Bob Graham

Mr. GRAHAM

Mr. GRAHAM. Mr. President, this is the last day of a long legislative season. We are about to take the month of August to go back to our home States, be with our constituents, and maybe have a little opportunity to get some personal relaxation and rejuvenation, and come back after Labor Day and complete this 107th session of Congress. It is exactly this time in the legislative calendar where maybe tempers and tolerance are beginning to wear thin and short. I share with my friend from Oklahoma high feelings for the persons who debated vigorously over the last 2 weeks on an issue whose importance we all understand and feel deeply about, which is the issue of providing a health care program to 40 million senior Americans by adding to that 37-year-old program, at long last, a prescription drug benefit. I think the goal is one we all share. We have somewhat different ideas as to how to get to that goal. The reason I came to the floor earlier today was out of, yes, a sense of personal attack but also a sense of the need to set a very obvious erroneous record somewhat straighter. My concern was piqued by a statement that was made which implied that I, Senator Smith, and others, tried to slip something by the Senate. And that ``something'' was not a small amount, but a very substantial, maybe as much as a $70 billion additional cost on the States according to my Republican colleagues. I knew that was not accurate because I had received from the Congressional Budget Office, which had scored our legislation, the fact that they had determined that, in fact, there was no additional cost to the States and I had made that representation to my colleagues. I felt my personal credibility was at stake. So I went back to the Congressional Budget Office today to recheck what they had said and they reaffirmed the statement that there was no additional cost to the States. I showed them this--

Mr. GRAHAM. But I think it is a given that no State is going to have zero savings. So that every one of these State-by-State numbers is overstated.

Mr. GRAHAM

Mr. GRAHAM. I think my integrity was impugned when it was suggested yesterday that we had slipped into this amendment, hoping it would go undiscovered, a provision that would end up costing the States some $70 billion over the next 10 years. That is close to a verbatim statement. That was made on the basis of this sheet which was printed and distributed on the Senate floor without a source and without anyone accepting personal responsibility. This is what I call Enron accounting. You only accounted for the additional cost to the States without any reference to the savings the States would get as a result of the Federal Government picking up substantial costs the States are currently incurring which the Congressional Budget Office has stated to be approximately equal to what the States would have to expend in terms of these new obligations. No reference was made----

Mr. GRAHAM

Mr. GRAHAM. Madam President, I have a somewhat longer statement I will deliver later, but at this point I will indicate clearly to my colleagues what exactly we are going to be doing in approximately an hour and 15 minutes. We will be voting on waiving the point of order that we anticipate will be raised against this amendment based on noncompliance with the budget resolution. Let's look at a few facts. In 2001, the Senate established, as the amount of money to be expended for a prescription drug benefit for 10 years, from 2001 to 2011, the number of $300 billion. That is the last budget resolution the Senate has enacted. The Senate Budget Committee, in 2002, reexamined what would be required for an adequate prescription drug benefit, and they recommended up to $500 billion, but that resolution has never been adopted. So 18 months later, we are being constrained by a $300 billion number, which has been found to be inadequate by the Budget Committee. The irony is that both the Republican proposal, the proposal of Senator Grassley and others, and the Graham-Smith proposal have a total expenditure of $400 billion minus. There is probably not a 2- or 3- percent difference in the amount of money the Grassley bill and the Graham-Smith bill have found to be necessary in order to provide our seniors an adequate prescription drug benefit. The issue of whether we are going to need to waive the Budget Act in order to get to the substance of this issue is one upon which both sides have agreed. So why do we not say yes, we have agreed that it is going to take more than $300 billion to have an adequate prescription drug benefit? Let's vote today to waive the Budget Act, and then we can have the full debate with amendments and all of the means by which Members of the Senate can express their specific policy positions on a variety of issues on this complex subject. If we cannot get past the Budget Act, the whole effort to provide 40 million Americans with some better access to a key component of their life and health will be again, for the seventh straight year, denied. I do not believe that is the record this Senate wants to go on. Let's have a vote to do what we have all agreed--that it will cost more than $300 billion to provide a benefit. Then let's move on to a discussion that justifies the title of this institution as being the world's greatest deliberative body. Let us deliberate. Let us not quibble over the issues of dollars for which there is no quibbling because we both agree as to what it is going to cost to provide this benefit. This is the last opportunity we are likely to have in 2002 to provide America's seniors this benefit. A vote against waiving the Budget Act is a vote for another year of denial. It is also a vote that when we come back next year, we are not going to be talking about the $400 billion that both sides have now agreed is necessary, we are going to be talking about a substantially higher number because of another year of prescription drug inflation and another year of that baby boom surge of entrants into the Medicare Program. If we think it is difficult today to vote to provide a prescription drug benefit, be assured it will be only more difficult every year into the future. I urge my colleagues to look at the reality of what we are doing and at least vote to waive the Budget Act so we can get on to a full debate on this issue.

Mr. GRAHAM. Pursuant to section 904 of the Congressional Budget Act of 1974, I move to waive the applicable sections of that act for purposes of the pending amendment, and I ask for the yeas and nays.

Mr. GRAHAM. Mr. President, we have a very simple message this morning. America's seniors now, for 37 years and 1 day--since 37 years ago yesterday was the day Lyndon Johnson signed the Medicare legislation into law--have been waiting for prescription drug coverage. It was a minor amount of their expenditures in 1965. On average, it was $65 a year. It is a staggering amount for seniors today--over $2,100 a year, on average. Today is the day that there are no more excuses for delay. There is no credible reason to vote against the motion to waive the Budget Act so that the Senate can then consider an affordable, bipartisan prescription drug proposal, and all of the modifications, amendments, and other alternatives that others might wish to propose. There have been a number of objections raised to our proposal--some of them last week--being contradictory to the same provisions or modifications that are in our current bill, and some new issues were raised this morning. Let me briefly comment. Last week, we heard that the prescription drug bill we had offered was too expensive, at an estimated cost of $594 billion for 10 years. We were told: we cannot support anything that is above $400 billion. So we went to work. We rolled up our sleeves, and we made a number of changes, and we have gotten the cost under $400 billion. In fact, the Congressional Budget Office states that in conjunction with the generic drug bill--on which our Presiding Officer has provided such leadership--the cost of our bill now will be $382 billion. So we have met the desire to have a less costly proposal. Now we are getting the other argument, that because it is less costly, it is not sufficiently comprehensive. Let me explain what this bill will provide, first, for all senior Americans. In my opinion, the most important thing it will provide is peace of mind. If you are a relatively well American in the early seventies, you have prescription drug costs you can manage. The problem is that you never know whether a day from now you might not suffer from some catastrophic event, such as a heart attack, or be found to have a chronic disease such as diabetes, which will suddenly escalate your prescription drug cost, potentially threatening the economic security of your retirement. This legislation will provide the peace of mind that will give you the assurance that, once having spent $3,300, you will get full coverage, but for a $10 per prescription copayment. That is a benefit of real value, which is available to all American seniors. The cost is $25 a year as an enrollment fee. There could be no greater bargain in the insurance market than to be able to buy the peace of mind of this catastrophic coverage for $25 a year. That is not all of the benefits that will be available to all senior Americans. Because we are going to have 40 million Americans with a champion, called a pharmacy benefit manager, negotiating with the pharmaceutical companies to get the best discounted prices, Families U.S.A., the Chain Drugstore Association, and the U.S. Department of Health and Human Services have all stated that, under our legislation, they estimate that these organizations would be able to negotiate discounted prices in the range of 15 to 25 percent. That will be available to all seniors. In addition to that, we are going to provide that there will be a 5- percent Federal supplement on top of whatever the discounted amount is. So there will be real benefits for all Americans. But we did have to make some difficult choices when we reduced the size of this program by over $200 billion. One of those decisions was that we would focus our effort on those who had the largest prescription drug bills through a catastrophic program that would be available to all, and we would focus on those who were the neediest Americans and, therefore, had the greatest difficulty paying their prescription drug costs. This business of life is a business of making choices, and we decided that those were the two groups that should get the most attention under the beginnings of a Medicare effort to provide prescription drug benefits. I might say that this is very consistent with what President George Bush said as ``candidate'' George Bush when he emphasized that he thought a prescription drug benefit was a priority for the Nation and that the priority within the priority was providing prescription drug coverage for those who were most in need. That is what we have done. For those persons who are under 200 percent of poverty--which today is 38 percent of America's 40 million Medicare eligibles--this will provide a very significant benefit; and with no premiums, with no deductibles, they will have access to prescription drugs for a copayment of $2 for generic drugs and $5 for brand name drugs. This will provide for the millions of senior Americans who are the most likely not to have any other source of assistance--they didn't work for an employer who provided retiree prescription drug benefits or they cannot afford a Medigap policy. This is the group of Americans who are at greatest need, and they will get the greatest assistance. There have been some other arguments raised today about the plan we are proposing. It has been suggested that there will be massive costs to the States as a result of this plan. Let me read you a statement we have just received from the Congressional Budget Office. It states: This plan will have almost no effect-- I would like my colleagues on the other side of the aisle to listen to this Congressional Budget Office release. This plan will have almost no effect on State spending and will have savings to States when combined with the underlying generic bill. There will also be savings for States that have their own State-funded drug programs. State savings come from the Federal Government paying all of the catastrophic benefits which are now paid by the State, as well as 5 percent of each beneficiary's drug cost, which is not subject to a match. This is not a new idea. We have a program that has been in place for several years called the QMBs and SLMBs program. Don't ask me what the acronyms fully stand for, other than that they provide Medicare assistance to pay premiums, deductibles, and coinsurance for low-income Americans who are still above the Medicaid level. That has not proven to be an unmanageable program for State-Federal cooperation, and neither will this. It has also been stated that previous employers will drop the insurance coverage of their retirees if we adopt this legislation. Quite to the contrary. The Congressional Budget Office, again, has stated that with our plan there would be no employer dropping of coverage, whereas with the plan that has been proposed by our colleagues on the Republican side, the same CBO estimates that up to one-third of the employers would drop prescription drug coverage. The issue today, frankly, is not any of the questions that have been raised in opposition to the thoughtful proposal that is the result of real compromise between Democrats and Republicans, a true bipartisan outreach. On many provisions of this bill, we have adopted language verbatim from legislation that was introduced last week by, for instance, Senators Hagel and Ensign. Senator Gordon Smith has worked in the highest standards of cooperation and collaboration to give this Senate an opportunity to vote on a solid, significant prescription drug benefit. What we are going to vote on in a few minutes is a motion to waive the Budget Act. How ironic. We have a Budget Act, which is 18 months old, that says the maximum amount we can spend on prescription drugs is $300 billion over 10 years. Both the Republican plan and the Democratic plan are above $300 billion, a clear recognition that people who have looked at what will be required to provide a prescription drug benefit have come to the same conclusion: we cannot provide a meaningful, responsible benefit to senior Americans for $300 billion. We are going to have an opportunity to vote to waive the Budget Act so we can then consider what would be a responsible prescription drug benefit, but unless we get 60 votes to waive the Budget Act, we will never get to the substance of this issue. I urge my colleagues to focus on the question that is before us: Should we maintain a slavish commitment to an 18-month-old number that both Republicans and Democrats have clearly indicated is inappropriate or should we waive the Budget Act and have an opportunity to have a full, substantive debate on prescription drugs? There have been some who said this is not the last time; that we can come back maybe in September or October, or some time in 2002, and act upon this. I admire their optimism, but as a pragmatist, I question the practical reality. In addition to the difficulty of passing legislation through the Senate, we know that we have to go to conference with the House, and the House is likely to have significantly different provisions, including different priorities in terms of where to place emphasis in a senior prescription drug plan for Medicare than the Senate will have. If we waste the month of August, which would be an opportunity for serious consultation between the House and the Senate, in hopes that in September we can arrive at a compromise that can be voted by the Congress and then signed into law by the President, we will have missed our greatest opportunity to achieve this long-sought goal of senior Americans. The real issue today is, we have a choice of saying, yes, we want to continue, we want to have the opportunity to develop a prescription drug benefit or we want to say no, that we are prepared to accept the status quo--another year in which senior Americans will be denied Medicare assistance in purchasing their prescription drugs, the fastest rising cost element in the typical health care budget of senior Americans. Mr. President, I urge my colleagues today to vote yes to waive the Budget Act and then vote yes to continue a serious, substantive debate on the issues involved in providing our senior citizens access to a meaningful prescription drug benefit. I would not like this debate to end in the ashes of a vote that says we are going to put a greater value on the homage to an archaic budget number, which nobody today is advocating as being adequate to meet the needs of senior Americans. That is the issue: Do we say yes to the opportunity or do we say no to further gridlock and denial of this critical element of a modern health care program? I thank the Chair.

Mr. GRAHAM

Mr. GRAHAM. I wish to express my appreciation for the graciousness of our colleague from Nevada for his very kind remarks. I share his sense of the importance of the debate we are about to begin. It is a debate which has been waiting for 37 years. As history would have it, it was exactly 37 years ago today, July 30, 1965, President Lyndon B. Johnson signed the law that created the Medicare Program. President Johnson did not sign the legislation in Washington, but he went to Independence, MO, the home of an American who had spent much of his political career attempting to secure a health care benefit for older and poorer Americans, President Harry S Truman, and his wife Bess. He wanted them not only to be able to witness the signing of the Medicare legislation, but President Johnson then went the next step and gave to President Truman and his wife the first two Medicare cards. President Truman had been fighting for decades for help for insurance for America's senior citizens, most of whom had been denied private insurance coverage because of preexisting conditions. In his remarks at the signing of the Medicare legislation, President Johnson declared: No longer will older Americans be denied the healing miracle of modern medicine. No longer will illness crush and destroy the savings they have so carefully put away over a lifetime, so they might enjoy dignity in their later years. No longer will young families see their own incomes, their own hopes, eaten away simply because they are carrying out their deep moral obligations to their parents and to their uncles and to their aunts. And no longer will this Nation refuse the hand of justice to those who have given a lifetime of service and wisdom and labor to the progress of this progressive country. There was one thing left out of the law President Johnson signed on that day 37 years ago. That was prescription drug coverage. Today, because prescription medications are so much more vital to health care in the 21st century and, frankly, because they are so expensive, we have the opportunity and the challenge to finish the job. Today we are poised to give this, the greatest generation, what they deserve. Today we can add a meaningful prescription drug benefit to the Medicare Program so that nearly 40 million older and disabled Americans who rely on Medicare are not choosing between medicines and the necessities of life. In 1965, the average older American spent on prescriptions $65. That was not $65 a week or $65 a month but $65 for an entire year. What is happening today, July 30, 2002? Today the average senior American spends $2,149 on prescription drugs each year. The average senior today has to worry about what will happen to his or her health and financial security if, like about 20 percent of Medicare beneficiaries today, his or her prescription drug needs escalate, grow to a level of $3,300 or greater. The average senior today has to work because the options for prescription drug coverage are few and those that are available are withering. Medigap coverage is expensive and generally is capped. Medicare+Choice coverage is available only to some, and it is almost totally unavailable in rural areas of America. Employer-funded retiree coverage has been shrinking dramatically over the last decade. The Senate has been debating a Medicare prescription drug benefit for the past 2 weeks. It has been actively considering such a benefit for the past 6 years. In 2000, I was proud to vote for a comprehensive prescription drug benefit for all Medicare beneficiaries. It lost. In 2001, I introduced another version of a comprehensive, universal bill. It lost. With my friends and colleagues, Senators Miller and Kennedy, I introduced an amendment a week ago today in hopes of again providing a comprehensive, affordable prescription drug benefit for all seniors. This proposal gained 52 votes, a majority of the Senate, but we did not have the 60 votes necessary to prevail against the point of order. What now? One thing we know, time is not our friend. It is certainly not America's seniors' friend. In another year, if we put this off from 2002 to 2003, the average senior will be spending $2,439 on drugs. If we wait 2 years, the average senior will be spending $3,059 on prescription drugs. In another year, the percentage of seniors spending more than $3,300 on drugs will not be the 20 percent today but will exceed 24 percent. By 2005, the number will have grown to about 35 percent of our seniors. In another year, Medigap coverage will be more expensive, fewer seniors will have access to Medicare+Choice, and fewer seniors will be covered by a previous employer's retiree program. There is no basis for delay. Whatever we do, the time to act is now. I am offering a proposal, and I am joined by Senators Gordon Smith--and I thank Senator Smith for the great contribution he has made to the development of this proposal--Zell Miller, who has been a stalwart for months in this effort, and Senators Lincoln, Bingaman, Kennedy, and Stabenow. Together, we are offering this amendment which will make a significant difference in the lives, the health, and the financial security of our grandparents, our parents, our aunts and uncles, our neighbors, the people we love the most, who will be affected the most by this legislation. The bipartisan Medicare Prescription Drug Costs Protection Act is estimated by the CBO to cost $390 billion over 10 years. It offers all seniors protection against catastrophic drug bills, and it provides special assistance for seniors with the lowest income. What will this plan do? First, for a low annual fee of $25, this legislation will offer all seniors who decide to voluntarily enroll up to 30 percent discounts and Federal supplements on the drugs they purchase--a very substantial benefit. This will also bring to all seniors the peace of mind in knowing, if I should have that heart attack, if I should be diagnosed with cancer or diabetes or any of the perils of old age, I will have, once I have paid $3,300 out of my pocket, or in conjunction with a stated prescription drug benefit, beyond that, I will have my prescription drugs paid, with only a $10 copayment per prescription. That will give enormous peace of mind to our seniors who are fearful of that catastrophic health event that will drive them into economic poverty. Moreover, this legislation will offer to those seniors who are the neediest, coverage for all of their costs. It will cover all seniors who are 200 percent, or lower, of poverty in their income. That means for an individual who earns less than $17,720, or a couple with an income of less than $23,880, all of their costs will be covered except for a copayment of $2 for each prescription which is generic, $5 for a brand name prescription. According to some recent information submitted by the Urban Institute, in the year 2002, a 200 percent of poverty standard would represent 47 percent of the almost 40 million Medicare beneficiaries in the United States. There is also an important consideration of the effect of this legislation on employers. Today, the largest segment of seniors who get some assistance with their prescription drugs, do so because a previous employer is providing that assistance. More people get assistance through that means than through a Medicare+Choice, HMO, or through a Medigap policy they have purchased. So it is very important that employers have a continuing commitment to participate in the health care costs of their retirees. I am pleased, therefore, to State that the Congressional Budget Office predicts that no employer will drop existing coverage because of the benefit that is in this legislation. This is a very important assurance for seniors who are receiving assistance today. I might say that competing plans have been evaluated by the Congressional Budget Office as causing up to one-third of the seniors who are currently receiving employer retiree benefits with their drug costs to lose those benefits. Is this proposal the perfect Medicare prescription drug benefit? I must admit it is not. I had hoped we could provide a more comprehensive and more affordable drug benefit which would be universally applicable to all seniors. This proposal is a responsible step towards providing what seniors want and need. While providing assistance for all seniors, it targets the seniors who need help the most--the sickest and those with the lowest income. There are always, here, voices for delay: Why do we need to do this on July 30? Why can't we wait? Why can't we wait until September? Or why can't we wait until next January? Why can't we put off the hard decisions? If we wait until January of 2003, and if we start this process again in the next Congress, and if we go to the Congressional Budget Office and say, then: Here is the same plan that was introduced on July 30, 2002; please tell us what it is going to cost over the next 10 years-- we have been told as of today it will cost $390 billion--the estimate is that same bill in January of 2003 will be given a 10-year cost of $470 billion. Why? Why in the world would the same plan just 6 months later cost approximately $80 billion more over 10 years? The answer is, the perfect storm of economic circumstances. It is the convergence of, first, the fact that the cost of prescription drugs, including both inflationary cost of the drugs, plus increased utilization has been going up at a rate of approximately 18 percent every year. You just ask the people who buy substantial amounts of prescription drugs what their costs are today in comparison to what their costs were just 12 months ago. And the number of seniors who will be participating is increasing dramatically. I was born in 1936. The year 1936 was the second lowest birth rate year in the 20th century in the United States. The reason? We were in the middle of a depression. Not very many families were adding to their size in 1936. So last November, when I reached 65, had I not been employed here in the Senate, I would have become a Medicare beneficiary. But you know what? I would not have had to have stood in a very long line to sign up because there are not a lot of people who became 65 in November of last year because there weren't very many people born in November of that year 65 years ago. But if we wait another 10 years, we are going to be on the leading edge of one of the most significant bubbles of population in the history of the United States of America. Today, we have 40 million Americans eligible for Medicare. Do you know how many Americans we are going to have eligible for Medicare in the year 2013? Fifty-one million. That is what is driving these costs. Every year that we delay, it becomes that much more expensive to initiate the program, to look at a 10-year window of how much this is going to cost. The time for the Senate to act is now. If we act now, in July, we will have the full month of August to work with our colleagues in the House where a bill has already been passed, a bill that is substantially different than the one we will be considering in this amendment but one which I think is the basis of reasonable compromise. Just a few hours ago the President signed corporate governance legislation. I know my good friend, Senator Smith, was at the signing of that legislation. I commend him for his role in the creation and passage of that legislation. Many people thought that it was going to be impossible to reach agreement between a different House bill and a Senate bill. But, in fact, it was only a matter of a few days when serious, conscientious people came to such an understanding. I believe we can do the same thing with our conference with the House on this legislation, but we need to use the month of August as the time to begin to build that consensus towards a common piece of legislation. There is no benefit in the cry for delay, delay, delay. We need every day that we can have to see that we arrive at a consensus that will lead the Congress to develop legislation which it can pass and the President can sign into law. We need to avoid adding yet another year of inflation and millions of additional seniors coming into the Medicare population, so we can pass this at today's price of $390 billion and not wait until next year when the same program is going to cost $470 billion. This is the type of good-faith compromise that I hope will bring all parties together. It has the best chance of becoming the law of the land and providing to our grandparents and parents and all of our loved ones who depend upon Medicare this critical additional benefit. In closing, I would like to remind all of you of something else that President Johnson said 37 years ago today when he signed the Medicare bill into law: Many men can make many proposals. Many men can draft many laws. But few have the piercing and humane eye which can see beyond the words to the people [those words] touch. Few can see past the speeches and the political battles to the doctor over there . . . trying to tend to the infirm; to the hospital that is receiving those in anguish, or feel in their heart the painful wrath at the injustice which denies the miracle of healing to the old and to the poor. This debate is not about specific concepts. It is not about economics. It is not about public administration. This debate is about real people, people, as President Johnson said 37 years ago, who served this Nation with honor and dignity. The lives of almost 40 million of our fellow citizens are going to be impacted by the vote we are going to cast today. They are America. On our behalf, I ask all our colleagues to support this legislation. On behalf of the cosponsors, I send to the desk the amendment and ask it be immediately considered. The sponsor's names are Senator Smith of Oregon, Senator Miller, Senator Lincoln, Senator Bingaman, Senator Kennedy, and Senator Stabenow.

Mr. GRAHAM. I ask unanimous consent the reading of the amendment be dispensed with.

Mr. GRAHAM. I thank my colleague and friend for his courtesy.

Mr. GRAHAM. Mr. President, I ask unanimous consent to have printed in the Record the preliminary Congressional Budget Office estimate of the proposal to establish an outpatient prescription drug benefit in Medicare.

Mr. GRAHAM. Mr. President, I suggest the absence of a quorum.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I ask unanimous consent to grant floor privileges to Dr. Louis Kazal, a health fellow from the office of Senator Kent Conrad, for the duration of debate on S. 812 and related amendments.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I also appreciate the kind remarks of the Senator from Utah and hope that he will open his Congressional Record tomorrow and will read the remarks that I am going to be delivering shortly, as we both share a very strong interest in the same destination, which is to assure that the 40 million Americans who are currently benefitting by Medicare will see in this year a fulfillment of a long held aspiration, which is to expand Medicare benefits to include prescription drugs.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, along with my colleague, Senator Gordon Smith of Oregon, and a number of other Members of the Senate, earlier today I introduced an amendment which will be debated beginning at 9:30 tomorrow, and voted on at 11 o'clock. I would like to use this opportunity to briefly summarize some of the elements of that amendment, and then use that as the basis to respond to some comments which have been made questioning the desirability and appropriateness of passage of this amendment. Our amendment has a simple objective. It is to bring Medicare into the 21st century by providing for it what virtually every private health insurance plan has--coverage of prescription drugs. When Medicare was established in 1965, prescription drugs were a relatively minor part of a comprehensive health care program. In fact, it is surprising to know that in 1965 the average senior American spent $65 a year on prescription drugs. That number has increased 35 times to over $2,100 as the average amount that senior Americans are spending this year on prescription drugs. Our objective is to provide a modern Medicare Program by providing a critical missing element from the current program. In our debate a week ago, there was a great deal of concern about the cost of the plan. I introduced a plan which would have met fully the standards of universal coverage, comprehensive in terms of drugs covered, and affordable to the beneficiary. That plan received 52 votes, which obviously is a majority of the Senate. Unfortunately, we weren't debating under the rules of majority rule. We were debating under the rules that said you had to have 60 votes in order to overcome procedural hurdles. We fell short of those 60 votes. One of the reasons given for not voting for our plan was that it was just too expensive; it had to be reined in. So we spent the last week reviewing our proposal to see what we could do in order to make it more acceptable to our brethren so that we can get the 60 votes. I want to again recognize and thank my colleague, Senator Gordon Smith, for the great contribution he has made in accomplishing this task. But one of the things we did was to say we are going to develop a plan which would cost no more than $400 billion over the next 10 years. We received today from the Congressional Budget Office their scoring of our plan where they found the plan actually had a cost of $389 billion over the next 10 years. We thought that would be a goal--holding the cost to under $400 billion that would result in the support of people who had not voted for our bill last year, saying: This is a proposition for which I can vote. Unfortunately, we didn't get that reaction. But we got the reaction that challenged the Congressional Budget Office, and whether it had accurately scored our bill. That is a little bit like challenging the umpire in a baseball game you think is not calling the ball in the strike zone. We decided, just like the American and National leagues decided, that we were going to have an umpire for our deliberations, including an umpire for our deliberations over a whole variety of spending, tax, health care, and other proposals that are going to cost the Federal Treasury. The Congressional Budget Office is that umpire. They have looked at our plan. They have given it a score of $389 billion. It is interesting that the same persons who were challenging us and who offered a competing plan have not received a Congressional Budget Office estimate of their cost. We don't know what their plan is going to cost when the common standards of evaluation are applied. The one that will be before us tomorrow has a Congressional Budget Office estimate of $389 billion. The second thing we did was we looked at the architecture of the bill. We said we would like to have universal coverage, but we don't have enough resources to provide meaningful universal coverage. So we have two basic choices: One, you can put water in the soup, make it thinner, and spread it out over more people or you can say, no, we are going to identify those Americans who are most adversely affected by the Medicare benefit for prescription drugs. We identify those people as being in two groups. One is those older Americans who have unlikely high prescription drug bills. I mentioned earlier the average senior American is a little more than $2,100. We set the standard of $3,300 for catastrophic. That is when the cost of prescription drugs becomes beyond what you can expect many senior Americans can pay. Remember, the average income for senior Americans this year is about $14,000 to $15,000. Second, we said the next group we would like to help is the neediest, those who have the lowest income; and, therefore, the cost of prescription drugs takes a disproportionate amount of their meager income. We also said, however, there should be some benefits that all of America's seniors can secure. For that group of Americans, we are going to provide the opportunity for a modest $25 a year enrollment fee to get a card, which will entitle them to get the benefits of pharmacy benefit managers, who will negotiate with the pharmaceutical companies to get discounted prices, which will then be made available to the Medicare beneficiaries. In order to assure that those PBMs will be part of this and that all the seniors will get even beyond what can be negotiated, we are going to provide a 5-percent supplemental reduction of the cost. For example, if a senior had the standard cost of $100 for a particular prescription, PBMs are estimated to be able to negotiate between a 15 and a 25-percent discount, so assume they can get 20 percent; that would reduce the cost of the drugs to 80 percent. Then the Federal Government would pick up 5 percent of that cost, or $4, so that the senior, instead of paying $100, would be paying $76. That is not an insignificant benefit. That same senior would also have an insurance policy against catastrophic losses at $3,300. The peace of mind, the reduction of the fear of what the consequences would be if a healthy senior has a heart attack or develops some other serious chronic disease, where suddenly their prescription drug costs are escalating, this will give them that peace of mind. There was another objection raised to that format that I just outlined, and that is, for the first time in the history of Medicare, we are going to be making a differential; we are going to be recognizing these Americans who have the lowest income among the 40 million seniors and give them some special benefits to help them, because they are the neediest of our seniors, to be able to meet the cost of their prescription drugs. I plead guilty. We are doing that. We are saying that the poorest of America's seniors, which we define as those who are at or below 200 percent of poverty, will get prescription drugs from the time they enroll in this program, with only a modest copayment of $2 for generic drugs and $5 for brand name drugs. It is said this is the first time we have ever split the Medicare population and provided such special treatment for a class; in this case, a class defined because of the level of their need. That is not true. In fact, we have a number of examples in Medicare today where we are providing different benefits based on income. Just to mention two of those, we have a program called SLiMBies and QMBies. SLiMBies are for those Americans who have an income between 100 percent and 120 percent of poverty. For those, there is a payment of the Part B premiums, which today are running approximately $50 a month. The Federal Government picks up the cost of those payments for Americans between 100 and 120 percent of poverty. For those who are at or below 100 percent of poverty, we not only pay for their premiums, we also pay for their deductibles and their coinsurance. So America, a compassionate society, has had a history of recognizing the special circumstances of the neediest of our elderly. We will extend that policy by the amendment which we will vote on tomorrow. We will have, as the delivery system for this drug benefit, Medicare as we have known it, Medicare as it has served the interests of senior Americans for 37 years. There are some who say that is an out-of-date system; it is an antiquated process, that we need to get private insurance to deliver prescription drug benefits. That was an intriguing idea, so I began to ask: What is our experience with private insurance delivering a prescription drug benefit? In fact, I had the conversation with a number of pharmaceutical company executives who have been a primary advocate of this plan, private insurance delivering prescription drug benefits. I asked: How do you, and how do your employees, get their prescription drugs? They said: Well, we have a contract with an insurance company that provides for the health care coverage of our employees, including myself and they, in turn, contract with a pharmacy benefit manager to administer the drug component of our health care program. I said: No. Do you have, for the drug component of health care for your employees, a separate program with a separate private insurance policy? They said: No, we don't have such a program. In fact, I don't think one exists. Do know what. They are right. One does not exist. Nobody is offering a prescription drug-only private insurance policy, which is what some would say should be the method by which we deliver prescription drugs to 40 million older Americans. I would analogize it to putting those 40 million older Americans on the Wright brothers first flight at Kitty Hawk. Do you want to really experiment with such a significant part of the health care of older Americans when nobody in any other sector, public or private, is using such a plan? I don't think that is a very prudent or conservative idea. Why are there no insurance companies that are providing a drug-only prescription benefit? The answer is: Because they say it is not an insurable risk. It would be the same answer that you would get if you were to ask: I own a house, and I want to buy fire insurance, but I only want to buy the fire insurance to cover the kitchen, or I have a rear bedroom which is next to an old and creeky tree that might fall over and crush the roof in a wind storm, so I only want to cover that back room. The insurance company would turn you down. They would say: We are not going to insure a specific room within your house; we will insure your whole house and take the total risk, but we won't let you parcel it out piece by piece. That is the same answer as to why no private insurance company today is providing a prescription drug-only benefit. They will insure your whole body. They will insure all of the health care that you might require. But they will not break it down into individual fragmented pieces, such as a prescription drug-only insurance policy. There are some other concerns, such as if you were to go to a private insurance policy, you would run very strong possibilities that there would be big sections of the country that would not be covered because they have populations that are peculiarly expensive. One of those which we are already seeing in the whole body of insurance called Medicare+Choice--an HMO that insures not just prescription drugs but all of your health care needs--is almost nonexistent in rural America. Why are they not in rural America? It is not because there are not doctors and hospitals and other facilities that can treat people in rural America. It is because the population of seniors in rural America is actuarially expensive and, therefore, an unattractive population to insure and treat. According to a 1998 report by the Kaiser Family Foundation, rural beneficiaries are 20 percent more likely to be in fair or poor health than their urban cousins. Rural seniors are 20 percent more likely to be under 150 percent of the Federal poverty level than their urban cousins. A study that was done in June of this year by the National Economic Council said that rural beneficiaries are 50 percent less likely to have drug coverage compared to their urban counterparts, which probably means they are less healthy because they have not had equal access to drugs. They use 10 percent more prescriptions than urban seniors, and nearly 60 percent of rural beneficiaries reported not being able to purchase drugs because of their cost. We know from our experience with Medicare+Choice that HMOs will not accept the risk of covering this urban population. What leads us to believe they are not similarly going to be left behind with this effort to have prescription drug only insurance policies? I think the answer is, unfortunately, they will be left behind. This last issue is not really a debate about drug coverage. It is a debate, rather, about Medicare itself. Shall Medicare continue to be a universal program that is administered through the Federal Government or shall it be a program whose administration will be privatized? That is the debate. We know there are people in this Chamber and particularly the predecessors who were here in the 1960s who thought that Medicare would fail, that it was not a sustainable system. I say quite to the contrary, Medicare has delivered on its promise of substantially increasing the health and welfare of older Americans. That brings me to my concluding observation which is that today is a fortuitous day to be having this debate because it happens to be the anniversary of Medicare. On July 30, 1965, then-President Lyndon Johnson went to Independence, MO, the home of President Harry Truman, a man who had spent much of his political career advocating for the needs of senior Americans and particularly access to affordable health care. So it was fitting and proper that President Johnson signed the bill at their home and then gave the first two Medicare cards to President Harry Truman and his wife Bess. That is the tradition we have had, a great tradition of service, respectful and compassionate, to America's seniors. We would honor that tradition if tomorrow we adopt the amendment which will for the first time in its history expand a prescription drug benefit for the beneficiaries of Medicare. It is a step which will not only honor those who 37 years ago championed this program, but it will also honor those who are served by it today, our grandparents, our parents, our family, and friends who look to Medicare as the means of securing their health care. Those are the people for whom we will be voting tomorrow. I hope my colleagues will grasp this opportunity to see that we bring Medicare into the 21st century.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I rise to respond to criticisms raised about the availability and cost of drugs under the Democratic proposal. The minority leader has distributed a memo in which he cites selected provisions of our bill to come to a false conclusion about the access seniors would have to prescription drugs. I want to set the record straight. Under the Democratic proposal, all medically necessary drugs would be available to our seniors at a rate of no more than $40 per prescription for the year 2005--all medically necessary drugs, not just the drugs that are on the preferred list. The sections of the amendment Senator Lott chose to omit make clear that every senior would have access to any drug that is medically necessary for that senior. Seniors are further protected because the Medicare Program would assure that the definition of a class of drugs is clinically appropriate. To the contrary, the Republican bill allows the drug HMOs to define the classes of drugs and, further, on page 32 of their amendment, clarifies that not all drugs within a class would have to be covered. Senator Lott may want to take a closer look at the Republican language given his concerns in this area. Under the Democratic proposal, seniors will know in advance exactly how much they will pay for any drug. In 2005, they will never pay more than $10 for a generic and $40 for a medically necessary brand name drug. Under the Republican plan, there is no way of knowing how much a senior would pay for a specific drug because there is no defined benefit in the Republican plan. Who makes the decisions? The drug HMOs make the decision. They choose how much the beneficiaries will pay, what the deductibles will be, and how much they will pay for each prescription in coinsurance. It could be 50 percent, which is what their charts say. It could be 80 percent. It will be determined not by the seniors, not by Medicare, but by the drug HMO. I urge my colleagues to consider carefully the differences between the Democratic and Republican bills. Our bill uses the Medicare Program, a tried and true delivery system, to provide prescription drugs to our seniors. The Republican bill privatizes Medicare and requires seniors to get their drugs from a drug HMO--if they can find one in their State. Our bill assures that seniors in rural America are guaranteed the same benefits provided to senior Americans elsewhere in this country. The Republican bill abandons rural Americans. Our bill gives seniors an affordable drug benefit and guaranteed prices. The Republican bill lets private insurers decide what drugs are covered and how much seniors will pay for each prescription. Our bill uses every taxpayer dollar, every dollar paid by the beneficiary in monthly premiums to lower the cost of prescription drugs for seniors. The Republican bill uses taxpayer dollars and premium dollars to lure uneager private insurers into a market for which today there is no private insurance being offered. Our bill is a bill for seniors. The Republican bill is a bill for drug companies and private insurers. The differences between the bills will make a very real difference in the ability of our seniors to afford the prescription drugs they need, and enjoy the improved health that those drugs will bring. I urge my colleagues to support the Graham-Miller-Kennedy Medicare prescription drug benefit. In the event that none of the proposals that will be voted on this afternoon garner the necessary votes to move forward, I urge my colleagues to roll up their sleeves and begin work immediately on a proposal that can be adopted this year. The outcomes of the votes today should not be viewed as a trumpet of defeat, but as an even more urgent call to find a proposal this year, in 2002, that will bring our seniors the drugs they need, the drugs that we have promised, the drugs a compassionate America will provide to this, our greatest generation.

Mr. GRAHAM. Mr. President, I yield myself 4 minutes, after I ask unanimous consent that Senator Dayton be added as a cosponsor of this amendment.

Mr. GRAHAM

Mr. GRAHAM. Senator Kennedy has talked extensively about the assets test, so I mention it briefly. It is a mirage to tell low-income seniors they are going to get access to the benefits of reduced or, in some cases, no copayments because of their limited income when we then impose, for the first time in the history of Medicare, an assets test that says if you own something as basic as a $1,500 burial fund, so she might be buried next to your loving spouse, that makes you ineligible to get any of the low- income benefits. It has been estimated that one-third of the 11 million seniors who would otherwise qualify for some special assistance because of their low income would be denied that assistance because they would not comply with the assets test. I will briefly touch on some of the criticisms the Republicans have made about our plan: First, the plan is too costly; that we cannot in our rich society afford to provide to our older citizens what is now a fundamental part of a comprehensive health care program. I do not believe that is the America we live in today. The Republicans have thrown around some numbers as to what our bill will cost. Let me say that we have a CBO number, a Congressional Budget Office number, which they do not have in their plan. It is that, assuming that the underlying generic drug bill is passed, which will encourage generic drug use, our plan for the first 8 years will cost $407 billion and for the full 10 years will cost $576 billion. Is this a cheap proposal? The answer is: No. A cheap proposal means meager benefits, less than universal coverage, less than comprehensive coverage. That will not do for America's seniors. But rather than looking at the cost of our drug proposal in isolation, let's put it in context. What are we currently paying? What percentage of the cost are we paying for all the other health care benefits that seniors receive through Medicare? The answer is approximately 77 percent. That is what we are paying for doctor care, hospitalization, all the things that Medicare covers. If we were to cover 77 percent of prescription drugs, this plan would not be costing $594 billion over the next 10 years. It would cost more than $1 trillion over the next 10 years. We also maybe should look at ourselves. We are all participants in the Federal Employees Health Benefits Plan. If we were to give seniors the same benefits that we get as Members of the Senate, with an average income that is 10 times what the average income of senior Americans is today, this plan would cost $750 billion. We are talking about, over 10 years, $596 billion. The reality is that the benefits of prescription drugs do not come cheap. The cost of prescription drugs is the fastest growing component of every health care plan, the private sector, the public sector, and it will be a significant part of any decent Medicare prescription drug benefit. That is what the debate that we had last week was all about. Are we going to pass generic drug, patent reform, reimportation, State group purchasing--all of which are designed to give to all Americans, including senior Americans, greater access and affordability to a very expensive part of our national budget today, prescription drugs? The reality is the plan that our Republican colleagues have offered will cover less than 25 percent of seniors' drug costs. That is based on the latest estimate that their plan will cost, in the range for prescription drugs, of $330 billion to $340 billion. And the total drug expenditures by seniors over the next 10 years will be $1.3 trillion. Our plan would provide almost twice the amount of coverage as the Republican proposal. It would provide $594 billion of the $1.3 trillion that seniors are going to spend on prescription drugs in the next 10 years. In my opinion, as costly as this is, it is not an extravagant benefit. It is far less than the 77 percent that we are covering for other medical services, and it will provide critical assistance to our seniors. It has been argued that seniors would pay more in copayments. The reality is seniors prefer to have their drugs acquired through a known amount per prescription, rather than through the unknown of a percentage of an unknown actual amount. If seniors go to the doctor and get a prescription, they are unlikely to know what that prescription is going to cost. But they do know if it is a generic drug it is going to cost them $10, and if it is a brand drug it will cost them $40. They like that degree of reliability and security. It has been said that this is a Government-run price control system. This is not a new argument. It is not an argument about prescription drugs through Medicare. This goes to the heart of whether America should have a Medicare Program at all. This debate was ongoing before Medicare was adopted. It was an argument which kept Medicare from being adopted for many years. And it has been an argument that has continued since Medicare was established in 1965. We should not forget that Republicans voted against the creation of the Medicare Program in 1965, and they have made their thoughts about Medicare very clear since then. Just listen to some quotes by prominent Republican leaders. In 1995, then-majority leader of the Senate, Senator Bob Dole, said: I was there fighting the fight, voting against Medicare in 1965 because we knew it wouldn't work. Former Republican Speaker Newt Gingrich, speaking on Medicare in 1995, said: Now we didn't get rid of it in round 1 because we don't think that it's politically smart and we don't think that's the right way to go through a transition. But we believe it is going to wither on the vine because we think people are voluntarily going to leave it. Republican House majority leader Dick Army said Medicare was ``a program I would have no part of in a free world.'' He deeply resents the fact that ``when I am 65 I must enroll in Medicare.'' Somebody should tell him that Part B of Medicare, as well as this drug benefit, are voluntary. If he chooses not to enroll, that is his election. I have news for my Republican colleagues. The Medicare program, as it is administered, has worked. Let me tell you a few of the successes. Since its creation, Medicare has provided health care coverage for more than 93 million elderly and disabled. Medicare has made a dramatic difference in the number of seniors with health insurance. In 1964, the year before Medicare, half the seniors were uninsured. Today, 97 percent of seniors have health insurance. Medicare has lifted countless seniors out of poverty, has expanded access to high- quality care for minority seniors, has improved the quality of life for seniors by providing access to procedures such as cataract surgery, hip replacement, cardiac bypass surgery, and organ transplant. We have the Medicare Program in part to thank for increasing the average life expectancy available to Americans. A 65-year-old woman who is entering Medicare today will live 20 percent longer than her counterpart who became 65 in 1960. It is Medicaid, making the miracles of modern medicine accessible and affordable, not private insurance, that made these advances possible. It wasn't private insurance plans that stepped to the plate in 1965 to provide health insurance coverage for seniors. In fact, they didn't want to cover seniors. That was why Medicare was established. I wish I had time to go into more detail on some of the reactions of seniors toward these plans and why virtually every major senior group has supported our plan. I wish I had greater opportunity to respond specifically to the concerns of the Senator from Mississippi, and hope I will have such an opportunity before we vote. But let me just conclude. This debate is not about programs. This is not about charts. This plan is about human beings, our parents and our grandparents. It is about working Americans who are paying the cost for their elderly family members' prescription.

Mr. GRAHAM. Madam President, I hope the minority leader might be able to stay on the floor so he would not run the risk of being unable to sleep tonight, as he tosses and turns, concerned about the fact that we have provided, as almost every private health care plan does provide, for a specific formulary as to what will get the benefit of the preferred $40 deductibles. At an appropriate time in my remarks, I am going to go into this in more detail, and I will also direct the Senator's attention to other language in the pages from which he was quoting, which indicates that we are sensitive to exactly the concerns he has expressed; we have, in fact, provided a means by which other drugs that are found to be clinically necessary would be added to the list of those which could be secured at the $40 copayment level. I think the Senator from Mississippi will find many of the remarks I am about to make to be informative, insightful, possibly requiring a reassessment of position and hopefully tomorrow at 2:30 p.m. to see him march proudly to the front of the Chamber and cast a vote in favor of the Graham-Miller-Kennedy bill. We would be honored to have that vote and would even keep the list of potential cosponsors open for his possible signature. One of our colleagues has specifically asked that I request unanimous consent that he be added as a cosponsor: Senator Akaka. I make such a request on his behalf.

Mr. GRAHAM. That is true, I say to the Senator. What you have just said contributes to a recent poll, done by the Kaiser Family Foundation in May of this year, which asked Americans: Which kind of plan did they want? For Republicans in America, 58 percent said they wanted a defined benefit plan; only 33 percent wanted the Republican plan as is offered today. Among Democrats, 71 percent wanted a defined benefit and 23 percent preferred the Republican plan. Among Independents, 72 percent-- even more than Democrats--wanted to have a defined benefit plan delivered by Medicare as a means by which they would get their prescription drug benefit.

Mr. GRAHAM. There are two rates. One is what I would call the retail rate, and the second is the wholesale rate. Insofar as the overall expenditures for individuals, if it is determined that individual requires a specific drug, which is not on the formulary, and it is medically necessary for that individual, then that particular drug will be treated as a preferred drug. Therefore, the maximum amount of copayment would be $40. But, on the wholesale level, if you would turn to page 62 of our legislation, it says that at least one but no more than two brand-name drugs shall be included for each therapeutic class unless--this is line 2 through 4--the Secretary of the Department of Health and Human Services determines that such limitation is clinically inappropriate for a given therapeutic class. If the Secretary of HHS determines that, let us say in the area of antidepressants, there needs to be more than two in order to be clinically appropriate, he or she has the authority to order that there will be whatever number of drugs within that therapeutic class are required. Let me point out, as the Senator already knows, that because of the defined contribution nature of the Republican plan, there is no assurance that even two drugs in any therapeutic class will be offered under their plan. As I understand it, the insurance companies, rather than the Department of Health and Human Services, will determine what the therapeutic classes will be. So one insurance company may say, we will use a very broad definition of therapeutic class, another may use a narrower definition, and, therefore, affect the number of drugs that are realistically available.

Mr. GRAHAM. Again, it is a leap of faith as to what you are going to have, whereas ours is a defined benefit.

Mr. GRAHAM. Mr. President, I appreciate your indulgence and my colleagues' indulgence. I hope tomorrow we will grasp the rare opportunity we have to give greater security and comfort to our senior citizens by their knowledge that they will now have affordable and accessible opportunities to experience the miracles that prescription drugs make available, and that they will be there for them in a reliable manner, in a manner with which they are familiar--tried, tested, and assured.

Mr. GRAHAM. Mr. President, one of the enigmas about Medicare and why it has fallen so far behind other major health care plans, such as the one that the Senator and the Senator from Maine and I participate in, along with Federal employees--one of the reasons is the system was established in 1965 and has not been forced to defend itself by making those changes which are required to continue to be a modern health care system. It is not only the absence of prescription drugs but the whole array of preventive measures. You would be shocked and appalled to know that, for instance, illnesses such as prostate and various forms of cancer for females, as well as colon cancer, have only in the last few years been added to the list of preventive services available through Medicare, and that a long, long list of items continue to be uncovered. If we had had a requirement that forced us to periodically look at this program as we, for instance, are now looking at Welfare to Work, which in 1996 said after 6 years it had to be reexamined and reauthorized--we are going to do so, and I think it will be a better program because it wasn't on autopilot. It had some real thoughtful considerations, analyses and improvements.

Mr. GRAHAM. The answer is no. It is because they start from a fundamentally different position. Our bill is what would be described as a ``defined benefit.'' You know what you are going to get, and you can rely on it. The Republican bill is a defined contribution. The Federal Government will subsidize private insurance companies, if some can be found that would be willing to provide a prescription drug-only benefit. Therefore, it is going to be up to the insurance companies to say what the monthly premium and the deductible will be. This is a chart which talks about what the costs would be for some of the major brand-name drugs. We can tell you with precision what they will be under our plan. A whole period of question marks are under the Republican plan because the insurance company can say we may cover 50 percent of the cost, or we may only cover 40 percent of the cost, or we may only cover 25 percent of the cost. It is up to the insurance plan.

Mr. GRAHAM. I thank the Chair. Last Thursday, the 18th of July, Senators Kennedy, Miller, Corzine, and I offered this amendment to provide affordable, comprehensive, and reliable prescription drug coverage for the 39 million older Americans and disabled citizens who are currently covered by Medicare. I have an interest in all Americans who will benefit by the adoption of this proposal. I have a particular interest in the 2,750,000 of these Americans who call their home Florida. I do not wish to repeat the remarks I made last Thursday, so let me just recap some of the principles that we think are important and should be the touchstone in evaluating any plan that is proposed for prescription drugs. We believe these principles include: a modernization of the Medicare Program; providing beneficiaries with real benefit; giving to the beneficiaries real choices; using a delivery system that seniors can rely upon and is affordable for the beneficiaries; and a program which is fiscally prudent. I also outlined last Thursday our specific proposal and indicated how it complied with those principles of a prescription drug program for Medicare. What does our proposal provide? We guarantee a universal benefit to all seniors, no matter where they live; that if they determine it is in their interest to voluntarily elect to participate in the prescription drug plan, they would pay $25 per month for that participation. Having done so, assistance would begin with the very first prescription. There is no deductible. They would pay a predictable copayment. For the year 2005, the first year that this program would be operational, the seniors would never pay more than $10 for a generic drug and $40 for a medically necessary brand-name drug. Medicare beneficiaries can also rest easy knowing that they would never pay more than $4,000 in a year for their prescriptions. Seniors with incomes below $13,290 for an individual and for couples below $17,910 annual, if that is your income, then you would receive additional assistance, including the waiver of copayments for those who are below 135 percent of poverty. We would also be able to guarantee that this benefit would be available to all seniors because we use a system to deliver the drug benefit that is as tried and true as the 37-year-old Medicare Program itself. It is the same system that you and I and all Members of the U.S. Congress use to receive their prescription drugs through the Federal Employees Health Benefits Program. We rely on pharmacy benefit managers, or PBMs, to deliver and manage our drug benefit. PBMs are private commercial companies that negotiate with the pharmaceutical companies to get discounted prices. These companies are currently providing drug benefits through public and private employer plans in every zip code in America, and they would work as well for our seniors as they do for Federal employees, private sector employees, and Members of Congress. What I wish to do this afternoon is focus first on what I think are some of the key concerns raised by the Republican plan and then respond to some of the questions which have been raised, such as the questions raised by the Senator from Maine, who is in the Chamber now, and the Senator from Mississippi. These key problems raised about the Republican plan include its reliance on a yet-to-be-created delivery system, the gaps in coverage, and their test of beneficiaries' assets, which will make it difficult, if not impossible, for many of our low-income seniors to get the drugs they need because even though they will qualify for special assistance based on their income, they will be rejected because they have too many assets. Let me discuss each of these principal flaws in some detail. Our Republican colleagues have criticized our proposal for being an integral part of the Medicare Program. Instead, they would use the prescription drug benefit to begin privatizing the Medicare Program; they would give the important task of delivering prescription drugs to private drug HMOs. I have grave doubts about the private insurance model for prescription drugs for the very basic reason that it has never been done this way. There is no place we can turn to say: How has a private insurance subsidized plan for only prescription drugs worked? If there is such a plan, if there is someplace that we can turn to inform our judgment on this, I would ask for the name of the company, its address, and its telephone number so we might call and ask some of the questions that concern us about how such a plan would work. I am afraid we will find there is no name, there is no address, and there is no telephone number. Private insurance plans have had every opportunity to offer drug-only insurance plans, and yet not one has stepped forward to do so. Private insurers simply have no interest in providing drug-only benefits. Why are they not interested in drug-only benefits? Let me use an analogy to the private insurance market as it relates to casualty insurance. Most of us who own a home have insurance on that home to cover risks, such as fire or windstorm damage. You can call State Farm and ask whether it would offer a kitchen-only casualty insurance policy, or would it offer a policy that would only cover that back room which is next door to an old and frail tree that might blow over in a storm and fall on the rear of the house. The answer to that is obviously no. State Farm and any other casualty insurance company would consider insuring your whole house, but they are not going to insure a specific room and particularly a room that is probably more vulnerable than other parts of the house. This is exactly what is being asked of insurance companies as it relates to offering a prescription drug-only plan. Prescription drugs happen to be the fastest growing segment of total health care costs in America. When Medicare was established in 1965, the average older American spent $65 on prescription drugs. I am not talking about $65 a week or $65 a month. I am saying $65 a year was the average amount that seniors spent on prescription drugs. That number has increased by a factor of 35 in the history of Medicare, the fastest growing segment of health care in America. That is why insurance companies have been unwilling to offer a prescription drug-only private insurance policy. This is what we are going to require as the model for delivery under the Republican proposal. About a year ago, I invited a group of chief executive officers of pharmaceutical companies to come into my office to talk about the various plans and specifically the method of distributing prescription drugs. I asked these executives a fairly simple question: How do your employees get their prescription drugs? Do they get them through a drug-only private insurance plan? Do you rely on drug HMOs for your employees, for you and your family to get these drug benefits? The answer from each of the CEOs was the same. No. Why not, I asked. The answer was: No such plan exists. So I asked this question: Why do we want to impose this untried system on our Nation's seniors? Why should they be the guinea pigs in some vast theoretical laboratory experiment of a plan that has never been tried? I am particularly concerned about how the Republican HMO drug plan will work in rural areas of which, in my State, in the State of the Presiding Officer, in virtually every State, is a significant amount of our population. We have to look no further than the Medicare+Choice system--these are the full Medicare HMOs--to see how rural areas would likely fair. According to the Congressional Research Service, 94 percent of Medicare beneficiaries in rural areas have no access to Medicare HMOs. Why is this the case? In significant part, it is because rural beneficiaries on the whole tend to be older and sicker than other senior Americans. Therefore, it is more difficult for a private insurance plan to spread its risk. Most of the beneficiaries served in rural areas are considered high-risk beneficiaries. A likely result of the prescription drug model that relies on drug HMOs is that seniors in rural areas will pay higher premiums than beneficiaries in urban areas, if they are able to get any coverage at all. In addition to questioning whether a drug benefit would actually be available if we rely on drug HMOs as proposed by our Republican colleagues, I have great doubts about the affordability of any benefit that is offered. Why is that? Because the drug HMOs get all the choices when it comes to the benefit they would offer. We cannot tell our seniors what the Republican prescription drug benefit is. No place in their bill does it tell us what premium the seniors will be charged. It does not say what the deductibles and coinsurance levels will be. They are only ``suggestions.'' My Republican colleagues talk about providing choices. What they do not tell us is they give all the choices to the private insurance companies. Under the Republican plan, our seniors will pay different premiums depending on where they live. Under the Republican plan, the drug HMOs determine what the premiums will be, not the Medicare Program. If it is not troubling enough that the insurance industry would be making these choices about what the premium is, what the deductible is, what the cost sharing will be, consider this: The Republican plan would spend precious resources to lure private insurers into the market. Instead of using these resources, Federal dollars, Federal taxpayer dollars, to ensure an affordable drug benefit for all seniors, they would use them to induce private drug HMOs to participate in the system. My concerns about the Republican plan are not based on speculation but on lessons learned in Nevada, which began offering seniors a drug benefit. The Nevada plan, while it has significant differences, is the closest example we have to the Republican plan that will be voted on tomorrow. We know from Nevada's experience that what seniors want is an affordable drug benefit, not a requirement that they analyze multiple and confusing plans with different premiums, deductibles, and cost sharing. Let me give this piece of history: When the State of Nevada originally offered seniors a multiple choice plan of drug benefits, how many seniors in Nevada signed up for the plan? The answer is 124. That was the total number of seniors in a relatively large State in our Nation who wanted to sign up for this multiple benefit plan. When the program was restructured and seniors were given one defined benefit plan, when they knew what they were going to get, how many people enrolled? Over 6,000. We also know from Nevada's experience that private insurers will not participate in the Republican model unless there are high profits to be made, dollars that could have been used to make the benefit more comprehensive or more affordable. In order to get a private insurer to participate, the State of Nevada had to pay the plan $106.54 per member per month, even though the member's actual drug cost averaged only $37.64 per month. That is a difference of nearly $69 per member per month, $69 that could have been used to offer a better benefit, cover more seniors, give an earlier catastrophic benefit. Even after adjusting for administrative and other costs, the State calculated that the private plan had a profit of $1 million over a 6- month period to serve a mere 3,000 beneficiaries. My Republican colleagues would repeat this mistake but on a massive scale. Rather than assuring that the money is spent on a drug benefit and is used to maximize drug coverage for seniors, the Republican bill would allow the money to be siphoned off to induce insurance companies to participate when they have indicated by their past behavior they do not want to participate. I also have grave doubts that seniors would get the drugs they need if they were to adopt the Republican proposal. Under their approach, the fewer drugs used by seniors, the higher the profits for private insurers. We hear a lot about the idea of transferring risk, insurance risk, to the private insurance companies, and because they will be responsible for this risk, therefore they will be more aggressive in containing costs. I find it a little disingenuous that this plan, which is supported by almost all the major pharmaceutical companies, has as one of its recommendations to be adopted that it is going to be more effective in containing costs. We have all heard the argument of the fox in the chicken coup. I think we have an example of that with the pharmaceutical company saying they support the plan with the principal benefit being its capacity to reduce pharmaceutical costs. Private insurance companies, in my judgment, have exactly the opposite goal. They are likely to want to restrict the drugs that the senior wants and needs because that is the way they can maximize their own profits. We need to listen to what our seniors have to say about privatizing Medicare before we go down this path. In 2001, a senior lady from Cincinnati, speaking before one of our major senior groups, said the problem with privatizing Medicare is these insurance companies will make the rules and you will live by the rules. You will not have any representative if you go to an insurance company and tell them you do not like the way they are doing something. Do you think they are really going to care? It is not just the delivery model, however, which worries me. It is also the benefit design in the Republican plan. In fact, the phrase ``truth in advertising'' should apply. If we are going to pass the Republican bill, we better be prepared to tell the truth. We better be prepared to tell seniors that they will face an enormous gap in the benefit, a gap which some people have referred to as the doughnut hole. This is Freda and Coleman Moss of Tampa, Florida. Freda is 80 years old. Coleman is 84. Freda has had serious health problems. She spends, on average, $7,800 on prescription drugs every year. Under the Republican plan, from about mid-June until the end of September, roughly a third of the year, she will be getting no help at all. The reason is that the Republican plan has this gaping gap in coverage. During that period when she is getting no benefits at all, however, her monthly premiums are not suspended; she continues to write that check out every month for monthly premiums. But while she is in the gap, the doughnut hole, she will get no benefit. How could this be? The Republicans insist the doughnut hole is so small, they would like to call it a bagel hole. Let's call it what it is: It is a gimmick. It is a gimmick which helps to lower the cost of their bill at the expense of seniors getting the drugs they need. It is important to understand what is really going on in the gap. They say this little bagel hole of a gap is only between $3,450 and $3,700, or $250. Is that really the size of the gap? Madam President, we will now talk a little arithmetic. If anyone would like to settle back and relax, this is a good time. Let's look at how the Republican plan works. Beneficiaries have to reach a point where the total spending--the spending of you, as the beneficiary, the Federal Government, and any other source--reaches a level of $3,450. Once you reach that point, you receive no assistance for your prescription drugs until you spend, out of your own pocket, $3,700. How does the math work? To get to the $3,450 level, the out-of-pocket expenditures by the beneficiary will be, first, a $250 deductible. You have to pay that before you get any assistance. Then, between $250 and $3,450, you pay half and the Federal Government pays half. You pay $1,600 and the Federal Government also pays $1,600. By the time the combined expenditures reach $3,450, you pay $1,850 out of your pocket-- the deductible plus the $1,600. In order to get out of this doughnut hole, you have to have total expenditures out of your pocket of $3,700 or an additional $1,850 beyond the $1,600 you already paid. So you will have to pay a total of $3,700 before you escape what is not a bagel hole, what is not even a doughnut hole, what is really a Grand Canyon of a gap. That is devastating. Let us consider the case of Freda. After spending $250 for the deductible, she would pay 50 percent for each prescription drug prescription until the total drug cost was $3,450. Freda would spend $1,600 in addition to the deductible, for a total of $1,850 from her own pocket. Freda already spent a lot of money. But guess what is coming. While she is in the gap, she pays 100 percent for every prescription to get her from a total of $1,850 that she has already spent to the $3,700 she needs to get to cross the Grand Canyon and remove herself from the gap. That means she will have to spend $1,850. During this period of time, she is paying for all of her prescription drug costs, paying her monthly premiums. The gap is confusing. But one thing is certain: It is no small amount. Most years, Freda would pay 50 percent of her prescription until about June 15. This is out of the $7,800 which is her average annual prescription drug cost. Then for 3 months--assuming she could, in fact, afford to pay 100 percent for the drugs she needs and would not have to cut down on prescription drugs in order to afford food, rent, and the other necessities of life--she would be paying that next $1,850 out of her pocket. It is a big assumption that she will be able to do that. Freda and Coleman Moss have a monthly income of $1,038. Freda would have to spend 65 percent of the total income she and her husband share during these 3 months she is in the gap in order to pay for prescription drugs alone. It is not hard to imagine Freda would not be able to get the drugs she needed during the time she was in the gap. This gap is bad medicine for Freda Moss. It is bad medicine for America's seniors. The gap is a gimmick that lowers the cost of the Republican plan at Freda Moss's expense. I am not going to inflict this gap on Freda Moss, on Coleman Moss, or any of the other 816,000 Floridians who would fall every year into this benefit gap. To my colleagues on the other side of the aisle, I say, let's be truthful about what we are doing to our seniors. If you think it is too expensive to offer the plan you are offering, be honest. Raise the monthly premiums. Increase the $250 deductible. Increase the percentage of coinsurance that the senior has to pay. But do not hide it in the middle of the benefit program to tell Freda Moss: From June 15 until the end of September, you have to pay 100 percent of your prescription drug costs. The fact is, she cannot afford to pay 100 percent of her prescription drug costs. The third key fault in the Republican plan is the assets test. I ask Senator Kennedy for an additional 10 minutes.