[Congressional Record (Bound Edition), Volume 152 (2006), Part 18]
[Senate]
[Pages 23536-23541]
[From the U.S. Government Publishing Office, www.gpo.gov]




                             TAX EXTENDERS

  Mr. GRASSLEY. Mr. President, pretty soon we will be taking up the tax 
bill that includes trade provisions and health provisions. I will start 
debate on that so we can use our time very efficiently.
  We are at the end of a very long road on what should be routine 
business: The two tax-writing committees have many provisions that have 
either expired or will expire shortly. The provisions cover three major 
areas of our jurisdiction: tax, trade, and health.
  The foundation of this bill is a tax-writing committee's agreement 
that goes back to last summer on the core package of expiring 
provisions and other items that were dropped from a reconciliation tax 
bill we passed early last spring.
  These provisions that were dropped were put together in what is 
called a trailer bill. That is an odd name for a bill. The bill has 
been held up for so long that some people have probably forgotten the 
reason for the nickname. I will remind everyone it is a trailer bill 
because it covers tax provisions that were dropped out of the tax 
reconciliation conference agreement of last spring. That conference 
agreement includes the cornerstones of both House and Senate bills 
which now have been signed by the President more than half a year ago.
  The cornerstone of the House bill was a 2-year extension of the lower 
rates on capital gains and dividends. The cornerstone of the Senate 
bill last spring was an extension of the hold harmless on alternative 
minimum tax. I was pleased we covered the cornerstone of both bills. We 
only had revenue room to cover those two provisions.
  The other provisions, principally what we call tax extenders, and 
what now will soon be before the Senate, were decided to travel in a 
bill that would follow, or trail. Hence, the name trailer bill.
  The two cornerstones, alternative minimum tax and capital gains and 
dividends, were very important achievements by this Senate last summer 
and when they were originally passed in 2003. The 2-year extension of 
capital gains and dividends was a key priority for my conference though 
we were pleased to garner some Democratic votes, as well. It was a 
priority for Senators Frist, Kyl, Lott, Gregg, and others. I was 
pleased we were able to deliver on that priority in that conference 
last spring.
  The alternative minimum tax was the other cornerstone. The 
alternative minimum tax, everyone recognizes, is a widespread tax 
problem because at least 15 million families will be affected. It was 
necessary to help those families so they were not paying a tax that was 
never intended to be foisted upon them in the first place and would not 
have been if the original alternative minimum tax passed in 1969 had 
been indexed. We assured all of these 15 million families that their 
lives would not be unnecessarily complicated by the tax system.
  The trailer bill took several weeks of intense negotiations. The 
negotiators were Chairman Thomas of the House and Senator Baucus and me 
in the Senate. They were tough negotiations, but they produced a fair 
agreement. That agreement, with some additions by the leadership, was 
included in the trailer piece of the trifecta bill that came up in July 
where we tried to pass a reform of the estate tax with, sort of cute 
processes that were put together but did not deliver the number of 
votes to break a filibuster. That, of course, occurred 4 months ago. A 
bill that should have passed 4 months ago we are still dealing with. 
That is the way the Senate sometimes works. That is the way the 
Congress sometimes works.
  Chairman Thomas represented the House, Senator Baucus represented 
Democrats, and I represented Senate Republicans. It was a bicameral, 
bipartisan agreement. In our view, that agreement was closed. No items 
should be subtracted. No items should have been added. A deal made last 
summer is still a deal now. Changes would only occur if all the parties 
to the agreement consented.
  When we returned, we all knew we didn't have another 5 or 6 weeks to 
renegotiate the trailer bill so we kept mostly to that original 
agreement. In getting to that agreement, I pushed hard for several 
Senate issues to be resolved. I am referring to items other than the 
basic 2-year extension of the provisions that expired on December 31, 
2005. I will go through a few of those items.
  First, there is a package of added incentives to enhance Hurricane 
Katrina rebuilding efforts. Senator Lott took the lead on that package 
along with support from Senators Vitter and Landrieu. We modified these 
provisions with the work of these Senators.
  Second, there were tax relief incentives for mine safety. Senators 
Byrd, Santorum, and Rockefeller argued for these important provisions.
  Third is an expansion of the veterans mortgage bond program. This is 
a program the States use to provide veterans who return from combat 
with low-interest loans so they can buy their families a home. Senators 
DeWine and Smith advanced these provisions.
  Fourth, there is a proposal to provide a deduction for private 
mortgage insurance for low-income home purchasers. Senators Lincoln and 
Smith deserve credit for those provisions.
  Fifth, there was a proposal to level the playing field between 
individual and corporate timber capital gains transactions. This 
provision would have ensured that timber-growing areas and related mill 
towns will not be disadvantaged if the timber company is a corporation. 
Most, if not all of the Senators from the timber-growing States of the 
Pacific Northwest, and the Southeast of the United States, had an 
interest in this provision. This proposal was dropped from the package, 
but I want my colleagues to know I argued for it.
  These are a few of the proposals that were negotiated and resolved in 
the trailer package. In my role as chairman of the Committee on 
Finance, I protected these Senate provisions.
  In the second round of negotiations, our Senate leadership backed me 
as we proceeded through the trailer issues. I appreciate Senator 
Frist's patience and support in our efforts to reach agreement.
  Why have I pushed so hard for this trailer package? There are two 
basic reasons. The first is for the 19 million tax filers who may face 
compliance problems because of uncertain tax law. The second reason is 
the hundreds of thousands of business taxpayers who have been in limbo 
waiting for final approval of measures such as the research and 
development tax credit.
  So let's look at some of those in detail. First, take a look at the 
Committee on Finance Web site. On September 13 and 26 of this year 
there are press releases that explain Committee on Finance tax staff 
research. At my request, the tax staff looked into the effects of 
delaying action on the three widely applicable expiring middle-income 
tax relief provisions: deduction of college tuition, teacher out-of-
pocket classroom expenses, and State sales tax deduction. We are 
talking about a group of up to 19 million tax filers being affected. 
Tax filers mean families filing jointly and individually as singles. In 
other words, we are talking about a lot more than 19 million taxpayers.
  The professional staff, all experienced tax practitioners who 
discussed this problem with the IRS, came to the conclusion that 
delaying action on extenders into the lameduck would have adverse 
consequences for that group of 19 million taxpayers. I won't go into 
the details. They are found on the Web site.

[[Page 23537]]

  So everyone knows, I have a few charts to show the impact of these 
provisions on these 19 million people. First, we have the college 
tuition deduction on the chart behind me. Between 4 and 6 million 
families, students, took advantage of this deduction in 2004.
  The next chart shows teachers benefiting from the educator expense 
deduction, where teachers pay out of their own pocket for materials for 
the classroom. For the last several years we have allowed a deduction. 
I suppose those supplies ought to be paid for by the school district 
but sometimes the school districts don't do it, the teachers need it, 
they want to help their kids, they pay for it out of pocket. We have 
allowed a tax deduction. That should not be allowed to expire. 
Nationwide, there are 3.3 million teachers who benefit from this 
deduction.
  Finally, in the next chart I have the sales tax deduction chart. In 
2004, almost 11 million families and individuals were helped by this 
deduction. If we do not get this bill passed, they lose that deduction.
  Serving as chairman of this committee is a privilege and a 
responsibility. I might say to my friend, Senator Baucus, who will be 
incoming chairman because the Democrats won a majority in the last 
election, I look forward to returning to the chair in a couple of 
years.
  I thank the people of Iowa and my friends and colleagues in the 
Senate Republican conference for that privilege. I have enjoyed every 
day I have served as chairman. It brings responsibilities as well. One 
of those responsibilities is tax policy.
  Now, whether an individual Senator agrees or disagrees with a 
particular expiring tax relief matter is always debatable. We all have 
opinions on a multitude of things, and particularly on tax policy. 
Probably no two Finance Committee members, let alone two U.S. Senators 
not on the committee, agree on all expiring tax relief measures. What 
we ought to agree on is that we should not deliberately--and I 
underline that word, ``deliberately''--take actions to unnecessarily 
complicate taxpayers' efforts to comply with our admittedly complex tax 
system. That is what delaying action on these provisions means.
  There are no ifs, ands, or buts--we need to act quickly. We are 
already about a year overdue. But if we get it done yet before we 
adjourn, we will take care of most of the problems taxpayers would 
otherwise have. The 2006 IRS forms were finalized, but the IRS 
hopefully can act to mitigate problems for these more than 19 million 
taxpayers with supplemental forms.
  As chairman, I would not be doing my job if I stayed silent. I spoke 
out. It is my responsibility to these 19 million taxpayers. Some could 
call it complaining. Some might call it annoying. Others could call it 
persistence. It is just simply doing my job. When you are talking about 
up to 19 million middle-income taxpayers who are trying their best to 
comply with the tax system, I will complain until I run out of breath.
  So that is the first reason I have been pushing for resolution of 
these matters, going back to the strong statements I made on the floor 
of this Senate at the time the trifecta bill was defeated last July and 
going back further since the reconciliation bill was passed in early 
spring.
  The second reason I pressed for quick resolution was the expiring 
business-related tax incentives. These matter. Just think about what 
you have heard from your constituents about the need for the research 
and development tax credit to continue and not lapse. These are all 
overwhelmingly popular in the House and Senate, but they are also good 
for our economy. Businesses are in limbo on these provisions. We are 
talking about almost a year of being in limbo and at least another 
month yet to come by the time we work this through and the President 
gets this signed.
  A lot of businesses in good faith relied on my assurances. They 
relied on assurances made by the congressional leadership in May of 
2006. These business folks were assured these extenders would be done. 
In my own State of Iowa, for example, a major business, Rockwell-
Collins of Cedar Rapids, IA, took a financial hit because we dilly-
dallied around with the reauthorization of the R&D tax credit.
  It is not just that management cares. Iowa is a manufacturing State, 
and we are proud of our research and development. Thousands of Iowa 
employees in these companies have a right to ask why this popular 
provision that does so much economic good has been delayed now at least 
6 months--some people could argue 8 months--beyond the time it should 
have been signed by the President.
  Aside from the new proposals I have talked about, the core tax 
extender package prevents tax increases on more than 19 million 
taxpayers and thousands of businesses. There is a revenue loss of $44 
billion. Some have called this a budget buster. But a close examination 
of the facts will tell you that you ought to reach a different 
conclusion. I would remind the Senate that revenues have shown record 
levels of increase over the last 2 years. These increases were not 
accounted for in budget resolutions because, quite frankly, the money 
came in faster than anybody could have anticipated when the resolutions 
were adopted. And that is good because the economy is good, or else you 
would not be getting all this tax revenue coming in.
  The tax relief here and in the reconciliation relief bill of last May 
are very small in comparison to the unexpected taxes that have come 
into the Treasury. So how can anyone call a bill that prevents tax 
increases a budget buster when the taxpayers are sending record levels 
of taxes into the Federal Treasury? So why would anybody penalize 
taxpayers with tax increases when revenues are not the source of the 
deficit? I don't get it. Because if this bill does not pass, it is 
going to be an automatic increase on the taxpayers and the businesses 
of this country because of the sunsetting of those tax laws.
  That is why these bills are before us, to get them reauthorized, not 
to decrease taxes but to keep the same level of taxation, the same 
policy. It just expired. Renew it. Our budget problems are not because 
of legislation that soon will be before this body. They are derived 
from out-of-control spending. That is where the budget busting is 
occurring.
  Present tax policy is bringing in more money than anybody anticipated 
it would bring in. Although the Democratic leadership has blamed 
Republicans for the deficit, we all know that spending problem is not a 
Democrat or Republican problem, it is a bipartisan problem. It is a 
disease in the Congress of the United States.
  I agree with the Budget Committee chairman that when Democrats gain 
control of Congress in a few weeks, we are going to see bigger spending 
problems. I am sure they would deny that tonight, but we have had 
evidence of it over the last decade.
  My evidence is, take a look at the last 10 years. Try looking for a 
Democratic spending cut for deficit reduction. Guess what. You are not 
going to find one. You will find lots of proposed tax increases. You 
will find lots of opposition to tax cuts. You will not find spending 
cuts in their deficit-reduction proposals. I hope I am wrong. Maybe we 
will see folks on the other side offering spending cuts when they have 
the budget resolution up next March and when they have appropriations 
bills up in the summer of 2007. I might be wrong. I hope I am. But we 
will see.
  So if you hear critics, Democrat or Republican, calling this bill a 
budget buster, keep the fiscal history in mind. Look at the numbers 
over the last 2 years. And take a look back for about a decade. The 
numbers do not lie.
  The bill is not a budget buster. It prevents tax increases. 
Preventing tax increases is not a budget problem. Millions of hard-
working, tax-paying families do not need tax increases, neither does 
the American business community.
  When I am holding my town meetings in Iowa, I have people coming in 
complaining about overspending. I do not have people coming into my 
town meetings saying: Tax me more; I am undertaxed.

[[Page 23538]]

  So I would then go on now, after talking about tax provisions here, 
to talk about the trade provisions. And we will start with the 
Generalized System of Preferences. This program offers developing 
countries duty-free access to U.S. markets. I have traditionally been a 
supporter of GSP. In recent years, however, I have come to question the 
merits of the Generalized System of Preferences. Too often, GSP 
benefits have gone to those who simply have not deserved them; in other 
words, meaning countries that have not deserved them.
  Perhaps due in part to the GSP Program, some industries in some 
developing countries have reached world-class status. These successful 
industries clearly are not the struggling businesses in poor countries 
for which the Generalized System of Preferences benefits were 
originally intended.
  In addition, I am concerned that the GSP has threatened U.S. 
interests in trade negotiations. Given that beneficiary countries 
already have duty-free access to the U.S. market for many of their 
products through the GSP Program, they have little incentive, then, to 
negotiate lower tariffs on U.S. exports. If they can get their product 
into our country under this program duty-free, they would consider 
themselves suckers to give our businesses and farmers the same 
advantage in their country.
  But that is what negotiations are all about. Like the Colombia Free 
Trade Agreement, the Peru Free Trade Agreement--both things before 
Congress that we ought to be passing. Those products from those 
countries are coming in here duty-free. We can have the advantage now 
of sending our products back to those countries duty-free for the first 
time ever. And do you know what. There are people in Congress here, 
right now, questioning whether we ought to approve the Peru Free Trade 
Agreement. It is stupid to not level the playing field for the American 
worker, the American farmer, and our service industry. But GSP has 
encouraged these countries to come along. Now they have developed. We 
need the same rights, the same consideration from them that we have 
been giving them over the last 20 years through the GSP Program.
  I am convinced that the lack of progress in the Doha Round of the WTO 
negotiations can be attributed, at least in part, to this GSP Program.
  GSP is set to expire in 23 more days. Due to my concern over GSP, I 
considered dropping my support for this program altogether, not even 
renewing it, for the unfair reasons I have told you. But in 
negotiations this week over a trade package in this bill, I agreed to 
compromise with Senator Baucus and my counterparts on the Ways and 
Means Committee for a short-term extension of this program for 2 years. 
Discussions I have had with Senator Baucus figured in my decision to 
support this short-term extension. Senator Baucus has agreed to work 
with me during the next Congress to reexamine the GSP Program. I 
anticipate that a reexamination of the GSP will result in needed 
reforms to this program.
  Today's legislation does take a very first step in making changes to 
GSP. It does so by allowing the President to limit the availability of 
GSP benefits for ``supercompetitive'' products. The word 
``supercompetitive'' is a technical term. Imports of products from 
numerous countries, including Brazil, India, and Venezuela, will be 
impacted by this provision of the bill, which will become operative in 
July of next year. This new supercompetitive standard reflects the 
results of a review of the Generalized System of Preferences Program, 
the GSP Program, conducted by the U.S. Trade Representative.
  Today's bill, in addition to extending the GSP under the proviso that 
we are going to review it next year, also extends the Andean Trade 
Preference Act, also expiring in 23 days. The Andean Trade Preference 
Act offers four Andean countries--Colombia, Peru, Ecuador, and 
Bolivia--duty-free access to the U.S. market for a variety of products. 
It was my strong inclination to extend benefits under this program to 
just two of the Andean countries, Peru and Colombia, for the reason 
they have been cooperating with us on this free-trade agreement. We 
have not adopted it yet. If we had adopted it, they would not need this 
program, and we would not be talking about it. But I would not be 
inclined to extend the benefits to Ecuador and Bolivia. Peru and 
Colombia have worked actively to strengthen their economic ties with 
our country by concluding free-trade agreements. It is only fitting for 
us to extend benefits to them until the point that these free-trade 
agreements are implemented.
  But Bolivia and Ecuador is another circumstance. Those countries, in 
contrast, have gone out of their way to demonstrate they do not value 
increased economic ties with the United States--unless, of course, 
those ties involve one-way trade benefits through the Andean Trade 
Preference Act where they can get their products into our country very 
easily and it is very difficult and very expensive for us to get our 
products into their countries.
  In order, however, to see that the Andean Trade Preference Act is 
extended to Peru and Colombia, where I said it ought to be for a short 
period of time, I had the opportunity to compromise with Senator Baucus 
and our House counterparts on an extension. This bill provides a 
straight 6-month extension of the program. Another 6-month extension 
will be provided if steps are taken to implement trade agreements with 
any of those countries, meaning if Ecuador or Bolivia want to get 
onboard and get into the act of cooperating in a bilateral way, they 
will get greater consideration in the future. But with their new 
Presidents nationalizing their industries, not having respect for 
personal property, not having respect for the growth that comes from 
the market economy, you wonder whether they are smart enough to think 
in terms of a free-trade agreement. But we hope they are.
  We have another trade preference program that is very popular; it 
almost passes unanimously most times in the Congress--the African 
Growth and Opportunity Act. That is modified by this legislation as 
well. This African Growth and Opportunity Act offers sub-Saharan 
countries duty-free access to the U.S. market. This program is 
instrumental in promoting economic growth in one of the poorest regions 
of the world. The third country fabric provision of the African Growth 
and Opportunity Act is going to expire October 2007. It allows 
beneficiary countries to keep preferential benefits on certain apparels 
made with fabric from countries other than the United States or Africa. 
This bill extends that third country fabric provision that will expire 
October 2007 until 2012.
  Also, in order to remove disincentives to investment in fabric 
production in Africa, we included what we call an ``abundant supply'' 
exception to eligibility under the third country fabric provision with 
respect to fabrics and yarns that are available in commercial 
quantities from African suppliers.
  The bill also provides tax benefits to Haiti, the poorest country in 
the Western Hemisphere, through the Haitian Hemispheric Opportunity 
Through Partnership Encouragement Act, also known by its acronym HOPE. 
This legislation provides new rules for origin for duty-free imports 
from Haiti. Haiti may only receive benefits under the bill if it meets 
certain political, economic, and labor criteria, as well as textile and 
apparel transshipment enforcement requirements. At this time, it is 
very important to recognize one of our colleagues who worked very hard 
on this, and that is Senator DeWine. He has contributed to advancing 
the economic development of Haiti during his tenure in the Senate.
  The bill also extends unconditional normal trade relations to 
Vietnam--something that should have been passed in November before the 
President went to Vietnam. This provision will enable us to enjoy the 
benefits of Vietnam's imminent accession into the World Trade 
Organization. That translates into significant benefit for our farmers, 
including those in my State of Iowa, by reducing duties on U.S. exports 
of beef, pork, soybeans, and other products.

[[Page 23539]]

  Our manufacturers and service providers also stand to benefit 
significantly from the Vietnam normal trade relation bill. And by 
engaging Vietnam through enhanced trade, we can best press the 
Vietnamese Government for continued progress with respect to where we 
don't think there is enough progress yet--religious freedom and human 
rights.
  In addition, this legislation modifies U.S. law with regard to 
changes in the U.S. harmonized tariff schedule. The U.S. Trade 
Representative periodically makes changes to tariff lines in the U.S. 
harmonized tariff schedule. This year, due to the thousands of changes 
to be made and to administrative delays, the business community 
requested that Congress extend the usual 15-day window for 
implementation, so we have extended the deadline to 30 days. This will 
allow time for the private sector to incorporate all of the changes in 
their computer system and avoid costly, time-consuming errors to entry.
  Finally, the bill includes numerous duty suspensions and reductions 
that have resulted from the Finance Committee's efforts to prepare a 
miscellaneous tariff bill. These provisions are noncontroversial in 
nature. They reduce tariffs on imported goods not produced in the 
United States. As a result, they will provide cheaper inputs for 
businesses operating in the United States and, thereby, increase the 
competitiveness of our firms and workers.
  I will talk about health care now, the third major area of 
jurisdiction of our committee, and the third major area in this piece 
of legislation. Despite what some might characterize as a ``do-nothing 
Congress,'' the 109th Congress actually accomplished a great deal 
relative to health care. We enacted the Deficit Reduction Act of 2005, 
which greatly strengthened and improved the Medicaid Program. Most 
would acknowledge that this bill made the most significant changes to 
the Medicaid Program in three decades. Those changes should make it 
possible for the States to serve more low-income beneficiaries, 
families who cannot afford to provide health insurance and pay for it.
  Significant challenges await us in the new Congress. We will need to 
take a serious look at the solvency of the Medicare Program. We have to 
develop a solution for the Medicare physician reimbursement system. The 
State Children's Health Insurance Program needs to be reauthorized. And 
there remain serious problems of the uninsured. I look forward to 
working with my partner and incoming chairman of the Finance Committee, 
Senator Baucus, on those issues and doing that in a bipartisan way.
  However, before we can adjourn this Congress and before we go home to 
enjoy the holidays, there is still urgent work needed to be done, and 
that is the purpose of this piece of legislation. In the legislation we 
consider today, there are several provisions that rise to the level of 
``must do.'' These include ensuring that physicians do not receive a 
drastic cut in the Medicare reimbursement that a formula in place for 
the last 15 years dictates they take and we generally don't let happen. 
There are a number of other expiring provisions that must be extended. 
I am very disappointed that this package doesn't include anything to 
address the coming shortfalls of the State Children's Health Insurance 
Program. The Senate package that I introduced with Senator Baucus 
included a proposal to address the shortfalls, but that proposal was 
rejected in the negotiations that Senator Baucus and I had with the 
House. We apologize for not winning on that.
  Our legislation will, however, increase payments for providers while 
providing additional payments for physicians and other health 
practitioners who report quality measures in order to ensure both 
continued beneficiary access and improved quality of care. We must 
ensure that health care providers can afford to continue to practice 
medicine. We must preserve Medicare beneficiaries' access to 
physicians, and we must provide incentives for quality improvement.
  The physician payment formula is deeply flawed. We need to reform the 
SGR formula's flawed payment system and develop a new way of paying 
physicians appropriately for their services. Last year, we included a 
provision in the Deficit Reduction Act to require the Medicare Payment 
Advisory Commission, known as MedPAC, to submit a report to Congress 
early next year on alternative mechanisms that could be used to replace 
the existing formula. It is a flawed formula. We must find a long-term 
solution that will stabilize physician payments in the future. Working 
to develop a better physician payment system will be one of my top 
priorities, and I am sure that under Senator Baucus's leadership, it 
will be a top priority as well.
  The legislation before us today will eliminate the 5-percent cut in 
physician fees scheduled to take effect in January 2007 and, instead, 
keep physician fees at the same level as this year. In effect, this 
would provide a 5-percent increase in payment fees over what the 
formula would otherwise allow. Next year, we must face the challenge of 
producing a long-term solution to the physician payment formula. The 
one-year-at-a-time approach we have used over the last several years 
makes the problem worse and does nothing to address the longer term 
challenges.
  We need to put better incentives into the health care system so 
providers are motivated to provide better quality care. So this bill 
before us establishes a quality reporting bonus for physicians and 
other eligible professionals--meaning nurse practitioners, physician 
assistants, podiatrists, and other health care professionals who submit 
data on quality measures from July through December in 2007.
  Our legislation also creates a fund, effective in 2008, to help 
stabilize physician payments and promote physician quality initiatives. 
This new fund of $1.35 billion will be available in 2008 to help 
minimize fluctuations in physician payments and promote physician 
quality initiatives.
  The physician payment changes will be offset by two adjustments to 
the Medicare Advantage stabilization fund. Our legislation does not 
repeal the fund but, rather, preserves the funds for future years. We 
adjust the funds in two ways.
  First, the fund will be reduced by $10 billion to $3.5 billion. 
Second, the Secretary will be able to use the proceeds in the funds 
only in the years 2012 and 2013. There is strong participation in the 
program right now, and if more funds are needed to be added back to the 
Medicare Advantage stabilization funds, Congress can add these funds in 
future years.
  I have been working very closely with my colleague Senator Baucus on 
realigning incentives in Medicare to reward for quality of care, rather 
than paying physicians as we do now, on volumes of service, without any 
care about quality. We have been doing that under these formulas for a 
long time. We began the process of moving toward quality care 
reimbursement in the Medicare Modernization Act of 2003. This Medicare 
Modernization Act required hospitals to report 10 quality inpatient 
measures in order to receive full payment update. Now almost 99 percent 
of hospitals are reporting this data. Without this incentive, they 
would not have done so. Our legislation includes provisions to extend 
quality reporting for hospitals to hospital outpatient departments and 
ambulatory surgical centers as well, beginning no sooner than 2009.
  Now that hospitals are reporting this data, it is time for other 
providers, such as physicians, to do that as well. The quality 
reporting measures in our bill today are a small step toward creating 
better incentives for quality care in Medicare. The transitional bonus 
payment policy included in this bill for reporting quality measures is 
a good first step for physicians and practitioners.
  The physician quality measures in this legislation before us today 
have been developed primarily by physician organizations, including the 
American Medical Association and physician specialty societies. All of 
the measures adopted for 2007 have the support of the physician 
community and will be easily reported electronically with the 
submission of their claims. Those professionals who participate in the 
quality reporting program and voluntarily

[[Page 23540]]

submit up to three quality measures that apply to their specialty will 
receive an additional 1.5 percent bonus incentive payment for services 
provided during the 6-month reporting period. I emphasize that that 1.5 
percent bonus is on top of our filling it in so that there is not the 
5-percent cut that the formula now applies for.
  Ultimately, we should move toward rewarding quality through higher 
Medicare reimbursement for better health care outcomes. Once that 
principle begins to govern medical care, we will be able to better 
align payment incentives throughout our health care system to reward 
for quality of care. We are interested in quality because when doctors 
and hospitals and other health care professionals do it right the first 
time, it is the least expensive way to have it done. If it is done 
wrong the first time, it is very expensive to send people back to the 
doctor and the hospital a second time. We want to do in the Government, 
through the Medicare Program, what a lot of major corporations are 
doing--being concerned about quality. With that quality, we can get 
better health care, but you are going to save a lot of money, whether 
it is for Ford Motor Company or for the taxpayers of the United States, 
under a Federal Medicare Program.
  In addition to reforming the manner in which Medicare pays for 
physician services, this legislation will extend several expiring 
provisions enacted in the Medicare Modernization Act of 2003 to help 
ensure that beneficiaries will continue to have access to needed 
medical care. This includes provisions applicable to rural payments to 
physicians, continued direct payments to independent laboratories for 
physician pathology services, and continuing Medicare reasonable cost 
payments for lab tests in small rural hospitals.
  Our legislation also provides a 1-year extension of the therapy cap 
exceptions process that we included in the Deficit Reduction Act last 
year to ensure that beneficiaries receive physical, occupational, and 
speech language therapy services that they need.
  We also give a 1.6 percent update for dialysis services effective 
April 1, 2007, thus helping to ensure continued access for 
beneficiaries who suffer from what is called end stage renal disease.
  Our legislation also includes some new provisions to improve 
beneficiary access and provide additional protections. We have included 
additional reimbursement for important preventive medicine by 
reimbursing health professionals for administering vaccines covered 
under the new Medicare Part D prescription drug benefit. We also 
include a requirement for reporting anemia indicators in cancer 
patients receiving anti-anemia drugs to better manage these patients' 
care.
  We have established a new postpayment review process to ensure the 
timely payment for drugs and biologicals that are delivered for patient 
use under the Competitive Acquisition Program.
  This legislation includes several provisions to improve 
accountability in Medicare. There has long been a concern that the 
program is vulnerable to fraud and abuse, and certainly experience has 
borne that out, with billions of dollars being wasted. Even more 
significant, the program has not been able to effectively detect when 
it makes payment errors. This legislation contains several provisions 
to address these concerns of ferreting out abuse and fraud.
  The Health Care Fraud and Abuse Control Program addresses fraud and 
abuse in the Medicare Program but has been funded at the same levels 
since 2003 despite significant increases in its responsibilities.
  In order to ensure that the Federal Government has sufficient 
resources to effectively combat health care fraud and abuse, this 
essential program will receive annual funding updates for the next 4 
years. And that investment has a good return. In other words, for a $1 
investment, many dollars come back to the Federal Treasury from either 
recouping fraud or preventing fraud.
  This legislation also includes a provision that addresses payment 
errors by adopting the Recovery Audit Contractor Demonstration as part 
of the Medicare Program and implements that program nationwide. Despite 
being implemented for a limited time in a limited number of States, 
this demonstration has already shown enormous potential for the 
identification of overpayments and underpayments and the recoupment of 
overpayments.
  In fiscal year 2006, this demonstration has identified around $300 
million in improper payments in just three States. By taking the 
recovery audit program nationwide, up to $10 billion in Medicare 
overpayments will be recovered in the next 5 years.
  By passing this legislation, we will also take a big step toward 
making sure that the Medicare Program does not pay for substandard care 
provided to beneficiaries. The National Quality Forum has identified a 
number of serious and preventable adverse health care events called 
``never events.'' The HHS inspector general will be required to conduct 
a study on Medicare payments for services related to never events and 
will provide guidance for CMS in setting policy regarding payments for 
services when never events are involved.
  Let me explain never events. We are not going to pay when somebody is 
operated on and covered by Medicare if they cut off the wrong leg--and 
this has happened--or the wrong arm or other things that were never 
intended to be done to a patient. We are sick and tired of paying for 
things such as that.
  This legislation will also promote more accurate hospital payments. 
One aspect of Medicare hospital payments that has been subjected to 
much criticism is the area wage index. Many say that the current method 
of calculating the wage index does not reflect the hospital's actual 
labor costs and is instead arbitrary in nature so that similarly 
situated hospitals can receive significantly different wage index 
values.
  Since the enactment of the Medicare Prescription Drug Improvement 
Modernization Act of 2003, hospitals have been able to obtain relief 
from this unfair situation temporarily. But we shouldn't have to do 
this every year in a temporary way. So this legislation will provide 
limited extension of this relief. More significantly, major steps will 
be taken toward comprehensively reforming the wage index classification 
system by requiring a report on alternatives to the current methodology 
for calculating the Medicare wage index, as well as proposals for 
reforming this classification system so we don't have to mess with 
these inequities.
  This legislation also includes several provisions relating to the 
Medicaid Program. These include codifying the provider tax rate paid by 
Medicaid providers at 5.5 percent and extending the transitional 
medical assistance and abstinence education programs. Throughout the 
year, we have heard from nursing homes, hospitals, and managed care 
plans that lowering the maximum provider tax rate would make it harder 
for them to treat Medicaid recipients as States had to make up for lost 
revenue. This provision protects health care access for some of the 
most vulnerable in society.
  While this legislation does not go as far as some would like, it 
accomplishes the goal of helping ensure the continuation of critical 
health care policies and programs.
  I was disturbed when I heard one of my colleagues refer to this bill 
as an example of bad legislative practice. The critics imply that 
political defeat was somehow connected with this kind of legislative 
practice. With all due respect, these criticisms could not be more off 
the mark. This legislation was based on popular expiring provisions 
within the jurisdiction of the tax writing committees, provisions that 
were meant to expire so they are reviewed occasionally so we know the 
best possible tax policy is being pursued by the Congress of the United 
States.
  The legislative business in this bill then is the people's business. 
Throughout the year, I pressed repeatedly to finish these matters. I 
was thwarted by others who sought to leverage these items for other 
purposes. I firmly believe that if we had dealt with these issues in a 
timely fashion, as was planned last May to do it in the pensions bill, 
we would have been rewarded politically.

[[Page 23541]]

  We are where we are, but we are here because of politics on both 
sides of the aisle getting in the way of processing these items in a 
timely fashion.
  I agree with the critics that this kind of omnibus bill is not the 
best way to finish this legislative business. The critics should know 
that the tax-writing committees had no choice.
  In conclusion, I hope my colleagues will support this bill--a bill 
that should have been law last summer--to finally get it done to save 
the taxpayers and 19 million people from being adversely affected.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Alaska.

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