Max Baucus

Mr. BAUCUS

Mr. BAUCUS. Mr. President, today I am pleased to join my friend and colleague, Senator Hatch, in introducing legislation to make permanent the subpart F provision for active financial serviced income earned abroad. The legislation we are filing today is identical to a bill we filed in the 107th Congress. Since then, this exemption has been temporarily extended but that will expire at the end of next year. This exemption ensures that the active financial services income earned abroad by U.S. financial services companies, or U.S. manufacturing firms with a financial service operation, is not subject to U.S. tax until that income is brought home to the U.S. parent company. By making this provision permanent, our legislation will put the U.S. financial services industry on an equal footing with its foreign-based competitors, which do not face current home country taxation on active financial services income. I will tell my colleagues that this bill is about jobs in Montana, and in each of our States. In fact, one of these competitive U.S. financial services companies employs hundreds of Montanans in Great Falls alone, so the health of that company is critically important to my constituents. American financial services companies successfully compete in world financial markets. We need to make sure, however, that the U.S. tax rules do not change that situation and make them less competitive in the world arena. This legislation will extend a provision that I believe preserves the international competitiveness of U.S.-based financial service companies, including finance and credit companies, commercial banks, securities firms, and insurance companies. This provision also contains appropriate safeguards to ensure that only truly active businesses benefit. As my colleagues have heard year after year, the active financial services provision is critically important in today's global economy. Our U.S. financial services industry is a global leader playing a pivotal role in maintaining confidence in the international marketplace. It is a fiercely competitive business. And U.S.-based companies would surely be disadvantaged with an additional tax burden if we allow this exemption to lapse. Through our network of trade treaties, we have made tremendous progress in gaining access to new foreign markets for this industry in recent years. Our tax laws should complement, rather than undermine, this effort. The temporary nature of the active financial services provision, like other expiring provisions, denies U.S. companies the stability enjoyed by their foreign competitors. It is time to make permanent this subpart F active financial services provision in order to allow U.S. business companies to make business decisions on a long-term basis. I ask my colleagues to join us in supporting this legislation, providing consistent, equitable, and stable tax treatment for the U.S. financial services industry.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, today I am pleased to join my friend and colleague, Senator Hatch, in introducing legislation to make permanent the subpart F provision for active financial serviced income earned abroad. The legislation we are filing today is identical to a bill we filed in the 107th Congress. Since then, this exemption has been temporarily extended but that will expire at the end of next year. This exemption ensures that the active financial services income earned abroad by U.S. financial services companies, or U.S. manufacturing firms with a financial service operation, is not subject to U.S. tax until that income is brought home to the U.S. parent company. By making this provision permanent, our legislation will put the U.S. financial services industry on an equal footing with its foreign-based competitors, which do not face current home country taxation on active financial services income. I will tell my colleagues that this bill is about jobs in Montana, and in each of our States. In fact, one of these competitive U.S. financial services companies employs hundreds of Montanans in Great Falls alone, so the health of that company is critically important to my constituents. American financial services companies successfully compete in world financial markets. We need to make sure, however, that the U.S. tax rules do not change that situation and make them less competitive in the world arena. This legislation will extend a provision that I believe preserves the international competitiveness of U.S.-based financial service companies, including finance and credit companies, commercial banks, securities firms, and insurance companies. This provision also contains appropriate safeguards to ensure that only truly active businesses benefit. As my colleagues have heard year after year, the active financial services provision is critically important in today's global economy. Our U.S. financial services industry is a global leader playing a pivotal role in maintaining confidence in the international marketplace. It is a fiercely competitive business. And U.S.-based companies would surely be disadvantaged with an additional tax burden if we allow this exemption to lapse. Through our network of trade treaties, we have made tremendous progress in gaining access to new foreign markets for this industry in recent years. Our tax laws should complement, rather than undermine, this effort. The temporary nature of the active financial services provision, like other expiring provisions, denies U.S. companies the stability enjoyed by their foreign competitors. It is time to make permanent this subpart F active financial services provision in order to allow U.S. business companies to make business decisions on a long-term basis. I ask my colleagues to join us in supporting this legislation, providing consistent, equitable, and stable tax treatment for the U.S. financial services industry.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I am pleased to join Senator Grassley, and our other colleagues, in introducing legislation to make the Section 529 enhancements enacted in 2001 permanent. In 2001, it was the Senate, especially my good friend Chairman Grassley, that insisted on including education savings in the tax bill. I am proud of that fact. And I am proud that the Senate is again taking the lead to make these important provisions permanent. Higher education is critical to our children's future and our Nation's economy. As a parent, or grandparent, you know that providing your children with a college education means they are likely to earn substantially more than if they only have a high school degree. One study estimated a million dollars more in today's dollars. College is a good investment, but a very expensive one. The cost of tuition is rising every year. Over the past ten years, expenses at public universities have increased nearly 40 percent. The U.S. Department of Education says the average cost of a four-year education is currently $34,000 and almost $90,000 for private colleges. In 1996, Congress created 529 plans to help families plan for this expense. Since their inception, 529 plans have helped families' college savings grow faster by not taxing investment income while it is accumulating in the account. In 2001, we saw a need to do more to help families deal with skyrocketing costs, so we allowed tax-free distributions from the account, as long as the money goes for its intended purpose--post-secondary education expenses. This income exclusion will expire after 2010 if we don't do something about it. There are a lot of provisions that will expire in 2010--so why focus on this one provision today? Because saving for college doesn't happen in five or six years. We want families to save today for college expenses fifteen to twenty years from now. Without this legislation, we are asking families to make critical investment decisions without the promise of today's tax benefits. This is not a good way to encourage savings. Making this tax benefit permanent will allow families to plan and finance their children's education beyond 2010. Thousands of young people back home have 529 plan accounts. By the end of 2004, Montana families had over $128 million set aside through the Montana Family Education Savings Program. Across the country there is about $68 billion invested in over 7 million accounts. The average account balance is just over $9,000. Not enough to finance a college education, but an important start. One of the great things about 529 plans is that grandparents can save for the future of their grandchildren. That is what Arlene Hannawalt did--she saved through a 529 plan for her granddaughter Nicole's education. Nicole dropped out of high school, but she is getting her GED. Later this year, with help from her 529 account, Nicole will be going to the University of Montana--Helena College of Technology to study accounting. Nicole's father is in the Army National Guard, serving in Iraq. Our prayers are with him. I'm sure Nicole's family is very pleased that she will soon be a college student. Tax-favored treatment for college savings is good policy, but it is not free. I assure my colleagues that we will be looking for appropriate offsets to cover the cost of this bill. Education is one of my top priorities. And saving for education should be one of a family's top priorities. I encourage my colleagues to join in making the tax status of 529 benefits permanent to help millions of American families plan for their children's future.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I am pleased to join Senator Grassley, and our other colleagues, in introducing legislation to make the Section 529 enhancements enacted in 2001 permanent. In 2001, it was the Senate, especially my good friend Chairman Grassley, that insisted on including education savings in the tax bill. I am proud of that fact. And I am proud that the Senate is again taking the lead to make these important provisions permanent. Higher education is critical to our children's future and our Nation's economy. As a parent, or grandparent, you know that providing your children with a college education means they are likely to earn substantially more than if they only have a high school degree. One study estimated a million dollars more in today's dollars. College is a good investment, but a very expensive one. The cost of tuition is rising every year. Over the past ten years, expenses at public universities have increased nearly 40 percent. The U.S. Department of Education says the average cost of a four-year education is currently $34,000 and almost $90,000 for private colleges. In 1996, Congress created 529 plans to help families plan for this expense. Since their inception, 529 plans have helped families' college savings grow faster by not taxing investment income while it is accumulating in the account. In 2001, we saw a need to do more to help families deal with skyrocketing costs, so we allowed tax-free distributions from the account, as long as the money goes for its intended purpose--post-secondary education expenses. This income exclusion will expire after 2010 if we don't do something about it. There are a lot of provisions that will expire in 2010--so why focus on this one provision today? Because saving for college doesn't happen in five or six years. We want families to save today for college expenses fifteen to twenty years from now. Without this legislation, we are asking families to make critical investment decisions without the promise of today's tax benefits. This is not a good way to encourage savings. Making this tax benefit permanent will allow families to plan and finance their children's education beyond 2010. Thousands of young people back home have 529 plan accounts. By the end of 2004, Montana families had over $128 million set aside through the Montana Family Education Savings Program. Across the country there is about $68 billion invested in over 7 million accounts. The average account balance is just over $9,000. Not enough to finance a college education, but an important start. One of the great things about 529 plans is that grandparents can save for the future of their grandchildren. That is what Arlene Hannawalt did--she saved through a 529 plan for her granddaughter Nicole's education. Nicole dropped out of high school, but she is getting her GED. Later this year, with help from her 529 account, Nicole will be going to the University of Montana--Helena College of Technology to study accounting. Nicole's father is in the Army National Guard, serving in Iraq. Our prayers are with him. I'm sure Nicole's family is very pleased that she will soon be a college student. Tax-favored treatment for college savings is good policy, but it is not free. I assure my colleagues that we will be looking for appropriate offsets to cover the cost of this bill. Education is one of my top priorities. And saving for education should be one of a family's top priorities. I encourage my colleagues to join in making the tax status of 529 benefits permanent to help millions of American families plan for their children's future.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, this weekend, millions of Americans watched in suspense as Anakin Skywalker was lured to the Dark side and became Darth Vader. What millions of those same Americans may not be aware of is another Darth Vader lurking in our tax code; that is, the Alternative Minimum Tax, or AMT. The AMT has many of the same qualities as Anakin Skywalker. The AMT was supposed to bring order and fairness to the tax world, but it eventually got off on the wrong path and became a threat to middle- income taxpayers. Both Skywalker and the AMT started off with great intentions, but eventually they went astray. And now we have the Darth Vader of the Tax Code bearing down on millions of unsuspecting families. That is why I am pleased to join with my friend and Chairman Chuck Grassley, and our fellow committee colleagues, Senators Wyden and Kyl, to introduce legislation today that will repeal the individual AMT. Our bill simply says that individuals beginning January 1, 2006 will owe zero, I repeat, zero dollars under the AMT. Further, our bill provides that individuals with AMT credits can continue to use those up to 90 percent of their regular tax liability. If we do not act, CRS estimates that in 2006, the family-unfriendly AMT will hit middle-income families earning $63,000 with three children. What was once meant to ensure that a handful of millionaires did not eliminate all taxes through excessive deductions is now meaning millions of working families, including thousands in my home State of Montana, are subject to a higher stealth tax. It is truly bizarre, Mr. Chairman, that we have designed a tax deeming more children ``excessive deductions'' and duly paying your State taxes a bad thing. Already, 5,000 Montana families pay a higher tax because of the AMT. But this number could multiply many times over if we do not act soon. Not only is the AMT unfair and poorly targeted, it is an awful mess to figure out. The Finance Committee heard testimony today from our National Taxpayer Advocate, who has singled out this item as causing the most complexity for individual taxpayers, and also from a tax practitioner who has seen first-hand how difficult this is for her clients. We heard also from other witnesses who said it is time for repeal of the AMT. Of course, repeal does not come without cost and that cost is significant even if we assume the 2001 and 2003 tax cuts are not extended. We are committed to working together to identify reasonable offsets. Certainly, I do not think we want a tax system unfairly placing a higher tax burden on millions of middle-income families with children. But it does not serve those families either if our budget deficit is significantly worse. Again, I look forward to working with my colleagues on this AMT repeal bill will put an end to the Darth Vader of the tax code, without any sequels.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, this weekend, millions of Americans watched in suspense as Anakin Skywalker was lured to the Dark side and became Darth Vader. What millions of those same Americans may not be aware of is another Darth Vader lurking in our tax code; that is, the Alternative Minimum Tax, or AMT. The AMT has many of the same qualities as Anakin Skywalker. The AMT was supposed to bring order and fairness to the tax world, but it eventually got off on the wrong path and became a threat to middle- income taxpayers. Both Skywalker and the AMT started off with great intentions, but eventually they went astray. And now we have the Darth Vader of the Tax Code bearing down on millions of unsuspecting families. That is why I am pleased to join with my friend and Chairman Chuck Grassley, and our fellow committee colleagues, Senators Wyden and Kyl, to introduce legislation today that will repeal the individual AMT. Our bill simply says that individuals beginning January 1, 2006 will owe zero, I repeat, zero dollars under the AMT. Further, our bill provides that individuals with AMT credits can continue to use those up to 90 percent of their regular tax liability. If we do not act, CRS estimates that in 2006, the family-unfriendly AMT will hit middle-income families earning $63,000 with three children. What was once meant to ensure that a handful of millionaires did not eliminate all taxes through excessive deductions is now meaning millions of working families, including thousands in my home State of Montana, are subject to a higher stealth tax. It is truly bizarre, Mr. Chairman, that we have designed a tax deeming more children ``excessive deductions'' and duly paying your State taxes a bad thing. Already, 5,000 Montana families pay a higher tax because of the AMT. But this number could multiply many times over if we do not act soon. Not only is the AMT unfair and poorly targeted, it is an awful mess to figure out. The Finance Committee heard testimony today from our National Taxpayer Advocate, who has singled out this item as causing the most complexity for individual taxpayers, and also from a tax practitioner who has seen first-hand how difficult this is for her clients. We heard also from other witnesses who said it is time for repeal of the AMT. Of course, repeal does not come without cost and that cost is significant even if we assume the 2001 and 2003 tax cuts are not extended. We are committed to working together to identify reasonable offsets. Certainly, I do not think we want a tax system unfairly placing a higher tax burden on millions of middle-income families with children. But it does not serve those families either if our budget deficit is significantly worse. Again, I look forward to working with my colleagues on this AMT repeal bill will put an end to the Darth Vader of the tax code, without any sequels.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, last week on Wednesday, we evacuated the Capitol. At the instruction of the Capitol Police, more than a few Senators and staff actually ran from this building and surrounding offices in the very real fear that a plane was carrying a bomb to attack this building, the center of our democracy. Sadly, Wednesday was not the first time, and Wednesday will likely not be the last time, that we guard against threats to our democracy by plane or by bomb. But there are other threats to our democracy and our freedoms just as menacing, equally as dangerous. Abraham Lincoln said: America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves. Former Librarian of Congress Daniel Boorstin said: It is not slogans or bullets, but only institutions that can make and keep people free. And Baron Montesquieu wrote in ``The Spirit of the Laws'': There is no liberty, if the judiciary power be not separated from the legislative and the executive. The effort to break the rules to allow the President more easily to appoint judges that undermine the independence of the Federal judiciary is no less than a threat to our democracy, a threat to our freedoms, and a threat to our liberties. For two centuries, Democrats and Republicans alike have used the Senate's rules to protect our democracy, to protect our freedoms, and to protect our liberties. After two centuries, it would be a mistake to change those rules. Unlimited debate allows Senators to protect minority freedoms. Unlimited debate helps to ensure that no one party has absolute power. Unlimited debate helps to give effect to the Founders' conception of checks and balances. History will see the actions of this month as what they are: A threat to those checks and balances. History will see the actions of this month as a terrible attempt to diminish the Senate. History will see the actions of this month as an attempt to diminish our democracy. If those who seek to change the rules succeed, especially by breaking the rules, it will be only a matter of time before the next step comes. It will be only a matter of time before some future Senate leader decides to once again to break the rules to change the rules, and abolish the filibuster altogether. And what will the Senate look like then? Then all our votes will be simple majority votes. Then lost will be a centuries-old check and balance. And then what will be left will be a vastly different Senate from the one to which I came in 1978. The majority leader has proposed that debate on important judges be limited to a fixed number of hours, to 100 hours. That might sound like a lot of time. But the point is not the number of hours. The point is that at the end of a set amount of time, no Member of the minority party need participate. At the end of a set amount of time, only the majority party will rule. At the end of that set amount of time, there would be no more check and balance. If one wants to see what the Senate will look like then, look at budget resolutions. Like the majority leader's proposed rule, they allow for a long period of debate. The leader's proposal calls for 100 hours of debate on judges. The Budget Act calls for 50 hours of debate on budgets. Look at the results. Rarely do budget resolutions achieve consensus. Since 1992, only one budget resolution has received more than 55 votes on final passage. This year, the vote on the budget resolution was 52-to-47. Last year, the disagreements on the budget were so partisan that the majority was not able to bring the conference report on the budget resolution to the floor in the Senate. In 2003, the vote was as close as it could get: 51-to-50. The Vice President had to break the tie vote. In 2002, once again, divisions were so partisan that the majority was not able to secure a majority in the Senate. In 2001, the vote was 53-to-47 In 2000, the vote was 50-to-48. In 1999, the vote was 54-to-44. In 1998, the majority was once again unable to adopt a budget resolution. And 1997 was the exception that proved the rule. That year, the budget resolution achieved a broad consensus, receiving a vote of 76- to-22. But in 1996, the vote was 53-to-46. In 1995, the vote was 54-to-46. In 1994, the vote was 53-to-46. In 1993, the vote was 55-to-45. And in 1992, the vote was 52-to-41. Thus, over 14 years, under Republican Presidents and a Democratic President, over the course of nearly a decade and a half, only one budget resolution has been the product of consensus. Fourteen years, and only one budget with more than 55 votes. The time limit on debate has not led to working together. The time limit on debate has caused partisanship. And three times in the last decade, the time limit on debate has led to complete failure. That is what would happen to the Senate if we head down this road. Votes would become more partisan, if that is possible, but it would happen. And the products of those votes would become more extreme. If we head down this road for the confirmation of judges, then judges will be more partisan. Judges will be more likely to uphold the powers of the President who appointed them. And judges will be less likely to defend individual freedoms and liberties against the powerful executive. Just think about that for a moment. Under this rule change, judges will be less likely to defend individual freedoms and liberties against the powerful executive. Why? Because of the partisan nature under which a partisan President will have appointed them. The Senate's role in protecting against extremism is particularly important in the context of nominations for the lifetime jobs of Federal judges. The Founders wanted the courts to be an independent branch of Government, helping to exercise the Constitution's intricate system of checks and balances. The Senate's involvement in the confirmation of judges has helped to ensure that the judiciary can be that more independent branch. And that independence of the judiciary, in turn, has helped to ensure the protection of our democracy, our freedoms, and our liberties. In ancient Rome, when the Senate lost its power, and the emperor became a tyrant, it was not because the emperor abolished the Senate. In ancient Rome, when the Senate lost its power, it continued to exist, at least in name. But in ancient Rome, when the Senate lost its power, in the words of the Senate's historian, Senator Robert Byrd, the Senate became ``little more than a name.'' In ancient Rome, when the Senate lost its power, the Roman Senate was complicit in the transfer. The emperor did not have to seize all the honors and powers. The Roman Senate, one after another, conferred greater powers on Caesar. It was not the abolition of the Senate that made the emperor powerful. It was the Senate's complete deference. Like the Roman Senate before us, we risk bringing our diminution upon ourselves. We risk bringing upon ourselves a hollow Senate, a mere shadow of its past self. And we risk bringing upon ourselves a loss of the checks and balances that ensure our American democracy. This change, if it succeeds, will leave Senators, as T.S. Eliot described in his 1925 poem, as ``The Hollow Men.'' In that poem, Eliot wrote of a place like what the Senate would become. He wrote: ``Our dried voices, when We whisper together Are quiet and meaningless As wind in dry grass This is the dead land This is cactus land In this hollow valley This broken jaw of our lost kingdoms In this last of meeting places We grope together And avoid speech Gathered on this beach of the tumid river This is the way democracy ends; this is the way democracy ends; this is the way democracy ends; not with a bomb, but a gavel.'' I yield the floor.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I ask unanimous consent the order for the quorum call be rescinded.

Mr. BAUCUS. Mr. President, I yield the remainder of time on our side. I understand we have an order to go to recess.

Mr. BAUCUS. Mr. President, I thank my good friend from Massachusetts. The Book of Proverbs teaches: Do not boast of tomorrow, for you do not know what the day will bring. In the play ``Heracles,'' the great playwright Euripides wrote: All is change; all yields its place and goes. And the Greek philosopher Heraclitus said: Change alone is unchanging. I urge my colleagues to bear the constancy of change in mind as they consider the proposal to break the rules to change the rules of the Senate. Many in the Senate's current majority seem bent on doing that. They seem quite certain that they shall retain the Senate majority for quite some time thereafter. But as Bertrand Russell said: Most of the greatest evils that man has inflicted upon man have come from people feeling quite certain about something, which, in fact, was false. My colleagues do not need to strain their memories to recall changes in the control of the Senate. Most recently, the Senate changed from Democratic to Republican control as a result of the 2002 election. Democrats did control the Senate throughout the sixties and the seventies, but since then the Senate has governed under six separate periods of one party's control. The Senate switched from Democratic to Republican control in 1980, back to Democratic control in 1986, back to Republican control in 1994, back to Democratic control in 2001, and back to Republican control again in 2002. Similarly, some in the Senate can remember the decade after World War II. The Senate switched from Democratic to Republican control in 1946, back to Democratic control in 1948, back to Republican control in 1952, and then back to Democratic control again in 1954. Senators who served from 1945 to 1955, a mere 10 years, served under five separate periods of one party's majority control. One cannot always see that change is coming, but change comes nonetheless. For example, in November 1994, Washington saw one of the most sweeping changes in power in Congress of recent memory. Very few saw that coming. The majority in the House and the Senate changed from Democratic to Republican. It is by no means easy to see that change coming. In March of 1994, just several months before the election, voters told the Gallup poll that they were going to vote Democratic by a ratio of 50 percent Democratic to 41 percent Republican. That same month, March of 1994, voters told the ABC News poll that they were going to vote Democratic by a ratio of 50 percent Democratic to 34 percent Republican. As late as September of 1994, voters told the ABC News poll that they were going to vote Democratic by a ratio of 50 percent Democratic to 44 percent Republican. On the first Tuesday in November 1994, however, more than 52 percent of voters voted Republican for Congress. Democrats lost 53 seats in the House and 7 seats in the Senate. In 1980, the Senate changed hands from Democratic to Republican control, but in August of 1980, voters in States with a Senate election told the ABC News-Louis Harris poll that they would vote for Democrats for the Senate by a margin of 47 percent for Democrats and 45 percent for Republicans. And on the first Tuesday in November 1980, Democrats lost 12 seats in the Senate. In November 2002, the voters gave the Republican Party victory in the Senate. But my colleagues in the majority would do well to remember. After a victorious campaign, Roman generals used to be rewarded with a triumph--a triumphant parade through the streets of Rome. Citizens acclaimed them like gods. But tradition tells us that behind the general on his chariot stood a slave who whispered: Remember that you are mortal. In the ceremony of a Pope's elevation, they used to intone: Sic transit gloria mundi: ``So the glory of this world away.'' At that very moment, they would burn a handful of flax. The burning flax would symbolize how transitory the power in this world is. In an address in Milwaukee in 1859, Abraham Lincoln said: It is said an Eastern monarch once charged his wisemen to invent him a sentence, to be ever in view, and which should be true and appropriate in all times and situations. They presented him with the words: ``And this, too, shall pass away.'' How much it expresses! How chastening in the hour of pride! How consoling in the depths of affliction! Mr. President, I urge my colleagues to remember that this Senate majority, too, shall pass away. This truth may console us in the minority, should the majority choose to break the rules to change the rules. But better still, better still would it be if the truth of constant change would chasten the current majority into abiding by the rules that protect Senators when they are in the majority and when they are in the minority alike. We should protect the rules to protect minority rights, for no one can ``know what the day will bring.'' We should protect the rules that protect minority rights, for ``all yield [their] place and go.'' And we should protect the rules that protect minority rights, for it is true of majority control, as it is true of all things, that ``change alone is unchanging.'' Mr. President, I yield the floor and suggest the absence of a quorum.

Mr. BAUCUS

Mr. BAUCUS. The Senator is correct that the bill in the Senate does not have specific funding for projects. However, it is up to the State of Arkansas to make the decision on how to spend this increase in funding and the additional money to the State can certainly be used to make progress on these projects. I would expect that many States would consider projects such as the ones described in Arkansas that are nationally significant. It would be up to the State to set those priorities and move forward. I believe the projects in Arkansas, both 1-49 and 1-69, are in various stages of development and construction. It is my understanding that both projects are eligible for Federal funding under this reauthorization bill we have written.

Mr. BAUCUS. I want to first commend the Senator for his continued work on transportation issues. He is a real leader in this area and I appreciate his hard work on behalf of the State of Arkansas. I am aware of the Senator's requests and I understand the importance of these projects to Arkansas and the country. My colleague has been very persistent and we have worked hard to include a formula in the bill that provides a significant increase in funding to Arkansas so that the State may be able to accomplish this task. Specifically, Arkansas stands to gain over $550 million over the 5 years of this bill, a 30 percent increase from the levels they received under TEA-21. Would this amount be sufficient to make progress on the two important interstates Senator Pryor has mentioned?

Mr. BAUCUS

Mr. BAUCUS. I agree with the comments made by my colleague, the chairman of the Environment and Public Works Committee. I understand the concerns raised by the Senator from Michigan. I appreciate his leadership and knowledge of transportation issues and I will continue to work with him as this bill progresses. household goods movers

Mr. BAUCUS. Thirteen. I will be brief. Mr. President, I thank all my colleagues. This was a consequence of both sides working together--big States, small States. It is now time to get to conference. It is also a good example of what we can do if we do not have this filibuster issue hanging over our heads. We can work together. We can get things done. I very much hope Senators recognize this because afterwards, it may not always be this way.

Mr. BAUCUS. Mr. President, how much time is remaining on this side?

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I yield 2 more minutes to the Senator from Maryland.

Mr. BAUCUS. Mr. President, I also join in thanking a lot of people who have worked very hard on this bill. Certainly the chairman of the committee, Senator Inhofe, deserves primary credit. It has been a long road, no fun. He has done a great job, and I commend him as well as the ranking Democrat of the committee, Senator Jeffords from Vermont. They worked very closely together. And that is what makes good legislation. This is not a partisan bill. This is a transportation bill. Of course, Senator Bond from Missouri has done yeoman's work, and I thank Senator Grassley, chairman of the Finance Committee. I wish to make a few comments as we prepare to vote on final passage. I think that vote will occur in several hours. I start by congratulating all those who have worked so hard on this issue, and I thank some people back in my home State of Montana. Jim Lynch is director of the Montana Department of Transportation. He is a terrific director, a very good man. I have known him for many years. He has his heart and soul in this work. I also thank members of his team: Sandy Straehl, Jim Currie, Jim Skinner, Dick Turner, and Mike Tierney, just to name a few. They are terrific people, and many of them were also helpful in TEA-21. They know highways. They know this bill. They know the program. Believe me, they do a good job in helping us. The bill we will vote on in a few hours is a good bill It is a solid bill. It is one that will move the country forward over the next 5 years. Every State will benefit from this legislation, the so-called donor States, donee States, urban, rural, large and small, every State. In my state of Montana, this bill will provide $2.1 billion over the next 5 years. This is an increase in highway funding over $500 million of historic levels of TEA-21. This means that more than 16,500 good- paying jobs will be sustained in Montana each and every year of this bill. In many respects, this is our economic development program, the highway program. It provides so many good-paying jobs as well as excellent transportation. I am very proud of the funding levels we have achieved working alongside my good friend from Iowa, Senator Grassley. I believe we developed a reasonable and fiscally responsible funding package. I am pleased that the Senate voted strongly to approve our efforts to increase the funding by $11 billion. The vote last week was 76 to 22 to waive the budget point of order, that is, in favor of that $11 billion. I hope the administration will take a long serious look at this. I hope they will reexamine their earlier opposition to increasing transportation investments. It is a good solid effort. The Senate has again publicly made its desires known with regard to funding levels. We did not go over the top. We could have gone with more, to 318, but we did not. We stayed under $300 billion--very responsible, very reasonable--and I hope the President will understand this is good legislation for the country, it helps our infrastructure, it is all paid for, and it is necessary to help America be competitive. In a moment, we will vote on an amendment to reduce the funding in this bill by almost $11 billion. That is stripping away the funding that we worked so hard to identify and that the Senate voted to support. I have here with me a stack of letters from a diverse group of organizations that strongly oppose the amendment being offered by the Senator from Alabama. I will not go through all of them, but it is really stunning, the number of organizations that have written us in opposition to the Sessions amendment. Every organization you can think of from the ACT--that is, the Association for Commuter Transportation-- the Transportation Construction Coalition, the Surface Transportation Policy Project, signed by Anne Canby, who is the President; AASHTO, signed by John Horsley, executive director, and many environmental organizations as well have written in opposing the Sessions amendment: National Association of Counties, National League of Cities, United States Conference of Mayors. It is just a representative sample of the large number of letters that have been written. Mr. President, I ask unanimous consent to have some of them printed in the Record.

Mr. BAUCUS. Mr. President, after nearly 3 years and 6 temporary extensions, the Senate is on the verge of passing a monumental highway bill. We will provide over $295 billion that will create thousands of jobs and keep our transportation infrastructure healthy. This legislation did not happen by itself--it took hard work and perseverance. First, I want to thank Senator Inhofe and Senator Jeffords, from the Environment and Public Works Committee, as well as Senator Bond, the chairman of the Subcommittee on Transportation and Infrastructure. They provided excellent leadership and I know their staff stayed up many a sleepless night. For Senator Inhofe's staff, I want to thank Ruth Van Mark, James O'Keeffe, Nathan Richmond, Angie Giancarlo, Andy Wheeler, Marty Hall, Greg Murrill, Alex Herrgott, Rudy Kapichak, John Shanahan, Frank Fannon and Michele Nellenbach. For Senator Jeffords' staff, I want to thank JC Sandberg, Ken Connolly, Alison Taylor, Jo-Ellen Darcy, Chris Miller, Margaret Wetherald, Mary Francis Repko, Malia Somerville, and Carolyn Dupree. And for Senator Bond's staff, I want to thank Ellen Stein, John Stoody, and Heideh Shamoradi. Senator Shelby and Senator Sarbanes also deserve recognition. They played an important role developing the transit title in this bill. I also want to thank my good friend Senator Grassley, the chairman of the Finance Committee, for his commitment to the transportation program. Let me take a moment and speak about the hard work of the Finance Committee staff. The House bill simply did not provide enough money for our highway infrastructure. The Finance Committee faced a difficult task. We needed to find additional revenue, but we also needed to pay for it. As is the rule on the Finance Committee, we worked in a bipartisan spirit to find an extra $7.8 billion for the highway trust fund, and all of it is paid for. I also want to thank some staff members in particular. I appreciate the cooperation we received from the Republican staff, especially Kolan Davis, Mark Prater, Elizabeth Paris, Christy Mistr, Ed McClellan, Dean Zerbe, John O'Neill, and Nick Wyatt. I thank the staff of the Joint Committee on Taxation and Senate Legislative Counsel for their service. I also thank my staff for their tireless effort and dedication, including Russ Sullivan, Patrick Heck, Bill Dauster, Kathy Ruffalo- Farnsworth, Matt Jones, Jon Selib, Anita Horn Rizek, Judy Miller, Melissa Mueller, Ryan Abraham, and Wendy Carey. I also thank our dedicated fellows, Mary Baker, Jodie Cruz, Cuong Huynh, Richard Litsey, Stuart Sirkin, and Brian Townsend. Finally, I thank our hardworking interns: Rob Grayson, Emily Meeker and Waylon Mathern. This legislation really was a team effort. I hope that we can keep working together as we move to conference and hopefully get this legislation done before the end of the month.

Mr. BAUCUS. These groups are many. There are at least 28 national associations and construction unions that make up the Transportation Construction Coalition. I mentioned AASHTO. I didn't mention the Environmental Defense Fund and Sierra Club, which are also in opposition to the Sessions amendment. You don't see that many groups together, construction groups, unions, environmental groups, local governments, all standing together on the same amendment; that is, in opposition to an amendment, in this case the Sessions amendment. This is one such occasion. I have heard it said that we should not increase funding for this bill because the House will not agree to it. I ask my colleagues, are we not a separate body? That can be turned around. The House should not pass something because we might not agree to it. They are a body, we are a body. We have just as much right as they to indicate what we should do. As I have said in this Chamber many times, legislating is the art of compromise. It is time for the administration and the House to demonstrate a willingness to work with the Senate on this bill. We are now ready to go to conference. We have less than 2 weeks until the expiration of the current extension of these programs. We have to get moving. The only chance we have to get this bill done is if we act quickly, reach an agreement soon on the funding levels in this bill, that once we have reached an agreement on the funding levels, I think virtually everything else will fall into place. I urge my colleagues in the House and in the Senate, also in the executive branch, to work with us, find an agreeable funding level for these programs. We cannot afford to argue for months about this issue. We have tough decisions to make, and the time is now to make them. We cannot afford to govern by extensions. States and local governments and the construction community are already feeling the pain from six extensions we have had to date. The time is now to roll up our sleeves, get to conference, and send a bill to the President. Then we can help the American people in doing so. I yield the floor.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. BAUCUS. Mr. President, I yield whatever time the Senator from Minnesota desires.

Mr. BAUCUS. Mr. President, it is quite clear, especially based upon the vote on the point of order yesterday where 76 Members of this body voted to waive that point of order indicating their support for this program, that there is not a lot of controversy remaining on this bill. There are important amendments, clearly, that will be offered by Members, but I believe all of us in this body know that this bill must be passed and must be passed quickly. It should be passed today, and it probably will be passed today, both because it is important and also to avoid the May 31 date when current law expires. Hopefully, we will get a conference that will bring back a conference report so we can pass this legislation and send it to the President's desk by that time. There is one point I wish to make, though. There is some concern that this bill is not fair to every State. We hear this in the committee. We who are managing this bill hear that statement often from a lot of Senators. I understand it. Every Senator is doing what he or she should do, and that is to fight for his or her State. I compliment those Senators. It is our job as managers of the bill and also our job as a body to do the very best we can to be as fair as possible to all concerned and get this legislation passed. I will say a word or two in defense of the Western States that are large in area but small in population as to why this national highway program is fair to us--I represent the State of Montana--and why it is also fair to some of the more populous States. We do not have a lot of people in Montana. Our population density is about six people per square mile. There are not very many States with a population density lower than ours. We are a huge State in area. In fact, the length across our State of Montana is as great as the distance from Washington, DC, to Chicago. It is that far to drive across Montana. In addition, if one were to overlay Montana over the New England States, the State of Montana would include New York and all the other New England States, and also include Pennsylvania. I think it would include about half of New Jersey. So it is a large area but very low in population density. The State of Arizona, for example, has 45 people per square mile. Montana, as I mentioned, has about six people per square mile. This is a national program. We are trying to get all States included. New Jersey, I might add, has a population density of about 1,100 people per square mile. New York has about 401 people per square mile. Again, Montana has six people per square mile. This is a national highway program. We want Americans to be able to travel freely across all States, the more populated States and also the less populated States. We want our commerce to travel nationwide, for truckers to be able to drive their vehicles across the United States virtually unimpeded. We do not want a situation where some States have the resources to build nice new highways and other States, just because there aren't any people there, do not have the resources to build highways, so it would be an uneven system. Clearly, not everybody is unhappy. We have done the best we can to make this as balanced as it could possibly be. I think the vote yesterday, while it is not a direct vote, is an indirect indication that most Senators are pretty satisfied. When 76 Senators vote to waive the point of order that was made yesterday, that is a vote in favor of the highway bill. I think that is a pretty good indication this is a fair and balanced bill. Different States have different State gasoline taxes to help pay for the highways in their States, matching along with the Federal contributions. We in the State of Montana pay a lot also per capita in our contributions to State and Federal highway trust funds, a lot more than most other States. In our State of Montana we spend about $360 per person per year in contributions to the highways. The national average is about $250 per person per year. We in Montana spend $360 per person per year. I point out that the folks in Arizona are actually below the average. The contributions the people in Arizona pay to the highway trust fund, both to the State and Federal highway trust funds, is about $235 per Arizonan per year. That is below the national average. That is fine. That is a decision in large part the people in Arizona are making because of their State gasoline taxes. But it is also a consequence of a lot of other factors in the formula for the States. The long and short of it is Arizonans pay less than the national average per capita in their contributions to Federal and State highway funds, whereas folks in other States pay much more. Montanans, as I mentioned, pay $360. South Dakotans pay a lot more for highways, more than the national average. People in South Dakota pay about $312 per person. It is interesting--New Yorkers actually are very low. New Yorkers pay only about $152 per person in their contributions to the highways in the State of New York. That is half what it is in some other States. Everybody can bring out figures and statistics. But I do think, for the sake of equity and fairness, it makes sense to get a good bit of these statistics out in the open, on the record, so we all understand and realize it is not a perfect bill, but it is a bill that by and large accomplishes what it is intended to accomplish--that is provide the resources so we can build and maintain our highways, our mass transit, and some of the other programs affiliated with the highway program. I thank the chairman, who is doing a great job managing this bill. I also very much thank Senator Jeffords, the ranking member of the Environment and Public Works Committee, for excellent leadership. Also I give special thanks to my colleague on the Finance Committee, Senator Grassley. He and I have worked closely together to provide the revenue for this bill and it is basically through gasoline taxes and other excise taxes. I remind my colleagues this legislation before us does not add to the Federal deficit, not at all. In fact, it reduces the Federal deficit. It reduces the Federal deficits; that is, our national debt, by about $14 billion over 10 years. We reduce the national debt--not by a lot, but we reduce it. We do not add to the debt. We reduce the debt by about $14 billion over 10 years. Those who are concerned that this is a spending bill, that this bill adds to the national debt and deficit, that is not accurate. As a reminder, this bill does not add at all to Federal deficit, not one dime. It is all paid for. I know a lot of proposals a lot of Senators have, either to lower taxes or spend money on something, are not paid for. This big highway program is all paid for. It is jobs for America. It is infrastructure for America so we Americans can live the life we want to lead, have the highways we want to have, and compete in the modern world and off in the future with a good highway system.

Mr. BAUCUS. Mr. President, I cannot commend the chairman of the Environment and Public Works Committee enough. He has worked extremely hard on this legislation. He is exactly right, if we are going to finish this bill, it is incumbent upon Senators to bring their amendments to the floor. It is the only way we are going to finish this bill. As Mr. Inhofe, the Senator from Oklahoma, is imploring Senators to come down, I very much hope they heed his words. I thank him for those words because it is so important to get this legislation done now. It is Thursday afternoon, and it seems to me there is a lot of time to get most of this bill done today. Rules Of The Road On Judicial Nominations Mr. President, this Nation's fast transportation system works. Why does it work? Because every day millions of individuals choose to abide by the rules of the road. On our Nation's highways, millions of people safely move great distances, at great speeds, in no small part because drivers respect other drivers and abide by the rules that oblige them to stay within the white and yellow lines painted on concrete and asphalt. When you stop to think about it, it is incredible. Here are thousands of pounds in one car and another car hurtling toward each other, at high speeds, yet they do not hit each other. They miss because the drivers know they must stay, in America, on the right side of the road, in their lane, which prevents a catastrophe. It is amazing when you stop to think about it. When drivers come to an intersection with a red and white stop sign, what happens? Drivers stop. Those of us on a cross street depend on drivers stopping. The other cars at a stop sign on other streets of the intersection also depend on that. When folks come to a red light, they stop. They wait for a green light. They let the cars come through from the other direction. Few things create more danger in traffic than running a red light. Mr. President, the Senate works much the same way. The Senate gets things done because day in and day out Senators choose to abide by the Senate's rules. The Senate has rules. We abide by them, and that enables us to get things done. Every year, the Senate confirms hundreds of nominations, addresses hundreds of amendments, and enacts hundreds of laws because Senators respect other Senators and abide by the rules of the road. In the 108th Congress alone, the Senate confirmed nearly 1,800 nominations, agreed or disagreed to nearly 1,800 amendments, and enacted nearly 500 laws. Yet in the 108th Congress, the Senate conducted just 675 rollcall votes. So what does that mean? That means in the 108th Congress alone, the Senate made more than 4,000 decisions with fewer than 700 rollcall votes. In the 108th Congress, the Senate made more than 3,300 decisions by voice vote or by unanimous consent. These numbers demonstrate what most Senators know in their bones: Five times out of six the Senate gets things done not by confrontation but by Senators abiding by the rules of the road and cooperating with other Senators. That is why it is so troubling that some in this Senate now threaten to try to change the Senate rules by breaking the rules. They plan to disregard the rules and disregard the precedents. They want to run the red light. The Constitution gives the Senate the power to set its own rules. Article I, section 5, of the Constitution says: Each House may determine the Rules of its Proceedings. . . . The Senate has determined its rules through adopting the standing rules of the Senate. The Senate has readopted or made general revisions of its rules only seven times since 1789. The most recent general revision was in 1979. The standing rules of the Senate continue from Congress to Congress. As Senate rule V says: The rules of the Senate shall continue from one Congress to the next Congress unless they are changed as provided in these rules. Rule V: ``The rules of the Senate shall continue from one Congress to the next Congress unless they are changed as provided in these rules.'' Now, Senators have the right to debate changes to the rules. Standing rule VIII spells out that, even under circumstances where Senators may not normally debate: motions to proceed to the consideration of any motion, resolution, or proposal to change any of the Standing Rules of the Senate shall be debatable. Standing rule XXII provides the procedure for bringing debate to a close on: any measure, motion, [or] other matter pending before the Senate. Senate rule XXII provides that ``any . . . matter'' includes nominations. That is how it is that Senators can debate at length any nomination that comes before the Senate, unless 60 Senators vote to bring that debate to a close. And ``any measure . . . [or] matter'' within the meaning of rule XXII on debate also includes a proposal to change the standing rules of the Senate because rule XXII of the Senate's standing rules spells out the procedure for changing the standing rules. When it addresses bringing debate to a close through cloture, rule XXII says: [O]n a measure or motion to amend the Senate rules . . . the necessary affirmative vote shall be two-thirds of the Senators present and voting. That is rule XXII. That is in the Senate rules, which continue over from Senate to Senate. The Senate's rules, thus, provide a procedure for changing the rules. That procedure involves the regular legislative process. That procedure involves fair and potentially extended debate. And that procedure requires, if it comes to extended debate, ``the . . . affirmative vote . . . [of] two-thirds of the Senators present and voting.'' That is the way Senators can change the rules, if they choose to respect other Senators, if they choose to abide by the rules of the road, if they choose not to run that red light. But what some are talking about is very different. What some are talking about is using brute force to change the rules. What some are talking about is running the red light. Here is what they would do. They would use the raw power of the Vice President to sit in the chair of the Presiding Officer. They would have the Vice President make a ruling that bypassed the Senate's rules for amending the Senate's rules. They would have the Vice President make a ruling that bypassed the Senate rules for how long Senators could debate. They would have the Vice President make a ruling that broke the Senate's rules. Now, article I, section 3, of the Constitution provides: The Vice President of the United States shall be President of the Senate. . . . But that does not mean that the Vice President can make up the Senate's rules anew every day. The Vice President, just like any Senator, must abide by article I, section 5, of the Constitution, when it says: Each House may determine the Rules of its Proceedings. . . . And when the Vice President acts as President of the Senate, the Vice President, just like any Senator, must abide by the standing rules of the Senate. To do otherwise, would be an abuse of power. Mr. President, I urge my colleagues to resist those who would break the rules to change the rules. Sir Thomas More, the British statesman and Lord Chancellor, resisted King Henry VIII when More felt that Henry had broken the law. In Robert Bolt's great play about More called ``A Man for All Seasons,'' More speaks about the importance of abiding by the law. The character William Roper asks More: So now you'd give the Devil benefit of law? More counters: Yes. What would you do? Cut a great road through the law to get after the Devil? Roper replies: I'd cut down every law in England to do that! More responds: Oh? And when the last law was down, and the Devil turned round on you where would you hide . . . , the laws all being flat? This country's planted thick with laws from coast to coast . . . and if you cut them down--and you're just the man to do it--d'you really think you could stand upright in the winds that would blow then? Yes, I'd give the Devil benefit of law, for my own safety's sake. The Senate's rules protect us all. They protect the ability of the Senate to get things done through working together, not through majorities that cut down all the opposition. For two centuries, the Senate's rules have protected the rights of the minority party, for Democrats and Republicans alike. After two centuries, it would be a mistake to cut down those rules. At the center of that forest of Senate rules are two mighty oaks. But don't take my word for it. Let me quote the Senate majority leader. In a forward that the senior Senator from Tennessee, the majority leader, wrote to a book published last year entitled ``Senate Procedure and Practice,'' the majority leader wrote: [A]bove all, together the Senate's rules and practices form a whole. It is a whole that faithfully reflects the Framer's design and ambition for the body. It is a whole that remains true to the Senate's two paramount values: unlimited debate and minority rights. ``[U]nlimited debate and minority rights.'' ``[U]nlimited debate'' allows Senators to protect ``minority rights.'' The Senate's rules thus help to protect personal rights and liberties. The Senate's rules help to ensure that no one party has absolute power. The Senate's rules help to give effect to the Framers' conception of checks and balances. Even law school dean and former judge and special prosecutor Kenneth Starr told CBS News that changing unlimited debate might damage the Senate. He said: It may prove to have the kind of long-term boomerang effect, damage on the institution of the Senate that thoughtful Senators may come to regret. The Senate's right of unlimited debate is particularly important in the context of nominations for the lifetime jobs of Federal judges. The Senate's involvement in the confirmation of judges has helped to ensure that nominees have had the support of a broad political consensus. The Senate's involvement has helped to ensure that the President could not appoint extreme nominees. The Senate's involvement has helped to ensure that judges have been freer of partisanship and more independent. The Framers wanted the courts to be an independent branch of government, helping to create the Constitution's intricate forest of checks and balances. The Senate's involvement in the confirmation of judges has helped to ensure that the judiciary can be that more independent branch. And that independence of the judiciary, in turn, has helped to ensure the protection of personal rights and liberties from the winds of temporary majorities. It is easy to push down the accelerator and cross that white line of paint, running across the concrete or asphalt. It is easy to push down the accelerator to run through that stop sign. It is easy to push down the accelerator and run through that red light. But once one has been hit by a car running a red light, can one ever look at an intersection the same way? The Senate works because, day in and day out, Senators choose to respect other Senators and abide by the Senate's rules of the road. If and when the Vice President and Senators start breaking those rules to change the rules, the Senate will never be the same. Once they run that red light, the rule of the road can never be the same. I urge my colleagues to slow down, take their foot off the accelerator, and stop, before it's too late. I yield the floor and suggest the absence of a quorum.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I ask unanimous consent that the privilege of the floor be granted to Emily Meeker, Rob Grayson, Waylon Mathern, and Jorlie Cruz for the remainder of the consideration of S. 732.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise today to join Chairman Grassley in introducing the Hospital Fair Competition Act of 2005. This bill, based primarily on recommendations of the Medicare Payment Advisory Commission (MedPAC), will improve the accuracy of Medicare's inpatient hospital prospective payment system (PPS); prevent the establishment of new specialty hospitals to which physician-owners can self- refer, while allowing existing physician-owned specialty hospitals to continue with restrictions; and allow ``gainsharing'' arrangements to foster improved physician-hospital efficiency. This legislation is important for patients, taxpayers, and the Medicare program, and I urge my colleagues to support it. About 17 months ago, Congress passed the Medicare Modernization Act-- the MMA. This 400-page bill included many important provisions, including long-awaited outpatient drug benefits under Medicare. The MMA also included a small provision--Section 507--related to the construction of physician-owned specialty hospitals. These facilities specialize in cardiac, orthopedic or general surgical care, and are partly- or wholly-owned by physicians. The provision was a response to growing concerns over physician self-referral, and placed a moratorium on the construction of new, physician-owned specialty hospitals, while ``grandfathering'' existing facilities and those in development. Having reviewed several independent analyses on this issue, I believe Congress was right to place a moratorium on specialty hospital construction. And I also believe that moratorium should effectively be extended permanently, while allowing existing facilities to continue operating in their current capacity. Some view specialty hospitals as innovative, focused factories for high-quality, specialized care. Advocates for these facilities say that by focusing on a limited number of services, specialty hospitals provide excellent care at a good price, while adding competition to the health care marketplace. Others say specialty hospitals flourish because they exploit a Medicare loophole allowing physician-owners to select patients who are healthier and, therefore, more profitable. For my part, I don't want to stand in the way of innovation or competition. For example, I'm glad that Congress brought innovation to Medicare in the form of outpatient drug benefits. That was long overdue. And hospitals and physicians should work together in innovative ways to improve efficiency in health care. The U.S. spends twice as much--or more--per-person on health care compared to any other developed country. And yet, our health outcomes are worse than theirs. We should get a better bang for our health-care buck, and we can take steps to that end by encouraging quality and accountability in health care. That's why I am pushing to advance incentives for quality improvement in Medicare, so patients--and taxpayers--get the most for their money. I introduced legislation last year to require that Medicare pay dialysis providers and Medicare managed care plans based on the quality of care they provide. And I am working on legislation to extend these principles of paying for quality to other parts of Medicare. As for competition, I'm all for it--as long as it's carried out on a level playing field. But when it comes to physician ownership of specialty hospitals, I'm not convinced the playing field is level. That's because physicians alone choose where patients go on the playing field--either to community hospitals or specialty hospitals. Some liken physician-owners of specialty hospitals to coaches who choose the starting lineup for both teams--in this case, the specialty hospital team and the community hospital team. And for the third time, a Federal agency has told us that the healthiest teams, that is, the most profitable patients, end up at physician-owned specialty hospitals. In 2003, the non-partisan Government Accountability Office (GAO) reported that, by and large, specialty hospitals care for relatively healthier patients than their community hospital counterparts. GAO surveyed 25 specialty hospitals, and found that 21 of the 25 had a less acute mix patients than community hospitals. GAO determined that of the hospitals studied, 17 percent cardiac patients seen by specialty hospitals could be classified as severe cases, compared with 22 percent in general hospitals. And about 5 percent of orthopedic cases in specialty hospitals were severe, compared with 8 percent in community hospitals. Earlier this year, on March 8, MedPAC issued its MMA-mandated report on specialty hospitals, and arrived at findings similar to those of the GAO. MedPAC found that despite shorter lengths of stay, physician-owned specialty hospitals are not more cost efficient than community hospitals. MedPAC found that specialty hospitals tend to treat lower shares of Medicaid patients than community hospitals. And, just as GAO did, MedPAC found that specialty hospitals treat patients who are generally less sick--and therefore, more profitable--compared to community hospitals. And while the Department of Health and Human Services has not officially issued its MMA-mandated report on the topic--but is expected to shortly--HHS reported on March 8 that, based on the small number of facilities it studied, specialty hospitals tend to care for a healthier patient population than their community hospital counterparts. I believe the phenomenon of specialty hospitals treating healthier patients is the result of a loophole in the Stark self-referral law. This loophole--related to the ``whole hospital exception''--is one that should be closed. If it is not closed, Congress will effectively sanction the practice of physician self-referral that has been prohibited for years. In 1989, the HHS Inspector General reported that patients of referring physicians who owned or invested in independent clinical labs received 45% more lab services than Medicare patients in general. In 1992, a study found that physical therapy visits per patient were 39% to 45% higher in facilities with physician ownership compared to those without. In short, the authors of the study found that utilization and charges per-patient were higher when facilities were owned by physicians with an ownership interest. In response to these studies and others like them, Congress passed the Stark laws, to prevent physician self-referral, first in the area of clinical labs, and subsequently in 10 other areas, including physical therapy and certain imaging procedures. But the Stark laws did not address the issue of physician self- referral to specialty hospitals. In part, that's because there weren't many specialty hospitals at the time. As the GAO pointed out in its 2003 report, the vast majority of specialty hospitals were built in 1992 or later. Instead, the Stark law included a provision that has come to be known as the ``whole hospital exception.'' While the Stark law prohibits physicians with ownership interest in only a hospital department from referring patients to that department, the law does allow physicians to refer to a facility they partially own, under two conditions. First, the physician must have admitting privileges in that hospital. Second, the physician must have a financial interest in the ``whole hospital,'' not just a department of the hospital. As the GAO explained in 2003: ``The premise [of the whole hospital exception] is that any referral or decision made by a physician who has a stake in an entire hospital would produce little personal economic gain because hospitals tend to provide a diverse and large group of services. However, the Stark law does prohibit physicians who have ownership interest only in a hospital subdivision from referring patients to that subdivision. With respect to specialty hospitals, the concern exists that, as these hospitals are usually much smaller in size and scope than general hospitals and closer in size to hospital departments, the exception to Stark could allow physician owners to influence their hospitals'--and therefore their own financial gain through practice patterns and referrals.'' The problem with the ``whole hospital'' loophole is that it treats a 10-bed surgical facility the same as a 500-bed community hospital, even though that 10-bed facility more resembles a department of the 500-bed hospital than it does the hospital itself. This loophole is unfair, and our bill closes it, by preventing the establishment of new specialty hospitals to which physician-owners can self-refer. Let me note that our bill does nothing to prevent the construction of new specialty hospitals--as long as self-referral is not part of the business model. Hospitals specializing in one type of care or another have existed in this country for years, and should be encouraged--as long as their owners and referrers are not one and the same. Opponents of this bill will likely make at least three claims. First, they will state that preventing the construction of new, physician-owned specialty hospitals is anticompetitive. Second, they will suggest that since the average physician-owner's share in a specialty hospital is small, economic incentives to self-refer are minimal. Third, they will claim the bill thwarts health care quality. Let me take these claims in turn. As I stated previously, I am all for competition--as long as it's fair. But I don't think it's fair to further a system in which physician-owners can send healthier and more profitable patients to facilities they own, while sending sicker, less-profitable ones to hospitals they don't own. There's a reason Congress acted to mitigate the effects of physician self referral over 15 years ago, and I see no reason why that principle should not be extended to the specialty hospital setting. On the issue of economic incentives, some argue that physician self- referral to specialty hospitals is a non-issue, since physicians typically own a very small share of a particular facility. In fact, MedPAC found that in about one-third of specialty hospitals they surveyed, the largest share owned by a single physician was just two percent. And as a group, physicians own just over a third of the typical heart hospital. But MedPAC also pointed out that about one- third of orthopedic and surgical hospitals were owned almost entirely by their physicians. Perhaps more important, MedPAC showed that even a relatively small ownership interest can reap large profits for an individual physician investor. Page 21 of MedPAC's March report on specialty hospitals says: What is the order of magnitude of physicians financial incentives to increase utilization when they own a hospital? What follows is a hypothetical example of the marginal profit associated with a group of cardiologists each referring just one additional patient (above the current patient load) for coronary artery bypass graft (CABG) surgery. In fiscal year 2002, the base payment for CABG surgery with cardiac catheterization (DRG 107) was roughly $24,000. Our examination of Medicare cost reports and hospital financial statements suggests that variable costs equal approximately 60 percent of the DRG payment, roughly $14,400. Hence the marginal profit--payments minus variable cost--would be $9,600 per patient ($24,000-$14,400). If 10 cardiologists owned a 3 percent interest each and they all induced one additional surgery per year, each cardiologist's income would increase by $2,880 ($9,600 3% 10).'' In other words, even a small ownership share--just three percent--can provide a strong profit motive--and a strong incentive toward self- referral. Finally, let me address the third claim that will likely be made against this bill--that it thwarts the provision of quality care. Specialty hospital advocates claim that due to the focused nature of their mission, physician-owned specialty hospitals provide better quality and outcomes than their community hospital counterparts. But recently the New England Journal of Medicine published a study showing that patients undergoing certain heart procedures in specialty hospitals were less likely to have coexisting conditions than those being treated at general hospitals. The authors of the study stated, ``. . . given that we found no significant differences in outcomes between specialty and general hospitals with similar volumes or between specialty cardiac hospitals and specialized general hospitals, it could be argued that the specialty-hospital model itself does not yield better outcomes.'' They also said, ``. . . our study provides no definitive evidence that cardiac specialty hospitals provide better or more efficient care than general hospitals with similar procedural volumes.'' In short, there is solid evidence that despite being less efficient, physician-owned specialty hospitals care for healthier, more-profitable patients, leaving community hospitals to care for sicker, less- profitable ones. Economic incentives toward physician self-referral in specialty hospitals are significant. And there is slim evidence that specialty hospitals provide better care than community hospitals. Given this evidence, it's clear that Congress should not facilitate the construction of more physician-owned specialty hospitals. And while we support ``grandfathering'' existing facilities, let me make clear that we do not intend to create another grandfathering period if the legislation is not enacted before June 8, 2005. The intent of this bill, even if it passes after June 8, is to effectively make permanent the MMA-mandated moratorium. But this bill does more than simply prevent the establishment of new, physician-owned specialty hospitals. It also takes steps to mitigate ill incentives in the inpatient PPS, by making the PPS more accurate for all providers of hospital care--community hospitals and `grandfathered' specialty hospitals alike. Medicare spends about $100 billion per year on inpatient hospital services, and it's important that this system be accurate. Accordingly, MedPAC recommended a number of steps to improve the accuracy of the Medicare inpatient payment system. These recommendations should mitigate incentives for all hospitals to choose healthy patients over sick ones, and to focus on some diagnoses at the expense of others. Medicare pays hospitals for inpatient services based on roughly 500 Diagnosis Related Groups (DRGs), which bundle services needed to treat a patient with a particular disease. DRGs cover most routine operating costs attributable to patient care, including routine nursing services, room and board, and diagnostic and ancillary services. Under current law, just over five percent of the base payment for all DRGs is set aside for inpatient outlier payments, even though some DRGs have almost no outlier cases. The Hospital Fair Competition Act directs the Secretary to adjust the DRG relative weights to account for differences in the prevalence of high-cost outlier cases, thereby removing their disproportionate impact on the payment system. The bill also improves accuracy of the DRG weights. Currently DRG weights are based on the national average of hospital charges for a particular DRG. The rate of growth for these charges may vary dramatically, depending on the service. For example, MedPAC has found that hospital markups for ancillary services (e.g., supplies, operating room time) tend to be higher than those of routine services (e.g., room and board, nursing care). As these ancillary and routine charges grow at different rates, the DRGs reflect that growth, gradually skewing the system away from the true costs of providing care. In short, a charge- based system causes Medicare to pay too much for some services, not enough for others. The Hospital Fair Competition Act directs the Secretary to substitute the charge-based system with one based on hospitals' costs, as well as base the DRG weights on the national average of hospitals' relative values in each DRG. Mind you, we believe that the Secretary currently has the authority to make the payment changes outlined above. The Hospital Fair Competition Act simply directs the Secretary to do so. We also believe the Secretary has the authority to promulgate regulations defining what a ``whole hospital'' is. When Congress passed the ``whole hospital exception'', it did not intend to allow self-referral to facilities that are effectively the equivalent of a hospital wing or department. We believe the Secretary can and should exercise his authority to close the ``whole hospital'' loophole by regulation. Mr. President, some say that the proliferation of physician-owned specialty hospitals is a function of physicians' desire for control over their workplace. They argue that physicians typically have no say in day-to-day hospital operations, and thus little incentive to improve the quality or efficiency of the care they provide in the hospital. MedPAC's recommendations for ``gainsharing'' stand to alleviate some of that concern, by giving physicians more control over their workplace. Gainsharing arrangements allow physicians and hospitals to improve hospital efficiency without the undesirable effects of physician self- referral. In a gainsharing arrangement, hospitals and physicians share cost-savings gained by means such as streamlining the purchase of medical devices, substituting less-costly items used in surgical procedures, and maximizing operating room efficiency. While gainsharing arrangements must be developed carefully so as not to compromise quality of patient care, gain sharing has the potential to align physician-hospital incentives so that care can be delivered in the most cost-effective manner. I realize that gainsharing arrangements are not a panacea toward improving physician-hospital relations. We can and should do more to give providers of all types a better stake in improving their workplace and the quality of care they provide. That's why I am pushing initiatives to tie Medicare payment to quality, so that--unlike the current system--the best providers are not paid the same rates as mediocre ones. This system of paying for quality stands to improve accountability across the spectrum of Medicare provider types, and give both patients and the government more for their money. We all know that Medicare's long-term fiscal future is much in doubt. Hardly a day passes without a warning about Medicare's finances and the retirement of the Baby Boom generation that will complicate the long- term financial picture of the program. Given these warnings, it's imperative that we make the most of the resources at hand, and--where possible--make Medicare a better more responsible buyer of health care. By leveling the playing field regarding patient referrals; improving the accuracy of Medicare's inpatient hospital payments; and giving physicians a larger stake in their hospital workplaces, this bill stands to do that. Chairman Grassley and I believe these changes will go a long way toward improving much of what ails hospital payment under Medicare, and we urge our colleagues' support for this important legislation.