[Congressional Record Volume 143, Number 25 (Monday, March 3, 1997)]
[Senate]
[Pages S1828-S1843]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. CONRAD (for himself, Mr. Kerrey, Mr. Harkin, Mr. 
        Wellstone, Mr. Baucus, Mr. Cochran and Mr. Inouye):
  S. 385. A bill to provide reimbursement under the Medicare Program 
for telehealth services, and for other purposes; to the Committee on 
Finance.


                THE COMPREHENSIVE TELEHEALTH ACT OF 1997

 Mr. CONRAD. Mr. President, today, I am pleased to be joined by 
Senator Kerrey, Senator Harkin, Senator Wellstone, Senator Baucus, 
Senator Cochran, and Senator Inouye to introduce legislation to help 
improve health care delivery in rural and underserved communities 
throughout America through the use of telecommunications and telehealth 
technology.
  Telehealth encompasses a wide variety of technologies, ranging from 
the telephone to high-technology equipment that enables a surgeon to 
perform surgery from thousands of miles away. It includes interactive 
video equipment, fax machines and computers along with satellites and 
fiber optics. These technologies can be used to diagnose patients, 
deliver care, transfer health data, read x-rays, provide consultation, 
and educate health professionals. Telehealth also includes the 
electronic storage and transmission of personally identifiable health 
information, such as medical records, test results, and insurance 
claims.
  The promise of telehealth is becoming increasingly apparent. 
Throughout the country, providers are experimenting with a variety of 
telehealth approaches in an effort to improve access to quality medical 
and other health-related services. Those programs are demonstrating 
that telecommunications technology can alleviate the constraints of 
time and distance, as well as the cost and inconvenience of 
transporting patients to medical providers. Many approaches show 
promising results in reducing health care costs and bringing adequate 
care to all Americans. For the first time, technological advances and 
the development of a national information infrastructure give 
telehealth the potential to overcome barriers to health care services 
for rural Americans and afford them the access that most Americans take 
for granted. But it is clear that our Nation must do more to integrate 
telehealth into our overall health care delivery infrastructure.
  Because I believe telehealth holds incredible promise for rural 
America, I formed the Ad Hoc Steering Committee on Telemedicine and 
Health Care Informatics to explore telehealth and related issues in 
1994. The purpose of the steering committee, which includes telehealth 
experts from government, private industry, and the health care 
professions, is to evaluate Federal policies on telehealth and how to 
use telecommunications technology more effectively to increase access 
to health care throughout America.
  Throughout the last few years, as the steering committee held 
meetings and policy forums, it became increasingly apparent that there 
is enormous energy and financial effort being devoted to telehealth 
today, both by government and private industry.
  Because so many rural and underserved communities lack the ability to 
attract and support a wide variety of health care professionals and 
services, it is important to find a way to bring the most important 
medical services into those communities. Telehealth provides an 
important part of the answer. It helps bring services to remote areas 
in a quick, cost-effective manner, and can enable patients to avoid 
traveling long distances in order to receive health care treatment.
  Telehealth is already making a difference in my State. The University 
of North Dakota has a fiber optic two-way audio and video interactive 
network that has been used to train students in areas like social work 
and medical technology. Recently, I had the opportunity to spend some 
time with two of the premier telehealth systems in the State of North 
Dakota. I was amazed at the capabilities of these systems. They 
currently supply speciality care to rural North Dakota clinics, manage 
chronic disease, lower administrative costs, and reduce the isolation 
felt by rural and frontier practitioners.
  Because telehealth is in many respects an emerging health care 
application, it is particularly important to constructively capitalize 
on efforts like these. My proposal attempts to facilitate this in a 
number of ways.
  The first element of my proposal builds on current demonstration 
projects to require the Health Care Financing Administration to put in 
place a reimbursement system for telehealth activities under Medicare. 
Medicare reimbursement policy is an essential component of helping to 
integrate telehealth into the health care infrastructure, and must be 
explored. It is particularly important in rural areas, where many 
hospitals do as much as 80 percent of their business with Medicare 
patients. While rural areas are the most in need of telehealth 
services, I also realize there are other groups that would greatly 
benefit from an expansion of this service. That is why I am also asking 
the Secretary of Health and Human Services to submit a report that will 
examine the impact of expanding telehealth reimbursement for nonrural 
Medicare beneficiaries who are home-bound or nursing home-bound and for 
whom being transferred for health care services imposes a serious 
hardship.

  The second element of this proposal asks the Secretary of Health and 
Human Services to submit a report to

[[Page S1829]]

the Congress on the status of efforts to ease licensing burdens on 
practitioners who cross State lines in the course of supplying 
telehealth services. Currently, consultation by almost any licensed 
health professional in this situation requires that the practitioner be 
licensed in both States.
  In talking with telehealth providers in my State, and with experts on 
the ad hoc committee, I have been told repeatedly that this is one of 
the most significant barriers to developing broad integrated telehealth 
systems. More importantly, they tell me States have actively been using 
licensure to close their borders to innovative telehealth practice. In 
the past 2\1/2\ years, 11 States have taken legislative action to 
ensure that out-of-State practitioners must be fully licensed in their 
State in order to provide telehealth services, even if they are fully 
licensed in their own State. During a recent discussion with a 
telehealth practitioner from my home State of North Dakota, I was told 
about a group of telehealth specialists who, among their small group 
practice, were licensed in more than 30 different States. That means 
they pay 30 different fees, are responsible for 30 different continuing 
education requirements, and are overseen by 30 different regulatory 
bodies. This is a costly and burdensome procedure for many 
practitioners, but the burden falls particularly heavily on rural 
practitioners, who face long travel times to acquire continuing 
education, and who frequently run on lower profit margins than urban 
practitioners.
  While I am not prepared at this time to propose that the Federal 
Government get involved with professional licensure, I have asked the 
Secretary to study the issue and report to Congress yearly on the 
status of efforts by States and other interested organizations to 
address this issue. This will allow us to reach out to the States and 
work together to find solutions to cross-State licensure concerns. As 
part of this report, I have asked the Secretary to make recommendations 
to Congress, if appropriate, about possible Federal action to lower the 
licensure barrier.
  A third element of my proposal involves coordination of the Federal 
telehealth effort. Vice President Gore has been making outstanding 
contributions in the area of the information super- highway. The 
Department of Health and Human Services, in large part at the urging of 
the Vice President, has created an informal interagency task force that 
is examining our Federal agency telehealth efforts. This group recently 
completed a report on telehealth that highlights current Federal 
activities and also provides a thorough examination of many of the 
important issues in telehealth.
  My bill attempts to use that task force to inventory Federal activity 
on telehealth and related technology, determine what applications have 
been found successful, and recommend an overall Federal policy approach 
to telehealth. Many departments and agencies of the Federal Government 
are engaged in telehealth activity, including the Veterans' 
Administration, Department of Defense, Department of Agriculture, 
Office of Rural Health Policy, and many others. The more these agencies 
work together to coordinate the Federal effort and consolidate Federal 
resources, the more effective the Federal Government will be in 
contributing to telehealth in a positive way. I believe this is 
especially important in light of the recent GAO report calling for an 
expanded role for this group and more coordination of telehealth issues 
across the Federal agencies. The efforts of this group, along with the 
ongoing activities of the congressional ad hoc steering committee, will 
provide a renewed focus for telehealth across the Federal Government. 
Such coordination will also help protect the American taxpayer from 
unnecessary duplication of effort.
  The fourth part of my proposal helps communities build homegrown 
telehealth networks. It attempts both to build a telehealth 
infrastructure and foster rural economic development and incorporates 
many of the most important lessons learned from other grant projects 
and studies on telehealth from across the Federal Government.

  Clearly, the scarcity of resources in many rural communities requires 
that the coordination and use of those resources be maximized. My bill 
encourages cooperation by various local entities in an effort to help 
build sustainable telehealth programs in rural communities. It plants 
seed money to encourage health care providers to join with other 
segments of the community to jointly use telecommunications resources. 
Using a unique loan forgiveness program, it rewards telehealth systems 
that supply appropriate, high-quality care while reducing overall 
health care costs.
  Most importantly, it does not create a system where various 
technological approaches are imposed upon communities. Rather it 
enables potential grantees to determine user-friendly approaches that 
work best for them. This homegrown approach to developing user-friendly 
telehealth systems, as well as the preference for coordinating 
resources within communities, will help ensure the long-term viability 
of such programs after the grant expires.
  Mr. President, my proposal is a sound first step in our national 
efforts to integrate telecommunications technology into the rapidly 
evolving health care delivery system. This bill is very similar to 
legislation, S. 2171 I introduced late in the 104th Congress. I am very 
encouraged by the positive feedback I have received from telehealth 
networks across the country. Over the past few months, I have attempted 
to reach out to different groups and incorporate their ideas into this 
proposal. As a result, I have made several changes in the bill that I 
believe will make this a stronger proposal. But, as with any complex 
issue, I understand that some may prefer different approaches. By 
introducing this legislation early in the 105th Congress, I hope to 
send a message to all interested parties that now is the time to come 
forward with creative solutions to these important issues. It is my 
hope that comprehensive telehealth legislation can be attached to any 
Medicare reform legislation enacted in this Congress so we can improve 
access to needed health care services for rural and underserved 
populations.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 385

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the 
     ``Comprehensive Telehealth Act of 1997''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Definitions.

        TITLE I--MEDICARE REIMBURSEMENT FOR TELEHEALTH SERVICES

Sec. 101. Medicare reimbursement for telehealth services.

                     TITLE II--TELEHEALTH LICENSURE

Sec. 201. Initial report to Congress.
Sec. 202. Annual report to Congress.

TITLE III--PERIODIC REPORTS TO CONGRESS FROM THE JOINT WORKING GROUP ON 
                               TELEHEALTH

Sec. 301. Joint working group on telehealth.

              TITLE IV--DEVELOPMENT OF TELEHEALTH NETWORKS

Sec. 401. Development of telehealth networks.
Sec. 402. Administration.
Sec. 403. Guidelines.
Sec. 404. Authorization of appropriations.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress finds the following:
       (1) Hospitals, clinics, and individual health care 
     providers are critically important to the continuing health 
     of rural populations and the economic stability of rural 
     communities.
       (2) Rural communities are underserved by specialty health 
     care providers.
       (3) Telecommunications technology has made it possible to 
     provide a wide range of health care services, education, and 
     administrative services between health care providers, 
     patients, and administrators across State lines.
       (4) The delivery of health services by licensed health care 
     providers is a privilege and the licensure of health care 
     providers and the ability to discipline such providers is 
     necessary for the protection of citizens and for the public 
     interest, health, welfare, and safety.
       (5) The licensing of health care providers to provide 
     telehealth services has a significant impact on interstate 
     commerce and any unnecessary barriers to the provision of 
     telehealth services across State lines should be eliminated.
       (6) Rapid advances in the field of telehealth give Congress 
     a need for current information and updates on recent 
     developments in telehealth research, policy, technology, and 
     the use of this technology to

[[Page S1830]]

     supply telehealth services to rural and underserved areas.
       (7) Telehealth networks can provide hospitals, clinics, 
     health care providers, and patients in rural and underserved 
     communities with access to specialty care, continuing 
     education, and can act to reduce the isolation from other 
     professionals that these health care providers sometimes 
     experience.
       (8) In order for telehealth systems to continue to benefit 
     rural and underserved communities, the medicare program under 
     title XVIII of the Social Security Act (42 U.S.C. 1395 et 
     seq.) must reimburse the provision of health care services 
     from remote locations via telecommunications.
       (b) Purposes.--The purposes of this Act are as follows:
       (1) To mandate that the Health Care Financing 
     Administration reimburse the provision of clinical health 
     services via telecommunications.
       (2) To determine if States are making progress in 
     facilitating the provision of telehealth services across 
     State lines.
       (3) To create a coordinating entity for Federal telehealth 
     research, policy, and program initiatives that reports to 
     Congress annually.
       (4) To encourage the development of rural telehealth 
     networks that supply appropriate, cost-effective care, and 
     that contribute to the economic health and development of 
     rural communities.
       (5) To encourage research into the clinical efficacy and 
     cost-effectiveness of telehealth diagnosis, treatment, or 
     education on individuals, health care providers, and health 
     care networks.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Health care provider.--The term ``health care 
     provider'' means anyone licensed or certified under State law 
     to provide health care services who is operating within the 
     scope of such license.
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
        TITLE I--MEDICARE REIMBURSEMENT FOR TELEHEALTH SERVICES

     SEC. 101. MEDICARE REIMBURSEMENT FOR TELEHEALTH SERVICES.

       (a) In General.--Not later than July 1, 1998, the Secretary 
     shall make payments from the Federal Supplementary Medical 
     Insurance Trust Fund under part B of title XVIII of the 
     Social Security Act (42 U.S.C. 1395j et seq.) in accordance 
     with the methodology described in subsection (b) for 
     professional consultation via telecommunications systems with 
     an individual or entity furnishing a service for which 
     payment may be made under such part to a beneficiary under 
     the medicare program residing in a rural area (as defined in 
     section 1886(d)(2)(D) of such Act (42 U.S.C. 
     1395ww(d)(2)(D))) or an underserved area, notwithstanding 
     that the individual health care provider providing the 
     professional consultation is not at the same location as the 
     individual furnishing the service to that beneficiary.
       (b) Methodology for Determining Amount of Payments.--Taking 
     into account the findings of the report required under 
     section 192 of the Health Insurance Portability and 
     Accountability Act of 1996 (Public Law 104-191; 110 Stat. 
     1988), the findings of the report required under paragraph 
     (c), and any other findings related to the clinical efficacy 
     and cost-effectiveness of telehealth applications, the 
     Secretary shall establish a methodology for determining the 
     amount of payments made under subsection (a), including the 
     cost of the consultation service, a reasonable overhead 
     adjustment, and a malpractice risk adjustment.
       (c) Supplemental Report.--Not later than January 1, 1998, 
     the Secretary shall submit a report to Congress which shall 
     contain a detailed analysis of--
       (1) how telemedicine and telehealth systems are expanding 
     access to health care services;
       (2) the clinical efficacy and cost-effectiveness of 
     telemedicine and telehealth applications;
       (3) the quality of telemedicine and telehealth services 
     delivered; and
       (4) the reasonable cost of telecommunications charges 
     incurred in practicing telemedicine and telehealth in rural, 
     frontier, and underserved areas.
       (d) Expansion of Telehealth Services for Certain Medicare 
     Beneficiaries.--
       (1) In general.--Not later than January 1, 1999, the 
     Secretary shall submit a report to Congress that examines the 
     possibility of making payments from the Federal Supplementary 
     Medical Insurance Trust Fund under part B of title XVIII of 
     the Social Security Act (42 U.S.C. 1395j et seq.) for 
     professional consultation via telecommunications systems with 
     an individual or entity furnishing a service for which 
     payment may be made under such part to a beneficiary 
     described in paragraph (2), notwithstanding that the 
     individual health care provider providing the professional 
     consultation is not at the same location as the individual 
     furnishing the service to that beneficiary.
       (2) Beneficiary described.--A beneficiary described in this 
     paragraph is a beneficiary under the medicare program who 
     does not reside in a rural area (as so defined) or an 
     underserved area, who is home-bound or nursing home-bound, 
     and for whom being transferred for health care services 
     imposes a serious hardship.
       (3) Report.--The report described in paragraph (1) shall 
     contain a detailed statement of the potential costs to the 
     medicare program under title XVIII of that Act of making the 
     payments described in that paragraph using various 
     reimbursement schemes.
                     TITLE II--TELEHEALTH LICENSURE

     SEC. 201. INITIAL REPORT TO CONGRESS.

       Not later than January 1, 1998, the Secretary shall prepare 
     and submit to the appropriate committees of Congress a report 
     concerning--
       (1) the number, percentage and types of health care 
     providers licensed to provide telehealth services across 
     State lines, including the number and types of health care 
     providers licensed to provide such services in more than 3 
     States;
       (2) the status of any reciprocal, mutual recognition, fast-
     track, or other licensure agreements between or among various 
     States;
       (3) the status of any efforts to develop uniform national 
     sets of standards for the licensure of health care providers 
     to provide telehealth services across State lines;
       (4) a projection of future utilization of telehealth 
     consultations across State lines;
       (5) State efforts to increase or reduce licensure as a 
     burden to interstate telehealth practice; and
       (6) any State licensure requirements that appear to 
     constitute unnecessary barriers to the provision of 
     telehealth services across State lines.

     SEC. 202. ANNUAL REPORT TO CONGRESS.

       (a) In General.--Not later than January 1, 1999, and each 
     July 1 thereafter, the Secretary shall prepare and submit to 
     the appropriate committees of Congress, an annual report on 
     relevant developments concerning the matters referred to in 
     paragraphs (1) through (6) of section 201.
       (b) Recommendations.--If, with respect to a report 
     submitted under subsection (a), the Secretary determines that 
     States are not making progress in facilitating the provision 
     of telehealth services across State lines by eliminating 
     unnecessary requirements, adopting reciprocal licensing 
     arrangements for telehealth services, implementing uniform 
     requirements for telehealth licensure, or other means, the 
     Secretary shall include in the report recommendations 
     concerning the scope and nature of Federal actions required 
     to reduce licensure as a barrier to the interstate provision 
     of telehealth services.
TITLE III--PERIODIC REPORTS TO CONGRESS FROM THE JOINT WORKING GROUP ON 
                               TELEHEALTH

     SEC. 301. JOINT WORKING GROUP ON TELEHEALTH.

       (a) In General.--
       (1) Redesignation.--The Joint Working Group on 
     Telemedicine, established by the Secretary, shall hereafter 
     be known as the ``Joint Working Group on Telehealth'' with 
     the chairperson being designated by the Director of the 
     Office of Rural Health Policy.
       (2) Mission.--The mission of the Joint Working Group on 
     Telehealth is--
       (A) to identify, monitor, and coordinate Federal telehealth 
     projects, data sets, and programs,
       (B) to analyze--
       (i) how telehealth systems are expanding access to health 
     care services, education, and information,
       (ii) the clinical, educational, or administrative efficacy 
     and cost-effectiveness of telehealth applications, and
       (iii) the quality of the services delivered, and
       (C) to make further recommendations for coordinating 
     Federal and State efforts to increase access to health 
     services, education, and information in rural and underserved 
     areas.
       (3) Periodic reports.--The Joint Working Group on 
     Telehealth shall report not later than January 1 of each year 
     (beginning in 1998) to Congress on the status of the Group's 
     mission and the state of the telehealth field generally.
       (b) Report Specifics.--The annual report required under 
     subsection (a)(3) shall provide--
       (1) an analysis of--
       (A) how telehealth systems are expanding access to health 
     care services,
       (B) the clinical efficacy and cost-effectiveness of 
     telehealth applications,
       (C) the quality of telehealth services delivered,
       (D) the Federal activity regarding telehealth, and
       (E) the progress of the Joint Working Group on Telehealth's 
     efforts to coordinate Federal telehealth programs; and
       (2) recommendations for a coordinated Federal strategy to 
     increase health care access through telehealth.
       (c) Termination.--The Joint Working Group on Telehealth 
     shall terminate immediately after the annual report filed not 
     later than January 1, 2002.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as are necessary for the 
     operation of the Joint Working Group on Telehealth on and 
     after the date of the enactment of this Act.
              TITLE IV--DEVELOPMENT OF TELEHEALTH NETWORKS

     SEC. 401. DEVELOPMENT OF TELEHEALTH NETWORKS.

       (a) In General.--The Secretary, acting through the Director 
     of the Office of Rural Health Policy (of the Health Resources 
     and Services Administration), shall provide financial 
     assistance (as described in subsection (b)(1)) to recipients 
     (as described in

[[Page S1831]]

     subsection (c)(1)) for the purpose of expanding access to 
     health care services for individuals in rural and frontier 
     areas through the use of telehealth.
       (b) Financial Assistance.--
       (1) In general.--Financial assistance shall consist of 
     grants or cost of money loans, or both.
       (2) Form.--The Secretary shall determine the portion of the 
     financial assistance provided to a recipient that consists of 
     grants and the portion that consists of cost of money loans 
     so as to result in the maximum feasible repayment to the 
     Federal Government of the financial assistance, based on the 
     ability to repay of the recipient and full utilization of 
     funds made available to carry out this title.
       (3) Loan forgiveness program.--
       (A) Establishment.--With respect to cost of money loans 
     provided under this section, the Secretary shall establish a 
     loan forgiveness program under which recipients of such loans 
     may apply to have all or a portion of such loans forgiven.
       (B) Requirements.--A recipient described in subparagraph 
     (A) that desires to have a loan forgiven under the program 
     established under such paragraph shall--
       (i) within 180 days of the end of the loan cycle, submit an 
     application to the Secretary requesting forgiveness of the 
     loan involved;
       (ii) demonstrate that the recipient has a financial need 
     for such forgiveness;
       (iii) demonstrate that the recipient has met the quality 
     and cost-appropriateness criteria developed under 
     subparagraph (C); and
       (iv) provide any other information determined appropriate 
     by the Secretary.
       (C) Criteria.--As part of the program established under 
     subparagraph (A), the Secretary shall establish criteria for 
     determining the cost-effectiveness and quality of programs 
     operated with loans provided under this section.
       (c) Recipients.--
       (1) Application.--To be eligible to receive a grant or loan 
     under this section an entity described in paragraph (2) 
     shall, in consultation with the State office of rural health 
     or other appropriate State entity, prepare and submit to the 
     Secretary an application, at such time, in such manner, and 
     containing such information as the Secretary may require, 
     including--
       (A) a description of the anticipated need for the grant or 
     loan;
       (B) a description of the activities which the entity 
     intends to carry out using amounts provided under the grant 
     or loan;
       (C) a plan for continuing the project after Federal support 
     under this section is ended;
       (D) a description of the manner in which the activities 
     funded under the grant or loan will meet health care needs of 
     underserved rural populations within the State;
       (E) a description of how the local community or region to 
     be served by the network or proposed network will be involved 
     in the development and ongoing operations of the network;
       (F) the source and amount of non-Federal funds the entity 
     would pledge for the project; and
       (G) a showing of the long-term viability of the project and 
     evidence of health care provider commitment to the network.

     The application should demonstrate the manner in which the 
     project will promote the integration of telehealth in the 
     community so as to avoid redundancy of technology and achieve 
     economies of scale.
       (2) Eligible entities.--An entity described in this 
     paragraph is a hospital or other health care provider in a 
     health care network of community-based health care providers 
     that includes at least--
       (A) two of the following:
       (i) community or migrant health centers;
       (ii) local health departments;
       (iii) nonprofit hospitals;
       (iv) private practice health professionals, including rural 
     health clinics;
       (v) other publicly funded health or social services 
     agencies;
       (vi) skilled nursing facilities;
       (vii) county mental health and other publicly funded mental 
     health facilities; and
       (viii) providers of home health services; and
       (B) one of the following, which must demonstrate use of the 
     network for purposes of education and economic development 
     (as required by the Secretary):
       (i) public schools;
       (ii) public library;
       (iii) universities or colleges;
       (iv) local government entity; or
       (v) local nonhealth-related business entity.

     An eligible entity may include for-profit entities so long as 
     the network grantee is a nonprofit entity.
       (d) Priority.--The Secretary shall establish procedures to 
     prioritize financial assistance under this title considering 
     whether or not the applicant--
       (1) is a health care provider in a rural health care 
     network or a health care provider that proposes to form such 
     a network, and the majority of the health care providers in 
     such a network are located in a medically underserved, health 
     professional shortage areas, or mental health professional 
     shortage areas;
       (2) can demonstrate broad geographic coverage in the rural 
     areas of the State, or States in which the applicant is 
     located;
       (3) proposes to use Federal funds to develop plans for, or 
     to establish, telehealth systems that will link rural 
     hospitals and rural health care providers to other hospitals, 
     health care providers and patients;
       (4) will use the amounts provided for a range of health 
     care applications and to promote greater efficiency in the 
     use of health care resources;
       (5) can demonstrate the long-term viability of projects 
     through use of local matching funds (cash or in-kind);
       (6) can demonstrate financial, institutional, and community 
     support for the long-term viability of the network; and
       (7) can demonstrate a detailed plan for coordinating system 
     use by eligible entities so that health care services are 
     given a priority over non-clinical uses.
       (e) Maximum Amount of Assistance to Individual 
     Recipients.--The Secretary may establish the maximum amount 
     of financial assistance to be made available to an individual 
     recipient for each fiscal year under this title, and 
     establish the term of the loan or grant, by publishing notice 
     of the maximum amount in the Federal Register.
       (f) Use of Amounts.--
       (1) In general.--Financial assistance provided under this 
     title shall be used--
       (A) with respect to cost of money loans, to encourage the 
     initial development of rural telehealth networks, expand 
     existing networks, or link existing networks together; and
       (B) with respect to grants, as described in paragraph (2).
       (2) Grants and loans.--The recipient of a grant or loan 
     under this title may use financial assistance received under 
     such grant or loan for the acquisition of telehealth 
     equipment and modifications or improvements of 
     telecommunications facilities including--
       (A) the development and acquisition through lease or 
     purchase of computer hardware and software, audio and video 
     equipment, computer network equipment, interactive equipment, 
     data terminal equipment, and other facilities and equipment 
     that would further the purposes of this section;
       (B) the provision of technical assistance and instruction 
     for the development and use of such programming equipment or 
     facilities;
       (C) the development and acquisition of instructional 
     programming;
       (D) demonstration projects for teaching or training medical 
     students, residents, and other health professions students in 
     rural training sites about the application of telehealth;
       (E) transmission costs, maintenance of equipment, and 
     compensation of specialists and referring health care 
     providers;
       (F) development of projects to use telehealth to facilitate 
     collaboration between health care providers;
       (G) electronic archival of patient records;
       (H) collection and analysis of usage statistics and data 
     that can be used to document the cost effectiveness of the 
     telehealth services; or
       (I) such other uses that are consistent with achieving the 
     purposes of this section as approved by the Secretary.
       (3) Expenditures in rural areas.--In awarding a grant or 
     cost of money loan under this section, the Secretary shall 
     ensure that not less than 50 percent of the grant or loan 
     award is expended in a rural area or to provide services to 
     residents of rural areas.
       (g) Prohibited Uses.--Financial assistance received under 
     this section may not be used for any of the following:
       (1) To build or acquire real property.
       (2) Expenditures to purchase or lease equipment to the 
     extent the expenditures would exceed more than 40 percent of 
     the total grant funds.
       (3) To purchase or install transmission equipment (such as 
     laying cable or telephone lines, microwave towers, satellite 
     dishes, amplifiers, and digital switching equipment).
       (4) For construction, except that such funds may be 
     expended for minor renovations relating to the installation 
     of equipment.
       (5) Expenditures for indirect costs (as determined by the 
     Secretary) to the extent the expenditures would exceed more 
     than 20 percent of the total grant funds.
       (h) Matching Requirement for Grants.--The Secretary may not 
     make a grant to an entity State under this section unless 
     that entity agrees that, with respect to the costs to be 
     incurred by the entity in carrying out the program for which 
     the grant was awarded, the entity will make available 
     (directly or through donations from public or private 
     entities) non-Federal contributions (in-cash or in-kind) in 
     an amount equal to not less than 50 percent of the Federal 
     funds provided under the grant.

     SEC. 402. ADMINISTRATION.

       (a) Nonduplication.--The Secretary shall ensure that 
     facilities constructed using financial assistance provided 
     under this title do not duplicate adequate established 
     telehealth networks.
       (b) Loan Maturity.--The maturities of cost of money loans 
     shall be determined by the Secretary, based on the useful 
     life of the facility being financed, except that the loan 
     shall not be for a period of more than 10 years.
       (c) Loan Security and Feasibility.--The Secretary shall 
     make a cost of money loan only if the Secretary determines 
     that the security for the loan is reasonably adequate and 
     that the loan will be repaid within the period of the loan.
       (d) Coordination With Other Agencies.--The Secretary shall 
     coordinate, to the extent practicable, with other Federal and 
     State

[[Page S1832]]

     agencies with similar grant or loan programs to pool 
     resources for funding meritorious proposals in rural areas.
       (e) Informational Efforts.--The Secretary shall establish 
     and implement procedures to carry out informational efforts 
     to advise potential end users located in rural areas of each 
     State about the program authorized by this title.

     SEC. 403. GUIDELINES.

       Not later than 180 days after the date of enactment of this 
     Act, the Secretary shall issue guidelines to carry out this 
     title.

     SEC. 404. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated to carry out this 
     title, $25,000,000 for fiscal year 1998, and such sums as may 
     be necessary for each of the fiscal years 1999 through 
     2004.
                                 ______
                                 
      By Mr. WYDEN:
  S. 386. A bill to amend title XVIII of the Social Security Act to 
protect and improve the Medicare Program, and for other purposes; to 
the Committee on Finance.


     THE MEDICARE MODERNIZATION AND PATIENT PROTECTION ACT OF 1997

 Mr. WYDEN. Mr. President, as this Congress moves forward to 
strengthen and secure the Medicare Program for future generations, 
three issues are crystal clear.
  First, we must have the political will to modernize Medicare to 
reflect both the quality and the efficiency of private health care 
plans now serving most working Americans, and in particular the Federal 
Employees Health Benefits Program which many Members of Congress, their 
staff and families, and other Federal employees enjoy.
  Second, we must maintain our commitment to current and future 
Medicare beneficiaries by preserving a basic, high-quality portfolio of 
health services for all enrollees, irrespective of their income, where 
they live, or their particular health circumstances.
  Third, we must begin the transformation of Medicare financial 
foundations in a way that is first fair to all beneficiaries, and 
second insures that Medicare will be there for our children and their 
children, and that it will not bust the Federal budget in the bargain.
  I believe that the legislation I introduce, today, The Medicare 
Modernization and Patient Protection Act of 1997, meets all three of 
these primary goals. While fully preserving traditional, fee-for-
service Medicare, this legislation also will create an array of new, 
high-quality, cost-efficient health plans for Medicare beneficiaries, 
and offer those enrollees positive incentives to try them. It will 
provide new protections and consumer rights to Medicare beneficiaries 
in capitated health plans. It will mandate new penalties and 
enforcement mechanisms to eradicate fraud and abuse now stripping 
billions of dollars per year from the program. And it will create new 
support systems for some of Medicare's most desperately ill and poor 
beneficiaries, and their families.
  Finally, through new cost-conscious management systems and a firm 
fiscal control mechanism, this plan will reduce Medicare cost growth by 
approximately $100 billion over the next 5 years, and with financial 
constraints that will continue to control runaway spending growth after 
fiscal year 2002.
  The Medicare Modernization and Patient Protection Act will offer 
seniors more health plan choices by eliminating the huge variability in 
capitated payments to health plans in counties around the nation. At 
the same time, it will raise the minimum payment to 80 percent of the 
national average payment, leveraging higher reimbursements and I 
believe more plan offerings in up to 20 percent of our counties.
  This proposal also establishes an outlier fund, an account fueled by 
withholding up to five percent of payments to Medicare health 
maintenance organizations. Medicare managers would have discretion to 
withhold those payments from plans which are being over-compensated by 
the HMO payment formula, and disburse those funds in the form of extra 
payments to plans which have avoided risk selection in their 
beneficiary recruitment and as a result are providing services to 
sicker enrollees with above-average health care costs. Compared to the 
meat-cleaver approach of reducing all plan payments from the current 95 
percent of local average health care costs, to 90 percent, this is a 
surgical solution to two significant Medicare managed care plan 
problems: (a) plan overpayments and (b) plans which avoid enrolling 
older, frailer beneficiaries because they cut profit margins.
  At the end of the year, any funds remaining in this account would be 
rolled back into the Medicare hospital insurance budget.
  At the same time, this bill reforms current rules for Medicare 
supplemental insurance, or Medigap policies, requiring that such 
policies must be issued to any eligible beneficiary at any time. This 
change will encourage more seniors to try capitated plans, because they 
know the Medigap safety net always will be available to them.
  Seniors would be protected from unfair denial of service decision and 
other health plan abuses through a strengthened and streamlined appeals 
process. Also, seniors would receive more informative and easily 
comparable information on health plans in their communities, and 
through the mail on a regular basis through annual enrollment fairs.
  The legislation also would require the collection of customer service 
and satisfaction data, and performance information to be used in 
qualitative analysis by Medicare to produce published report cards on 
plan performance, and help consumers make kitchen-table assessments of 
their plan options.
  By Federal statute, plans also would be barred from muzzling doctors 
and other health care practitioners in their conversations with 
patients about their medical condition and all treatments appropriate 
to their case.
  New criminal and civil penalties are created for practitioners and 
plans who rip off the system.
  Programs for hospice care, Alzheimer's respite care, and prospective 
payment for both home care and skilled nursing care are added to 
Medicare. The legislation requires Medicare to study and make 
recommendations on the more extensive and appropriate use of community 
pharmacy, telemedicine and so-called social health maintenance 
organization plans for dual eligibles in its portfolio of services to 
beneficiaries.
  The fiscal integrity portion of this bill would set overall part A 
and part B spending limits for each of the next 5 years. These overall 
spending limits would include target spending allotments for each of 
the several major areas of Medicare activity: doctors, hospitals, 
diagnostic services, nursing homes, and the like.
  Typically, Medicare has sought to control costs in these areas in the 
past by rolling back reimbursement rates for goods and services. 
Providers, however, have watered down Medicare's attempts at thrift by 
increasing volume in the face of lower per-service payments. Too often 
this has led to waste and inefficiency, with providers ordering 
procedures and services that beneficiaries really don't need, crippling 
Medicare with unnecessarily high costs.
  With $100 billion in cumulative savings expected in 5 years, my 
proposal would require that Medicare practitioners live within the 
budget's ceiling by mandating reduced reimbursements if cumulative 
billings otherwise would bust an individual service sector's annual 
spending plan.
  Despite these restraints, Medicare fee-for-service providers will 
enjoy generally healthy annual increases under this proposal. 
Beneficiaries should see no change in the level or quality of care they 
receive. Expensive, unnecessary care, however, could be sharply 
curtailed.
  Mr. President, I believe that this Congress should not as a first 
step relinquish Medicare restructuring to a special commission. I think 
most of us have an acute awareness of what is needed to fix the program 
for the long term. Some steps will be harder than others. But as the 
old Chinese proverb reminds us, a trip of a thousand miles begins with 
the first step.
  I hope my colleagues will agree with me that the Medicare 
Modernization and Patient Protection Act is that good first step, and 
join with me in co-sponsoring this legislation.
  Mr. President, I ask unanimous consent that additional material be 
printed in the Record.

[[Page S1833]]

The Medicare Modernization and Patient Protection Act of 1997--Section-
                          by-Section Analysis


  title i: promoting competition, quality, and beneficiary choice in 
                                medicare

     Section 1: Short title; table of contents, definitions.
     Section 2: Findings
     Section 101: Establishment of Plan Inprovement and 
         Competition Office
       Subsection (a), establishes an office within Health Care 
     Financing Administration to carry out several of the pro-
     quality, pro-consumer mandates of the legislation.
       Subsection (b), defines duties.
     Subsection 102: HMO and Competitive Pricing Demonstration 
         Projects
       Subsection (a), directs the Secretary to conduct 
     demonstration projects for competitive bidding between HMO 
     contractors in counties in which the AAPCC rate is 120 
     percent of the national average AAPCC rate, or higher.
       Subsection (b), directs reports to Congress.
       Subsection (c), waives certain requirements under the 
     Social Security Act.
       Subsection (d), requires that the projects be conducted 
     within existing department funding.
     Subsection 103: Medigap amendments
       Subsection (a), guarantees issues of Medicare supplemental 
     insurance regardless of preexisting health conditions.
       Subsection also requires community rating of Medigap 
     policies. Further, this subsection guarantees offer of 
     Medigap coverage to persons who leave Medicare risk plans for 
     any one of several reasons, including voluntary disenrollment 
     at any time during the first 12 months of enrollment in a 
     risk plan (and had not been in a risk plan, earlier).
       Subsection (b), limits exclusion from coverage due to pre-
     existing health conditions.
       Subsection (c), clarifies non-discrimination requirements 
     during initial enrollment periods.
       Subsection (d), extends the six-month initial enrollment 
     period to non-elderly Medicare beneficiaries.
       Subsection (e), sets effective dates.
       Subsection (f), defines transition rules including a 
     directive that the National Association of Insurance 
     Commissioners amend its Model Regulation to reflect Medicare 
     supplemental insurance policy changes required by the 
     section.


             title ii: increasing medicare coverage options

                   Subtitle A: Risk Plan Improvements

     Section 201: Changes in medicare managed care program
       Subsection (a), HMO payments, amends the current formula 
     for determining local HCFA annual reimbursement rate 
     increases for persons insured by risk-sharing plans providing 
     both Part A and Part B benefits (Medicare Risk plans). The 
     reformulation would, beginning in 1998, set a new minimum 
     payment ``floor'' requiring that HCFA pay no plan less than 
     80 percent of the national average for payments to all plans 
     in 1997. For each community, payment increases in subsequent 
     years would be determined by selecting the highest figure 
     from three alternative formulas; (1) 102 percent of the 
     previous year's rate, (2) in 1999, 80 percent of the 1998 
     national average, and in 2000 and in subsequent years 
     increasing the rate by the previous year's national average 
     growth rate for Medicare managed care plan reimbursements, or 
     (3) an increase determined by a ``melded'' rate of local and 
     national managed care average reimbursements, according to 
     the following formula:
       1998: area specific percentage of increase is determined by 
     the sum of 80 percent of the local average increase in the 
     average adjusted per capita cost (AAPCC) in previous year, 
     and 20 percent of the national AAPCC increase.
       1999: area specific percentage determined by the sum of 75 
     percent of the local AAPCC increase in the previous year, and 
     25 percent of the national AAPCC increase.
       2000: area specific percentage determined by the sum of 70 
     percent of local AAPCC increase in previous year, and 30 
     percent of the national AAPCC increase.
       2001: area specific percentage determined by the sum of 65 
     percent of the local AAPCC increase in previous year, and 35 
     percent of the national AAPCC increase.
       2002: area specific percentage determined by the sum of 60 
     percent of the local AAPCC increase in previous year, and 40 
     percent of the national AAPCC increase.
       2003, and in each subsequent year: area specific percentage 
     determined by the sum of 60 percent of the local AAPCC 
     increase in previous year, and 40 percent of the national 
     AAPCC increase.
       This section also contains certain budgetary protections 
     for beneficiaries receiving treatment for end-stage renal 
     disease, and for high-cost-growth metropolitan counties.
       Subsection (b) creates additional quality standards for 
     section 1876(c)(6) of the Act, requiring Medicare managed 
     care plans to meet new standards established by the Secretary 
     of HHS in consultation with private accreditation 
     organizations, and addressing such issues as ongoing quality 
     assurance programs stressing (1) health outcomes, and (2) 
     providing review by physicians and other certified health 
     professionals.
       Plans meeting these additional standards may waive the 
     requirement of at least 50 percent non-Medicare beneficiary 
     enrollment for participation as a Medicare Risk contractor.
       Subsection (c) requires coordinated enrollment and 
     disenrollment periods for Medicare managed care plans, 
     similar to so-called ``open season'' periods for Federal 
     Employee Health Benefit Program plans.
       Subsection (d) sets service area requirements for 
     participating plans, including requirements that plans 
     provide enrollment within all of a metropolitan statistical 
     area if such organization provides enrollment in any part of 
     the metropolitan area. Some limited exclusions may be 
     allowed.
       Subsection (e) provides other enhanced enrollee protections 
     involving provision of emergency room care and services, 
     renal dialysis, and reimbursement of services outside the 
     plan's services area (specific to renal disease).
       Subsection (f) allows the Secretary in certain instances to 
     make additional payments to plans insuring certain 
     individuals, for reasonable costs related to anomalies in 
     specific service areas.
       Subsection (g) provides for intermediate sanctions against 
     plans for program violations, short of termination. These 
     intermediate sanctions may include civil penalties of not 
     more than $25,000 per offense, and suspension of new 
     enrollment. The section also provides for reasonable notice 
     to the organization and a right of appeal.
       Subsection (h) requires that Medicare managed care plans 
     must submit to standardized quality review through 
     independent organizations to determine and demonstrate that 
     they have maintained the new, higher quality performance 
     levels required under this legislation. The section also 
     requires a review of plans' quality performance by the U.S. 
     General Accounting Office, no later than July 1998.
       Subsection (i) sets an effective date for Section 101 as 
     the contract years beginning with 1998.
     Section 202: Quality report cards and comparative reports
       Subsection (a) requires that beginning in calendar year 
     1998, the Secretary will begin distribution of quality report 
     cards to beneficiaries on eligible managed care plans and on 
     Medicare supplemental policies, including a comparison of 
     benefits, costs and quality indicators developed under this 
     section.
       Subsection (b) directs the Secretary to develop quality 
     indicators on (1) disenrollents statistics, (2) care 
     outcomes, (3) population health status, (4) appropriateness 
     of care, (5) consumer satisfaction, (6) access to care, 
     including waiting time for scheduled appointments and access 
     to emergency room care, and (7) preventative care programs.
       Subsection (c) directs the Secretary to develop 
     standardized reports comparing plans on the basis of (1) 
     monthly premiums, (2) choice of doctors, (3) choice of 
     hospitals, (4) service area, (5) emergency room care 
     coverage, (6) hospital charges, (7) physician charges, (8) 
     prescription drug coverage, (9) ambulance coverage, (10) 
     coverage of routine eye exams and eyeglasses, (11) coverage 
     of skilled nursing facilities and home health care, (12) 
     coverage of hearing exams and hearing aids, (13) coverage of 
     mental health therapy, (14) the number of beneficiaries in 
     the plan, and several other indicators of plan coverage.
       Subsection (d) requires that plans divulge to the Secretary 
     information required to complete this comparative analysis. 
     The Secretary also is empowered to collect, on a pro rata 
     basis, costs from plans to carry out the requirements of this 
     section.
       Subsection (e), definitions.
     Section 203: Preemption of state laws restricting managed 
         care
       Subsection (a) preempts states from establishing care 
     mandates for health insurance coverage in Medicare.
       Subsection (b) preempts state laws restricting managed care 
     arrangements. This preemption would lift state laws which (1) 
     prohibit or limit carriers from offering incentives to 
     enrollees to use services of participating providers, (2) 
     prohibit or limit carriers from limiting services to 
     participating providers, and other state restrictions on 
     managed care plans.
       This subsection also includes a number of definitions.
       Subsection (c) preempts state laws restricting utilization 
     review programs. However, the section specifies that this 
     preemption exempts laws preventing denial of lifesaving 
     medical treatment pending transfer of enrollees to another 
     health care provider.
       Subsection (d), effective date, January 1, 1998.
     Section 204: Appeals
       Subsection (a) requires all Medicare Risk contractors to 
     designate an independent ombudsman to assist enrollees in 
     exercising rights to dispute plan decisions, and in other 
     grievances.
       This section also directs the Secretary to establish no 
     later than January 1, 1998, an office for the collection of 
     data one each plan pertaining to decisions on the 
     disallowance of services to beneficiaries, in full or in 
     part.
       Subsection (b) requires that plans provide enrollees with 
     clear and understandable description of grievance and appeal 
     procedures.
       Subsection (c) creates an expedited HCFA grievance and 
     appeals procedure.
     Section 205: Medicare HMO Enrollment Fair
       Subsection (a), mandates that the Secretary require and 
     coordinate annual enrollment fairs in each Medicare payment 
     area to inform beneficiaries of plans offered by health care 
     organizations.

[[Page S1834]]

            Subtitle B: Maintaining Fee-for-Service Program

     Section 211: Failsafe budget mechanism
       Subsection (a) requires payment adjustments to achieve 
     specified Medicare targets. Sets annualized, five-year 
     spending targets for Medicare, Parts A and B, according to 
     budget estimated under Clinton Administration plan.
       Includes a ``fail-safe'' budget mechanism allowing the 
     Secretary to undertake proportional reductions in provider 
     reimbursements if spending targets otherwise would be 
     exceeded by billing volume.
     Section 212: Maintenance of part B premium at current 
         percentage of part B program costs
       Subsection (a) maintains monthly premium setting formula at 
     the current percentage of actual Part B program costs.
       Subsection (b) sets effective date, applying to premiums 
     paid for months beginning with January 1997.


title iii--promotion of programs of all-inclusive care for the elderly 
     (pace) and of social health maintenance organizations (shmos)

     Section 301: Definitions
     Section 302: Expanding the availability of qualified 
         organizations for frail elderly community projects 
         (program of all-inclusive care for the elderly (pace))
       Subsection (a) directs the Secretary to establish PACE 
     provider status for public or nonprofit organizations to 
     provide comprehensive health care services, on a capitated 
     basis, to frail elderly patients who are at risk of 
     institutionalization in skilled nursing facilities, and who 
     would qualify for benefits under both Medicare and Medicaid. 
     Such organizations would qualify for three-year periods, with 
     re-qualification procedures. Requirements for assuming 
     financial risk are specified.
       The subsection, the Secretary would be required to act on 
     applications within 90 days.
       Subsection (b) provides for terms and conditions of 
     approval, equivalent to those contained in conditions of 
     approval for an On Lok waiver, section 603C of the Social 
     Security Amendments of 1983, as extended by OBRA 1985. The 
     section also defines other entry requirements, and certain 
     responsibilities of the Secretary to assure quality and 
     feasibility of the plan.
       Subsection (c) defines eligibility for participation by 
     PACE plans.
       Subsection (d) sets reimbursement to the organization 
     through a capitation basis.
       Subsection (e) applies Section 302 statutes to plans 
     currently operating under an On Lok waiver.
       Subsection (f) applies current Social Security Act statutes 
     relating to income and resources of institutionalized spouses 
     to any individual receiving services from an organization 
     operating as a PACE provider.
       Subsection (g) allows participating plans to also offer 
     services to frail populations other than the elderly, except 
     where the Secretary finds provision of such services may 
     impair the ability of the organization's performance as a 
     SHMO.
     Section 303: Application of spousal impoverishment rules
       Applies protections against spousal impoverishment to 
     couples receiving services through PACE organizations.
     Section 304: Permitting expansion and making permanent SHMO 
         waivers
       The section lifts limitations on how many SHMOs may be 
     approved by the Secretary, as well as limitations on how many 
     individuals may be enrolled in any such project.
     Section 305: Repeals; effective date; and application to 
         existing waivers
       Subsection (a) repeals certain federal statues which are 
     non-conforming to the intent and purpose of this legislation.
       Subsection (b) requires that the Secretary within nine 
     months of enactment make effective interim final regulations 
     on the provisions of this title. Until then, all existing 
     PACE providers and OnLok waivers will remain in effect. After 
     implementation of new regulations, SHMOs which at that point 
     have completed three years of activity will attain PACE 
     provider status without need for reapplication.
       Demonstration sites operating less than three years will be 
     accorded PACE provider status, but will be required to 
     undergo annual review for three years.


                    title IV--Other Medicare Changes

     Section 401: Application of competitive acquisition process 
         for part B Items and services
       Subsection (a) authorizes the Secretary to describe 
     appropriate competitive acquisition procedures for awarding 
     contracts for items or services. Selected areas of 
     acquisition to be governed by competitive bidding will be 
     left to the Secretary's discretion. The section applies to 
     the acquisition of durable medical equipment, clinical lab 
     services, prosthetic devices, diagnostic tests, surgical 
     dressings, and other items and services which may be 
     identified by the Secretary.
       Section 401 sets a number of requirements to assure the 
     health and safety of Medicare beneficiaries.
       Subsection (b) sets limitations and requirements with 
     respect to exclusive and non-exclusive competitions.
       Subsection (c) sets an effective date of January 1, 1997.
     Section 402: Simpler procedure for inherent reasonableness 
         determinations
       Subsection (a) and Subsection (b) revise, strike or extend 
     existing status to reform Medicare acquisitions procedures 
     for both goods and services, and improve efficiency within 
     those activities.
       Subsection (c) makes those changes effective on January 1, 
     1997.
     Section 403: Promoting advanced directives
       Subsection (a) requires that persons who have executed 
     advanced directives are ensured that such documents are 
     included in hospital medical charts.
       Subsection (b) would require development and dissemination 
     of standard national forms by the Secretary.
       Subsection (c) encourages health plans in Medicare to 
     encourage use of advanced directive forms through education 
     and dissemination of promotional material.
       Subsection(d) directs the Secretary to develop and 
     implement a promotional campaign with respect to advanced 
     directives.
     Section 404: Antifraud efforts
       Subsection (a) increases penalties for Medicare fraud, and 
     includes definitions.
       Subsection (b) establishes new definitions of punishable 
     offenses.
       Subsection (c) requires a study on standardization of 
     claims administration focused on determining the feasibility 
     and desirability of establishing a standardized Medicare 
     claims administration process, implementing other measures to 
     improve record keeping, and taking other appropriate steps to 
     reduce waste, fraud and abuse in making payments in the 
     Medicare program.
       Subsection (d) directs the Commission on Reinventing 
     Government to report to Congress on the effectiveness of 
     current efforts to combat waste, fraud and abuse in Medicare, 
     and whether these efforts would be enhanced by establishing a 
     coordinated, all-payer, multijurisdiction antifraud program.
     Section 405: Hospice benefits
       Subsection (a) restrucutes the benefit period for hospice 
     care, extending such benefits to an unlimited number of 60-
     day periods. This section includes a number of conforming 
     amendments.
       Subsection (b) provides new language for reimbursement of 
     related services including ambulance, diagnostic tests, 
     chemotherapy and radiation therapy within the hospice 
     environment.
       Subsection (c) allows for contracting with independent 
     physicians and physician groups for hospice care services.
       Subsection (d) waives certain staffing requirements.
       Subsection (e) limits liability of beneficiaries and 
     providers with regard to certain hospice coverage denials.
       Subsection (f) extends the period for a physician to 
     medically certify an individual's terminal illness.
       Subsection (g) sets effective date.
     Section 406: Study providing pharmacy services to medicare 
         beneficiaries
       Subsection (a), directs the Secretary to identify cost 
     savings which may be achieved through expanding the role of 
     pharmacy services under the program.
       Subsection (b) describes services which should be analyzed 
     in the study.
       Subsection (c) and (d), require development of 
     recommendations and a report to Congress.
     Section 407: Respite Benefit
       Subsection (a) describes entitlement structure for service 
     not exceeding 32 each year.
       Subsection (b) further describes conditions and limitations 
     on payment.
       Subsection (c) definitions.
       Subsection (d) defines payments from supplementary 
     insurance trust fund for individuals with only hospital 
     insurance coverage.
       Subsection (e) effective date.


         Title v--prospective payment for home health services

     Section 501. Payment for home health services
       Subsection (a) amends the Social Security Act to mandate 
     that home health services be reimbursed through a prospective 
     payment system. This provision describes discrete areas of 
     services.
       (b) directs establishment of a per visit rate for home care 
     services.
       (c) sets aggregate limits for services and for patients.
       (d) sets a medical review process for the system of 
     payments described in the act, and supervision to insure that 
     individuals receive appropriate care.
       (e) provides for adjustments to payments and for the 
     tracking of patients who may switch home health agencies. 
     This section also provides for monitoring features that 
     determine changes in the quality and level of health care. 
     The provision also requires that the Secretary report 
     annually to Congress regarding recommendations for ensuring 
     access to appropriate home health services.
       (f) provides for payment to Christian Science providers.
       (g) requires an annual report to Congress during the first 
     three years of this payment plan by the Medicare Prospective 
     Payment Review Commission on the effectiveness of the payment 
     methodology.
       (h) mandates development of an ``episodic'' prospective 
     payment system for home health care.
       (i) requires the Secretary to develop a data base upon 
     which managers may develop a fair and accurate case mix 
     adjustor as required elsewhere in this act for the 
     determination of prospective payment.
       Subsection (b) appeals process.
       Subsection (c) sunsets reasonable cost limitation.

[[Page S1835]]

       Subsection (d) effective date.
     Section 502. Review by peer review organization of home 
         health services
       Subsection (a) requires utilization and quality review of 
     home health services by an appropriate peer review 
     organization. These reviews would occur under conditions 
     including a health agency's determination that a patient did 
     not meet conditions for care, that the patient no longer 
     requires care, that the patient's level of care is 
     inconsistent with the prescription of the attending 
     physician.
       This provision also requires written notification to the 
     patient by the agency and the peer review organization.
       Subsection (b) describes hearing rights.
     Section 503. Retroactive reinstatement of presumptive waiver 
         of liability.
       Reconciles OBRA 1986 and other statutes to allow 
     implementation of prospective payment for home health 
     services.


      title vi: prospective payment system for nursing facilities

       Section 601: Definitions for acuity payment, aggregated 
     resident invoice, allowable costs, case mix weight and other 
     items to be cited in the determination of prospective 
     payment.
       Section 602: Sets payment objectives, including maintaining 
     a fair and equitable balance between cost containment and 
     quality of care.
       Section 603: Defines powers and duties of the Secretary.
       Section 604: Reconciles provisions of this title with the 
     Social Security Act.
       Section 605: Establishes a resident classification system 
     to be used to adjust payment rates to practical care 
     requirements.
       Section 606: Establishes a ``cost-center'' system for 
     establishing appropriate reimbursement to facilities based on 
     overhead expenses and general operating costs.
       Section 607: Resident assessment. Requires facilities to 
     assess needs of each resident in accordance with the 
     reimbursement requirements of the title.
       Section 608: Establishes a system for formulating per diem 
     rates of reimbursement for enrolled residents.
       Section 609: Establishes a per diem reimbursement system 
     for compensating facility administrative and general costs.
       Section 610: Establishes payment system for fee-for-service 
     ancillary costs.
       Section 611: Provides for reimbursement of selected 
     ancillary services and other costs.
       Section 612: Establishes per diem payment for property 
     costs related to rentals required by facilities.
       Section 613: Creates a procedure for mid-year rate 
     adjustments.
       Section 614: Creates payment rate exceptions for new and 
     low-volume nursing facilities.
       Section 615: Creates a process for appealing decisions by 
     HCFA regarding payments in the amount of $10,000 or more.
       Section 616: Phases in prospective payment for skilled 
     nursing facilities over a three-year period. First year would 
     have payments based on 25 percent of new system, 75 percent 
     of old system. Second year goes to a 50-50 split. Third year 
     is 75 percent new system, 25 percent old system. Fourth year 
     fully exercises all payment requirements under the title.


                        title vii: telemedicine

     Section 701: Internet access for health care providers for 
         rural areas.
       Subsection (a) amends the Communications Act of 1934 by 
     adding minimum requirements for Internet access for health 
     care providers for rural areas. Requires carriers to provide 
     access ``necessary for the provision of health care 
     services'' and at rates described in the title. Sets 
     threshold requirements for infrastructure and bandwidth, to 
     be determined by ``commission.''
       Subsection (b) definitions.
       Subsection (c) conforming amendments.
     Section 702: Establishes a congressional Commission on 
         Telemedicine to undertake requirements of the title.
       Subsection (a) defines membership, term of office, payment.
       Subsection (b) describe duties, including ``a thorough 
     study and develop(ment) of recommendations on all matters 
     relating to which Telemedicine service should be covered 
     under Medicare.''
       Title also requires a report on these issues not later than 
     one year following enactment.
       Subsection (c) through (f) describe powers, personnel, 
     termination and appropriations for the commission.
                                 ______
                                 
      By Mr. HATCH (for himself, Mr. Baucus, Mr. Nickles, Mr. Breaux, 
        Mr. Gorton, Mrs. Feinstein, Mrs. Murray, and Mrs. Boxer):
  S. 387. a bill to amend the Internal Revenue Code of 1986 to provide 
equity to exports of software; to the Committee on Finance.


                     THE SOFTWARE EXPORT EQUITY ACT

  Mr. HATCH. Mr. President, I rise today to introduce the Software 
Export Equity Act. I am pleased to be joined in this bipartisan effort 
by my colleagues on the Senate Finance Committee, Senators Max Baucus, 
Don Nickles, John Breaux, as well as Patty Murray, Slade Gorton, Dianne 
Feinstein, and Barbara Boxer. Identical legislation has been introduced 
in the House by Representative Jennifer Dunn and a strong bipartisan 
group of her House colleagues.
  This bill highlights an issue that I have mentioned many times in the 
Finance Committee. Currently, the section of the Internal Revenue Code 
outlining what qualifies for foreign sales corporation [FSC] treatment 
and tax benefits is unclear and has left out software that is exported 
overseas. Our bill would clarify the treatment of software.
  What is a foreign sales corporation? It is a corporate entity 
established by Congress to help facilitate the export of American made 
goods to foreign markets. The FSC rules allow a corporation a tax 
benefit on a portion of its earnings generated by the sale or lease of 
export property. It is consistent with sound U.S. policy to promote 
U.S. exports.
  When the foreign sales corporation statute was enacted in 1971, the 
computer software industry was relatively new. The original FSC statute 
was drafted with the intent that only U.S. job-creating property 
manufactured or produced in the United States and sold or leased 
outside the United States qualifies for export benefits. The FSC rules 
are designed to assist U.S. exporters in competing with products made 
in other countries that have more favorable rules for taxing exports.
  Mr. President, it is in our best interests to encourage the export of 
American goods and services. The United States is currently the world 
leader in software development, employing approximately 2 million 
people in software development jobs. As this industry continues to 
grow, much of the expansion of the industry is due to the growth of 
exports. However, as the software industry has grown in response to 
global markets, the tax laws have not kept up.
  Currently, the statute allows films, tapes, records or similar 
reproductions to qualify for FSC benefits. However, because of a narrow 
interpretation of the FSC rules, software does not generally receive 
this export incentive.
  Let me provide an example that I have shared before with my 
colleagues on the Finance Committee. Suppose you have two CD-ROM's--one 
containing a musical recording, the other containing dictionary 
software with musical recordings included. The two look the same and 
are very similar except for the software. If the you export a master 
CD-ROM of the musical recording to another country for reproduction, 
the export qualifies for FSC benefits. However, if you export a master 
copy of the software CD-ROM with a license to make additional copies, 
you will be denied FSC benefits. This is simply wrong and unfair. In an 
age where many computer products are multipurpose--with music and 
software--this makes no sense.
  Now this problem is not beyond repair. The Treasury Department does 
not believe that it has the authority to issue regulations to correct 
this problem. However, they support the legislative fix I am 
introducing today. The FSC statute must be clarified to allow exported 
software with the right to reproduce to receive fair and equitable 
treatment.
  Mr. President, this problem hits home in my State of Utah. There are 
a number of software manufacturers in Utah that have developed a 
worldwide presence. Watching musical and other intangible items receive 
FSC treatment while highly sophisticated software is left out, is 
simply discouraging for these sometimes small software companies. This 
legislation corrects this inequity and reestablishes our commitment to 
promoting American competitiveness.
  I am please to introduce the Software Export Equity Act today. I urge 
all of my colleagues to support this bipartisan effort and cosponsor 
this bill.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 387

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Software Export Equity 
     Act''.

[[Page S1836]]

     SEC. 2. CLARIFICATION OF APPLICATION OF FOREIGN SALES 
                   CORPORATION RULES TO SOFTWARE.

       Subparagraph (B) of section 927(a)(2) of the Internal 
     Revenue Code of 1986 (relating to property excluded from 
     eligibility as FSC export property) is amended by inserting 
     ``, and software, whether or not patented'' after ``for 
     commercial or home use''.

  Mr. NICKLES. Mr. President, I am pleased to join Senator Hatch, 
Senator Baucus, and Senator Breaux in the introduction today of the 
Software Export Equity Act, a bill to provide that software exports 
receive the same tax treatment as other products made in the United 
States. Our bill will help ensure that the U.S. software industry, the 
current world leader, maintains their competitive edge.
  The Software Export Equity Act simply clarifies that software 
produced in the United States for export fully qualifies for foreign 
sales corporation [FSC] export incentives the same as most other U.S. 
products. The bill proposes no special or unique benefit for the 
software industry, just equal and fair treatment under existing law.
  The FSC statute and its predecessor, the domestic international sales 
corporation statute, were enacted by Congress to help U.S. companies 
compete abroad. The FSC statute provides a tax exemption of up to 5 
percent of a company's income attributable to export sales of U.S.-made 
products. Only those products manufactured or produced in the United 
States for export to a foreign market qualify for FSC benefits to 
ensure domestic economic growth and job creation.
  Unfortunately, the fledgling software industry was not specifically 
considered by Congress when the FSC statute was enacted, and subsequent 
Treasury Department rules disqualified them for FSC benefits. Indeed, 
Treasury's narrow interpretation allows nearly identical products, 
exported in an identical manner, such as movies and compact disc 
recordings, to fully qualify for FSC benefits, but not software.
  Repeated attempts to convince the Treasury Department to modify their 
rules have failed, Mr. President, leaving only the alternative of 
amending the law. Fortunately, this issue has broad bipartisan support 
in the House and Senate and was recently included in President 
Clinton's fiscal year 1998 budget request.
  Employing over 2 million people and exporting more than $26 billion 
in software each year, the U.S. software industry is an important and 
growing part of our economy. They lead the world in the development of 
innovative products and cutting-edge technology. In today's competitive 
global economy, incentives to encourage firms to develop products here 
for export abroad are vitally important. The enactment of this 
legislation will assure that we provide these incentives to all U.S. 
products equally.
  I encourage all my colleagues to join us in supporting this 
legislation.
  Mr. BREAUX. Mr. President, I am pleased today to join Mr. Hatch, Mr. 
Nickles, and Mr. Baucus in introducing the Software Export Equity Act. 
This legislation is extremely important to maintaining the U.S. 
software industry's competitiveness and the growth of high-skilled, 
high-paying software industry jobs in the United States. The Software 
Export Equity Act has broad bipartisan support and was included in the 
fiscal year 1998 budget that the President submitted to Congress. I 
urge my colleagues to join with us in support of swift enactment of 
this legislation.
  The U.S. software industry is a vital and growing part of the U.S. 
economy, creating many new high-paying, high technology jobs in the 
United States. Much of the expansion of the software industry is due to 
the growth of export sales. The Software Export Equity Act clarifies 
the application of the foreign sales corporation [FSC] rules to exports 
of U.S. software.
  The FSC rules were enacted to address the competitive disadvantages 
faced by U.S. exporters vis-a-vis exports from other countries that 
have more favorable tax systems, particularly those that effectively 
exempt export sales from home country tax. The goal of the FSC 
provisions was to prevent manufacturing and production jobs from moving 
out of the United States. Unfortunately, a narrow IRS interpretation of 
these rules precludes exports of U.S. software from fully qualifying 
for the FSC incentive. I am very concerned that this problem could 
cause U.S. software companies to begin examining such options as moving 
high-skilled, high-paying software development jobs overseas where 
highly skilled labor is available at much lower wages. The FSC 
incentive will help offset higher U.S. labor costs by providing 
benefits on the export of products developed in the United States. 
Moreover, there is no justification to deny U.S. software exports the 
FSC incentive. Virtually every other U.S. exporter fully qualifies for 
these incentives. I believe it is vital to quickly enact legislation 
that would clarify these rules to reflect the Congress' intent with 
respect to software, not only to protect U.S. software development 
jobs, but also to preserve ownership of this technology in the United 
States.
  Mr. BAUCUS. Mr. President, I am pleased today to join Senator Hatch 
in cosponsoring the Software Export Equity Act. I believe the continued 
vitality of the U.S. software industry is extremely important to the 
U.S. economy. The Software Export Equity Act will not only help us to 
retain high-paying U.S. software development jobs with successful U.S. 
software companies, but also will help smaller U.S. software companies 
to enter the export market by helping to offset the high costs of 
exporting.
  The Software Export Equity Act ensures that U.S. software exports 
qualify for the benefits of the foreign sales corporation [FSC] rules, 
which are very important to maintaining a high level of U.S. exports. 
The foreign sales corporation rules were enacted to provide an 
incentive for U.S. companies to manufacture their products in the 
United States for export overseas, thus retaining U.S. development and 
manufacturing jobs. It is clearly as important to Congress to retain 
U.S. software development jobs, which are among the highest paying jobs 
in the United States, as it is to retain other manufacturing and 
development jobs. Nonetheless, the IRS has questioned the application 
of the FSC rules to software because independent software products did 
not exist when this incentive was originally enacted in 1971. Our tax 
laws must keep up with changes in technology and recognize that FSC 
rules should apply to software.
  This legislation is about fairness, but more importantly, this 
legislation is about jobs and preserving the ownership of technology in 
the United States. The Department of Commerce estimates that every $1 
billion of export trade is worth domestic jobs. Today there are nearly 
600,000 U.S. employees working directly in the software industry, with 
at least another 1.5 million software developers employed in related 
industries. These are high-paying jobs, with average compensation in 
1992 of $55,000 per employee. The Software Export Equity Act will 
prevent U.S. software companies from moving those high-paying software 
development jobs overseas, where highly skilled labor is available for 
much lower wages. The Software Export Equity Act will also help smaller 
software companies to enter the export market by helping to offset the 
high cost of exporting, which was one of the principal purposes for 
creating the FSC rules. FSC treatment is as important to exports of 
software as it is to exports of other U.S. products that are clearly 
covered by these rules.
  Finally, the Software Export Equity Act will protect U.S. ownership 
of technology. If software development jobs were moved outside the 
United States, ownership of the technology created would also move 
outside the United States. Today the software industry has revenues of 
$200 billion a year and a growth rate of 13 percent per year. To lose 
U.S. ownership of the future of this industry would mean not only a 
tremendous direct loss to the GDP, but also would mean a loss of the 
spillover benefits that U.S.-developed technology has on other U.S. 
industries. In summary, the loss of ownership of this technology would 
be devastating to the growth potential of the U.S. economy.
  I appreciate the fact that the administration supports our position 
and has recommended FSC treatment for computer software in the budget. 
Enactment of this legislation will make that recommendation reality. I 
urge my colleagues to join Senators Hatch, Breaux, Nickles, and myself 
in support of swift action on the Software Export Equity Act.

[[Page S1837]]

 Mr. GORTON. Mr. President, I am pleased to join Senator Hatch 
today in introducing the Software Export Equality Act. In 1971, 
Congress created foreign service corporations [FSC] in order to 
encourage U.S. exports and increase U.S. competitiveness in the 
international marketplace. Under current law, FSC legislation gives 
U.S. manufacturers a tax incentive for exports of domestically produced 
goods. Today, virtually every U.S. product manufactured for export 
abroad qualifies for FSC benefits. Yet current tax laws continue to 
discriminate against one of the America's fastest growing exports: 
software.
  Due to the IRS's narrow interpretation of FSC rules, the software 
industry is precluded from qualifying for any FSC benefits despite the 
fact that approximately 85 percent of products sold by U.S. software 
companies are developed in the United States and it currently ranks 
seventh in U.S. industry exports. This bill will clarify that computer 
software qualifies as export property and is eligible for FSC benefits. 
Continuing to deny the benefits of FSC rules to the software industry 
is not only unfair, it poses a serious impediment to the 
competitiveness of U.S. manufactured software.
  Software is one of the America's fastest growing industries, with 
revenues of more than $200 billion and a growth rate of 13 percent per 
year on average. As the world leader in software development, the 
United States is home to more than 8,000 software companies that 
provide, directly and indirectly, millions of high-paying, high-skilled 
American jobs in many States.
  Software is a vital and growing part of many State economies, 
including my own State of Washington. In Washington State, the software 
industry accounted for $3.5 billion worth, and 12 percent, of 
Washington State exports and employed over 22,509 people in 1995. 
Microsoft, the State's largest software producer, alone supported 1.5 
percent of the State's economy in 1995. But these impressive numbers do 
not even take into account the significant impact the numerous small 
and middle-sized software companies that make up the majority in 
Washington State have on the State's economy.
  The worldwide market for software is exploding and global competition 
is quickly on the rise. In this increasingly competitive world economy, 
incentives to encourage firms to develop and export from the United 
States are more important than ever to job creation and economic 
stability. This bill provides a simpe way to ensure the U.S. software 
industry remains the world leader in software manufacturing and 
American software jobs are protected.
  I encourage my colleagues to join me in support of this very 
important legislation and urge its quick passage in the Senate.
                                 ______
                                 
           By Mr. LUGAR:
  S. 388. A bill to amend the Food Stamp Act of 1977 to assist States 
in implementing a program to prevent prisoners from receiving food 
stamps; to the Committee on Agriculture, Nutrition, and Forestry.


                       FOOD STAMP ACT AMENDMENTS

 Mr. LUGAR. Mr. President, I rise today to introduce a bill 
that will stop prisoners from getting food stamp benefits. My bill will 
assist States in implementing a program to ensure that prisoners are 
not counted as members or heads of food stamp households, thus either 
increasing the households' benefits or allowing an individual to 
illegally receive benefits in the prisoner's name.
  I was disturbed to read in the newspaper about a draft General 
Accounting Office report showing over $3 million in food stamp benefits 
being overpaid to households in which a member has been incarcerated. 
Current law prohibits prisoners from receiving food stamp benefits and 
requires that households notify their local welfare office of any 
changes in the makeup of the household. I am concerned to see that 
there is a breakdown in the system, allowing millions of dollars to be 
paid out illegally.
  Briefings by USDA's Food and Consumer Service and the General 
Accounting Office have confirmed that although a few States are 
performing computer matches of data on States' food stamp participants 
and verified inmates, most are not. All States should be doing these 
computer matches. This bill requires the Secretary of Agriculture to 
collect information from States already doing computer matches to 
prevent prisoners from receiving food stamp benefits, then evaluate, 
summarize, and disseminate this information to all States not later 
than 180 days after the bill's enactment. The Secretary must then 
provide the States with technical assistance to implement a computer 
matching system.
  The problem of prisoners illegally receiving Federal benefits is not 
limited to the Food Stamp Program. Another recently released General 
Accounting Office report shows that the Social Security Administration 
has made erroneous payments to prisoners who were incarcerated in the 
jail system at the time of the study. In response to this study, the 
Personal Responsibility and Work Opportunity Act of 1996 included 
language authorizing the Commissioner of the Social Security 
Administration to enter into agreements with institutions to prevent 
these erroneous payments. We should make a similar effort to prevent 
these erroneous payments in the Food Stamp program.
  The Food Stamp Program provides a safety net for millions of people. 
We cannot allow fraud and abuse to undermine the Food Stamp Program. 
Integrity is essential to ensure a program that can serve those in 
need. It is Congress' responsibility to play a role in ending fraud and 
abuse in all federally funded programs. This legislation is an 
important step in ending fraud and abuse in the Food Stamp Program.
  I urge my colleagues to support this legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 388

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,
       SECTION 1. DENIAL OF FOOD STAMPS FOR PRISONERS.
       Section 11 of the Food Stamp Act of 1977 (7 U.S.C. 2020) is 
     amended by adding at the end the following:
       ``(q) Denial of Food Stamps for Prisoners.--
       ``(1) Collection and dissemination of information.--Not 
     later than 180 days after the date of enactment of this 
     subsection, the Secretary shall--
       ``(A) collect information on policies and procedures used 
     by States that conduct computer matches or other systems to 
     prevent prisoners from receiving food stamp benefits; and
       ``(B) evaluate, summarize, and disseminate to each State 
     the information collected under paragraph (1) that describes 
     the best practices of the States (including information 
     related to verifying prisoners' social security numbers with 
     the Social Security Administration).
       ``(2) Assistance to states.--The Secretary shall assist 
     States, to the extent practicable, in implementing a system 
     to conduct computer matches or other systems to prevent 
     prisoners from receiving food stamp benefits.''.
                                 ______
                                 
      By Mr. ABRAHAM (for himself, Mr. Bond, Mr. Nickles, Mr. 
        Hutchinson, Mr. Helms and Mr. Sessions):
  S. 389. A bill to improve congressional deliberation on proposed 
Federal private sector mandates, and for other purposes.


                  THE MANDATES INFORMATION ACT OF 1997

  Mr. ABRAHAM. Mr. President, I rise today to introduce the Mandates 
Information Act of 1997. This bill in my view furthers the cause of 
careful deliberation in this, the greatest deliberative body in the 
world. It will force Members of Congress to carefully consider all 
aspects of potential legislation containing mandates affecting 
consumers, workers, and small businesses.
  I am proud to say that my colleagues and I aided the cause of careful 
deliberation during the last Congress. We passed the Unfunded Mandates 
Reform Act of 1995. That legislation required the Congressional Budget 
Office to make two key estimates with respect to any bill reported out 
of committee: First, whether the bill contains intergovernmental 
mandates with an annual cost of $50 million or more; and, second, 
whether the bill contains private sector mandates with an annual cost 
of $100 million or more. The 1995 act also established a point of order 
against bills meeting the $50 million

[[Page S1838]]

cost threshold for intergovernmental mandates. Although the point of 
order can be waived by a simple majority vote, it encourages Congress 
to think carefully before imposing new intergovernmental mandates.
  The 1995 act did not apply its point of order to private sector 
mandates. This was understandable, given the bill's focus on 
intergovernmental mandates. But States and localities are not alone in 
being affected by Federal mandates. Consumers, workers, and small 
businesses also are affected when the Federal Government passes along 
the costs of its policies. This is why the Mandates Information Act of 
1997 will apply a point of order to bills meeting the $100 million cost 
threshold for private sector mandates, while also directing the CBO to 
prepare a ``Consumer, Worker, and Small Business Impact Statement'' for 
any bill reported out of committee.
  These reforms are necessary in my view, Mr. President, because the 
1995 act, while effective in its chosen sphere of intergovernmental 
mandates, does not contain the necessary mechanisms to force Congress 
to think seriously about the wisdom of proposed mandates on the private 
sector. This leaves our private sector faced with the same dilemma once 
faced by our States and localities: Congress does not give full 
consideration to the costs its mandates impose. Focusing almost 
exclusively on the benefits of unfunded mandates, Congress pays little 
heed to, and sometimes seems unaware of, the burden that unfunded 
mandates impose on the very groups they are supposed to help.
  Unfunded mandate costs by definition do not show up on Congress' 
balance ledger. But, as President Clinton's Deputy Treasury Secretary 
Lawrence Summers has written, ``[t]here is no sense in which benefits 
become `free' just because the government mandates'' them. Congress has 
merely passed the costs on to someone else.
  And that ``someone'' is the American people. As economists from 
Princeton's Alan Krueger to John Holohan, Colin Winterbottom, and 
Sheila Zedlewski of the Urban Institute agree, the costs of unfunded 
mandates on the private sector are primarily borne by three groups: 
consumers, workers, and small businesses.
  What forms do these costs take? For consumers, mandate costs take the 
form of higher prices for goods and services, as unfunded mandates 
drive up the cost of labor.
  For workers, the costs of unfunded mandates often take the form of 
significantly lower wages. According to the Heritage Foundation, a 
range of independent studies indicates that some 88 percent of the cost 
of private sector mandates are shifted to workers in the form of lower 
wages.

  And mandates can cause workers to lose their jobs altogether. Faced 
with uncontrollable increases in employee costs, our job creators too 
often find that they can no longer afford to retain their full 
complement of workers. The Clinton health care mandate, for example, 
would have resulted in a net loss of between 200,000-500,000 jobs, 
according to a study conducted by Professor Krueger.
  Small businesses and their potential employees also suffer. Mandates 
typically apply only to businesses with at least a certain number of 
employees. As a result, small businesses have a powerful incentive not 
to hire enough new workers to reach the mandate threshold. As the Wall 
Street Journal recently noted, ``The point at which a new [mandate] 
kicks in * * * is the point at which the [Chief Financial Officer] asks 
`Why grow?' ''
  That question is asked by small businesses all over the country, but 
let me cite one example from my State. Hasselbring/Clark is an office 
equipment supplier in Lansing, MI. Noelle Clark is the firm's treasurer 
and secretary. Mindful of the raft of mandates whose threshold is 50 
employees, Ms. Clark reports that lately ``we have hired a few temps to 
stay under 49.'' Thus, unfunded mandates not only eliminate jobs, but 
also prevent jobs from being created.
  Much as Members of Congress may wish it were not so, mandates have a 
very real cost. This does not mean that all mandates are bad. But it 
does mean that Congress should think very carefully about the wisdom of 
a proposed mandate before imposing it.
  Such careful thinking, Mr. President, is the goal of the Mandates 
Information Act of 1997. Just as the Unfunded Mandates Reform Act of 
1995 protects State and local governments from hasty decisionmaking 
with respect to proposed intergovernmental mandates, the Mandates 
Information Act would protect consumers, workers, and small businesses 
from hasty decisionmaking with respect to proposed private sector 
mandates. It would do so, in essence, by extending the reforms of the 
1995 act to private sector mandates.
  The bill I introduce today would build on the 1995 act's reforms in 
two ways. First, to give Congress more complete information about the 
impact of proposed mandates on the private sector, my bill directs CBO 
to prepare a ``Consumer, Worker, and Small Business Impact Statement'' 
for any bill reported out of Committee. This statement would include 
analyses of the bill's private sector mandates' effects on the 
following: First, consumer prices and [the] actual supply of goods and 
services in consumer markets; second, worker wages, worker benefits, 
and employment opportunities; and third, the hiring practices, 
expansion, and profitability of businesses with 100 or fewer employees.
  But providing Congress with more complete information about the 
impact of proposed private sector mandates will not guarantee that it 
pays any attention to it. This we know from experience. In 1981, 
Congress enacted the State and Local Government Cost Estimate Act, 
sponsored by Senator Sasser. Pursuant to that act, CBO provided 
Congress with estimates of the cost of intergovernmental mandates in 
bills reported out of committee. But Congress routinely ignored this 
information. It did so because the 1981 act had no enforcement 
mechanism to force Congress to consider the CBO estimates. As Senator 
Sasser himself explained in introducing a follow-up bill in 1993, 
``[t]he problem [with the 1981 act], it has become clear, is that this 
yellow caution light has no red light to back it up.''
  To supply that ``red light,'' Senator Sasser's Mandate Funding Act of 
1993 contained a point of order. Of course, the Unfunded Mandates 
Reform Act of 1995 likewise contained a point of order, which is why it 
succeeded where Senator Sasser's 1981 act had failed.
  The Mandates Information Act of 1997 will provide this red light for 
proposed private sector mandates. It contains a point of order against 
any bill whose private sector mandates exceed the $100 million 
threshold set by the 1995 act. Like the 1995 act's point of order 
against intergovernmental mandates, the 1997 bill's point of order can 
be waived by a simple majority of Members. Thus it will not stop 
Congress from passing bills it wants to pass.
  But the point of order will serve a vital purpose. It will ensure 
that Congress does not ignore the information contained in the 
consumer, worker, and small business impact statement. It will do so by 
allowing any Member to focus the attention of the entire House or 
Senate on the impact statement for a particular bill.
  The Mandates Information Act of 1997 will provide Congress with more 
complete information about proposed mandates' effects on consumers, 
workers, and small businesses. It will also ensure that Congress 
actually considers this information before reaching a judgment about 
whether to impose a new mandate. The result, Mr. President, will be 
focused, high-quality deliberation on the wisdom of private sector 
mandates.
  Because of the success of the 1995 act, Congress is now much more 
careful to consider the interests of State and local governments in 
making decisions about unfunded mandates. But Congress must be just as 
careful to consider the interests of consumers, workers, and small 
businesses in making such decisions. This bill will ensure that care, 
helping produce better legislation; legislation that imposes a lighter 
burden on working Americans.
  Mr. President, I ask unanimous consent that the following sample of 
letters from small business groups supporting the bill be introduced in 
the Record, along with a list of groups that have expressed their 
support for it.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

[[Page S1839]]

     Organizations Supporting the Mandates Information Act of 1997


                         national organizations

  Chamber of Commerce of the United States; National Association of 
Wholesaler-Distributors; National Federation of Independent Businesses; 
National Retail Federation; Small Business Survival Committee; National 
Restaurant Association; National Association for the Self-Employed.


                         michigan organizations

  Associated Underground Contractors, Inc.; Grand Rapids Area Chamber 
of Commerce; Michigan Association of Timbermen; Michigan Chamber of 
Commerce; Michigan Farm Bureau Family of Companies; Michigan NFIB; 
Michigan Retailers Association; Michigan Soft Drink Association; Small 
Business Association of Michigan.
                                                                    ____

                                            National Federation of


                                         Independent Business,

                                Washington, DC, February 11, 1997.
     Hon. Spencer Abraham,
     U.S. Senate,
     Washington, DC.
       Dear Senator Abraham: On behalf of the more than 600,000 
     members of the National Federation of Independent Business 
     (NFIB), I want to express support for the Mandate Information 
     Act of 1997
       In 1995 with the passage of the Unfunded Mandates Act, 
     Congress acknowledged the significant problem that federal 
     government mandates have on the operation of states and 
     localities. Government mandates create equally burdensome 
     problems on the private sector and especially small 
     employers. These federal mandates discourage small business 
     start-ups, growth and job creation.
       Our members have consistently ranked unreasonable 
     government regulation as one of their top concerns. The 
     Mandate Information Act works to address the problem of 
     federal mandates on small businesses by applying the reforms 
     put in place by the Unfunded Mandates Act of 1995 for state 
     and local government to the private sector. This would 
     require Congress to weigh more carefully the impact of 
     proposed legislation on small businesses and their employees.
       We commend you on your efforts to reduce the government 
     mandated burdens a small business must shoulder and look 
     forward to working with you to ensure that this positive 
     reform becomes law.
           Sincerely,

                                                   Dan Danner,

                                                   Vice President,
     Federal Governmental Relations.
                                                                    ____



                                          Chamber of Commerce,

                                  Washington, DC, January 7, 1997.
     Hon. Spencer Abraham,
     U.S. Senate,
     Washington, DC.
       Dear Senator Abraham: I am pleased to offer the support of 
     the U.S. Chamber of Commerce Federation for your proposed 
     legislation, the Mandates Information Act of 1997.
       One of the key success stories of the 104th Congress was 
     the adoption of bipartisan unfunded mandates reform requiring 
     Congress to consider the cost and consequences of federal 
     requirements on state and local government. Another important 
     component of this law was the requirement that significant 
     federal mandates on the private sector be measured and made 
     public. Such mandates have an enormous impact on consumers, 
     small businesses and workers in the form of higher prices, 
     fewer jobs, declining good and services and reduced workers 
     benefits. Moreover, these mandates are likely to escalate as 
     scarce budgetary resources will place even greater pressure 
     on utilizing federal regulations as a means of implementing 
     government programs and initiatives.
       [The Mandates Information Act would provide the next 
     necessary step to promote greater public and congressional 
     accountability regarding the impact of federal mandates.] It 
     builds upon the success of the unfunded mandates law by 
     requiring Congress to have more information on who will be 
     affected and ultimately pay the costs associated with these 
     mandates. It would allow Member of Congress to vote on each 
     mandate--considering not only its benefits but its effect on 
     the private section as well as the economy, jobs and 
     consumers.
       [It is good government policy for Congress to engage in the 
     practice of legislating with the necessary information 
     concerning the impact of their actions. Policymakers have the 
     responsibility and obligation to make informed decisions and 
     to be accountable for the consequences of those decisions.] 
     Such a proposal would help ensure that when resources are 
     diverted from jobs, wages and families into government rules, 
     the impact are fully considered.
       The U.S. Chamber of Commerce Federation, the world's 
     largest federation of business, chambers of commerce and 
     business organizations representing every size and sector of 
     the nation's economy, looks forward to working with you in 
     seeking adoption of this common sense, good government 
     proposal.
           Sincerely,
     R. Bruce Josten.
                                                                    ____



                                   National Retail Federation,

                                Washington, DC, February 12, 1997.
     Hon. Spencer Abraham,
     U.S. Senator,
     Washington, DC.
       Dear Senator Abraham: On behalf of the National Retail 
     Federation, the world's largest retail trade association, I 
     am writing to support your legislation, the Mandates 
     Information Act of 1997.
       Too often Congress passes new mandates on entrepreneurs 
     without understanding the actual cost. Many times, mandates 
     look good on paper, but can have a disastrous effect once 
     implemented. Your legislation will correct that once and for 
     all.
       The costs associated with mandates, as you well know, are 
     more than direct cash outlays, these costs mean less economic 
     growth, fewer jobs created and higher costs to consumers. 
     Congress' worthy goal of balancing the budget, combined with 
     desires of some to ``deliver more things'' to voters that the 
     government doesn't have to pay for, will put more pressure 
     than ever on Members of Congress to burden business.
       New mandates automatically won't be stopped, only 
     automatically considered under this bill. That's right in 
     line with Main Street. The Abraham legislation assures 
     retailers and other entrepreneurs that Congress will consider 
     the impact of proposed mandates set forth in the CBO 
     Consumer, Worker and Small Business Impact Statement before 
     they are simply enacted into law.
       Again, thank you for your leadership against new mandates. 
     We look forward to working with you to pass this legislation.
           Sincerely,

                                               John J. Motley,

                                            Senior Vice President,
     Government and Public Affairs.
                                                                    ____



                                 Michigan Chamber of Commerce,

                                    Lansing, MI, January 31, 1997.
     Hon. Spencer Abraham,
     U.S. Senate,
     Washington, DC.
       Dear Spence: Your proposed ``Mandates Information Act of 
     1997'' is a great idea!
       As you know, the Michigan Chamber and many other taxpayer 
     groups supported--and voters approved--the Headlee Amendment 
     to the State Constitution in 1978 that required state 
     mandates on local government to be funded by the State. This 
     has caused greater legislative and executive branch 
     evaluation of state program mandates and related costs on 
     local units of government and resulted in funding of any 
     mandates by the state. The Michigan Chamber also supported 
     adoption of unfunded mandates reform during the 104th 
     Congress.
       It's important that Congress now consider protection for 
     the private sector from new unfunded mandates. Careful 
     consideration of the impact of federal mandates on state and 
     local government should be extended to job providers and 
     consumers.
       The Michigan Chamber of Commerce and our 6,500 member firms 
     are pleased to support this needed legislation.
           Sincerely,
                                                      Jim Barrett,
     President.
                                                                    ____

                                                    Small Business


                                      Association of Michigan,

                                    Lansing, MI, January 31, 1997.
     Hon. Spencer Abraham,
     U.S. Senate, Dirksen Senate Office Building, Washington, DC.
       Dear Senator Abraham: The Small Business Association of 
     Michigan (SBAM is pleased with your decision to introduce the 
     ``Mandates Information Act.'' Your bill will help protect 
     small businesses from the financial impact of Congressional 
     mandates.
       Congressional mandates imposed on the private sector are 
     already driving down worker wages, increasing consumer costs 
     and reducing the availability of goods and services. These 
     mandates could multiply as a result of the effort for a 
     balanced budget. As funding becomes increasingly scarce, 
     advocates of increased government intrusion in the private 
     sector will try to shift program costs to small businesses in 
     the form of new mandates.
       A key provision of your legislation is the small business 
     impact statement--to inform Congressional members about 
     mandates and their impact on the private sector. The bill 
     will direct the CBO to estimate the impact of a bill's 
     mandates on consumer cost, worker wages, the availability of 
     goods and services and small business job creation.
       SBAM is Michigan's latest state based small business 
     association representing 8,000 businesses in all of 
     Michigan's 83 counties. We look forward to working with you 
     on this important small business issue.
           Sincerely,

                                             Barry S. Cargill,

                                                   Vice President,
                                             Government Relations.

  Mr. BOND. Mr. President, I rise today in support of the Mandates 
Information Act of 1997. I am pleased to be an original cosponsor of 
this important legislation, and I applaud my distinguished colleague 
from Michigan, Mr. Abraham, for his leadership in this effort.
  The bill we are introducing today continues the work begun in the 
104th Congress with the enactment of the ``Unfunded Mandates Reform Act 
of 1995--the 1995 act--authored by Mr.

[[Page S1840]]

Kempthorne to ensure that Congress is well advised of the cost unfunded 
mandates would impose on State and local governments. I was a cosponsor 
of the 1995 act, and I believe the time has come for us to expand its 
provisions to require similar detailed information and accountability 
on unfunded mandates affecting the private sector--so we can protect 
consumers, workers, and small businesses.
  As chairman of the Senate Committee on Small Business, I am all too 
aware of the disproportionate burden Federal regulations impose on our 
Nation's small businesses. A 1995 study found that an average firm with 
less than 20 employees spent approximately $5,500 per employee in 1992 
to comply with Federal regulations--compared with $3,000 per employee 
by firms with 500 or more employees. The overall cost to the economy is 
between 6 and 9 percent of gross domestic product--between $420-670 
billion--in 1995 dollars--in regulatory compliance. Before we permit 
the Federal Government to adopt any new mandate that would add to this 
burden, the Congress needs to be fully informed of the new costs to be 
imposed on the economy so we can make an informed judgment.
  The reforms proposed in this bill are needed to ensure that the 
Congress gives careful and thoughtful consideration to the impact 
unfunded mandates impose on the private sector. The ability of small 
businesses to compete and create new jobs can be hindered by unfunded 
mandates, we need to be aware of the magnitude of any future adverse 
effects. The Committee on Small Business will continue its work to 
ensure that the Government's actions here in Washington foster the 
growth of small businesses located on Main Street. This bill will help 
to ensure that all Members of Congress are equally informed of the 
effects a bill would have on the customers, employees, and owners of 
America's small businesses, the engine of our Nation's economic growth.
  The legislation Senator Abraham and I are introducing today will 
ensure that the private sector impact of unfunded mandates is addressed 
during deliberations on legislation imposing those mandates. Consumers, 
workers, and small businesses will benefit from the reforms to enhance 
congressional deliberations on unfunded mandates affecting the private 
sector. The Mandates Information Act of 1997 establishes a new 
parliamentary point of order against any bill that will impose private 
sector mandates exceeding a $100 million cost threshold. The measure 
directs the Congressional Budget Office to estimate the impact of the 
proposed unfunded mandates on consumer costs, worker wages, and the 
availability of goods and services.
  As with the Unfunded Mandate Reform Act of 1995, the point of order 
authorized by the bill would bar the House or Senate from further 
action on a proposed measure unless a majority agrees to move forward 
with the initiative. By authorizing a point of order triggered by 
private sector impacts, the legislation introduced today puts teeth 
into the law to ensure that Congress addresses the costs that would be 
imposed by the unfunded mandates on small businesses, consumers, and 
workers. This change requires Members of Congress to go on record as 
either supporting or opposing an unfunded mandate that would add costs 
to the private sector.

  With the aid of a consumer, worker, and small business impact 
statement, Members of Congress will have the information required to 
make an informed decision on the merit of imposing a mandate without 
also providing funding for compliance. The impact statement would be 
prepared by the Congressional Budget Office--which the bill directs to 
estimate the economic impact of a proposed mandate on consumers, wages, 
and the availability of goods and services.
  All in all, this bill is about good governance. It provides 
information to ensure that Congress is fully informed on the impact of 
an unfunded mandate on the economy and the private sector in 
particular. By tasking the Congressional Budget Office with preparing 
an impact statement, the bill also provides important information to 
educate Congress on the effect of pending legislation. This, in itself, 
is an important step toward ensuring that the needs and concerns of 
small businesses, and the workers and customers that depend on small 
businesses, are given the attention they deserve by Congress. As with 
the Small Business Regulatory Enforcement Fairness Act of 1996--or the 
Red-Tape Reduction Act as I prefer to call it--today's bill seeks to 
ensure that the Government treats small business fairly. The Mandates 
Information Act has the support of the National Federation of 
Independent Business, the National Restaurant Association, the U.S. 
Chamber of Commerce, the National Retail Association, the National 
Association of Wholesaler-Distributors, and the Small Business Survival 
Committee--I urge my colleagues to join our efforts to enact this bill 
and enhance our efforts to ensure good governance.
                                 ______
                                 
      By Mr. COVERDELL (for himself, Mrs. Feinstein, and Mr. Helms):
  S.J. Res. 19. A joint resolution to disapprove the certification of 
the President under section 490(b) of the Foreign Assistance Act of 
1961 regarding foreign assistance for Mexico during fiscal year 1997; 
read the first time.
  S.J. Res. 20. A joint resolution to disapprove the certification of 
the President under section 490(b) of the Foreign Assistance Act of 
1961 regarding foreign assistance for Mexico during fiscal year 1997; 
to the Committee on Foreign Relations.
  S.J. Res. 21. A joint resolution to disapprove the certification of 
the President under section 490(b) of the Foreign Assistance Act of 
1961 regarding assistance for Mexico during fiscal year 1997, and to 
provide for the termination of the withholding of and opposition to 
assistance that results from the disapproval; to the Committee on 
Foreign Relations.


                        DISAPPROVAL LEGISLATION

  Mr. COVERDELL. Mr. President, I have introduced today three separate 
joint resolutions to disapprove the President's decision to certify 
Mexico as fully cooperating in our war on drugs. The first joint 
resolution will eventually be placed on the calendar by way of rule XIV 
of the Standing Rules of the Senate. The second resolution is identical 
to the first joint resolution; however, it will be referred to the 
Senate Foreign Relations Committee for their consideration.
  Finally, Mr. President, the third joint resolution I have just 
introduced would disapprove the President's certification and instead 
decertify Mexico but authorize a national interest waiver.
  Mr. President, I have been joined today by a coauthor of these 
resolutions, Senator Feinstein of California, who will make remarks in 
a moment. I will take just a few minutes to visit this subject and then 
yield the floor to Senator Feinstein.
  First, let me say, Mr. President, that this is a most difficult 
issue, and it has very broad ramifications. Mr. President, I stand here 
as a friend of Mexico and the Mexican people, but I believe the actions 
on the part of the administration were a resounding endorsement of the 
status quo. Mr. President, the status quo is unacceptable. The status 
quo sees the Government of Mexico under siege by perpetrators of fraud 
and corruption and destabilization. Mr. President, the status quo sees 
millions of new victims being ravaged by the assault of drugs within 
our community. I suspect that the actions on the part of the 
administration, of President Clinton, were an effort to be supportive 
of President Zedillo. I can understand that, but I believe this 
decision to certify without condition, versus to decertify and waive as 
our resolution calls for, misleads both nations. It suggests that 
things are going along fairly well and we just need to keep doing what 
we have been doing.
  The President of Mexico himself said the greatest single threat to 
the security of his republic are the drug cartels. Mr. President, we 
are losing this war. That is what the status quo represents. We are 
losing. The people of Mexico are losing through destabilization of 
their government at all levels, the American people are losing through 
the victimization of millions of American citizens, and the democracies 
of the hemisphere are losing because this is a pervasive cloud over our 
future as we enter the new century.
  All the opportunity one can envision about this hemisphere, the fact 
that 40 percent of our trade occurs in this hemisphere, the abounding 
opportunities that one can easily look at when

[[Page S1841]]

you see what commerce can produce in the uplifting of all of our 
peoples, the single most serious threat to all those opportunities are 
the drug cartels. It hangs as a cloud, Mr. President. I believe the 
actions on the part of the administration do a disservice to all of our 
people on both sides of the border. And I hope that we can come at this 
question more honestly and admit that we have deep problems here, and 
that the good will that exists between our peoples is vibrant enough 
and strong enough that it can face an honest problem head on. No one is 
served by sweeping it under the rug for yet another year. Every day 
that goes by, we lose a little bit more and we come closer and closer 
to a time when this becomes unresolvable.

  Mr. President, we will hold hearings on these resolutions in the very 
near term. I compliment my colleague from California for her extended 
work in this area for a considerable period of time.
  At this point, I yield the floor to my colleague from California, 
Senator Feinstein.
  The PRESIDING OFFICER. The Senator from California is recognized.
  Mrs. FEINSTEIN. I thank the Chair and I thank the Senator from 
Georgia. I am pleased to join with him in this joint resolution, 
disapproving the certification of Mexico.
  Mr. President, my disappointment in the administration's decision to 
certify Mexico's antidrug efforts last week, I think, was known to all. 
I believe that decision was a mistake, and I said so.
  The decision to certify Mexico in the face of what I consider to be 
an overwhelming lack of cooperation undermines the integrity of the 
certification process itself, as well as damaging the credibility of 
the United States in our dealings with other countries with whom we 
seek cooperation.
  I rise today to join with the Senator from Georgia and a number of my 
colleagues in introducing this resolution. But I do so with some 
regret. I regret the need for the resolution for two reasons. First, 
Mexico is a neighbor, a friend, and an ally of our country. Second, I 
very much regret the need to disagree with my President on this issue. 
I believe he made what he believes to be the right decision, but I 
respectfully disagree with him.
  Our intention is clear: We believe that the evidence overwhelmingly 
supports decertification of Mexico, and then if the President sees fit, 
invoking a vital national interest waiver. For that reason, Senator 
Coverdell has introduced a second resolution that allows the President 
to waive the sanctions on grounds of vital national interest after we 
enact our resolution of disapproval.
  Last week, a bipartisan group of 39 Senators sent a letter to the 
President urging that this be his decision.
  I ask unanimous consent that this letter be printed in the Record 
following my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mrs. FEINSTEIN. Mr. President, section 490 of the Foreign Assistance 
Act requires the President to certify that Mexico has cooperated fully 
with the United States, or taken adequate steps on its own to combat 
drug trafficking. It's just not tenable to claim that Colombia did not 
meet that standard, but Mexico did. Let me read one sentence from the 
decertification of Colombia in 1996. It reads:

       Critical to the U.S. judgment that the Government of 
     Colombia did not fully cooperate on counternarcotics in 1995 
     is the assessment that corruption remains pervasive, despite 
     the efforts of some dedicated Colombians to root it out.

  That is no different from the situation in Mexico today. There are 
dedicated efforts in Mexico, but the corruption is pervasive.
  I think the events of last week are an example in point.
  Just hours before the President's decision on certification of Mexico 
was to be announced, Mexican officials were touting the arrest of a 
reputed cartel leader, Humberto Garcia Abrego, brother of Juan Garcia 
Abrego, who was expelled from Mexico during last year's certification 
process.
  Then, just a few hours after the decision to certify was announced, 
guess what? Garcia Abrego simply walked away from Mexican custody a 
free man. The Mexican Attorney General's office claimed responsibility 
for setting him free. His release was ``inexplicable,'' they said.
  Mr. President, this is just one example of the kind of cooperation 
the United States has received. It has tightened up just before 
certification and then, just after certification, it's business as 
usual.
  With 70 percent of the cocaine, a quarter of the heroin, 80 percent 
of the marijuana, and 90 percent of the ephedrine used to make 
methamphetamine entering the United States from our southern border, 
Mexico's drug problem is America's drug problem, and the problem is 
getting worse, not better.
  Last year at this time, Senator D'Amato and I compiled a list of 
actions we considered necessary for the Mexican Government to take in 
order to show progress on their antidrug efforts. Regrettably, I 
believe the evidence shows there has been little or no progress on 
nearly all of the items on this list.

  Some of these failures are due to inability; others are due simply to 
a lack of political will.
  For example, some questions: Has Mexico extradited one Mexican 
national on outstanding drug charges? The answer is no. I was puzzled 
because the Secretary of State, in her statement on certification, made 
this statement: ``Mexico has set a precedent by extraditing its own 
nationals.'' One might conclude that this includes Mexicans wanted on 
drug charges. Yet, to the contrary, both the Department of Justice and 
the DEA tell me that not a single Mexican national has been extradited 
to this country on drug-related charges.
  If the State Department has information that Mexican nationals are 
being extradited on drug-related charges--and there are 52 of them on 
the extradition list--I ask them now to make that list public. Tell us 
which Mexican nationals have been extradited on drug-related charges.
  Francisco Arellano-Felix of the notorious Tijuana cartel is currently 
in custody in a Mexican prison and wanted on narcotics charges here in 
the United States. I say to Mexico, why not show good faith and 
extradite him?
  Mexican authorities tell us that there has been an agreement in 
principle on extraditing Mexican nationals, but there has been no 
change in their actions.
  Question 2: Has Mexico implemented new laws aimed at curbing the 
rampant laundering of drug money? No.
  Nearly a year ago, the Mexican Parliament passed criminal money 
laundering laws. But the new laws are a far cry from the stronger 
legislative action sought by U.S. officials. The new laws do not even 
require banks to report large or suspicious currency transactions. 
Promises to enact such regulations have, so far, gone unfulfilled.
  To my knowledge, not one money exchange house in Mexico has changed 
its operations.
  Have Mexican authorities significantly increased their seizure rate 
of cocaine or their arrest of drug traffickers? Let's take a look at 
it. The answer to that clearly is no. Cocaine seizures by Mexico, which 
increased slightly last year, are barely half of what was seized in 
1993.

  Here are seizures in 1993--46.2 tons. Here they are in 1995--22.2 
tons. And they are just slightly above that in 1996. Actually, instead 
of 22.2 tons, in 1996 they are 23.5.
  So that is the record. It has been effectively downhill, and then a 
straight line, and a small little jog up.
  Let's take a look at drug-related arrests in Mexico. Drug-related 
arrests last year are less than half of what they were in 1992. Here 
are the figures. In 1992, 27,369; down in 1993; down in 1994; and way 
down in 1995, all the way to 9,700. We don't have 1996 on this chart 
yet, but the 1996 figures are 11,245. That is a startling drop since 
1992.
  So here is a country being certified as fully cooperative, and drug 
seizures have gone down and drug arrests have gone down in the last 3 
years.
  One has to ask then: What is ``full cooperation"?
  Mr. COVERDELL. Mr. President, will the Senator yield?
  Mrs. FEINSTEIN. I certainly will.
  Mr. COVERDELL. I have a comment on the statistics just demonstrated, 
because I was reading in the New York Times, and they begin the data in 
1994.

[[Page S1842]]

 So it shows a slight increase. But the dramatic case that the Senator 
made is absolutely correct. You have to go back to 1992 and 1993 to see 
what really is happening with arrests and seizures of narcotics.
  I just point out that it is good that the Senator is making the point 
because our adversaries like to start measuring statistics in 1994. We 
can't do that.
  Mrs. FEINSTEIN. The Senator is correct. I thank him very much for 
that comment because he is absolutely right. The jog up is so small 
when you compare it with the drop which is so steep and pronounced. So 
I thank the Senator very much.
  It leads me to the conclusion that the situation with Mexico has 
never been worse. DEA has suspended American agents going into Mexico 
because, just last month, Mexico forbade United States drug agents from 
carrying weapons on the Mexican side of the border.
  I understand that there may be some agreement again to enable our 
agents to be armed, and then they will go in again. However, it should 
be pointed out that death threats against our agents are up.
  I would like to ask that all Members, if they would be willing, to 
simply read the testimony provided by Thomas Constantine, Administrator 
of the Drug Enforcement Administration, before the House Government 
Reform and Oversight Committee, the National Security, International 
Affairs, and Criminal Justice Subcommittee, last week. It was played 
about three times on C-SPAN over the weekend. I heard it. I also read 
the remarks. And the remarks are really very, very profound.
  In this report, Mr. Constantine points out again:
       Since 1993, 23 major drug-related assassinations have taken 
     place in Mexico. Virtually all of these murders remain 
     unsolved. Many of them have occurred in Tijuana, or have 
     involved victims from Tijuana in the last year. Twelve law 
     enforcement officers, or former officials, have been gunned 
     down in Tijuana, and the vast majority of the 200 murders in 
     that city are believed to have been drug related.

  The Administrator also points out that of the 1,200 firings firings 
of Government officials for corruption made by President Zedillo, no 
successful prosecutions of these individuals have ever taken place. So 
of the 1,200 Government officials fired for corruption, there has not 
been a single successful prosecution.

  The arrest last month of Gen. Jesus Gutierrez Rebollo brings, I 
think, the level of drug-influenced corruption in Mexico into some 
glaring relief. It is frightening. But, as I have pointed out, it is 
just the tip of the iceberg.
  In September, a federal police commander, Ernesto Ibarra, who had 
vowed to take down the Tijuana cartel, was murdered, and some of the 
assailants were his own officers.
  That should tell us a great deal about the level of corruption.
  The celebrated army raid of a wedding last month of the sister of 
Amado Carillo-Fuentes, Mexico's most powerful cartel leader, seems to 
be an elaborate charade. The raid, which was organized by General 
Gutierrez, who we now know was on the Carillo-Fuentes payroll and the 
target of the raid, was tipped off in advance and either never did come 
to the wedding or escaped. Federal police were found to be protecting 
the drug traffickers at that wedding. The federal police were 
protecting drug traffickers. I find that just amazing.
  As former DEA Administrator Robert Bonner said, ``It would be hard 
for anyone to say with a straight face that the Mexican Government is 
taking effective action against the major drug traffickers at this 
juncture.''
  Yet, they were just certified as so doing.
  The purpose of section 490 was not to deliver merit badges to nations 
whose leaders have good intentions. The world is filled with leaders 
who have good intentions. The act was designed to measure uniformly the 
actions taken by countries to assist the United States in antidrug 
efforts.
  Colombia was decertified last year and again this year because their 
efforts were ineffectual.
  How Mexico cannot be held to the same standards I have a hard time 
understanding. To certify Mexico in the face of overwhelming evidence 
to the contrary undercuts the certification process.
  So I ask all of my colleagues to join the distinguished Senator from 
Georgia and myself in voting to disapprove the President's decision on 
certification of Mexico but to allow him, if he sees fit, to enact a 
national-interest waiver.
  Then we should work with the President to devise conditions under 
which Mexico would be eligible for recertification.

                               Exhibit 1


                                                  U.S. Senate,

                                Washington, DC, February 26, 1997.
     The President,
     The White House, Washington, DC
       Dear Mr. President: We are writing to urge you to deny 
     certification that Mexico has taken sufficient actions to 
     combat international narcotics trafficking when you report to 
     Congress on the anti-narcotics efforts of major drug 
     producing and drug-transit countries. We believe a reasonable 
     examination of the facts leads to no other decision.
       Regrettably, we have concluded that there has been 
     insufficient progress, or no progress, on a wide range of key 
     elements of an effective counternarcotics program in Mexico. 
     Some of these failures are due to inability; others are due 
     to a lack of political will. But all have set back the urgent 
     effort to end the plague of drugs on our streets.
       We want to bring to your attention a number of the most 
     significant examples of Mexico's inability and unwillingness 
     to deal with the drug trafficking problem effectively:
       Cartels: There has been little or no effective action taken 
     against the major drug cartels. The two most powerful--the 
     Juarez Cartel run by Amado Carillo Fuentes, and the Tijuana 
     Cartel, run by the Arellano Felix brothers--have hardly been 
     touched by Mexican law enforcement. Those who have been 
     arrested, such as Hector Palma, are given light sentences and 
     allowed to continue to conduct business from jail. As DEA 
     Administrator Thomas Constantine says, ``The Mexicans are now 
     the single most powerful trafficking groups''--worse than the 
     Colombian cartels.
       Money Laundering: Last year, the Mexican parliament passed 
     criminal money laundering laws for the first time, but the 
     new laws are incomplete and have not yet been properly 
     implemented. These laws do not require banks to report large 
     and suspicious currency transactions, or threaten the banks 
     with sanctions if they fail to comply. Promises to enact such 
     regulations--which prosecutors need to identify money-
     launderers--have so far gone unfulfilled. Mexican officials 
     said that such regulations would be developed by January, 
     but they were not produced.
       Law Enforcement: While there have been increases in the 
     amounts of heroin and marijuana seized by Mexican 
     authorities, cocaine seizures remain low. Although slightly 
     higher than last year's figures, the 23.6 metric tons seized 
     in 1996 is barely half of what was seized in 1993. A modest 
     increase in drug-related arrests brought the total to 11,245 
     in 1996--less than half of the 1992 figure.
       Cooperation with U.S. Law Enforcement: Our own drug 
     enforcement agents report that the situation on the border 
     has never been worse. Last month, the Mexican government 
     forbade U.S. agents to carry weapons on the Mexican side of 
     the border, putting their lives in grave danger. Recent news 
     reports indicate that death threats against U.S. narcotics 
     agents on the border have quadrupled in the past three 
     months. Some U.S. agents believe that all their cooperative 
     efforts are undone almost instantly by the corrupt Mexican 
     agents with whom they work.
       Extraditions: Mexico also has made very little progress in 
     the area of extraditions. In the past year, they have failed 
     to capture and extradite a single high-ranking member of any 
     of the major drug cartels. There are 52 outstanding U.S. 
     extradition requests for drug dealers, and Mexico has failed 
     to comply with a single one of them. No Mexican national has 
     ever been extradited to the United States on drug charges. In 
     the last year, Mexico has fired two directors of its National 
     Institute to Combat Drugs, one Attorney General, and several 
     high-ranking officials in the federal police for their 
     corrupt involvement with the drug lords. We should expect 
     Mexico to pursue the cartel leaders with the same level of 
     intensity used to expose and punish corruption by government 
     officials.
       Corruption: Mexico's counternarcotics effort is plagued by 
     corruption in the government and the national police. Among 
     the evidence are the eight Mexican prosecutors and law 
     enforcement officials who have been murdered in Tijuana in 
     recent months. There has been considerable hope that the 
     Mexican armed forces would be able to take a more active role 
     in the counternarcotics effort without the taint of 
     corruption. But the revelation that Gen. Jesus Gutierrez 
     Rebollo, Mexico's top counternarcotics official and a 42-year 
     veteran of the armed forces, had accepted bribes from the 
     Carillo Fuentes cartel, casts grave doubts upon that hope.
       Recent news reports indicate that U.S. law enforcement 
     officials suspect judges, prosecutors, Transportation 
     Ministry officials, Naval officers, and Governors of 
     corruption and actively facilitating the work of drug 
     traffickers. The National Autonomous University of Mexico 
     estimates that the drug lords spend $500 million each year to 
     bribe Mexican officials at all levels, and many consider that 
     figure to be a gross under-estimation.

[[Page S1843]]

       Mr. President, we believe that the evidence is overwhelming 
     and can lead to no decision other than the decertification of 
     Mexico. It would send a strong signal to Mexico and the world 
     that the United States will not tolerate lack of cooperation 
     in the fight against narcotics, even from our close friends 
     and allies. Accordingly, we urge you to establish a clear set 
     of benchmarks by which you will judge if and when to 
     recertify Mexico for counternarcotics cooperation. These 
     benchmarks must include, but not be limited to: effective 
     action to dismantle the major drug cartels and arrest their 
     leaders; full and ongoing implementation of effective money-
     laundering legislation; compliance with all outstanding 
     extradition requests by the United States; increased 
     interdiction of narcotics and other controlled substances 
     flowing across the border by land and sea routes; improved 
     cooperation with U.S. law enforcement officials including 
     allowing U.S. agents to resume carrying weapons on the 
     Mexican side of the border; and a comprehensive program to 
     identify, weed out, and prosecute corrupt officials at all 
     levels of the Mexican government, police, and military.
       You may feel, as many of us do, that U.S. interests in 
     Mexico, economic and otherwise, are too extensive to risk the 
     fall-out that would result from decertification. That is why 
     Congress included a vital national interest waiver provision 
     in Section 490 of the Foreign Assistance Act. But other vital 
     interests are not a valid reason to certify when 
     certification has not been earned. If you feel that our 
     interests warrant it, we urge you to use this waiver. But an 
     honest assessment of Mexico's cooperation on counternarcotics 
     must fall on the side of decertification.
           Sincerely,
         Wayne Allard, Jeff Bingaman, Barbara Boxer, John Breaux, 
           Richard Bryan, Max Cleland, Susan M. Collins, Kent 
           Conrad, Paul Coverdell, Larry Craig, Alfonse D'Amato, 
           Pete Domenici, Byron Dorgan, Dick Durbin, Russ 
           Feingold, Dianne Feinstein, Wendell Ford, Slade Gorton, 
           Judd Gregg, Chuck Hagel, Jesse Helms, Kay Bailey 
           Hutchison, Tim Hutchinson, Dirk Kempthorne, Bob Kerrey, 
           Jon Kyl, Mary Landrieu, Frank Lautenberg, Connie Mack, 
           Patty Murray, Frank Murkowski, Daniel Patrick Moynihan, 
           Carol Moseley-Braun, Jack Reed, Harry Reid, Rick 
           Santorum, Ted Stevens, Robert Torricelli, and Ron 
           Wyden.

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