[Congressional Record Volume 144, Number 39 (Tuesday, March 31, 1998)]
[Senate]
[Pages S2851-S2862]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. ROBERTS:
S. 1884. A bill to amend the Commodity Exchange Act to remove the
prohibition on agricultural trade options outside contract markets; to
the Committee on Agriculture, Nutrition, and Forestry.
THE TRADE OPTIONS FOR FARMERS AND RANCHERS ACT
Mr. ROBERTS. Mr. President, today I am pleased to introduce the Trade
Options for Farmers and Ranchers Act (TOFRA). This legislation will
provide farmers and ranchers across the United States with new,
improved and affordable risk management products to help producers
succeed in the 21st century.
This bill fulfills a promise we made to America's farmers and
ranchers during the 1996 farm bill debate. The far-reaching, market-
oriented reforms contained in the Freedom to Farm Act have provided
substantial financial benefits to agriculture producers throughout the
country. At the same time, this policy must be buttressed by proper
risk management tools, regulatory relief, tax changes and a consistent,
strong export policy. As a result, while leading the fight to get the
federal government out of producers' daily lives and pocket-books, I
promised to fight for better tools to help manage the tremendous
financial risk that is inherent in life on the farm today.
The TOFRA would repeal the Commodity Futures Trading Commission's
prohibition on the sale of over-the-counter agriculture trade options.
The CFTC ban dates to the Great Depression. It was put in place during
a time when financial and commodity markets were viewed with both
suspicion and fear. Today, we live in a time of mutual funds,
computerized financial transactions and round-the-clock, global
commodity trading. While we should never forget the important lessons
of the Great Depression, we must not let the troubling memories of the
past hold back our nation's farmers and ranchers when there is so much
promise in the future.
The CFTC's agriculture option ban created a monopoly. Today, if a
farmer or rancher wants to hedge his price risk with an agriculture
option, he must purchase the option from a commodity exchange. Over the
years, the exchanges have performed a valuable service to farmers and
ranchers by giving them the opportunity to manage their price risk in a
regulated environment. Despite their best efforts, organized
exchanges--primarily as a result of excessive regulation--have not been
able to keep up with the tremendous demand in Farm Country for newer,
better alternatives to existing risk management tools.
I will continue to support legislative efforts to allow all
interested parties--commodities exchanges included--to sell a wider
variety of financial products. In fact, I continue to be frustrated
with the CFTC's unwillingness to provide organized exchanges with the
same basic business opportunities available to over-the-counter
brokers. This bias is unfortunate and counterproductive to both buyers
and sellers of commodities.
At the same time, overly restrictive regulations are preventing
America's farmers and ranchers from receiving the new, innovative
products they need. The CFTC ban on over-the-counter agriculture
options has been maintained in order to ``save farmers from
themselves.'' The argument here is that farmers, grain elevators and
others in rural America don't understand how options work. Therefore,
the federal government has seen fit to limit severely the development
of, and competition in, financial instruments that would provide
substantial benefits to producers who understand commodity marketing in
order to protect the few remaining producers who have no interest in
managing price risk. Basically, current federal policy in this area is
targeted towards the 1930s instead of the 2030s.
Agriculture options are complex, expensive financial instruments. In
order to use them properly, producers must have specialized knowledge
of commodity marketing and the risks associated with participating in
them. As a result, many producers may choose not to use the additional
financial products made possible through this legislation. However,
agriculture options should be readily available to those producers with
the skill, knowledge and desire to use them.
It is important that agriculture options--whether sold on an
organized commodity exchange or through an over-the-counter broker--be
sufficiently regulated. This legislation will simply make agriculture
options just like all other options. If you purchase an option on
wheat, natural gas or common stock, the bookkeeping, registration and
disclosure requirements should be the same. Similarly, strong
protections against fraud and manipulation are included to help prevent
and punish fly-by-night operations and bucket-shops. In short, this
bill establishes a simple formula: provide business opportunity with
limited, but vigorously enforced rules. With proper oversight, this
bill will be good for producers, brokers, businesses and consumers
alike.
I do want to thank the CFTC for recently submitting a proposed rule
that would begin to lift its long-held ban on over-the-counter
agriculture trade options. They have taken the initial step toward
removing the ban on off-exchange agriculture options trading.
Unfortunately, the CFTC's proposal is so limited, so burdened with red-
tape and reporting requirements, that significant benefit is doubtful.
No new
[[Page S2852]]
products, no improved products and no more competition to drive down
the price of risk management for America's farmers and ranchers.
I am hopeful this legislation will renew CFTC interest in a workable
regulation to govern agriculture option trading. I also urge the CFTC
to act quickly to make these important tools available to America's
farmers and ranchers. In conclusion, let me simply say this: if we give
our producers a helping hand and appropriate safeguards, they will do
the rest.
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. 1884
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. AGRICULTURAL TRADE OPTIONS OUTSIDE CONTRACT
MARKETS.
The Commodity Exchange Act is amended by inserting after
section 4p (7 U.S.C. 6p) the following:
``SEC. 4Q. AGRICULTURAL TRADE OPTIONS OUTSIDE CONTRACT
MARKETS.
``(a) Definitions.--In this section:
``(1) Agricultural trade option outside a contract
market.--The term `agricultural trade option outside a
contract market' means an agreement, contract, or transaction
(or class thereof) entered into on other than a contract
market for--
``(A) the purchase of an agricultural trade option
involving a commodity by a person who is a producer,
processor, commercial user, or merchant handler of the
commodity;
``(B) the sale or transfer of an agricultural trade option
involving a commodity; or
``(C) a purpose related to the business of a person
referred to in subparagraph (A).
``(2) Commodity.--The term `commodity' means an
agricultural commodity referred to in section 1a(3).
``(b) Authorization.--Subject to subsection (c), an
agricultural trade option outside a contract market shall be
permitted and shall be considered to be consistent with the
other provisions of this Act.
``(c) Regulation.--
``(1) Safeguards.--Subject to paragraph (2), an
agricultural trade option outside a contract market shall, to
the extent determined to be applicable by the Board, be
subject to--
``(A) sections 4b and 4o;
``(B) the provisions of sections 6(c) and 9(a)(2), to the
extent that the provisions prohibit manipulation of the
market price of any commodity in interstate commerce for
future delivery;
``(C) prohibitions against fraud or manipulation under
section 4c(b);
``(D) registration requirements of the Commission
administered by the National Futures Association;
``(E) a requirement that the person providing the option
has a net worth of at least $50,000;
``(F) requirements for full disclosure of risks and
responsibilities involved in the contract or agreement for
the option; and
``(G) recordkeeping and reporting requirements of the
Commission.
``(2) Limitations.--
``(A) Total assets.--Except for the fraud and manipulation
provisions of the provisions of law referred to in
subparagraphs (A), (B), and (C) of paragraph (1), paragraph
(1) shall not apply to an agricultural trade option outside a
contract market if the buyer and seller of the option each
have assets of a value of at least $10,000,000.
``(B) Physical delivery; structure and strategies.--An
agricultural trade option outside a contract market shall not
be subject to--
``(i) a requirement that the option, if exercised, be
physically delivered; or
``(ii) a limitation on the structure of the option or
trading strategies for the use of the option.
``(c) Termination of Effectiveness.--The authority provided
by this section terminates effective September 30, 2002.''.
SEC. 2. CONFORMING AMENDMENTS.
(a) Section 4(a) of the Commodity Exchange Act (7 U.S.C.
6(a)) is amended--
(1) in paragraph (1), by inserting ``(A)'' after ``(1)'';
(2) by redesignating paragraphs (2) and (3) as
subparagraphs (B) and (C), respectively;
(3) in subparagraph (C) (as so redesignated), by striking
the period at the end and inserting ``; or''; and
(4) by adding at the end the following:
``(2) the contract is an agricultural trade option outside
a contract market permitted under section 4q.''.
(b) Section 4c(b) of the Commodity Exchange Act (7 U.S.C.
6c(b)) is amended in the first sentence by striking ``No''
and inserting ``Except as provided in section 4q, no''.
SEC. 3. REGULATIONS.
Not later than 90 days after the date of enactment of this
Act, the Commodity Futures Trading Commission shall issue
such regulations as the Commission determines are necessary
to carry out this Act and the amendments made by this Act.
______
By Mr. D'AMATO (for himself, Mr. Rockefeller, Mrs. Hutchison,
Mrs. Feinstein, and Mrs. Boxer):
S. 1885. A bill to amend the Internal Revenue Code of 1986 to provide
for a medical innovation tax credit for clinical testing research
expenses attributable to academic medical centers and other qualified
hospital research organizations; to the Committee on Finance.
the medical innovation tax credit act of 1998
Mr. D'AMATO. Mr. President, I rise today to introduce legislation
with my colleagues, Senators Rockefeller, Hutchison, Feinstein and
Boxer, to create a new tax credit that will make it easier for medical
schools, teaching hospitals, and non-for-profit research hospitals to
invest in potentially life saving medical research. Our bill will add
Section 41A to the Internal Revenue Code to establish a Medical
Innovation Tax Credit. This new credit would apply to qualified medical
innovation expenses for biopharmaceutical research activities,
including clinical trials, at qualified academic institutions. The
credit rate would be 20% of qualified expenses on research conducted in
the United States. This tax incentive is necessary in order to assure
that the United States maintains its position as the leading country
for biomedical research.
The Medical Innovation Tax Credit will supplement the current law
Research and Experimental Tax Credit (R&E) which has allowed
biopharmaceutical companies to invest hundreds of billions of dollars
in research for new drug therapies. Clinical trials are conducted by
these drug companies in order to obtain FDA approval. However, these
initial studies are only a fraction of the applied research needed to
follow patients and to discover possible combinations of drugs which
provide the most effective therapy. These post-approval studies are
performed by clinical investigators and major academic medical centers.
Until recently, medical schools, teaching hospitals, and not-for-
profit hospitals were able to fund research from their operating
profits. Many physicians chose to practice at these hospitals at a
reduced salary based on the opportunity to engage in teaching and
clinical research. With the profound changes in the health care
industry over the last few years, this profit no longer exists. In the
era of managed care, many insurance companies are reimbursing
physicians and hospitals at the cost of services. Combined with cuts in
Medicare payments and reduced subsidies for graduate medical education,
teaching hospitals can barely afford to pay their medical staff's
salary, let alone fund its research.
These financing changes have had the largest impact on hospitals
affiliated with academic medical centers. A recent study found a 22%
decline in clinical research conducted at member hospitals of the
Association of American Medical College's Council of Teaching
Hospitals. This drop is alarming because it demonstrates that these
hospitals no longer have the financial resources to contribute to the
public's health. Traditionally, academic medical centers trained new
doctors, supported applied biomedical research, and provided the bulk
of uncompensated care for uninsured patients. Under this system medical
residents had the opportunity to treat a wide spectrum of patients,
regardless of their health insurance status. In addition, uninsured
patients were able to receive the latest care within the scope of
clinical trials performed at academic hospitals. With reductions in
private and public funding these medical centers have been forced to
reduce these social services to compete with for-profit-hospitals with
no research agenda. This development promises only to stagnate the
level of care and number of treatment options that the next generation
of doctors can offer their patients.
Mr. President, my state of New York has 12 medical schools and 40
teaching hospitals, in addition to 8 designated cancer centers. Each of
these institutions will be eligible for the Medical Innovation Tax
Credit. Without continued funding of research at these institutions,
many New Yorkers will recognize a profound effect upon the quality of
their health care. Without the opportunity to conduct research many of
the country's top doctors may leave to
[[Page S2853]]
practice in locations where they can earn more money. Such a move will
also reduce the need for research specialists and their staffs.
Patients will have to choose between hospitals that only recognize the
bottom line while their children will not enjoy the same medical
advances as they did. Many uninsured patients will not be able to
receive uncompensated care and will not be able to receive the most
advanced medicine possible.
And these changes aren't just particular to my state. Almost every
state has a medical school which serves as the epicenter for a network
of teaching hospitals which employ thousands of physicians, nurses,
research specialists, and support staff. A large percentage of each
state's economy is based on these medical centers. Thus, we all stand
to recognize two main benefits from the Medical Innovation Tax Credit,
more jobs and better health. Only by encouraging private investment in
medical research can our health care infrastructure develop new and
innovative ways to deliver the most advanced care to all citizens of
our country.
We urge all of our colleagues to support this legislation that will
restore to medical schools and teaching hospitals the ability to
perform applied biomedical research to help treat and cure many of our
pressing health needs such as cancer and heart disease. This is a
targeted measure which has widespread benefits for all citizens.
Mrs. FEINSTEIN. Mr. President, I rise today to join Senator D'Amato,
Senator Boxer, Senator Rockefeller and others in support of legislation
to create the Medical Innovation Tax Credit. The proposed tax credit
can be an effective complement to the existing research and
experimentation tax credit. The new proposal will support additional
medical research at fine research universities, like the University of
California and Stanford University, assisting in the development of new
products to improve health and save lives. I am pleased to support
Senator D'Amato's proposal.
Under the legislation, the Medical Innovation Tax Credit would
provide a pharmaceutical or biotechnology company with a tax credit
equal to 20% of their expenditures for human drug clinical trials
conducted at medical schools, university teaching hospitals or non-
profit research hospitals working in conjunction with the National
Institutes of Health.
The proposal will provide an important incentive to conduct the
research trials in the university hospital setting, improving academic
training, health care and the development of new research and bio-
medical products.
The legislation will assist medical schools and research institutions
leverage additional private sector support for medical schools and
teaching hospitals. Teaching hospitals have historically been an
important site of research activity. However, partially because of the
universities' broad education mission, teaching hospitals face a cost-
disadvantage when compared to a ``for profit'' contract research
organization. This new research credit will help level the playing
field for medical schools and teaching hospitals.
The proposal will help provide, in an indirect manner, additional
resources for medical research. The administration and Congress both
enthusiastically support increasing federal support for medical
research through the National Institutes of Health. However, with our
acute budget needs, Congress may face difficulty in meeting our goals.
Congress can provide new sources of revenue for these research
hospitals by encouraging them to serve as sites for clinical trials.
Only clinical research activities conducted in the United States can
qualify for the credit, decreasing the economic incentive to move the
research activities to lower cost facilities off-shore.
The support is appropriate because academic health centers address
important societal priorities, accepting expenses other medical
facilities may not have to incur.
University-based teaching hospitals provide a disproportionate share
of high-cost, critical services to low-income or uninsured individuals.
University-based teaching hospitals carry a higher burden of
necessary, but in many cases unprofitable, services, such as emergency
trauma care and burn unit facilities. Academic health centers represent
only 2% of all non-federal community hospitals, but have 33% of the
trauma units and 50% of its burn units.
The credit will help provide, in an indirect manner, additional funds
for medical research by encouraging them to serve as clinical trial
sites. The infusion of research dollars will support their vital
missions.
The proposal will help arrest the declining rate of clinical research
trials conducted at these facilities.
The American Association of Medical Colleges, which supports the
legislation, reports a 22% drop in clinical research at member
hospitals.
A recent study of three pharmaceutical companies indicates that
although pharmaceutical R&D is larger than the research funds of the
National Institutes of Health, the level of university-based clinical
trials has declined from 82% in 1989 to 68% in 1993.
This proposal can help schools arrest the steady, five year decline
and make the most of their research dollars.
The credit will serve as an effective supplement to the current
Research and Experimentation Credit and the Orphan Drug Tax Credit and
provide a cost-effective incentive to encourage companies to pursue
research in an academic setting. The credit will promote research at
teaching hospitals, lead to the development of stronger research
universities, contribute to new medical therapies and products and
strengthen our world leadership in the important field of medical
innovation. I am pleased to lend my support.
Mrs. BOXER. Mr. President, I want to take a few minutes to talk about
an important piece of legislation which is being introduced today, the
``Medical Innovation Tax Credit.'' I am an original co-sponsor of this
legislation.
The Medical Innovation Tax Credit will establish a new, free-standing
credit in the Internal Revenue Code. The credit, modeled after a law in
my home state of California, provides a targeted tax incentive for
companies to increase clinical trials at medical schools and teaching
hospitals. The California law has been successful in encouraging
biotechnology and pharmaceutical companies to expand their pioneering
research activities at medical schools and teaching hospitals
throughout the state. The Medical Innovation Tax Credit will encourage
and stimulate such pioneering research in California and throughout the
country.
Many medical institutions today face significant financial pressures
as a result of fundamental changes in the health care marketplace. With
fewer funding sources available, medical schools, teaching hospitals,
and charitable research hospitals designated as cancer centers by the
National Cancer Institute (NCI), are having to cut back on their
cutting-edge research activities.
The Medical Innovation Tax Credit will help alleviate some of these
financial pressures by encouraging more clinical trials to be conducted
at medical schools, hospitals and NCI-designated cancer centers; thus
providing these institutions additional private sector resources to
fund cutting-edge medical research projects which otherwise may not
have been funded. These extra resources will also enhance research and
training opportunities, thereby ensuring our nation's continued
leadership in innovative medical research.
Moreover, the Medical Innovation Tax Credit encourages companies to
conduct their research activities here in the United States since only
domestic clinical trials are eligible for the credit. By decreasing the
economic incentive to move such activities off-shore, more clinical
research projects will be conducted in the U.S. Such domestic based
research will ultimately lead to increased jobs, investments and
productivity here at home.
So, Mr. President, I am very proud to support this bill and I
congratulate my colleague Senator D'Amato for his hard work on this
legislation. The enactment of this legislation will provide important
resources for our nation's leading medical schools, teaching hospitals
and NCI-designated cancer centers and it will help ensure America's
continued preeminence in innovative medical research. I encourage my
colleagues to join in supporting the Medical Innovation Tax Credit.
______
By Mr. Durbin (for himself and Ms. Moseley-Braun):
S. 1886. A bill to designate the facility of the United States Postal
Service
[[Page S2854]]
located at 3750 North Kedzie Avenue in Chicago, Illinois, as the
``Daniel J. Doffyn Post Office Building''; to the Committee on
Governmental Affairs.
the daniel j. doffyn post office building designation act of 1998
Mr. DURBIN. Mr. President, I rise today together with my
distinguished colleague, Senator Carol Moseley-Braun, to introduce
legislation to designate the United States Post Office facility at 3750
North Kedzie Avenue in Chicago, Illinois, as the ``Daniel J. Doffyn
Post Office Building.''
This legislation honors the service and heroism of Daniel Doffyn, a
40-year-old rookie officer with the Chicago Police Department, who was
fatally shot in the line of duty two years ago.
On the afternoon of March 8, 1995, Daniel Doffyn and his partner,
Milan ``Mike'' Bubalo, who had just completed their regular shift,
responded to a report of a burglary in progress. What they encountered,
in broad daylight, just a few steps away from the Austin precinct house
on Chicago's West Side, were three gun-wielding gang members hiding in
an apartment. Believing the officers to be there to arrest them for
their involvement in an earlier gang shooting, the trio panicked and
tried to escape through a window.
After capturing one suspect, Doffyn was shot in the head and chest by
a second man, who opened fire with a TEC-DC9 semiautomatic pistol, one
of the 19 assault weapons banned under the 1994 Federal law. Officer
Doffyn died in surgery later that evening. In the barrage of gunfire,
Officer Bubalo was seriously wounded in the thigh, and has an
artificial left hip as a result of the shooting.
Officer Doffyn tragically lost his life in the course of performing a
job that he truly loved, less than a year after graduating from the
Chicago Police Academy, following a three-year quest to fulfill a dream
to protect and serve his community. If someone needed help, Danny
Doffyn was the first one there. In the words of District Commander
LeRoy O'Shield, ``he exemplified the very finest the police department
has to offer. He was not assigned this job but responded to it.''
The post office sought to be designated is in the neighborhood where
Officer Doffyn, who was posthumously awarded the Medal of Valor for his
ultimate sacrifice, resided with his parents, bicycled and roller
skated with his eight-year-old daughter, Brittany, and donned his blue
uniform and police star #14030 with pride.
We trust our colleagues will agree that this designation is a worthy
tribute to salute the life and courage of Daniel Doffyn, and to pay
respect to the thousands of men and women in law enforcement careers
who risk their lives every single day striving to keep our citizens,
streets, and sidewalks safe.
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. 1886
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. DESIGNATION OF DANIEL J. DOFFYN POST OFFICE
BUILDING.
(a) In General.--The facility of the United States Postal
Service located at 3750 North Kedzie Avenue in Chicago,
Illinois, shall be known and designated as the ``Daniel J.
Doffyn Post Office Building''.
(b) References.--Any reference in a law, map, regulation,
document, paper, or other record of the United States to the
facility of the United States Postal Service referred to in
subsection (a) shall be deemed to be a reference to the
``Daniel J. Doffyn Post Office Building''.
______
By Mr. HARKIN (for himself, Mr. Chafee, and Mr. Graham):
S. 1889. A bill to reduce tobacco use by children and others through
an increase in the cost of tobacco products, the imposition of
advertising and marketing limitations, assuring appropriate tobacco
industry oversight, expanding the availability of tobacco use cessation
programs, and implementing a strong public health prevention and
education strategy that involves the private sector, schools, States,
and local communities; read the first time.
the kids deserve freedom from tobacco act of 1998
Mr. HARKIN. Mr. President, today I am joined by my colleagues
Senators John Chafee, Bob Graham in introducing the first bipartisan
comprehensive proposal to cut youth smoking--The Kids Deserve Freedom
From Tobacco Act, or simply, The KIDS Act. Today marks the turning
point in the drive for tobacco reform this year.
Before I go further, I want to thank my partners in this effort, John
Chafee and Bob Graham. They are real heroes in the fight to save kids
from tobacco. They've taken significant risks in joining this effort.
And they have done a terrific job in putting our proposal together.
This has truly been a bipartisan team effort.
I also want thank the leaders of the public health community who have
joined us to support our efforts. They will play a critical role in
shaping the course of this historic tobacco reform effort in the coming
months. And their support is vital to the success of The KIDS Act.
Finally, I want to thank Dr. C. Everett Koop and Dr. David Kessler, for
their help and counsel to us in crafting our proposal.
We are introducing this bill because we face a public health crisis
affecting our children. 3,000 kids start smoking every day and fully
1,000 of them will die prematurely because of it. That's the equivalent
of 3 jumbo jets packed with kids crashing every day. 400,000 Americans
die every year of tobacco related illness at a cost of over $50
billion. And the tobacco industry has been engaged in a systematic
campaign of distortion and deceit to hook kids and hide the facts from
the American people.
Tobacco reform is the issue of 1998. It is the crown jewel of this
Congress. And passing a tobacco bill like the KIDS Act is a once and a
lifetime opportunity. Unfortunately, though, the tobacco debate so far
has been largely partisan. That's why we've joined arms across party
lines behind the KIDS Act. We hope and believe that the introduction of
our bipartisan bill will change the debate and significantly increase
the odds that reforms will be made.
The KIDS Act would cut tobacco use by kids in half over the next
three years through aggressive and comprehensive reforms. That's the
sharpest and fastest reduction achieved by any bill proposed to date.
Our goal is to cut it by at least 65 percent shortly after that. The
Food and Drug Administration has found that reducing the use of tobacco
by children by 50 percent could prevent well over 60,000 premature
deaths every year, and will save up to $43 billion annually in reduced
medical costs and improved productivity.
Now is not the time for anything but the strongest, most effective
bill possible.
Experts agree that a substantial price hike over a very short period
of time is key to changing teen smoking behavior. If left unchanged,
the Commerce Committee draft bill, which spreads a $1.10 price increase
over 5 years will do little to impact teen smoking. In contrast, the
KIDS Act increases the price by $1.50 in just two years, achieving a
50% reduction in just three years. That's the bottom line and anything
less is just smoke and mirrors.
In addition, our bill gets tough on the individual companies that
addict the most kids by imposing tough penalties if the company doesn't
meet teen smoking reduction targets. I'm very concerned that the
Commerce Committee proposes no company-specific penalty. Without a
profit-based deterrent, the penalty will just be passed through to
consumers, giving companies no incentive to cut youth smoking.
Finally, our bill caps the annual liability of the tobacco industry
as part of a tough, comprehensive bill that dramatically reduces youth
smoking. Without a tough public health bill, the annual liability cap
is not acceptable.
As Drs. Koop and Kessler say in their letter, our bill is ``tough
medicine for a tough problem.'' Our proposal sends a simple message to
the tobacco industry: Keep away from our kids. Our plan will be a very,
very bitter pill for the industry. And no doubt they will criticize us.
But in the end, I believe they are going to have to swallow it.
Creating a more sensible policy toward tobacco has been a goal of
mine for many years. It was in 1977, over 21
[[Page S2855]]
years ago, that I first introduced legislation calling for repeal of
the tax deductibility of tobacco advertising and marketing.
Unfortunately, victories in the tobacco wars have come few and far
between. In 1988, we finally changed federal law on smoking in
airplanes. It was a full ten years later, and after failing one time,
the Senate took its next step last September by passing the Harkin-
Chafee plan to fully fund enforcement of the FDA youth ID check.
But I am more hopeful now than ever that we can pass a comprehensive
plan that would once and for all change how this nation deals with
tobacco and dramatically cut the number of our kids addicted to this
deadly product. Mr. President, our goal is to be on the Senate floor
three years from now announcing that indeed, child smoking has been cut
in half. We're going to put all our energies into making that happen.
We urge our colleagues to review our proposal and join us in
sponsoring it. We look forward to working with all our colleagues on a
bicameral, bipartisan basis to make good on the historic opportunity we
have this year.
Mr. President, I ask unanimous consent that a summary of the KIDS
Act, letters of endorsement of our bill and copies of several
editorials in support our the KIDS Act be included in the Record.
There being no objection, the items were ordered to be printed in the
Record, as follows:
Kid Deserve Freedom From Tobacco Act of 1998 ``The KIDS Act''
Principles
Congress has an historic opportunity to enact legislation
this year which will significantly reduce tobacco use--
especially among children. Nearly one in five deaths in
America today is attributable to tobacco use, making it the
single most preventable cause of premature death, disease and
disability facing this country. These facts compel us to act
now. However, to ensure the most effective result,
legislation must embody the following principles:
It must be bipartisan and comprehensive--not piecemeal--to
ensure a fundamental and lasting change in the way tobacco
products are marketed and sold in this country.
It must attack the youth smoking epidemic as rapidly as
possible by forcing the price of cigarettes to increase by
$1.50 per pack within the first two years, and providing for
comparable increases in other tobacco products.
It must preserve the rights of individuals and groups to
sue tobacco manufacturers for the damages they have caused,
while at the same time establishing a framework to ensure
that funds are available to cover awards and settlements
secured by successful claimants.
It must provide incentives to states, local communities,
schools, research institutions, health professionals and
other stakeholders to develop innovative strategies to
discourage youth smoking, and to assist adult smokers in
kicking the habit.
It must have as its primary purpose the promotion of
aggressive anti-tobacco initiatives and public health
improvements, including the provision of significant new
resources for medical research.
Summary
The Kids Deserve Freedom From Tobacco Act of 1998 (``The
KIDS Act'') significantly improves upon and strengthens the
June 1997 Attorneys General Tobacco Settlement Agreement
(``June 1997 Tobacco Agreement''). The legislation would
substantially reduce youth tobacco use through a
comprehensive set of policy changes. These include increasing
the cost of tobacco products, curtailing advertising and
marketing to children, assuring appropriate industry
oversight, expanding the availability of smoking cessation
programs, and implementing a strong public health prevention
and education strategy involving the private sector, schools,
states and local communities.
i. economic incentives
Price Increase. Public health experts agree that the single
most important component of a comprehensive plan to reduce
youth tobacco use is to significantly increase the price of
tobacco products over a short period of time. A gradual
increase, phased in over 5 or more years, will not
significantly reduce teen tobacco use. Therefore, our
proposal would increase the price of a pack of cigarettes by
$1.50 within two years ($1.00 the first year; $0.50 the
second year). The price of other tobacco products with
significant market shares would be increased by a comparable
amount. These increases would be achieved through annual
industry payments totaling $20 billion the first year and $25
billion per year thereafter (indexed to inflation).
Annual Youth Reduction Targets. There is clear and abundant
evidence that the tobacco industry has tailored its marketing
and advertising programs to attract and encourage children to
smoke. Largely because of the industry's success in this
regard, 3,000 children start smoking every day in America.
Accordingly, the KIDS Act would make the tobacco industry
accountable for promoting and achieving a significant
reduction in tobacco use among children. Our proposal would
set an ambitious, but realistic schedule for reducing the
rate of youth smoking by 65 percent over the next ten years.
The schedule would follow the recommendations of the Final
Report of the Advisory Committee on Tobacco Policy and Public
Health, chaired by Dr. C. Everett Koop and Dr. David Kessler.
The following targets would be set:
Percent of reduction
Year:
2................................................................15
3................................................................20
4................................................................25
5................................................................30
6................................................................40
7................................................................50
8................................................................55
9................................................................60
10...............................................................65
Beyond...........................................................65
(youth prevalence measured by monthly use)
Tough Look-back Penalties. The KIDS Act would impose up to
an additional $10 billion per year in non tax-deductible
penalties (indexed to inflation) on the tobacco industry for
failure to meet these targets. First, and most importantly,
company-specific penalties would be imposed to prevent
individual manufacturers from achieving any financial reward
from addicting children to their products. Second, industry-
wide penalties would be assessed for failure to meet the
above targets. Finally, unlike the June 1997 Tobacco
Agreement, the KIDS Act would provide no abatement or rebate
relief to tobacco companies.
Company-specific Penalties: The KIDS Act would impose the
strongest possible incentives for individual tobacco
companies to stop recruiting and addicting children. It sets
up a system of tough and escalating penalties for those
companies that miss youth reduction targets. This is crucial
because, unlike industry-wide penalties which can be passed
on to consumers equally by all companies without affecting
market share, company-specific penalties directly tie company
profits to reducing teen smoking.
Under the KIDS Act, for each percentage point a company
misses between 0 and 10 percent, a penalty of 1 cent per pack
is imposed. The penalty doubles for each percentage point
missed between 11 and 20 percent and triples for each
percentage point missed over 21 percent. For those companies
that miss the targets by 20 percent or more for 3 consecutive
years, this portion of the penalty is doubled to 6 cents per
pack.
Industry-wide Penalties: The KIDS Act imposes a similarly
tough penalty structure industry-wide if it fails to meet the
youth reduction targets. In addition, if the industry fails
to meet the targets for 3 consecutive years, the penalties
are doubled.
No Anti-trust Immunity. Anti-trust laws are the most
important safeguard we have against anti-competitive actions
which hurt consumers and undermine the free market. As such,
exceptions to these laws should be made only in rare
circumstances, where important policy objectives outweigh the
benefit of free market protections. The tobacco industry has
not made a persuasive case for the grant of immunity it
seeks. Therefore, unlike the June 1997 Tobacco Agreement, the
KIDS Act would not extend any anti-trust exemptions to
tobacco manufacturers.
State Performance Bonus Pool. The June 1997 Tobacco
Agreement and pending legislative initiatives fail to provide
strong economic incentives for states and communities to help
decrease tobacco use among children. The KIDS Act would
address this shortcoming by establishing a $500 million
annual ``Performance Bonus Pool'' for states that meet or
exceed the reduction targets within their own borders.
This would serve as an important incentive for states and
localities to develop aggressive and innovative anti-smoking
strategies suited to their own individual needs. State-
specific baselines and targets would be developed using a
standardized methodology determined by the Centers for
Disease Control and Prevention. Furthermore, the KIDS Act
would clarify the authority of states and local governments
to encourage the enactment of stronger anti-tobacco policies.
II. changing how tobacco products are sold
Marketing and Advertising Reforms. The tobacco industry
spends an estimated $5 billion per year on marketing and
promotional activities--much of it targeted to children. The
KIDS Act would fundamentally alter tobacco marketing and
advertising practices to eliminate this reprehensible
practice.
Health Warning Labeling Reforms. Evidence suggests that the
current warning label regime for tobacco product packaging
fails to adequately convey to children the risks associated
with tobacco use. For example, nearly half of the 8th graders
in a 1993 study denied any great risk associated with pack-a-
day smoking, despite the presence of health warnings on
cigarette packaging. Moreover, consumer research indicates
that alterations in format, composition and warning label
content would make them far more effective in reaching
children. Thus, the KIDS Act proposes to significantly
strengthen warning labels on all tobacco products to improve
their impact on the behavior of children. These messages
would be regularly reviewed and updated by the Secretary of
Health and Human Services to reflect
[[Page S2856]]
changes in public awareness and attitudes about tobacco use.
Minors' Access Reforms. Illegal sales to minors and
shoplifting are the primary means by which children obtain
tobacco products. An estimated 516 million packs of
cigarettes per year are consumed by minors, of which at least
half are obtained through direct, illegal sales to minors.
Shoplifting is another serious concern. In Iowa alone, more
than 4 million packs of cigarettes are shoplifted every year.
The KIDS Act would address these problems by banning self-
service displays in stores that sell tobacco products,
prohibiting vending machine sales in places children
frequent, requiring retailers to verify age, and fining those
vendors caught selling to children. In addition, the KIDS Act
would require states to conduct spot checks of tobacco
retailers to ensure compliance with minors' access
provisions. If a retailer repeatedly violates the law, it
could face suspension or revocation of their registration to
sell tobacco products. These reforms would build upon those
developed by the U.S. Food and Drug Administration (FDA), and
those contained in the June 1997 Tobacco Agreement.
Importantly, the tobacco companies would be bound by
enforceable consent decrees precluding them from challenging
such restrictions in the courts, or providing any means of
support to third parties for this purpose.
State Preemption. The KIDS Act would clarify the authority
of states and local governments to regulate the sale and use
of tobacco products by repealing the preemption clause in
existing federal law. However, it would preserve the national
requirement for uniform packaging and labeling standards to
ensure the free flow of interstate commerce.
At-A-Glance: Changing How Tobacco Products Are Sold
advertising
B&W text only (except in adult-only facilities and
publications).
No human images or cartoon characters.\1\
---------------------------------------------------------------------------
\1\ Contained in consent decrees.
---------------------------------------------------------------------------
No outdoor advertising.\1\
No advertising on the Internet.\1\
No self-service displays.
marketing
No ``trinkets & trash'' (caps, jackets, bags, etc.) or
proof-of-purchase clubs.
No sponsorship of sporting events or other forms of
entertainment.
No paid product placement in movies, TV shows, on Internet
or video games.\1\
No free samples.
labeling
Improved and updated warnings.
Increased size.
Rotating messages.
Statements of intended use.
Regularly reviewed and updated by HHS.
minors' access
No distribution or sales to minors under age 18.
Photo id required up to age 27.
Face-to-face sales required.
No single cigarettes sales.
No vending machines sales (except in adult-only
facilities).
No self-service sales (except in adult-only facilities).
iii. oversight and enforcement
FDA Authority. Given the addictive, disease-causing nature
of tobacco products, full and appropriate regulation is
needed. Therefore, in addition to establishing new
advertising and marketing restrictions, the KIDS Act would
assure that FDA has the authority to effectively monitor and
regulate the manufacture and distribution of tobacco
products, promote the development of safer alternatives, and
to conduct research. For these purposes, the KIDS Act would
allocate $300 million over and above those provided in the
annual appropriations process. Importantly, FDA would not be
required to overcome special burdens or procedural hurdles in
its regulatory activities--a major flaw of the June 1997
Tobacco Agreement. The KIDS Act would classify ``nicotine''
as a drug, and ``tobacco products'' as drug delivery
devices (to include cigars, pipes and loose tobacco). In
addition, our legislation would authorize FDA to implement
a ``public health'' standard in its review of tobacco
products.
The FDA's authority over tobacco products would be no more
and no less than its authority over other drugs and devices.
However, because of the addictive nature of tobacco products,
and the high prevalence of their use, the KIDS Act would
specifically prohibit the FDA from banning the sale of
tobacco products to adults. Finally, the KIDS Act would
ensure that FDA has adequate financial resources and
appropriate access to tobacco industry documents to carry out
its responsibilities.
Ingredient Disclosure. Evidence strongly suggests that
tobacco companies design and manufacture their products to
satisfy and enhance nicotine dependence. Therefore, increased
information about the role and function of tobacco additives
is essential to the effective regulation of such products.
The KIDS Act would substantially strengthen current
ingredient disclosure requirements for tobacco manufacturers.
For example, each company would be required, by brand and
content, to submit lists of all tobacco additives. Further,
if the Secretary of Health and Human Services determines that
any of these additives pose a particular risk to smokers or
others exposed to tobacco smoke, this information will be
fully and promptly disclosed to the public.
Reduced Risk. Much remains unknown about the feasibility
and effectiveness of developing a less hazardous tobacco
product. However, it is clear that tobacco manufacturers have
the ability and knowledge to modify their products. Indeed,
various forms of ``reduced risk'' nicotine delivery devices
already have been introduced into the market. The KIDS Act
would require tobacco companies to come forward with
information in their possession about reduced risk products,
and provide increased monitoring of new technologies. It
would also stop tobacco companies from making misleading
claims about these products.
Licensing. There are approximately one million tobacco
outlets in the United States, and as recently as 1994, nearly
three-fourths sold tobacco products to minors. These include
supermarkets, newsstands, hotels, gas stations, convenience
stores, and other types of vendors. Additionally, each year
interstate cigarette smuggling costs states millions of
dollars in lost excise tax revenues. To address these
problems, the KIDS Act would establish minimum federal
licensing standards for tobacco manufacturers, importers,
exporters and distributors, and the registration of tobacco
retail establishments. States could continue to impose
additional licensing requirements, and would work closely
with federal officials to enforce licensing and registration
policies, just as they do with the distribution and sales of
alcoholic beverages. By providing for the permanent
revocation of tobacco licenses and registration permits for
repeated violations of any provision of our law. The KIDS Act
will put the worst offenders out of the business of making or
selling tobacco products.
IV. Stopping Children from Smoking Before They Start
Prevention in Communities and Schools. In addition to
economic incentives, changes in tobacco product advertising
and marketing, and improved oversight of enforcement, experts
agree that a comprehensive slate of public health activities
is needed to stop children from taking up this deadly habit.
For example, research-tested school programs have proven to
consistently and significantly reduce adolescent smoking.
Therefore, the KIDS Act would provide $1.25 billion to states
for community and school-based prevention activities. These
initiatives would be designed and implemented at the local
level to ensure their effectiveness.
Because minority and low-income populations suffer a
disproportionate burden of tobacco-related disease, and are
among the greatest users of tobacco products, the KIDS Act
would allocate a portion of the funding for community-based
prevention activities to address their special needs. Funding
also would be provided to assist Native American populations
in their efforts to prevent and reduce youth smoking.
Counter Advertising. Research findings show that well-
designed counter advertising initiatives do help to reduce
teen smoking. Thus, an intensive, sustained media campaign at
the state and federal level is needed to ``deglamorize''
tobacco use among young people. Accordingly, the KIDS Act
would provide $650 million annually to fund a nationwide
campaign with national, state, and local components.
Preeminent advertising firms with proven expertise in the
formulation of messages aimed at children would be charged
with the development and implementation of
``deglamorization'' campaigns.
V. Helping Current Smokers Kick the Habit
Smoking Cessation. While the primary emphasis of our
proposal is to reduce tobacco use among children, the more
than 48 million adult Americans who currently smoke deserve
and need help in kicking the habit. The KIDS Act would
establish a coordinated federal and state-based initiative to
increase access to, and awareness of, effective programs.
When fully implemented, the legislation would provide $1.5
billion annually for programs designed to enhance existing
employer-based initiatives, and those which target uninsured
and underserved populations.
VI. Expanding Research
National Fund for Health Research. Tobacco products kill
more than 400,000 Americans every year--more death than from
AIDS, alcohol and drug abuse, car accidents, murders,
suicides, and fires combined. To stop this epidemic, we must
strengthen our national commitment to finding preventive
measures and cures for diseases--especially those related to
tobacco use, including cancer, heart disease, emphysema and
stroke. Therefore, the KIDS Act would establish a National
Fund for Health Research to allocate resources over and
above those provided to the National Institutes of Health
(NIH) in the annual appropriations process. The KIDS Act
would allot $3.225 billion per year to the Fund.
Prevention and Cessation Research. While we know a great
deal about reducing tobacco use, much remains unknown.
Therefore, a significant expansion of prevention and
cessation research is critical to the success of any
comprehensive effort to reduce tobacco use. In particular,
more information is needed on why people use tobacco and on
what program interventions are most effective. Efforts must
also be undertaken to increase our understanding of the
health effects of tobacco use and exposure to second-hand
[[Page S2857]]
smoke. The KIDS Act would provide $600 million per year for a
major new research effort.
vii. helping the victims of tobacco-related diseases
The KIDS Act would fully preserve the rights of individuals
and groups to utilize the civil justice system to recover
tobacco-related damages. Unlike the June 1997 Tobacco
Agreement and some of the legislation currently pending in
Congress, the KIDS Act would not ban class action lawsuits or
punitive damage awards, as the tobacco industry has sought.
Simply put, it would provide no immunity to the tobacco
industry. Given the industry's behavior, such liability
protections cannot be justified or condoned. Furthermore, our
legislation would provide no protections from, or limitations
on criminal prosecution of the tobacco industry.
National Victims' Compensation Fund. To ensure that
resources are readily available for the victims of tobacco-
related diseases, the KIDS Act would provide for the
establishment of a prefunded National Victims' Compensation
Fund (the ``Fund''), from which court awards and settlements
would be paid. Furthermore, given the uncertainty of the
legal environment surrounding tobacco litigation, an
additional Contingency Reserve Account would be established
within the Fund. The Fund and the annual cap would be indexed
to medical inflation.
Annual Base Payment: At the beginning of each year, the
tobacco industry would make a Base Payment of $4 billion into
the Fund; awards and settlements would be paid from this base
amount. At the end of every year, any unobligated funds from
the Base Payments would be deposited into an interest-bearing
Contingency Reserve Account.
Out-of-Pocket Supplement and Annual Cap: If awards and
settlements exceed the Base Payment during any year, the
industry would be liable for an additional $4 billion in out-
of-pocket payments to cover the excess, for a total potential
annual liability payment by the tobacco industry of $8
billion. This cap would not include payments made to states
in settlement of existing Attorneys General suits, and would
apply only to civil claims against past wrongdoing by the
industry.
Contingency Reserve Account: As a further protection for
claimants, the KIDS Act would establish a Contingency Reserve
Account (the ``Account'') within the Victims' Compensation
Fund. Any unobligated funds from the $4 billion Base Payment
would be placed in the Account. For example, if awards and
settlements paid in the first year amounted to $1 billion,
the remaining $3 billion would be deposited into the account.
Funds in the account would build up substantially in the
early years as settlements and awards during this period are
expected to be relatively small. For any year in which
liability awards and settlements exceed $8 billion, the
Account would be drawn down to make the excess payments. In
the unlikely event that awards and settlements ever deplete
the Account in any year, unpaid claims would be rolled over
and paid from the Base Payment at the beginning of the
following year.
If the Account accumulates a balance of $20 billion, the
Attorney General, in conjunction with the Secretary of Health
and Human Services, would determine whether to continue to
deposit excess funds therein, or to redirect those funds to
anti-smoking and other public health activities authorized
under the legislation.
Small Claimant Protection: Under the KIDS Act, individuals
and smaller classes of individuals would be given priority in
disbursements from the Fund to ensure that large awards or
settlements, paid to 3rd parties for example, would not deny
smaller claimants timely payment of their claims.
Settlement of State Suits and Castano Class Action: Forty
state Attorneys Generals have brought suits against the
tobacco industry to recover costs incurred for tobacco-
related illnesses and other damages. The KIDS Act would
provide states the opportunity to settle their suits in
exchange for funding from the National Tobacco Trust Fund
established under this Act. In addition, the Castano Class
Action lawsuits would be settled in return for the
establishment of smoking cessation programs.
VIII. ENDING TOBACCO INDUSTRY SECRECY
For decades, to the severe detriment of the public health,
the tobacco industry has concealed evidence of the
consequences of tobacco use and deliberately misled the
public. Moreover, tobacco manufacturers have broadly misused
the doctrine of attorney-client privilege to cloak industry
documents and research in a veil of secrecy.
Therefore, the KIDS Act would require tobacco companies to
submit key documents relating to the health effects, safety,
and marketing of products to children to a Tobacco Document
Depository. Trade secret and attorney-client privilege claims
would be scrutinized by a professional Tobacco Document
Review Board. This reform would assist the victims of
tobacco-related diseases in securing judgments against
tobacco companies, and out-of-court settlements, without the
traditional barriers and costs associated with document
discovery. Manufacturers who make claims in bad faith will be
subject to fines of up to $5 million per violation. Moreover,
failure to comply with this section would result in license
revocation and the waiver of the annual liability cap.
FDA to Obtain Needed Documents. Tobacco companies would be
required to turn over to the FDA all documents the agency
deemed necessary to carry out its regulatory
responsibilities--including assessing the health effects of
nicotine and other tobacco ingredients, the design and
development of ``less hazardous'' or ``safer'' tobacco
products, as well as the advertising, marketing and promotion
of such products.
ix. transition assistance to farmers
Changes in national policy regarding tobacco products, and
the expected decline in their consumption, will have
ramifications for farming families, workers and communities
in tobacco growing regions. The KIDS Act would provide $13.5
billion for compensation, income support and transitional
assistance to tobacco farming families, and for economic
development and related assistance in tobacco-dependent
communities.
x. assuring clean indoor air
Our knowledge is growing daily on the deleterious effects
of exposure to Environmental Tobacco Smoke (ETS) in the home,
the workplace and other public facilities. Annually, 3,000
Americans die of lung cancer caused by second-hand smoke, and
15,000 children under 18 months of age are hospitalized with
respiratory infections related to ETS exposure.
While the ETS components of the KIDS Act are still a work
in progress, our bill would place significant emphasis on
reducing ETS exposure in the home--including such measures as
pediatric outreach, public service announcements, and
comprehensive media campaigns; $100 million from the counter
advertising funds would be directed towards this purpose. The
bill would also provide $100 million to help reduce exposure
to ETS in workplaces and public facilities.
The KIDS Act would also require Congress to comply with the
``no smoking'' policies already in place throughout the
Executive Branch. Furthermore, legislation would not preempt
states and local governments from establishing even more
stringent policies to protect individuals from ETS.
xi. stopping smuggling and showing world leadership
In some countries, significant increases in cigarette
prices have resulted in large-scale smuggling operations.
Contraband cigarette trafficking can occur both at national
borders and between states with wide disparities in tobacco
excise taxes. Since 1992, this criminal activity has
increased by more than 500% in the United States. Each year,
interstate cigarette smuggling costs some states more than
$100 million in lost excise tax revenue. As the price of
cigarettes increases as a result of tobacco settlement
legislation, actions must be taken to prevent the wide
availability of contraband cigarettes.
Tough Anti-Smuggling Initiative. In addition to licensing
all tobacco product sellers in the stream of commerce, the
KIDS Act would allocate $100 million per year to implement
an aggressive, well-coordinated anti-smuggling program
aimed at stopping contraband tobacco products from
entering or being sold in the United States. The bill
would facilitate substantial coordination of
international, federal and state law enforcement
activities, as well as providing new resources to expedite
the deployment of innovative anti-smuggling technologies.
Harsh New Penalties to Stop Smuggling. To further deter
contraband trafficking in tobacco products, the KIDS Act
would also establish harsh new criminal and monetary
penalties for individuals convicted of such offenses.
Violations by manufacturers, importers, exporters, or
distributor or retailers could result in permanent revocation
of their license or registration.
World Leadership. The World Health Organization (WHO)
currently estimates that tobacco use causes three million
deaths per year worldwide--a number which is expected to
increase exponentially as the U.S.-based tobacco industry
intensifies its global marketing and promotional activities.
By the year 2023, WHO projects tobacco-related mortalities
will jump to ten million, with nearly 70 percent occurring in
developing countries. This troubling trend is expected to
accelerate with the enactment of strong anti-tobacco policies
in the United States.
Unlike the June 1997 Tobacco Agreement, our bill would
provide clear leadership on international efforts to curb
tobacco use. The KIDS Act would terminate all support for
tobacco promotion overseas by the United States Government,
provide $100 million per year to fund global education
efforts, and encourage America's participation with other
nations in efforts to harmonize tobacco policies worldwide.
xii. industry consent decrees
Voluntary, but legally-binding consent decrees--signed by
the federal government, state governments and tobacco
manufacturers--are critical to the success of any
comprehensive tobacco legislation aimed at significantly
reducing tobacco use by children. Without these decrees, key
provisions of such a law could be delayed by lengthy legal
challenges. To help avoid this problem, the KIDS Act would
require tobacco companies to sign legally-binding consent
decrees in order to receive the benefits of the annual
liability cap established under the legislation. Violation of
any of the terms of the consent decrees would result in
exclusion of that company from the annual liability cap.
Among other things, the consent decrees--which would be
enforceable by the U.S. Attorney General or State Attorneys
General through federal and state courts--would
[[Page S2858]]
commit the companies to abide by the following agreements:
Not to directly or indirectly bring or support legal
challenges to the implementation of any aspect of the KIDS
Act, including existing or future FDA regulatory authority,
document disclosure, youth look-back survey methodology and
penalties, and advertising and marketing restrictions;
To pay and fully pass through the cost of annual industry
payments and industry-wide look-back penalties, assuring that
the price of cigarettes would increase by at least $1.50 per
pack over 2 years, with comparable increases for other
tobacco products;
All reforms related to the labeling, sale, advertising and
promotion of tobacco products intended by this Act;
Not to directly, or through contractors, lobby federal,
state or local governments against any provision of this Act;
To only do business with those retailers and distributors
in full compliance with all provisions of this Act;
To dissolve the Tobacco Institute and other existing trade
associations;
Not to advertise over the Internet; and,
To comply also with all of the marketing and advertising
restrictions in both the FDA regulation and the proposed June
1997 Tobacco Agreement.
xiii. annual tobacco payments and spending
Industry Payments: The KIDS Act would require a non-
deductible industry payment of $10 billion immediately upon
enactment. That payment would be used by states and local
communities, as well as the federal government, to begin
implementation of the strong anti-tobacco measures authorized
under the Act.
One year after enactment the industry would make a payment
of $20 billion to the National Tobacco Trust Fund. Each year
thereafter the industry payment would be $25 billion, indexed
to inflation. These payments would be assessed based upon
each company's share of the overall tobacco market. Twenty-
five percent of the payments would be deemed punitive, and
therefore non-deductible.
Payments to States: As under the June 1997 Tobacco
Agreement, $193.5 billion over the 25 year period would be
reserved for state use. Of those funds, fifty percent would
be distributed to the states to use at their discretion. The
remaining fifty percent would be allocated to the states in
the form of a Health, Human Services and Education block
grant to be used to meet each State's particular needs in
these areas.
Additionally, $500 million annually would be made available
to states meeting or exceeding youth tobacco reduction
targets.
Payments for National Programs: Under the KIDS Act, $4
billion of the industry's yearly payment would be directed to
the National Victim's Compensation Fund as the Annual Base
Payment. Remaining industry payments would be used
exclusively for national anti-tobacco and public health
purposes. These include funding for smoking cessation,
counteradvertising, and community and school-based prevention
programs, international education, health research, and other
activities outlined in this summary.
____
March 11, 1998
Hon. Tom Harkin,
Hon. John Chafee,
Hon. Bob Graham,
U.S. Senate,
Washington, DC.
Dear Senators Harkin, Chafee and Graham: We are sorry we
are not able to be with you in person as you introduce your
bill, but we wanted to offer our congratulations to you for
crafting a very strong, comprehensive package of tobacco
reforms.
We have carefully reviewed a detailed summary of your plan
and strongly support its major features, with the exception
of the concept of liability caps. While we await actual
legislative language, it appears to us that if enacted, we
believe your proposal includes many measures that would
significantly reduce tobacco use and fundamentally alter the
way America deals with tobacco. It is tough medicine for a
tough problem. It would set national tobacco policy on to a
course that would bring down nicotine addiction and the
terrible health consequences of using tobacco.
You are to be especially commended for forging a bipartisan
consensus on this difficult and complex issue. For a proposal
to be successful in Congress, it must have bipartisan
support. Yours is the first to meet that crucial test.
Your plan correctly deals with this public health crisis in
a comprehensive manner, seeking to come as close as possible
at this time to the ideals expressed last July in the report
of the Advisory Committee on Tobacco Policy and Public
Health. A piecemeal approach clearly won't work. We are
especially pleased that you specify an increase in the cost
of tobacco products within two years. This is vitally
important for reducing tobacco use by young people.
Protecting the FDA's authority, protecting a State's ability
to develop and enforce stronger public health measures, and
other such provisions make this proposal very attractive. We
understand that you will address environmental tobacco smoke
and we will be pleased to work with you on that. You are also
to be commended for recognizing that the United States must
play an enhanced role in promoting enlightened policies
toward tobacco in other countries. We have a moral imperative
to lead in this area as well as protecting the public health
within the United States.
We look forward to continuing to work with you as you
finalize this very promising proposal. There is much to be
done this year, but the announcement of your bipartisan
effort is a major step forward in our long battle for a
tobacco policy.
Sincerely,
C. Everett Koop, M.D., Sc.D.
David A. Kessler, M.D.
____
The KIDS Act Allocation of Industry Payments
The following amounts represent the annual maximum spending
for each of the activities, assuming a 25% excise tax offset.
[In billions of dollars]
States--no strings...............................................$3.000
States--Human Services Block Grant................................3.000
States--bonus pool................................................0.500
__________
States--total.................................................6.500
==========
_______________________________________________________________________
Smoking Cessation.................................................1.500
Counteradvertising................................................0.550
Community-based Prevention........................................1.000
School-based Prevention...........................................0.300
Youth Database/Evaluation.........................................0.175
Event Sponsorship Replacement.....................................0.075
Tobacco Prevention Research.......................................0.600
International Education...........................................0.100
Native American Programs..........................................0.200
Environmental Tobacco Smoke.......................................0.200
FDA...............................................................0.300
Anti-Smuggling Efforts............................................0.100
__________
Anti-Tobacco Program Total....................................5.100
NIH Research......................................................3.225
Victim's Compensation Fund........................................4.000
Additionally, the KIDS Act would provide a total of $13.5
billion for transition assistance to farmers.
____
Statement of the ENACT Coalition Regarding the Introduction of KIDS
Deserve Freedom From Tobacco Act
(March 12, 1998)--The ENACT coalition of major public
health organizations applauds today's introduction of the
KIDS Deserve Freedom From Tobacco Act by Senators Harkin,
Chafee and Graham. These Senators have exhibited courageous
leadership in crafting a strong, comprehensive, bipartisan
solution to the urgent problem of tobacco use.
This is the first bipartisan proposal which, based on the
summary being released today, encompasses the key public
health policies that ENACT has stated must be included in any
effective tobacco control legislation. We support the public
health features of this proposal because of their potential
to save millions of lives and, therefore, welcome it as an
important step forward.
The proposal contains strong and effective provisions
regarding FDA authority over tobacco sales, manufacturing and
advertising; significant price increases to deter use by
kids; ``look-back'' penalties if sales to youth do not
decrease; a vigorous crackdown on the illegal sale of tobacco
to minors; protections from secondhand smoke; disclosure of
tobacco industry documents; funding for tobacco-related
health and cessation research; assistance to tobacco farmers;
and support for efforts to reduce tobacco use
internationally.
The KIDS Act also addresses issues relating to the tobacco
industry's liability. It would make the internal documents
the tobacco industry has been forced to produce available to
plaintiffs and the general public. It would also require the
tobacco industry to make a minimum annual tort-related
payment of $4 billion a year, no matter what happens in the
courts. It contains no limitations on class action or the
rights of individuals to collect full compensatory or
punitive awards from the industry, nor does it protect the
industry from being held accountable for future misconduct.
However, it does contain an annual cap of $8 billion a year
on civil liability payments for the tobacco industry in suits
based on past action.
While we await the receipt of the actual legislative
language, we believe that this proposal would significantly
reduce tobacco use, particularly among children, and would
rein in the tobacco industry. We strongly support this
proposal's major features with the exception of the liability
cap. ENACT believes that only a comprehensive bill that meets
our minimum criteria can adequately address the complex
problem of tobacco use and reduce the number of kids who
start using tobacco, and the number of adults who die each
year. ENACT is committed to working with Senators Harkin,
Chafee and Graham, as well as all Members of Congress from
both parties, to enact a comprehensive, bipartisan, well-
funded and sustainable tobacco control policy.
[From USA Today, Mar. 20, 1998]
Billion-Dollar Blinders Hide Tobacco Deal's Flaws
Big Tobacco has a politically enticing offer for lawmakers.
Give us some legal protection against our past sins, and
we'll pony up billions of dollars every year to fund your pet
programs.
The offer proved too much for state attorneys general.
They signed a loophole-ridden settlement deal last June
that gave a slap on the wrist to the industry and threw new
roadblocks in front of the regulation of nicotine by the Food
and Drug Administration (FDA)
[[Page S2859]]
Next week, Senate Commerce Committee Chairman John McCain
will try to do better as his panel marks up a settlement
plan. He's hoping to put together a tougher deal--one that
will win the backing of health groups and members of both
parties, and still secure the industry's consent. A delicate
balancing act, to be sure, and one that comes amid fierce
partisan wrangling, turf wars and general election-year
money-grubbing.
Until last week, no proposals fit the bill. Either they
were winners for the tobacco industry or they couldn't get
support from across the aisle. Sens. Tom Harkin, John Chafee
and Bob Graham broke the pattern with a bipartisan bill that
has won over key health advocates.
Among their plan's virtues:
It would impose annual industry payments of $25 billion--
two-thirds higher than the settlement. That would push up the
price of a pack of cigarettes by $1.50, deterring smoking by
children--the most important objective of any settlement.
Better yet, the deal would severely punish individual firms
if they failed to meet company-specific teen smoking
reduction targets--a clear incentive for each to join the
effort to cut teen smoking. The industry as a whole could be
fined up to $10 billion a year if teen smoking rates aren't
cut by 65% within 10 years.
The measure preserves the FDA's ability to regulate
tobacco. The industry had snookered the attorneys general by
requiring the FDA to meet absurd burdens of proof.
Finally, there's no offer of blanket immunity on class-
action suits, as the attorneys general allowed. People harmed
by the industry could recover up to $8 billion a year from an
industry-financed liability fund.
The offer to industry: Your total costs will be capped at
$39 billion a year. Put in perspective, domestic cigarette
sales are about $50 billion a year.
The two most prominent tobacco industry foes of recent
years--former surgeon general C. Everett Koop and former FDA
head David Kessler--both endorsed the Harkin-Chafee bill,
calling it ``tough medicine for a tough problem.''
Whatever its merits, this is the minimum acceptable. Yet
the risk that Congress will gut it and pass a flimsy
substitute is enormously high. The industry is sure to throw
its weight behind weaker bills; and with everyone in
Washington salivating over the prospect of all that money to
spend on pet programs in an election year, priorities easily
will be warped.
There are already so many meat hooks in the funds that it
would take several deals to appease all interests. President
Clinton wants to fund everything from child care to Medicare
with the money. Some Republicans want to use the tobacco
funds to pay for tax cuts, others to pay for reforming the
IRS. Advocacy groups see the chance to fund their cherished
programs.
As the prospect of billions of dollars draws closer, even
ardent health advocates might be tempted to dispense with
sweating the details.
But the point of this exercise isn't to raise lots of
money, boost the size of the federal government, or enrich a
bunch of trial lawyers. The goal is to cut the horrendous
human toll smoking imposes on society. The only effective way
to do that is to stop the supply of new addicts.
That for the most part means keeping teens from taking up
the habit. More than nine in 10 regular smokers started
smoking before celebrating their 19th birthday. The Harkin
proposal would give industry a strong push to help curb this
trend despite the long-term consequences for the industry.
In the end, however, lawmakers must be willing to chuck a
bad deal, even if that means killing the golden tobacco
goose.
comparing the settlements
The so-called KIDS Act toughens the June 1997 attorneys
general settlement on several key fronts.
Annual payments
Settlement: Maximum of $15 billion a year for a total of
$368.5 billion over the next 25 years.
KIDS Act: Maximum of $25 billion a year for a total of $630
billion over next 25 years.
Teen smoking
Settlement: 60% cut in smoking rates within 10 years.
KIDS Act: 65% cut in smoking rates within 10 years.
Failure to reduce teen smoking
Settlement penalty: Maximum of $2 billion a year.
KIDS Act: No; but does put an $8 billion annual cap on
total damages.
Class-action lawsuit immuity
Settlement: Yes, but individuals could still sue.
KIDS Act: No; but does put an $8 billion annual cap on
total damages.
FDA regulations
Settlement: Imposes new restrictions on FDA tobacco
regulations.
KIDS Act: Preserves FDA authority.
Advertising
Settlement: Tough restrictions, including ban on human
forms, Internet ads.
KIDS Act: Similar changes.
Source: USA Today research.
____
[From the Portland Press Herald, Mar. 28, 1998]
Senate Should Pass a Better Tobacco Deal
Legislation settling claims against the tobacco industry is
now before the Senate Commerce Committee. The committee's
chairman, Sen. John McCain, R-Ariz., is trying to forge a
compromise among Democrats, Republicans and opponents and
supporters of the tobacco lobby.
The starting point in this process is a settlement
agreement negotiated last year between the tobacco companies
and the attorneys general from 40 states. It is a deeply
flawed document that gives up too much to big tobacco.
What that agreement lacks--and what any final agreement
should have--is the approval of two men who have fought hard
to reduce tobacco's deadly toll on the American people. C.
Everett Koop, the former surgeon general, and David Kessler,
former head of the Food and Drug Administration, have opposed
the tobacco settlement as it is now.
Much of what Koop and Kessler seek is in a bipartisan
proposal sponsored by Sens. Tom Harkin, D-Iowa, John Chafee,
R-R.I. and Bob Graham, D-Fla. Maine Sens. Susan Collins, who
sits on the commerce committee, and Olympia Snowe should back
it or legislation that has the same basic elements.
The proposal would raise the price of cigarettes by $1.50 a
pack, extracting $25 billion a year from the tobacco
companies as payment for the huge costs imposed by these
products on the government. Unlike the settlement negotiated
with the states, it gives the FDA unfettered control over
tobacco. It also has strong proposals for reducing youth
smoking and sets up a system for processing claims against
the tobacco companies without granting them immunity from
future lawsuits.
In return, the tobacco companies would see their
liabilities in civil suits capped at $8 billion a year. This
is a far better approach than the blanket protection from
future lawsuits contained in the agreement negotiated by the
attorneys general.
Already, other ideas are surfacing. The committee seems
settled on a $1.10-per-pack price increase for cigarettes and
is discussing an annual liability cap ranging from $5 billion
to $8 billion. FDA authority over tobacco, meanwhile, remains
a sticking point.
The principles of the bipartisan bill are central to
reaching a fair accord with the big tobacco companies over
the immense harm they have caused the American people. As
such, the bill should be taken seriously by Collins, Snowe
and their Senate colleagues.
Mr. CHAFEE. Mr. President, over the course of the next month or two,
the Senate will have the opportunity to debate how best to address the
most significant, preventable public health problem confronting this
nation today: the scourge of tobacco use by our young people. The
Senate will face some difficult choices in this regard. The grim
statistics about this epidemic, coupled with almost daily revelations
of tobacco industry misdeeds, underscore the need for our earnest
action.
We can all agree, where adults are concerned personal responsibility
must be the rule; tobacco is a legal product and adults are free to
make that choice. However, the same level of independent judgment
cannot be said where fourteen year-olds are concerned. Bear in mind,
only one in ten smokers takes up smoking after the age of eighteen; the
remainder start well before that stage.
All of us--Democrats and Republicans--share a deep and abiding
concern about this problem, and a recognition that now is the time for
action. However, each of us has different thoughts on how best to
attack this problem. The Commerce Committee draft bill offers a good
beginning, but it must be strengthened. Senators Harkin, Graham and I
believe that an aggressive, but responsible approach is essential if we
are to be successful in reducing teen tobacco use.
This is why the KIDS Act would force the price of cigarettes up by
$1.50 over the course of two--not four, five or six--years. The price
hike must be significant and rapid in order to affect the purchasing
behavior of children; the evidence solidly favors that position. Simply
put, a smaller increase of only $1.10 over a longer period of time--in
effect 20 cents per year in the Commerce Committee draft--will not
achieve the desired result. As a result of our aggressive approach on
price, the KIDS Act would halve teen smoking within just three years!
That is also why the KIDS Act contains very stiff so-called look-
back'' penalties if the industry fails to meet the annual youth
reduction targets specified in our bill. Unlike the Commerce Committee
draft, the KIDS Act emphasizes company-specific penalties to ensure
that the companies who do the addicting take the hit. Additionally, our
annual penalties are capped at $10 billion per year, as opposed to $3.5
billion in the Commerce Committee draft. These look-back penalties are
the very heart of our efforts to curb
[[Page S2860]]
youth tobacco use; if they miss the mark, the whole program is the
weaker for it.
This is also why the KIDS Act provides roughly $5.1 billion per year
for anti-tobacco programs, including counteradvertising, school and
community-based prevention and education programs, cessation and other
initiatives. For those who think this is too much spending, we spend a
lot more money on addressing other ills which kill far fewer than
400,000 Americans per year.
Recognizing that the needs of each state are very different, the KIDS
Act hands back $6 billion per year to the states in recognition of the
costs and damages they have incurred in treating tobacco-related
illnesses. Importantly, this funding could be used to meet the
particular needs of each state; flexibility is the key with respect to
the use of this funding. One pool of $3 billion per year could be used
to meet any need; the other pool of $3 billion takes the form of a
health, human services and education block grant to meet virtually any
human need.
Our bill also includes a State Performance Bonus Pool to help incent
and enlist states in the war against teen tobacco use, and we need all
the stakeholders we can get! As a consequence of these provisions, the
National Governors Association supports the state payment mechanism
contained in the KIDS Act.
Some have pointed out that the draft Commerce Committee bill
incorporates the cap on annual liability payments included in our
bill--although at $6.5 billion, not $8 billion. My response is that the
cap cannot be examined in isolation from the other parts of the
legislation. If, for example, the youth smoking provisions are not as
tough as they should be, than I question the appropriateness of a
liability cap.
Now, some people have said our bill is too tough and could bankrupt
the tobacco industry. Says who? The tobacco companies? I'm not sure we
can rely upon their representations if past history is any judge. What
about the securities analysts who understand the financial workings of
the tobacco industry? Can we rely upon these individuals and firms when
many of these same companies manage pension and mutual fund portfolios
with significant investments in tobacco stocks? Frankly, I think the
only reliable measure of what the industry can truly afford would be an
independent audit--not an illogical request of an industry which seeks
a virtually unprecedented deal with the federal government, the several
states and the American people.
The KIDS Act would require the industry to pass along in the price of
its products an annual payment of $25 billion. Given discussions we
have had with a variety of experts, both inside and outside the
government, we do not believe the payment requirements in our bill
would jeopardize the profitability or future viability of the tobacco
industry.
In closing, I urge my colleagues to examine the KIDS Act and to join
with us in working to pass a strong, responsible tobacco bill as
quickly as possible. We look forward to working with our respective
Leaders, Senator McCain, and our colleagues toward that end.
Mr. GRAHAM. Mr. President, I rise today with my colleagues, Senator
John Chafee and Senator Tom Harkin, to introduce the Kids Deserve
Freedom from Tobacco Act of 1998, legislation which if passed will have
a monumental effect on the number one public health problem facing
America's youth: underage smoking.
This legislation is the first bipartisan, comprehensive piece of
legislation which has the support of the Administration and the public
health community. Since the beginning of this school year, more than
half a million kids have started smoking. If we don't act soon, another
half million children will take up the habit by the start of the next
school year. And by its inaction, Congress will have signed their death
warrants.
In Florida alone, where minors purchase more than 12 million packs of
cigarettes each year, 28% of high school students currently smoke
cigarettes. Nationally, the number is closer to 35%. The KIDS Act takes
a number of strong actions--all of which would be funded by the
industry's annual $25 billion payment--to lower the rate of youth and
teenage smoking. These include:
price increase
Because public health experts agree that substantially increasing the
cost of cigarettes is the most effective way of keeping adolescents
from buying them, the KIDS Act would force the tobacco industry to
raise the price-per-pack of cigarettes and other tobacco products by
$1.50 over the next two years.
In addition to raising the price of tobacco products, the KIDS Act
would establish ambitious goals for the reduction of teenage tobacco
use. The bill would mandate that the tobacco industry reduce youth
smoking by 65 percent over the next ten years--or face as much as $10
billion in annual penalties. States, on the other hand, would be
rewarded for reducing teen tobacco use. The KIDS Act would set aside
$500 million of bonus money each year for states that meet or exceed
annual smoking reduction targets.
marketing reforms
For decades, the tobacco industry has pushed its products on young
Americans both overtly--on billboards and through the prominent
sponsorship of sports like auto racing--and subtly, through characters
like Joe Camel. Their efforts have been helped by the shockingly easy
access that many minors have to tobacco products. Nationally, more than
62 percent of 12-to-17 year-old smokers report that they buy their own
cigarettes. Nearly half of those minors were never asked to show proof
of age.
The KIDS Act would dramatically change the rules governing tobacco
advertising and sales. It would limit tobacco companies to black-and-
white text advertisements--no more human images, cartoon characters,
outdoor displays, sports and entertainment sponsorships, or product
giveaways. It would also encourage illegal tobacco purchases by banning
vending machines sales of cigarettes and requiring state licensing of
tobacco retailers. Stores caught selling to minors would face severe
financial penalties.
payments to states
In addition to the federal money it channels to states through bonus
payments, incentives, grants, and federal programs, the KIDS Act would
directly distribute almost $200 billion over 25 years--a third of the
settlement money--to individual states to spend on a broad array of
health and anti-tobacco programs.
As a former Governor, I strongly believe that states deserve to be
recognized for their efforts to bring the tobacco industry to the
table. Without state's efforts, Congress would not be in the position
to introduce this bill today. Any legislation contemplated by this
Congress must recognize the State crucial role in this process.
cap on annual industry payments
Unlike last year's national settlement, the KIDS Act would not
safeguard the tobacco industry from future lawsuits. It ensures
reliable industry payments, so that the industry cannot use the excuse
of financial woes to avoid its annual $25 billion commitment. As such,
it would require that tobacco firms deposit $4 billion/year into a
``National Victims Compensation Fund.'' Money from that fund would be
used to pay victims who settle claims or win judgments against the
industry. The industry would also have to pay up to $4 billion/year in
any additional claims--a maximum total of $8 billion/year.
I want to stress that my colleagues, Senators Chafee and Harkin, and
I believe that this is our best and possibly our only chance to get
this historic legislation passed. We cannot let this opportunity slip
away. A half-hearted, piecemeal effort simply won't do.
______
By Mr. DASCHLE (for himself, Mr. Kennedy, Mrs. Boxer, Mr. Dodd,
Ms. Mikulski, Mrs. Feinstein, Mr. Durbin, Mr. Reed, Mr. Inouye,
Mr. Torricelli, Mr. Kerry, Ms. Moseley-Braun, Mr. Wyden, Mr.
Lautenberg, Mr. Rockefeller, Mr. Cleland, Mr. Leahy, Mrs.
Murray, Mr. Wellstone, Mr. Sarbanes, Mr. Akaka, and Mr.
Bingaman):
S. 1891. A bill to amend the Internal Revenue Code of 1986 to protect
consumers in managed care plans and other health coverage; to the
Committee on Finance.
[[Page S2861]]
the patients' bill of rights act of 1998
Mr. DASCHLE. Mr. President, I join my colleagues in introducing the
Patients' Bill of Rights Act of 1998. This legislation has been
developed cooperatively with Democrats in the House and Senate to
address a growing concern of the American public, the quality of care
delivered by health plans and insurance companies. Today, three of
every four working, insured Americans are in managed care plans, and
far too many have experienced serious problems with their coverage. We
all know someone with a horror story in that regard.
Today, David Garvey of Illinois told us the tragic story of his wife,
who had taken a ``dream'' vacation to Hawaii with a few of her friends.
When she arrived in Hawaii, she noticed some bruises on her body. She
went to a clinic and was quickly admitted to the hospital. She was
diagnosed with aplastic anemia. Her doctor in Hawaii began a course of
treatment, and said that she would likely need a bone marrow transplant
to save her life.
Several days into the treatment, her HMO called from Chicago and said
she had to return to Chicago for the treatment and transplant. They
insisted that she return, even over the strong objections of the doctor
in Hawaii who said that she was not stable enough to travel and that
her immune system could not fight infection. Mr. Garvey tried to talk
to the decisionmakers in the plan, but they insisted that she return to
Chicago or forego coverage. As the medical bills were adding up, Mrs.
Garvey had no choice but to fly back to Chicago. During that flight,
Mrs. Garvey had a stroke, and within days of her return, she developed
a fungal infection. Ten days later, she died.
Mr. President, I am outraged by what happened to the Garveys and
believe we need legislation to protect patients against medically
inappropriate decisions by health plans that too often put the
financial bottom line before patients' health care needs.
The bill I am introducing today would provide enforceable protections
for millions of patients. It would ensure access to medically needed
care, including coverage at emergency rooms. It would allow patients
with serious conditions to see their specialist without asking
permission each time and would allow women direct access to their ob/
gyn.
The bill would allow patients denied benefits to appeal decisions
both within the plan and to an independent, external reviewer. When a
plan says no to a treatment that your doctor says you need, you should
be able to appeal to an independent body that has no financial stake in
the decision. This bill gives every patient that right and says the
decision has to be made in a time frame that will not put the patient
at risk.
The Patients' Bill of Rights provides protection for the provider-
patient relationship by banning gag clauses and limiting inappropriate
financial incentives to deny care. It also would put a stop to
arbitrary decisions by plans to limit care, such as decisions to
discharge mastectomy patients from the hospital before it is medically
appropriate.
Finally, the bill would hold plans legally accountable for decisions
to deny or delay care that result in harm to patients. Today, 125
million Americans who get their health care through their employer have
little recourse if their plans' decisions harm them, even when the
decisions lead to death. Doctors and hospitals are held accountable for
their decisions, but health plans are not, and that is something that
needs to change.
The Patients' Bill of Rights is an important proposal that has the
backing of the American Medical Association, Consumers Union, Families
USA, the National Association of Children's Hospitals and numerous
other organizations that advocate for quality patient care.
I hope we can engage in productive debate on this issue in the coming
months and pass legislation to improve the quality of health care for
the American people.
Mr. KENNEDY. Mr. President, the time for action to protect patients
and curb insurance company abuse has come. We face a crisis of
confidence in health care. A recent survey found that an astonishing 80
percent of Americans now believe that their quality of care is often
compromised by their insurance plan to save money. One reason for this
concern is the explosive growth in managed care. In 1987, only 13
percent of privately insured Americans were enrolled in HMOs. Today 75
percent are in some form of managed care.
At its best, managed care offers the opportunity to achieve both
greater efficiency and higher quality in health care. In too many
cases, however, the priority has become higher profits, not better
health. Conventional insurance companies, too, have abused the system
by denying coverage for treatments that their customers need and that
their faithful payment of premiums should have guaranteed.
And the issue is not just confidence. It goes to the heart of the
issue of quality care and to the fundamental doctor-patient
relationship. In California, a Kaiser Foundation study found that
almost half of all consumers reported a problem with their health
plan--and substantial proportions reported that the plan's misbehavior
caused unnecessary pain and suffering, delayed their recovery, or even
resulted in permanent disabilities. Projected to the national level,
these results indicate that 30 million Americans actually developed
additional health problems because of their plan's treatment of them,
and a shocking 11 million developed permanent disabilities.
The list of those victimized by insurance company abuse grows every
day.
A baby loses his hands and feet because his parents believe they have
to take him to a distant emergency room rather than the one close to
their home.
A Senate aide suffers a devastating stroke which might have been far
milder if her HMO had not refused to send her to an emergency room--the
HMO now refuses to pay for her wheelchair.
A doctor is denied future referrals because he tells a patient about
an expensive treatment that could save her life.
A child suffering from a rare cancer is told that life-saving surgery
should be performed by an unqualified doctor who happens to be on the
plan's list, rather than by the nearby cancer specialty center equipped
to provide quality care.
A San Diego paraplegic asks for referral to a rehabilitation
specialist. Her HMO refuses, and she develops a severe pressure wound
that a rehabilitation specialist would have routinely checked and
treated. She is forced to undergo surgery, and has to be hospitalized
for a year with round-the-clock nursing care.
A woman is forced to undergo a ``drive-by'' mastectomy and is sent
home in pain, with tubes still dangling from her body.
The list goes on and on.
The opponents of action are already waging a calculated and well-
financed campaign of disinformation arguing that protecting patient's
rights is the same as massive government mandates and vastly increased
costs. But the American people know better.
Opponents of the legislation try to create a false dichotomy between
relying on competitive market forces and relying on regulatory
standards. In fact, this amendment helps competition by establishing a
level playing field between those who compete by providing quality care
at a reasonable cost and those who try to compete by attracting only
healthy enrollees and denying those who fall ill the care they have
promised.
This legislation guarantees people the rights that every scrupulous
insurance company already provides. These rights are common-sense
statement of components of quality care that every family believes they
have been promised when they signed up for coverage and faithfully paid
their premiums.
Let me cite a few of these common-sense rights specified in our
legislation. They include access to an appropriate specialist when your
condition requires specialty care. They allow people with chronic
illnesses or disabilities to have standing referrals to the specialists
they need to see on a regular basis. They assure that patients who need
a prescription drug to save their life or their health can have access
to it even if it is not included in their plan's formulary.
They assure that a person suffering from serious symptoms can go to
the nearest emergency room without worrying that their plan will deny
coverage. No patient with the symptoms of a heart attack should be
forced to
[[Page S2862]]
put their life at risk by driving past the emergency room down the
street to the network provider an hour or more away. No patient with
symptoms of stroke should be forced to delay the treatment to the point
where paralysis and disability is permanent, because a clerk two
thousand miles away does not respond promptly and appropriately. And no
patient who goes to an emergency room with symptoms of a heart attack
that proves to be a false alarm should suffer a real heart attack when
a bill for thousands of dollars arrives that the health insurer has
refused to pay.
This amendment also says that any reform worthy of the name
must guarantee that insurance plans meet the special needs of women and
children. Women should have access to gynecologists for needed
services. No women with breast cancer should be forced to endure a
``drive-by'' mastectomy against the advice of her doctor.
No child with a rare childhood cancer should be told that the
urologist who happens to be in the plan's network will treat him--even
if that urologist has no experience or expertise with children or with
that rare cancer.
Too many desperate patients--especially cancer patients--know that
their only hope for survival is participation in a clinical trial. Such
trials not only offer hope to patients, they also advance our knowledge
and lead to better treatments for dread diseases. Many insurers have
routinely paid for the medical costs associated with clinical trials,
because they knew they offered benefits for patients and because the
patients would incur medical costs in any event, even if they were not
part of the trial. But today, many insurers are backing away from that
constructive policy. Managed care plans, in particular, have often
denied their patients the ability to participate in such trials.
Our legislation provides patients a right to participate in such
trials if stringent conditions are met. There must be no standard
treatment that is effective for the patient, and the patient must be
suffering from a serious or life-threatening illness. The trial must be
funded by the NIH or another government agency meeting NIH standards.
And the trial must offer the patient a realistic hope for clinical
benefit.
Patients need the right to appeal decisions on their plans to
independent third parties. Today, if a health plan breaks its promise,
the only recourse for most patients is to go to court--a time-consuming
and costly process that may not provide relief in time to save a life
or prevent a disability.
Independent review was recommended unanimously by the President's
Commission. It has worked successfully in Medicare for four decades.
Working families deserve the basic fairness that only an impartial
appeal can provide. Without such a mechanism, any ``rights'' guaranteed
to patients exist on paper only--and they are scarcely worth the paper
on which they are written. When the issues are sickness and health--and
often as serious as life and death--no health insurance company should
be allowed to be both judge and jury.
When health plan misconduct results in serious injury or death,
patients and their families should be able to obtain accountability.
Every other industry in America can be held responsible for its
actions. Why should health plans, whose decisions truly can mean life
or death, enjoy this unique immunity?
Reforms must protect the integrity of the doctor-patient
relationship. ``Gag clauses'' and improper incentive arrangements
should have no place in American medicine.
And finally, everyone should agree that noncontroversial steps to
improve quality and provide greater patient information should be part
of reform.
This amendment should not be controversial for any member of the
Senate who is serious about protecting patients from insurance company
abuse. Its basic provisions were included in legislation introduced by
Democrats in the House and Senate. That legislation is supported by the
American Medical Association, the Consortium of Citizens with
Disabilities, the National Alliance for the Mentally Ill, the National
Partnership for Women and Families, the National Association of
Children's Hospitals, the AFL-CIO, and many other groups representing
physicians and other health care providers, children, women, families,
consumers, persons with disabilities, Americans with serious illnesses,
and working families.
It is rare for such a broad and diverse coalition to be assembled in
support of any legislation. But ending these flagrant abuses will help
every American family.
The choice is clear. The Senate should stand with patients, families,
and physicians. We must not stand with the well-heeled special
interests that put profits ahead of patients.
______
By Mr. DeWINE (for himself, Mr. Hatch, Mr. Leahy, and Mr.
Specter):
S. 1893. A Bill to establish a law enforcement block grant program;
to the Committee on the Judiciary.
the local law enforcement block grant act of 1998
Mr. DeWINE. Mr. President, today I rise to introduce the Local Law
Enforcement Block Grants Act of 1998, which reauthorizes the very
successful Local Law Enforcement Grant Program. This program gives
local governments the resources to fight crime, without the
``Washington knows best'' strings attached. I believe it is a mistake
for Washington to try to micromanage how local communities spend their
law enforcement dollars. Instead Washington should play the role of
partner with local law enforcement to improve the tools they use to
fight crime.
My views on this issue are based on more than 20 years of experience
in the criminal justice system: as a prosecutor in Greene County, Ohio;
in the Ohio State Senate; as a United States Congressman on the
Judiciary Committee; as Lieutenant Governor overseeing anti-crime and
anti-drug efforts; and now, as a member on the Senate Judiciary
Committee. I have had an opportunity to work on criminal justice issues
from the local, state, and federal levels, and have been fortunate to
see firsthand what Congress can do to help local communities be victors
in the war on crime.
Because 90 percent of all criminal prosecution is local, the fight
against crime will be won or lost by local law enforcement, local
prosecutors and courts, and concerned citizens in every community. I
believe the best way for the federal government to help local
communities fight crime is to return more money to those communities,
because in the final analysis, it is they who will get the job done.
For too long the Federal Government has had all the money--and local
communities all the crime. Local communities know what works--and they
should have the resources.
From 1999-2003, this Act authorizes $750 million each year for direct
grants to local law enforcement to reduce crime and improve public
safety. Distributions are made by the Bureau of Justice Assistance on a
formula basis, directly to local governments. Grants may include, but
are not limited to, equipment and law enforcement personnel, enhancing
school security measures, violent offender adjudication, drug courts,
crime prevention programs and youth intervention programs.
One of the most frequent uses of this grant money in Ohio, and by
local law enforcement across the country, has been for crime fighting
technology. I believe there is a critical need to modernize the crime
fighting tools used by local law enforcement, who have been fighting
increasingly sophisticated criminals with outmoded tools. That's why I
am expressly providing that funds may also be used for information and
identification technology, such as criminal history information,
fingerprint dissemination, and DNA and ballistics tests.
Let me underscore here that this Act leaves to local governments the
decision regarding what their funding priorities should be, while at
the same time requiring accountability as to how funds are ultimately
used. Local advisory boards also have an opportunity to recommend how
monies are spent as well. These funds will help local law enforcement
meet the critical local needs, by letting them put the resources where
they are needed most.
____________________