  It is clear that the health care marketplace has been undergoing 
dramatic changes over the last several years and that further changes 
will occur.
  As new types of provider organizations and reimbursement practices 
have evolved over recent years, many observers note that the 
traditional doctor-patient relationship is being redefined.
  There are complex and novel issues presented by the introduction of 
many new nonphysician decisionmakers in the care of patients.
  Tensions often are apparent between the twin goals of providing high 
quality care and providing this care at reasonable costs. That became 
evident in our consideration of S. 1357, as we struggled to make 
certain that the bill afforded Medicare beneficiaries the opportunity 
to participate more in the medical marketplace, while still maintaining 
a marketplace which allows doctors, nurses and other health care 
professionals to continue to practice traditional medicine.
  There is no doubt that coordinated care offers abundant opportunities 
for our citizens, including those who participate in the Medicare and 
Medicaid programs, to receive quality health care services in the most 
cost-effective setting.
  On the other hand, as we enter this new era in which managed care 
becomes the norm, it is imperative that the overriding goal be to save 
lives, not dollars.
  What I am saying is that managed care is an important option in the 
health care delivery continuum, but so is traditional medicine.
  Fee-for-service medicine must be maintained as an option for patients 
who are more comfortable with that kind of care, as well as for 
providers who do not wish to join the managed care environment.
  One of the major innovations in this reconciliation bill is that it 
will encourage the further participation of Medicare enrollees in 
managed care plans. A key feature of the legislation is that it allows 
individuals to choose the type of health care delivery system which 
best meets their needs. This bill allows American citizens, not the 
Federal Government, the freedom to make this choice.
  I think it critical that Medicare beneficiaries be allowed to choose 
the provider of their choice, if this is important to them. In fact, 
the bill contains a provision I authored which will make certain that 
beneficiaries are provided with the information they need to gauge 
whether the Choice plan they contemplate joining allows them this 
freedom.
  At the same time, I do not think it is fair for the Congress to 
require that all plans mandate this option, since participants in 
Medicare do have flexibility under the current bill.
  I also want to note, in turn, that health care providers will face 
individual choices with respect to which type of health care delivery 
system best meets their career plans. Some will prefer a managed care 
environment, while others will not. They, too, must have the freedom to 
make that choice.
  And that freedom must not be in name only.
  For some time, I have been concerned that we are destroying the 
incentives providers have to practice good medicine in America. 
Liability concerns, cost constraints, regulations which impede 
technology development, change in medical education reimbursement--all 
these can have a stifling effect on the ability of health care 
professionals to be satisfied with the work environment.
  That is one reason I was so pleased about the House inclusion of a 
medical liability reform proposal. Medical liability reform is 
something I have been fighting for for some time, and I am pleased at 
the House action.
  We had a good deal of debate about this ``creative tension'' in the 
health care delivery system during development of the physician service 
network (PSN) provision contained in this bill. Doctors and hospitals 
were rightly concerned that because of time-consuming state 
certification requirements, they would not have the ability to form 
networks to compete as providers under the new choice plans.
  On the other hand, insurers were equally concerned that we not create 
a system which put them on an uneven footing, by allowing certain 
organizations to escape the solvency requirements and antitrust 
requirements in current law.
  The challenge we face is to find the right balance between two 
competing interests--our intention to provide seniors with real health 
care choices, especially in rural areas, and our interest in making 
sure that those who provide that care have the incentives to do so, but 
to do so with accountability. I am satisfied that the bill before us 
meets these goals, but I will be monitoring its implementation 
carefully to see that it continues to measure up.
   The bill before us today also provides beneficiaries with the option 
of establishing medical savings accounts, something I have long 
favored.
  Under the proposed legislation, Medicare recipients would have new 
options, including the choice to remain in the traditional Medicare 
program, enroll in a health maintenance organization or select a high-
deductible health insurance plan with a Medical Savings Account [MSA].
  I support the MSA provisions in the pending bill and hope they will 
remain in the final measure as signed into law.
  MSA's are personal, individual accounts used to pay for routine and 
preventive health care and are combined with high-deductible, 
catastrophic health insurance that pays for major expenses. 
Beneficiaries pay all medical bills up to the deductible with the MSA 
and out-of-pocket funds. Catastrophic insurance pays all expenses above 
the deductible.
  Among the benefits of MSA's for seniors will be that they will have 
first-dollar coverage for such services as primary and preventive care, 
in contrast to Medicare, which has deductibles and copayments. Seniors 
could use their MSA's for items not covered by Medicare, such as 
eyeglasses and prescription drugs. In addition, patients would have 
incentives to make prudent choices because they would have a larger 
voice in deciding how their health care dollars were spent.
  Medical Savings Accounts incorporate sound economics while 
encouraging individual responsibility and choice.
  Mr. President, I want to point out that, contrary to many reports, 
the Balanced Budget Reconciliation Act does not cut Medicare spending. 
It does not reduce benefits. It does not breech our contract on 
Medicare.
  And contrary to the assertions of many, Medicare spending will 
increase each year under this budget. It will rise from $181 billion 
this year, to $277 billion on fiscal year 2002, a $96 billion or 53 
percent increase. Expressed differently, Medicare benefits will 
increase from an average of $4,800 per person this year, to $6,700 in 
fiscal year 2002, hardly a cut.
  For Medicaid, S. 1357 allows a 5 percent rate of growth over the next 
7 years, with the program rising from $157 billion this year to about 
$220 billion in 2002. I don't believe this increase of 40 percent can 
be termed a ``cut'', either.
  Many of my constituents have visited with me, offering both praise 
and criticism about the provisions in this bill.
  On a positive note, I have received much positive feedback about the 
provisions in this bill which inject a greater measure of private 
market competition in Medicare. I have received warm endorsement of the 
provisions in the bill which allow the States to tailor 

[[Page S 16078]]
their Medicaid programs to their own individual needs. In particular, 
many in my home state are pleased about the opportunity to work 
cooperatively together with our Governor to craft a Medicaid program 
which meets the needs of Utahns, not the needs of those in states 
across the Nation.
  I have been troubled for some time about the inflexibility of the 
Medicaid program, and the innumerable, burdensome requirements placed 
on the programs at the Federal level. This has served to drive up 
costs, as well as to hamstring innovators such as our Governor, Mike 
Leavitt, who have some wonderfully creative ideas on how to deliver 
services in a cost-efficient manner.
  I recall the story Governor Leavitt related to me about the Medicaid 
waiver he was trying to submit to the Health Care Financing 
Administration. Utah had determined that it could provide services to 
more citizens if it restricted the dental benefit to children and adult 
emergencies. HCFA turned him down cold.
  Later, at a briefing with my staff, HCFA said they had not turned any 
states down on coverage requests such as this. When queried, they 
admitted that they had told the state not even to submit the request, 
because it would be turned down.
  This bureaucratic gamesmanship is a prime example of why Utah should 
not have to seek approval from Washington of its State Medicaid plan. 
The changes made in this bill, which will allow Utah to design its own 
coverage program without a federal waiver--with continued coverage for 
the aged, disabled, and pregnant women and children--are in important 
step and a needed step.
  That being said, I want to acknowledge openly and frankly my 
understanding of the tremendous unease the prospects of major change 
cast upon our citizenry.
  This is a natural reaction to change.
  I make the pledge that if we receive evidence that these reforms are 
not working, I will do everything I can to seek an immediate 
legislative solution in this Chamber.
  I want to make that perfectly clear.
  I, too, am not completely satisfied with each and every provision, as 
I will discuss in a moment. I am hopeful that in the conference we can 
improve these provisions.
  But first of all, I want to discuss how the changes in this bill 
affect Native Americans. This is a subject in which I have a great 
interest.


                            NATIVE AMERICANS

  Mr. President, I am especially pleased that the pending legislation 
contains needed provisions, which I sponsored in the Finance Committee, 
relating to the impact of Medicare and Medicaid reform on Native 
Americans.
  As we debate this important legislation, I want to be sure that we do 
not lose sight of how these reforms will affect Indian Country.
  And, I would point out to my colleagues that Congress has recognized 
the severely depressed health conditions existing among Native 
Americans. But there is a need to do more.
  The current health status of Native Americans and Alaska Natives 
remains disproportionately low compared to the rest of the population. 
The Native American (IHS Service Area) age-adjusted mortality rates 
remain considerably higher than for the rest of the U.S. population.
  Between 1989 and 1991 the mortality rates for Native Americans were 
440 percent greater for tuberculosis; 430 percent greater for 
alcoholism; 165 percent greater for accidents; 154 percent greater for 
diabetes mellitus; and 46 percent greater for pneumonia and influenza.
  These rates are simply unacceptable. The bottom line is this: per 
capita spending for Indian health care is approximately one-half that 
of the national average. In 1992, the U.S. National Health Expenditures 
per capita was $3,155 compared with an IHS Health Expenditures per 
capita of $1,489.
  The Native American provisions contained in this bill serve to 
reaffirm our Nation's commitment with respect to Medicare and Medicaid 
reimbursement for Indian Health Service programs.
  In effect, these provisions will help ensure that Indian health care 
continues to improve even as the Medicare and Medicaid programs undergo 
reform. Given the limited budget within which the Indian Health Service 
(IHS) and tribes must operate their health care programs, third-party 
income such as Medicare and Medicaid collections allow the IHS to 
supplement their already limited Federal appropriation.

  The IHS estimates that it will collect $54,250,000 in Medicare and 
$120,750,000 in Medicaid reimbursements in fiscal year 1995. These 
collections allow the IHS and tribal programs to improve the conditions 
of their facilities and free-up financial resources to provide critical 
health care services which they could not otherwise provide.
  In fiscal year 1995, Medicaid funds were used to pay the salaries and 
benefits for 1,379 FTEs. These staff positions include physicians, 
nurses, pharmacists, lab technicians, and support staff. The loss of 
Medicaid funds would mean that these health care providers would have 
to be laid off due to a lack of money to pay salaries and benefits.
  The impact of the loss of this money would be tremendous because 
these funds supplement direct clinical care to Native Americans and 
Alaska Natives. It would result in the closure of critical inpatient 
services in some of the most remote parts of the country. The outcome 
would be truly devastating to the already poor health status of Native 
Americans.
  Under existing law, IHS facilities like other health care providers 
are eligible to receive Medicaid and Medicare payments for services 
provided to eligible Indians. The provisions I sponsored will ensure 
that these arrangements remain in place in the new world of reformed 
Medicaid.
  In addition, my language expands coverage to tribally owned and 
operated health care facilities as well as urban Indian organizations 
that serve Medicaid eligible Indian patients.
  Approximately 1.4 million Native Americans receive health care 
services from the IHS and from Indian owned and operated health care 
facilities.
  In an effort to address the poor health conditions of Native 
Americans and because of the fact that Indian health programs are 
almost entirely dependent upon Federal appropriations, Congress made 
two exceptions to allow the IHS and tribal health facilities to 
participate in the Medicare program and use their reimbursements to 
improve facility conditions.
  First, Congress made an exception to the general ban against payments 
to Federal providers of services for IHS and tribal health providers 
pursuant to Section 401 of the Indian Health Care Improvement Act and 
Section 1880 of the Social Security Act.
  Second, Congress made an exception to the requirement that the IHS 
and tribal health facilities meet all of the conditions and 
requirements for participation in the Medicare program, as long as 
those facilities provided the Secretary with a plan for achieving 
compliance.
  Pursuant to Section 1880 of the Social Security Act, hospitals and 
skilled nursing facilities owned by the IHS may receive reimbursement 
from Medicare for services provided to eligible Indians.
  Pursuant to Section 1861(aa)(4)(D) of the Social Security Act 
outpatient facilities that are owned by the IHS are eligible to be 
Federally Qualified Health Centers and participate in the Medicare 
program but only if those facilities are operated by tribes or tribal 
organizations under the Indian Self-Determination and Education 
Assistance Act, or by urban Indian organizations.
  Tribally-owned health care facilities are able to participate in the 
Medicare program subject to the same conditions and requirements as any 
other provider in the State in which those facilities are located.
  As this bill moves through the legislative process, I hope these 
provisions can be maintained, because I believe we should do all we can 
to enhance the level of health care provided to Native Americans 
through the Medicare and Medicaid programs. I thank my colleagues on 
the Finance Committee and the Committee on Indian Affairs for their 
support and assistance in developing these important provisions.
  Another issue in which I have a great interest is the Federal effort 
to prevent health care fraud.


                            FRAUD AND ABUSE

  The problem of health care fraud and abuse is certainly one of the 
most troubling aspects in our Nation's health care delivery system. By 
most estimates, the costs of health care in the 

[[Page S 16079]]
United States approach $1 trillion annually. By the turn of the 
century, the figure will exceed $1.5 trillion annually, consuming up to 
16 percent of the Nation's gross domestic product.
  Even by most conservative estimates, billions of dollars are lost to 
waste, fraud and abuse. Health insurance experts, the FBI and other 
agencies agree that fraud and abuse account for as mush as 5 to 10 
percent of total health care expenditures. As much as $27 billion 
taxpayer dollars are lost to fraud and abuse in the Medicare and 
Medicaid programs. These losses are clearly not insignificant.
  Clearly, the Federal Government must take steps to put a halt to the 
deliberate and unscrupulous act of defrauding individuals, health care 
providers, and State and Federal Governments in the provision of health 
care.
  The anti-fraud and abuse provisions contained in this legislation 
essentially represent the provisions contained in S. 1088, which was 
developed by our colleague from Maine, Senator Cohen.
  I am extremely pleased that the final compromise addressed my 
concerns about provisions in S. 1088 which would have authorized the 
use of health care fraud related fines and penalties to finance 
investigative and enforcement efforts of the HHS IG's Office and 
efforts at the Justice Department.
  I have long opposed this so-called bounty hunter provision, as I 
strongly feel it would create an incentive for Federal investigators to 
forgo prosecution or exclusion where warranted in favor of large civil 
penalties that would provide additional funding for investigators.
  Under the new language as contained in the bill, all penalties, fines 
and damages collected will be deposited into the Medicare trust fund. 
Under this arrangement, the original purpose to strengthen the 
financial solvency of the Medicare program is further achieved. I 
strongly believe this approach serves to address my concerns as well as 
ensuring the integrity of the anti-fraud and abuse provisions.
  I do have remaining concerns, which I will work to address in 
conference.
  First, I would note that the bill does not uniformly punish those who 
would attempt to defraud a health care plan or provider or those who 
would conspire with others to do so. Nor does it appear to criminalize 
attempts or conspiracies to embezzle.
  I think it is vitally important that those who conspire with others 
to cheat our health care plans should be punished to the full extent of 
the law. Otherwise, a conspiracy to defraud or embezzle will be 
uncovered before the crime is actually completed. Those situations 
should be addressed by this statute.
  Second, while we provide for the forfeiture of property, real or 
personal of persons convicted of health care fraud, it is unclear 
whether the bill would also permit the forfeiture of the fraudulently 
obtained proceeds. While it is certainly important to obtain 
fraudulently obtained property, it is even more vital to divest 
criminals of their unlawfully obtained proceeds. We must be careful to 
craft legislation that will destroy the financial incentive for 
criminals to abuse our health care system.
  In the same vein, the bill only permits forfeiture of property from 
persons actually convicted of a crime. Thus, if someone perpetuates a 
fraud against a health care plan or provider, and then flees outside 
the jurisdiction of the United States, it may be difficult to obtain 
their ill-gotten gains remaining in this country unless we permit the 
government to bring a civil forfeiture action.
  Civil forfeiture must be available even if a conviction cannot be 
obtained. This is an important, complex issue. Indeed, I am currently 
working on legislation that would affect forfeiture law, and want to be 
able to craft responsible language.
  I also have several technical concerns with the fraud and abuse 
provisions. For example, section 7141 punishes those who commit health 
care fraud with a maximum 10-year penalty. If serious bodily injury 
results, the criminal can be punished for any term of years.
  Unfortunately, the statute does not appear to address a crime leading 
to someone's death. Serious bodily injury is not defined to include 
death, so the possibility of a death occurring as a result of the crime 
must be taken into account.
  Finally, we need to ensure that this bill does not improperly extend 
Federal criminal jurisdiction and that it conforms to accepted 
investigative demand procedures. In light of the Lopez decision issued 
by the Supreme Court last term, we must be careful to draft legislation 
that contains the proper legislative nexus to the Constitution's 
commerce clause. We must put an end to the days of federalizing crime 
without giving any thought to the legitimate prosecutorial interests of 
the States.

  We must also guarantee that appropriate, established, investigative 
demand procedures are followed. The administrative subpoena is a 
powerful tool that should not be used unless accepted procedures are 
followed.
  In addition, I have continuing concerns about the provisions relating 
to the anti-kickback statute. I have been concerned about the discount 
exception to the statute as currently interpreted, and the discount 
safe harbor regulation which is, in effect, impeding the implementation 
of commercially reasonable and non-abusive marketing practices.
  One such practice is the combining for discount purposes of various 
products and/or services supplied by a company to a provider. Another 
example involves the provision of discounts based upon the volume 
purchased during a fixed time period.
  Hospitals and health plans purchase medical devices, pharmaceutical 
products and other health care products and services from one 
manufacturer, and thereby receive a percentage price discount on the 
total products purchased. The discount is allocated on a flat across-
the-board basis for all products. Similarly, hospitals and health plans 
routinely purchase all products used for treatment of a particular 
disease from a supplier, at a fixed rate for all products.
  In addition, manufacturers want to be certain that they can lawfully 
bundle products into a single procedure kit which contains all items 
needed to perform a specific procedure or treatment, and to offer the 
kit for purchase at a discount. Without the discount exceptions, such 
arrangements can be construed as a sale of one product tied to another 
and, therefore, a kickback under Medicare law, even when practiced 
lawfully in the treatment of patients.
  These arrangements are appropriate and create no potential for abuse 
so long as there is adequate disclosure of the financial parameters of 
these arrangements so that the Medicare and State health care programs 
are able to ascertain cost data for purposes of revising payment rates 
and are able to evaluate the impact of these arrangements.
  While these arrangements may differ from pure time-of-sale price 
discounts on a single item or service, they are appropriate in the 
current health care environment.
  Discount arrangements are, in fact, commonplace in the private sector 
and have resulted in substantial savings to hospitals, managed care 
companies and, most importantly, consumers.
  Unfortunately, current Medicare law is vague in this area and implies 
potential illegality of certain innovative purchasing practices common 
in the private sector. These types of purchasing arrangements enable 
hospitals and managed care companies to purchase medical supplies and 
drugs at a discount when they are sold as a package or in volume.
  The success of Medicare reform relies heavily on the ability of 
health plans to replicate successful private sector practices--
including innovative arrangements between providers and drug and device 
manufacturers that result in savings to beneficiaries and ultimately to 
the Medicare trust fund.
  Accordingly, it is my desire to clarify that these innovative 
purchasing arrangements are allowable under the existing Medicare 
antikickback rules. Although we have made some progress in this respect 
in the bill as reported by the Finance Committee, it is my desire to 
pursue clarifications in all these areas as the bill moves forward.


                         CHIROPRACTIC SERVICES

  During consideration of the reconciliation bill an the Finance 
Committee, I offered an amendment to allow chiropractors to practice 
their profession 

[[Page S 16080]]
under Medicare to the full extent of the scope of practice permitted 
under State law. The Committee agreed to accept this amendment subject 
to working out the financing provisions with the Congressional Budget 
Office. However, due to the press of business, it has not yet been 
possible to complete the task of fine tuning a mechanism that would 
achieve this goal without significantly increasing the cost to the 
Medicare program.
  This is unfortunate because I believe that the time is ripe to 
discard the antiquated restrictions on chiropractors that permeate 
current law. Today, chiropractic is recognized by the medical 
profession, and, indeed, a recent government report concluded that 
chiropractic treatment is among the most effective for the treatment of 
certain type of ailments. Many of us in this Chamber did not need a 
government study to tell us what we already know.
  I am committed to work with my colleagues on the Finance Committee to 
effectuate a change in the limitations on chiropractors. I believe--and 
I am confident that a majority of my colleagues both on the Finance 
Committee and in this chamber agree with me--that chiropractors should 
be allowed to be reimbursed under Medicare as long as the service they 
provided is an existing covered service, and that they are operating 
within the scope of their license as defined by State law.


                    ORTHOTIC AND PROSTHETIC SERVICES

  I wanted to take this opportunity to mention another amendment I 
authored in Finance Committee, which was approved but later dropped 
because we could not find a suitable offset. That amendment would have 
allowed a 1 percent update in the reimbursement rate for orthotics and 
prosthetics providers, in particular for artificial limbs and braces.
  Orthotics and prosthetics providers design, fit and fabricate custom 
orthopedic braces and artificial limbs for a wide variety of persons 
with physical disabilities.
  I understand that the O&P fee schedule has been frozen for a number 
of years, resulting in only a 1 percent update factor per year since 
1985. The bill freezes the update.
  I am sympathetic to concerns which have been raised about the growth 
in reimbursement for this industry, and I would only note that this is 
a highly specialized segment of the health care industry; where 
utilization controls should not be an issue. In addition, while the 
Congressional Budget Office cites large growth in O&P since 1990, part 
of this growth is due to parenteral and enteral nutrition [PEN], 
urological supplies and other non-custom devices which would have not 
been covered by my amendment.
  I am hopeful that the final bill can include the one percent update.


                          ABSTINENCE EDUCATION

  Providing education to young adults about the value of abstinence is 
extremely important and I applaud the effort that this bill makes in 
this area. Many of us share the belief that abstinence is the best and 
healthiest method for our young people to avoid the risks associated 
with early sexual activity--dangers that have both physical and 
psychological manifestations.
  I am concerned, however, that the language defining abstinence 
education in section 7445 of S. 1357 may be interpreted by some as 
being so restrictive that some excellent abstinence-based programs, 
including some programs operating in my state, would not be eligible 
for funding. This issue turns on the interpretation of the term 
exclusive purpose in section 7445(c)(5)(A) and whether this will be 
read as encompassing programs, such as operated by the Community of 
Caring in Utah, for which abstinence is a primary goal. This program 
exists in 50 schools in Utah and has been successful in achieving 
abstinence by teaching and reinforcing it within the values of caring, 
respect, responsibility, trust and family. I would hope that a family 
values-based program this effective would not be excluded from funding.


                       PRESCRIPTION DRUG REBATES

  Many of us opposed the Medicaid drug rebate program when it was first 
enacted in 1990, although I recognize that it has provided a valuable 
source of revenue for financially strapped State Medicaid programs. The 
theory behind this program is that it would constrain the costs of 
pharmaceuticals by guaranteeing State Medicaid programs the best price.
  Because of the growing move toward Medicaid managed care, with its 
inherent cost containment strategies, the importance of the rebate 
program is now overstated.
  I have been concerned that rebates are anticompetitive and constrain 
the ability of hospitals, HMOs, and other private sector purchasers of 
prescription drugs to negotiate discounts from pharmaceutical 
manufacturers. In addition, overly high rebates can act as a 
disincentive to provider participation in Medicaid, as well as to the 
pharmaceutical research and development necessary to foster 
breakthrough drug products.
  Under the current Medicaid program, states receive a manufacturer's 
best price for a drug, plus an additional rebate reflecting any 
differences between price increases and inflation--as measured by the 
Consumer Price Index. Under the original Finance bill, the Federal 
rebate program would have been retained for 3 years, after which the 
States could choose whether to implement programs on their own. An 
amendment adopted in committee removed that sunset.
  I believe it is important to clarify what was intended by an 
amendment that I offered at the Senate Finance Committee on the topic 
of prescription drug rebates.
  Currently, several States require rebates from prescription drug 
manufacturers over and above what is required under the Federal 
Medicaid program. The bill that we will ultimately send to the 
President will also be likely to retain the authority for States to 
continue to collect rebates. My personal belief, and I think that most 
of my colleagues on Finance would concur, is that this authority should 
be along the lines of the original Finance Committee bill which 
included a transition period of 3 years allotted to States to integrate 
drug rebate programs into their overall health care programs.
  At the Finance Committee there was discussion as to whether the 
language adopted would preclude States that choose to opt out of the 
Medigrant Program from collecting supplemental or additional rebates on 
top of the rebate amount authorized under the program. The Senate 
Finance Committee voted that States would be precluded from collecting 
unlimited rebates. At the committee level the point was made that the 
pharmaceutical industry is expected to spend about $15 billion on 
research and development in 1995 alone. States may choose to opt out of 
the drug rebate program but will be prohibited from collecting 
unlimited rebates from this research and development-intensive 
industry.


                               FDA EXPORT

  I was pleased to learn this morning that the House adopted as part of 
its reconciliation bill legislation I authored with Representative Fred 
Upton and Senator Judd Gregg (H.R. 1300/S. 597) a bill which would 
dramatically expand export opportunities abroad for American 
manufacturers of pharmaceuticals and medical devices. That bill, the 
FDA Export Reform and Enhancement Act of 1995, will both create jobs in 
the United States, as well as provide incentives for us to enhance our 
technological capacity to develop new medical products.
  I intend to work concertedly to ensure that this provision becomes 
law, and I commend my colleagues in the House, especially 
Representative Upton, for their work in this area.


             REIMBURSEMENT FOR EXPERIMENTAL MEDICAL DEVICES

  On June 22, 1995, Senators Gregg, Frist, Kennedy, Kassebaum, Grams, 
Wellstone, Chafee, Hutchison, D'Amato and I introduced the Medical 
Devices Access Assurance Act of 1995. A companion measure, H.R. 1744, 
was introduced in the House by Chairman Bill Thomas, the first in 
Congress to step forward in this area.
  This legislation addresses two serious threats to our health care 
system: restricted access for our senior citizens to the most advanced 
experimental medical technologies and our country's loss of clinical 
research activities to overseas facilities. This bill helps harmonize 
our reimbursement policies for experimental medical devices with those 
governing payment for experimental drugs. This is good policy that is 
fair and advances the public health. 

[[Page S 16081]]

  Because of ``Byrd rule'' considerations we are not able to pursue 
this matter in the bill today, even though the measure is included in 
the House-passed bill. It is my intention to pursue this legislation 
vigorously throughout the remainder of this congressional term, either 
as part of the reconciliation bill, or on the Medicare/Medicaid 
technicals bill which I understand the Chairman intends to consider 
later this year.


                             OXYGEN THERAPY

  As part of the Medicare reform legislation, the Finance Committee 
reported a 40 percent reduction of the home oxygen benefit payment. In 
contrast, the House Ways and Means Committee reported a 20 percent 
reduction.
  While I recognize that these provisions, to a certain extent, mirror 
Health Care Financing Administration efforts under an inherent 
reasonableness proceedings, nevertheless I am concerned about the 
impact of such a significant reduction on patients in Utah who require 
a higher level of service, particularly those patients in rural or 
remote areas of the State.
  In addition, I have met with numerous small home oxygen providers who 
believe that with their slim profit margins they cannot possibly 
sustain a 40 percent payment reduction. And for many patients, the 
small provider may be the only nearby source of home oxygen therapy.
  As the legislative process moves forward, I hope that we can 
reexamine this proposal.


                              HOSPICE CARE

  I would also like to mention my deep interest in making sure that 
Federal support for hospice care remains as strong as possible.
  Hospice care provides palliative care for terminally ill individuals 
with a life expectancy of 6 months or less if the terminal illness runs 
its normal course. Specifically, hospice care provides relief of pain 
and uncomfortable symptoms through a specially qualified 
interdisciplinary group of medical, psychosocial and spiritual 
professionals. Besides being certified as terminally ill, an individual 
must be entitled to part A of Medicare in order to be eligible to elect 
hospice care under Medicare. Under the Medicare hospice benefits, a 
terminally ill individual can receive comprehensive high-quality care 
at a lower cost.
  While I recognize the need to hold back the growth in spending for 
all components of the Medicare program, I am concerned that the 
effective and efficient service of hospice care currently available to 
Medicare beneficiaries may be compromised by the proposed 2.5 percent 
budget reduction.
  Hospice care is in effect comprehensive managed care for a 
specialized population, the terminally ill, since the current Medicare 
hospice benefit is reimbursed on a fixed, all-inclusive per diem basis.
  As a recent Lewin-VHI study indicated, ``efforts to control Medicare 
expenditures [that] discourage hospice providers from offering their 
services to Medicare beneficiaries, Medicare expenditures would likely 
increase.'' We must monitor this situation closely to assure that the 
benefits of hospice care are not undermined by this proposal.
  In addition, I also think we need to clarify how the hospice benefit 
will interact with the managed care opportunities provided in both the 
House and Senate bills. The House language is explicit in stating that 
Medicare contractors will assume full financial liability for services 
other than hospice care. The Senate language is silent on this point 
and I am hopeful this can be addressed in conference.


                            HOME HEALTH CARE

  I am also concerned about the impact of this legislation on the 
provision of home health care.
  As my colleagues are aware, home health has long been a personal 
priority of mine. I have seen time after time how gratified Utah 
families are to be able to care for their loved ones in the home. This 
compassionate, caring alternative to institutionalization can make all 
the difference in the lives of those who are ill.
  At the same time, I recognize that the rapid growth of these services 
in recent years attests to the fact that patients prefer home health 
care over traditional institutional care.
  I have had the opportunity to talk to patients and their families who 
receive these services. Almost without exception the family setting 
enhances the patients morale and serves as a positive influence in 
speeding recovery or sustaining the critical nature of an illness.
  Accordingly, as we reform Medicare we should be careful not to limit 
access artificially.
  The legislation before us today proposes significant changes to the 
home health care industry. One provision will require that home health 
care services be paid on a prospective pay system. This is something I 
have favored for a long time; I think this provision will serve to 
address concerns regarding costs as well as to promote cost efficiency 
and effectiveness among providers without compromising the quality of 
care.
  While I support the enactment of a PPS for home health, I do have 
concerns about some of the provisions contained in the Senate and House 
proposals which could have unintended consequences of erecting barriers 
to care for several categories of the elderly.
  For instance, the greatest deficiency in the respective House and 
Senate plans, and one which will cause the greatest financial hardship 
to agencies as well as impact on patients, is the treatment of extended 
care/outlier cases; that is, patients who require more than 120 days of 
care.
  According to some industry sources who have contacted me, as much as 
30 percent of the national caseload falls into this category. The 
discrepancy between the per episode cap--based on the average regional 
cost of providing 120 days of care--and the per agency limit based on 
165 days of care--must be addressed and eliminated.
  If the episode cap is limited to 120 days, then additional payments, 
where warranted and approved by the fiscal intermediary, should begin 
on day 121. Or, alternatively, the per episode cap should be based on 
the regional average costs of providing 165 days of care.
  The financial impact on providers of the discrepancy is obvious. The 
impact on patients is no less obvious. In the first place, the plan 
effectively--albeit certainly unintentionally--discriminates against 
patients with certain medical needs and conditions. While Medicare will 
pay providers the full cost of furnishing care to some patients whose 
needs fall within the arbitrarily day limits, it will pay for only part 
of the care for patients who are either more acutely ill or have 
chronic conditions.
  Additionally, it is reasonable to assume that agencies with large 
caseloads of patients needing care beyond 120 days--but less than 165--
cannot long operate under this system. The logical result will be 
limited access to care in some areas as agencies close.
  With respect to the home health market basket updates, payment rates 
should be based on actual reasonable costs. The provision which would 
adjust payments by the home health market basket minus 2 percent is 
clearly unreasonable. Per visit payment directly affects per episode 
limits, so the limitation has a compounded effect.
  Also punitive, particularly in light of the 45-day window of 
vulnerability/discrepancy, is the limitation of the savings share to 5 
percent of an agency's aggregate Medicare patients. I think this is 
something we may need to examine, especially since the limitation 
serves as a disincentive to bring overall costs to a level that will 
yield savings greater than 5 percent.
  The limitation could ultimately hurt the Medicare program, whose 
level of savings would increase if real incentives were in place for 
home health agencies to work to produce saving beyond the 5 percent 
limit.
  Another issue regards the break in care between a particular illness 
or episode. Any required break in the delivery of home health services 
before a new episode can begin would, by definition, be arbitrary. A 
60-day break seems to be unnecessarily long, given the nature of the 
Medicare home health care population. I think that 45 days might be 
more reasonable.
  Another question I have about our proposal is that it leaves open the 
question of what responsibility, if any, a home health agency would 
carry for a patient who is discharged--for example at 120 days--and 
then who needs services for another condition 50 days later. This issue 
needs to be clarified. If patients cannot receive the care they 

[[Page S 16082]]
need through home health, it is reasonable to assume they will obtain 
it in a more costly institutional setting.
  Finally, I note that the House bill extends the waiver provision 
until the implementation of the PPS system on October 1, 1996. I hope 
this is something we can reexamine.


                           CHILDREN'S HEALTH

  Nothing can be more important to our future than the health of our 
children. Too often that fact is left out of our debate on entitlement 
programs.
  This debate has underscored that there is obvious disagreement over 
whether Medicaid should remain an entitlement, but I am certain there 
is no disagreement that children should be a primary focus no matter 
how we reform Medicaid.
  In particular, children with special health care needs--those with 
serious chronic conditions or disabilities such as those with cerebral 
palsy, cystic fibrosis, cancer or heart conditions--are fortunately 
very small in number. In fact, they represent only 2 percent of all 
children. But, it will take special attention to make sure their needs 
are being met.
  For example, managed care can offer these children and their families 
better access to care and better coordination of services, but--as the 
managed care industry's own National Committee on Quality Assurance has 
recognized--managed care has little experience with children with 
special needs.
  The bill we have before us today contains an amendment which would 
have States outline in their plans how they will serve children, and in 
particular, how they will serve children with special health care 
needs. While I am certain the Governors will devote appropriate 
attention to children with special needs, I think that outlining how 
this will be accomplished in the State plans will give us all the peace 
of mind that these very vulnerable children will not fall through the 
cracks.
  In addition, the bill contains a provision I coauthored with Sen. 
Graham to clarify that States are required within their Medigrant plans 
to describe the methodology to be used to continue disproportionate 
share payments to hospitals. An explicit methodology is important for 
hospitals such as Primary Children's in Salt Lake City, which receives 
7 percent of its Medicaid revenues from disproportionate share 
payments.


                             NURSING HOMES

  One of the reasons I have introduced S. 1177, the Quality Care for 
Life Act, is that I firmly believe we need to adopt a national policy 
for long-term care. That policy need not be a Federal-only solution. 
Indeed, any plan to provide comprehensive long-term care services for 
Americans citizens must embrace a mix of private and public solutions, 
including incentives for long-term care insurance development.
  There are 17,000 nursing homes in this country, who serve 1.7 million 
residents. The care of two-thirds of these residents, some 1.13 
million, is paid by Medicaid, and the care of 100,000 is paid by 
Medicare.
  The impact of this bill on the provision of long-term care services 
is immeasurable, since we are reforming the Medicaid system which 
provides a good deal of the long-term care services in this country, as 
well as making substantial changes to Medicare reimbursement for 
skilled nursing facilities [SNF's].
  There is no doubt that savings from SNF reimbursement should be 
included in a reconciliation bill; I think that all involved --
providers, patients, and policymakers--recognize that fact. However, I 
have had some concerns about the way the provisions were crafted in the 
proposal that we considered in Finance Committee.
  I have very much appreciated the willingness of Chairman Roth, and 
his most capable staff, to work with me to address my concerns.
  Two weeks ago, I received a letter from 28 organizations, 
representing a broad spectrum of companies and health professionals 
providing care to 1 million Medicare beneficiaries. These 
organizations, which include nursing homes, subacute facilities, 
ancillary service providers and health care professionals serving 
nursing home patients, were opposed to the committee proposal which 
would have established a flat, per-stay reimbursement rate for all 
ancillary services based on a blend of a facility-specific and a 
national average rate.
  The basis of concern was that the move toward a national average 
could cause wide shifts in reimbursement, which could jeopardize 
patient care especially for those with severe illnesses. In addition, 
the funding mechanism could jeopardize the trend toward using subacute 
care as a cost effective alternative to hospital care.
  I also think that, despite the Health Care Financing Administration's 
lack of priority in developing a prospective payment system for SNF's, 
there is consensus that future payment must be made on a prospective 
basis. The only practical solution to the funding problem for nursing 
homes under the fee-for-service sector of the Medicare Program is to 
implement a prospective payment system that contains the necessary cost 
containment incentives. This will take some time to develop. Under the 
most rosy scenario, such a PPS system could not be implemented before 
October 1, 1997.
  To me, the goals in developing a SNF reimbursement proposal should be 
twofold. We must make certain that any proposal we approve maintains 
appropriate incentives for high quality services. At the same time, it 
must also provide reimbursement in the most equitable way, especially 
during the transition period as we move to a PPS system.
  The key to designing a new system is to get a handle, not only on the 
price the Medicare Program is paying for the nursing home service 
package, but also on the amount of services provided in the coverage 
package. Control over the latter can only be accomplished by paying 
SNF's prospectively on a per episode, per case, or per spell of illness 
basis--as opposed to the per diem or per day approach that has been 
traditionally employed in the nursing home industry.
  Faced with prospective per episode payments, skilled nursing 
facilities will be able to economize on the amount of services provided 
during each Medicare covered stay by adjusting the intensity of 
services provided during each day of the patient's stay in the facility 
and by making sure that the Medicare covered stay is no longer than 
necessary. Of course, other mechanisms outside of the payment system 
must be relied upon to control the number of Medicare covered 
admissions, but I expect we will be addressing these concerns through 
controls on coverage decisions, shifts to managed care, and 
modifications in eligibility rules.
  These prospective episodic payments should cover all of the 
reasonable costs that skilled nursing facilities incur when providing 
Medicare covered services, including both operating costs (both routine 
and non-routine) and property costs. The prospective episodic payments 
under this system are intended to cover the entire cost of services 
provided during the period of Medicare part A coverage. This means that 
the payments are to cover both part A and part B services that are 
provided to the patients during their Medicare part A covered stays.
  Additionally, the prospective episodic payments need not be the same 
for all patients in all facilities. For example, the prospective 
payments should be case-mix sensitive so that patients with varying 
service needs are associated with varying levels of payments. Skilled 
nursing facilities operating in different labor markets also should 
have their prospective payment schedules adjusted to account for these 
market differences. Finally, special consideration should be given to 
the prospective payments for patients in skilled nursing facilities 
with very low volumes of Medicare activity so as to preserve the access 
to SNF services that these providers afford. This can be done either by 
preserving the current low volume prospective per diem Medicare SNF 
payment system or by adjusting the prospective episodic payment levels 
for these facilities to recognize their higher costs of operation. No 
payment adjustments should be authorized other than those just 
described.
  With this kind of approach to prospective Medicare SNF payment, we 
can expect to finally get a handle on one of the most rapidly expanding 
sectors of the Medicare Program.
  I am extremely appreciative of the efforts that Senator Roth and his 
staff have made to work with me to address 

[[Page S 16083]]
concerns I have had about the SNF provisions in the bill.
  There is one other SNF issue I wish to address. The Finance Committee 
amendment we considered today differed somewhat from an earlier draft I 
reviewed with respect to section 7037. In the previous draft, the 
language made it clear that the Secretary of HHS should establish 
salary equivalency limits based on ``recent and accurate data relevant 
to the specific types of therapists and providers, subject to the 
salary guidelines.'' This language also specified that the existing 
guidelines for physical therapy and respiratory therapy would be 
updated to conform to that guidance. As my colleagues may be aware, the 
current guidelines for physical therapy and respiratory therapy are 
based on 1981 data and they are outdated.
  This language was not included in the draft of this morning. I am 
hopeful that we can work to clarify this section during conference to 
make certain that the Secretary shall use accurate, timely, and 
relevant data in developing occupational therapy and speech language 
pathology guidelines and to assure that the Secretary will rebase the 
existing guidelines for physical therapy and respiratory therapy based 
upon timely, accurate, and relevant data.


                         CLINICAL LABORATORIES

  Another provision about which I have some concern is the provision on 
reimbursement of clinical labs contained within this bill. I have no 
objection to reducing the level of spending under this category, and I 
am very appreciative of the fact that the bill does not contain the 
unwise proposal from 1993 to impose a copayment on lab services.
  In committee, I had suggested a provision similar to the Ways and 
Means bill which would only freeze updates for lab payments and include 
much-needed administrative simplifications which could provide 
efficiency and cost-effectiveness in the delivery of lab services, a 
key regulatory reform goal of this Congress.
  We were not able to work out the scoring on this proposal, but I am 
hopeful the issue of lab reimbursement, and especially administrative 
simplification, can be reexamined in conference.


                   FEDERALLY QUALIFIED HEALTH CENTERS

  During Finance consideration of this bill, the committee adopted 
without objection a provision I authored with Senators Chafee and 
Grassley which would allocate one percent of Federal Medicaid spending 
for the preservation of what I believe is really the Nation's primary 
care infrastructure--community health centers and rural health clinics. 
Since the bill rewrites title IX of the Social Security Act, Medicaid, 
it eliminates the cost-based reimbursement they would have received 
under Medicaid as Federally-Qualified Health Centers (FQHCs).
  Let me make perfectly clear that I am extremely sensitive to the 
concerns that our Nation's Governors' have raised about using a 
Medicaid set-aside as a funding source for this amendment; I want to 
work to address these concerns as the process moves forward.
  Under our amendment, one half of the amount allocated would be used 
for payments to community health centers, and the other half for rural 
health clinics. The Secretary of HHS would determine the methodology 
for determining payments to these centers and would make payments 
directly to the centers. Payments made to centers by the Secretary 
would be in addition to any other revenues the centers receive from 
Medicaid, either directly from States or from managed care plans.
  Mr. President, over 1000 community health centers and 2500 rural 
health clinics play a unique role in the health care system. In inner-
city areas, community health centers are often the only providers of 
care to Medicaid patients and the uninsured. In rural areas, community 
health centers and rural health clinics are often the only providers 
for the residents of the area, whether they are on Medicaid or 
Medicare, have private insurance, or are uninsured.
  Community health centers and rural health clinics serve over 16 
percent of Medicaid patients nationwide. My colleagues might be 
surprised to know that 36 percent of community health center patients 
are on Medicaid; 44 percent are uninsured; 8 percent are on Medicare; 
and 12 percent have private insurance.
  For rural health clinics, 27.7 percent of the patients are on 
Medicaid; 29.4 percent are on Medicare; 14.4 percent are uninsured; and 
28.5 percent have private insurance.
  The current Medicaid Program recognizes the unique role of these 
centers, and provides them with cost-based reimbursement, in order to 
assure that the payments are sufficient to meet the health care needs 
of Medicaid patients they serve.
  Unlike providers with large numbers of privately insured patients, 
these centers do not have reserves or available capital, and do not 
have the ability to cost-shift losses from insufficient payments under 
public programs.
  Under many current Medicaid managed care programs, these centers have 
not received sufficient payments from managed care plans to meet their 
costs of caring from Medicaid patients.
  Some of my colleagues may ask why these centers need special 
consideration. A major reason is that many will be forced to close 
their doors or reduce services if their reimbursement is not 
maintained.
  Centers are committed to serve all in their communities. Without a 
sufficient flow of funds to meet the needs of their Medicaid patients, 
centers will be forced to substantially reduce their patient loads, and 
many will go out of business. Other providers will not enter these 
underserved communities because the economic base will not support 
them, and the community will be left with no remaining health care 
infrastructure.
  Another reason is that Medicaid patients (particularly those seen by 
centers) often are more difficult to treat than the privately insured 
patient enrolled in a managed care plan because Medicaid health center 
patients have more serious health conditions and poorer overall 
indicators of health status.
  In addition to traditional medical services, centers provide other 
services (such as outreach, transportation, health education, and 
translation) which enable Medicaid patients to better utilize care and 
comply with medical direction. These services are not generally 
included in a capitated payment which a health center receives from a 
health plan.
  There are many benefits which would result from this legislation.
  Since these centers must be located by law in underserved areas, 
access to cost-effective preventive and primary care services will be 
assured.
  These centers deliver health care which is one of the best bargains 
anywhere. For example, the total annual cost of community health center 
comprehensive primary and preventive care is, on average, less than 
$300 per patient.
  I would also like to reassure my colleagues that this provision could 
result in substantial savings for State Medicaid Programs. Several 
recent studies have found that Medicaid patients who regularly use 
health centers have lower total annual health care costs than Medicaid 
patients who use other primary care providers, such as HMOs, hospital 
outpatient units, or private physicians. These studies show that health 
center patients were 22 percent to 33 percent less expensive overall 
and had between 27 percent to 44 percent lower inpatient costs and 
days.
  Other providers could also benefit from this provision. These centers 
serve disproportionate numbers of high-risk patients, and adequately 
compensating the health centers for their care can make risk levels 
more reasonable for other providers in communities with more than one 
provider.
  As we prepare to vote on this landmark legislation, I want to express 
my deep personal appreciation to the Finance Committee health staff, 
who have labored long and hard under the most difficult circumstances 
to bring us a solid piece of legislation. In particular I want to cite 
the hard work of Julie James, Roy Ramthun, Alec Vachon, Susan Nestor, 
and Donna Norton. I would be remiss if I did not also mention the 
monumental efforts of Lindy Paull, Rick Grafmeyer, and last, but not 
least, Gioia Bonmartini.
  In conclusion, Mr. President, unfortunately, there is no easy nor 
painless way to effect reductions in the growth of Medicare and 
Medicaid. But it has to be done.
  My message is simple. I wish we lived in a world in which we had 
unlimited 

[[Page S 16084]]
resources so that all--aged, disabled, poor--could have the services 
they desire. But such a world does not exist.
  We must be fair to our Nation's disabled, to our seniors, and to the 
low-income. But we must also be fair to our children, and their 
children. In short, we just have to do the best we can and this bill is 
a good start.

                          ____________________