Phil Gramm

Mr. GRAMM

Mr. GRAMM. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. GRAMM. Mr. President, I am not going to get into an argument with our dear friend from New York. I will say, I think in New York if you make $9,000 a year, you qualify for Medicaid. So you are completely covered. I also have to say, if we are going to take the approach the Senator from New York takes, and that is ``how much are they willing to spend to help you,'' then we get into a debate not about what works, not about what is feasible, not about what we can afford, but who is willing to spend more money? In truth, we have already been in that debate. I want to show my colleagues this, because this is frightening to me. In 1999, just before he left office, President Clinton proposed a comprehensive drug benefit--let me start earlier. We had, through a legislative act of Congress, a bipartisan commission appointed with Senator Breaux as chairman. I was on that commission. Part of what we did is we put together a proposal to modernize Medicare through the use of competitive marketplace forces. For example, if you have a cane with four little legs on it and you buy it through Medicare, the average Medicare cost is $40. The VA, which has never been thought of as the world's most efficient buyer, buys it for $15. The Breaux commission put together a proposal to modernize Medicare and to use some of those savings to help people get coverage for pharmaceuticals, and the way they got it was opting into a more cost-effective system. That proposal actually saved money because reforms in Medicare save more money than providing the pharmaceuticals cost within this more competitive environment. President Clinton, who had us all down to the White House, looked us in the eye and said: Don't let this process fail because of you. I was one of the members of this commission. President Clinton looked us right in the eye and said: Don't let it fail because of you. And then all four of his appointees voted no at the last minute. We needed 11 out of the 17 to make a recommendation to Congress, and we only got 10. At that point, incredibly, providing pharmaceuticals not only did not cost money, it was part of a reform program where the savings we would have gotten with Medicare reform would have paid for the pharmaceutical benefit. That is where the debate started, and we failed to act because of one vote on the bipartisan commission, when all four of the President's appointees voted no. In fact, they had a press conference at the White House denouncing the plan before we had the vote. At that point, at the end of his administration, President Clinton said: We can have a comprehensive benefit for $168 billion. That was in 1999 just as President Clinton was ending his term. Then Congress in 2000 had a proposal. Former Senator Robb from Virginia was the author of that proposal, and it cost $242 billion. If you went back and looked at that debate, everybody who was for that plan said: We can solve this problem. If you will just give us $242 billion, we can solve the problem. Then you will remember the budget debate we had last year, the Baucus amendment. I could quote 20 Democrat Senators who said: We can provide all the benefits we need for $311 billion. I could quote Senator Baucus, I could quote the distinguished majority leader, but it is never fair using people's words against them. I do not do it, but I could. In the budget debate last year, $311 billion would have done everything we wanted to do. This year in the budget we said: No, that is not enough. That is being tight fisted with the elderly. We do not want $311 billion. In the budget we said $500 billion. The budget did not pass, but that is what the budget had. Now we come to the floor with a proposal that says: We cannot spend $500 billion; that is being tight fisted with our seniors. How dare we to have thought of $311 billion? What was wrong with Senator Robb's tightness at $242 billion? Was Bill Clinton a person who did not love the elderly at $168 billion? What a heartless man he was. Today, we said: No, it is going to take $600 billion--not $311 billion but $600 billion.

Mr. GRAMM. The $600 billion would not pay for a real program. It starts in 2005. It ends in 2010. So if one does not live until 2005, they get no benefits; if they live past 2010, they get no benefits--and it still cost $600 billion. Now, where do we think we are going? Where does all of this end? We are asking people to look and see who cares the most. And you can measure that by how much money they are willing to spend. Where does this end? Will it not go on forever? I am going to yield to the Senator, but let me make this point to sort of bring it together. Forget this red in the chart. That was about this bill that I was talking about when I made the chart. Just look at the yellow on this chart. I want to try to impress this one figure on people's minds. Today, Medicare, which has an unfunded liability in present value terms of $17 trillion--when you discount it above the present value of the revenues we are going to collect, today it is taking 2 percent of the economy. If we do not pass any drug benefit and we just leave Medicare as it is, by 2030 it is going to take 4 percent of the economy. Today the payroll tax for Medicare and Social Security is 15.3 percent. If left unchanged, meaning we do not cut it and we do not increase it, the payroll tax will have to more than double by 2030 to over 30 cents out of every dollar earned by every worker to pay for Social Security and Medicare. That is without a prescription drug benefit. Some people estimate that if the bill had been adopted that we sustained a point of order against today, this would go not from 2 percent of the economy to 4 percent but from 2 percent to 6 percent. We would literally be looking at over 40 cents out of every dollar earned by every worker to pay for Social Security and Medicare. I understand all of these people who want these benefits are writing these letters saying we do not love them enough--that $170 billion is not enough. They say these people who want to spend $600 billion love us more. Of course, they are going to love us even more next year with $900 billion. There will be lots of love next year. The point is, does anybody care if young workers 28 years from today are paying 40 cents out of every dollar they earn on Medicare and Social Security? How much love can we afford? That, I think, is a critical point. So I beg my colleagues, let us not get in the business where we measure a program simply by how much it costs. Others I am sure want to speak, but I am going to talk about how this program gets you a lot for every dollar you spend. I am happy to yield.

Mr. GRAMM. If I were from New York, I would be trying to change that.

Mr. GRAMM. Let me also say one thing that has happened about which I am worried. Many of my Democrat colleagues, knowing that this tax cut that we adopted is temporary--because of this quirk in the budget, unless something changes it goes away in 10 years--almost seem determined to spend and spend and spend until we have to take the tax cut away. I remind my colleagues, throughout American history the highest sustainable tax rate that we have been able to sustain over long periods of time was taking 19 cents, on average, of every dollar created in the economy. When we adopted the tax cut last year, the Government was taking 22 cents out of every dollar produced in the economy. That was a record high that only had one year higher. That was 1944 at the peek of the war effort. I hope people do not believe we should go back to a 22-percent tax burden. The final point I make, the Senator acts as if death taxes would pay for Medicare. We all know Medicare is funded by payroll taxes. If you are working in some factory somewhere--I don't imagine you are watching this debate, but if you are and say you are taking a coffee break and this is the only thing they have on in the factory--don't think that some rich guy is going to be forced to sell off his farm to pay for your Medicare. You are going to have to pay for it with higher payroll taxes. Don't be confused. Now, I have talked longer than I had intended. Let me make a couple of points. First, I read a quote, from John C. Rother, policy director of AARP. In recognizing that the two big plans would be defeated, he said: Another possibility is for Medicare to provide catastrophic coverage for prescription drug expenses over a certain threshold. And he notes also that we could have a Government-authorized discount card. Now, let me make my points about this bill and stop. First, I had virtually nothing to do with writing this bill. Two Senators have been principal authors of it. I recognized, in simply looking at it, that it was the best plan around. They came up with it. Why is it the best plan around? First, it is within budget. Now, it is hardly some insignificant amount of money. Somewhere between $140 and $170 billion is what this costs. That is a lot of money. What it does is provides the most help to people who fall into two categories: A, you don't have very much income; and B, you have high drug bills. I submit those are the people who need the help the most. The problem with the other two proposals--let me make my criticism bipartisan--the problem with the other two proposals is that they spend 80 percent of their money helping people who don't need help. When you take the view that the Government ought to have a program that pays at least 25 percent of the drug bill for Bill Gates and Ross Perot--that it is not a universal program unless they are covered--you are going to end up spending huge amounts of money paying for people who don't need the help. You end up paying for the roughly two-thirds of people who already have health insurance for pharmaceuticals, because you substitute the taxpayer for the private insurance policy they already have as part of their retirement program. The point I am trying to make is you are spending 80 cents on people who either almost have the benefit or don't need it to get 20 cents on the target to people who do need it. The advantage of the Hagel-Ensign bill is that it puts every dollar on the target. This is what it says. Again, you can spend more money; God knows you can spend more money. But just listen to what it does. Let me take a retired couple. If their income is $23,000, they would have to pay roughly $100 a month in drug bills themselves, but at slightly above $100 a month this program kicks in and they get full payment except, possibly, a very small, little copayment per prescription. Now, our colleague from New York said a huge number of seniors, 80 percent I think he said, would reject this program. I don't believe it. My mama's drug bill is $400 a month. She does not want help in 2005. She does not know if she will be alive in 2005. She wants help now. The advantage of this program is that it provides help right now. What it would mean in her case is she would have to pay a little over $100 a month and now she is paying $400 a month. Now, if your income goes up, then the deductible goes up. For example, if you are making $46,000 a year, your deductible is $3,500. If you are retired, most retirees who make $46,000 a year own their own home. What this bill says is, if your expenses on pharmaceuticals get up really high, the Government is going to come in and help you. If you make $69,000, you have to spend $5,500 to get the payment by the Government. So it is tied to your income. And for Bill Gates and people who are very wealthy, they have to spend 20 percent of their income on pharmaceuticals. Bill Gates will never get a benefit and he shouldn't. He doesn't need it, and he doesn't want it. He might not even take it. That is not the only help you get, by the way, because immediately this program would let private companies contract through Medicare to represent Medicare beneficiaries in negotiating for their pharmaceuticals. So each of these companies would compete in buying the drugs you buy. You would buy from whoever could sell them to you the cheapest, and it is estimated that they would save you somewhere between 25 percent and 40 percent of the cost of your drug bill. In my mama's case, this would mean spending much less than $400 a month-- it is estimated that these companies, because they have more buying power, would get the best price. She goes to the same pharmacy because it is the one convenient to her house. These companies could go all over the country to find her drugs and buy them the cheapest. They could save her $100 on average just simply by being competitive. Remember I told you about the cane with four legs on it--Dr. Frist, you have seen them--lots of people have them in hospitals. Medicare pays $40 for that cane on average. The VA buys that cane for $15 because they go out and engage in competitive bidding. These companies would do the same thing. Then, anything above $100 per month, the Federal Government would pay. If you said to my mother and anybody else's mother: Would you rather have the Government pay the whole thing? The answer would be yes. She would rather the Government pay the whole thing. But the point is, this is a reasonable, responsible program that would help real people. Finally, Senator Ensign has presented three or four times--you can never do it enough--cases of people who have real high drug bills, and remarkably he has shown that his program is cheaper for them than these very expensive programs. Before somebody runs down here to the floor to answer me and says: How is it possible? We spend $600 billion and Senator Ensign spends $170 billion and you are saying it is cheaper? You are saying it is cheaper under Senator Ensign's program. How can that be when he doesn't spend as much money? The answer is very simple. He doesn't cover everybody. If you do not have high pharmaceutical bills--and in any given year a substantial number of seniors do not--and if you do not have moderate income, he helps you get competitive purchase of your drugs, which saves you between 25 percent and 40 percent. But the Government does not pay if you do not fall in this category of people. You don't get help under those circumstances. Now you say everybody should get help. The point is, this bill helps the people who need the help the most. This is a good proposal. I remind my colleagues, we are at an impasse here. There are some people already talking about spending more money to break the logjam. The logical thing to do now, if we want to act this year, is to take this proposal and adopt it. That will help people who need the help most and help them now. Then we can come back next year. We can look at the budget situation, we can see where we are, and in the process we can supplement this if we want to. Let me give you one example because Senator Ensign has done it better than I could possibly do it. This is somebody who lives in Nevada. He calls her Betty Smith. She is 66 years old. She has an income of $15,000 per year. She is being treated for a whole bunch of things. Her drug bill is $8,000 a year. My mother's drug bill is $4,600 a year and, thank God, she doesn't have these kinds of problems. So it is easy to believe an $8,000 bill. Here is the point. Look at the Hagel-Ensign bill under exactly this situation. Your income is $15,500 and you are being treated for breast cancer and you are taking all these drugs and you have a $8,000 bill, so you are spending over half of your income on drugs. This is literally somebody. We all talk about this cliche of people being forced to choose between medicine and food. I hope her children are helping her. If they aren't, they ought to be. But she would literally--if she didn't have any children, didn't have anybody helping her--she would literally be choosing between eating and drugs. Now, here are the three bills. Two of them we voted on, and one we are about to vote on. The point that Senator Ensign has made is that under the bill that costs $600 billion and covers everybody, this lady would have to pay $3,180 a year. Under the tripartisan bill, she would have to pay $2,570 a year. But under the Hagel-Ensign bill, she would pay $2,152. In other words, for a lady who is very sick and who has a very moderate income, she would be better off under this plan. But for people who say how is that possible when it only spends $170 billion, the way it is possible is it is focused to help exactly people like this lady. It does not take the view that we have to provide the Government program for everybody. It just helps people who need the help. And it provides this system of competitive purchase for everybody. So, I urge my colleagues, do not get into this business about saying this cannot be as good as that because that costs so much more money. Some of the best things in life are not necessarily the most expensive. Remember, we are going to have to pay for it. Not ``we'' being Members of the Senate. We are not going to pay for it. We don't pay for anything. We are going to be covered by the Government insurance program when we get out of here. But that blue collar worker on that assembly line is going to have to pay for it. I congratulate my colleagues. This bill ought to be adopted. There is a budget point of order against it but not because it is over budget. It is because we wrote in the budget that the bill had to come out of the Finance Committee. The Finance Committee refused to report a bill, so no bill could come out of the Finance Committee. So every bill had a budget point of order. If it had gone through the Finance Committee, no point of order would have lied against this bill. However, if the Graham-Kennedy bill had gone through the Finance Committee, two points of order would still have lied against the it, a section 302 and a section 311 point of order, as well as the tripartisan bill. But this bill is not subject to a point of order because it spends too much money. It is subject to a point of order because the Finance Committee was not allowed to do its job. So I hope people will look at this and decide we can help a lot of people, and we can do it right now. The purchasing discounts would start immediately. We do not have to wait until 2005. And this is something we can afford. We could come back and do more next year if we had the money. I appreciate my colleagues listening, and I commend this program to them. I yield the floor.

Mr. GRAMM. I am going to answer that point. Was there a third point?

Mr. GRAMM. Let me begin with No. 3 first. We are comparing apples and apples. In 2001, in the political bidding war we were in then, $311 billion represented a sufficient number of apples to engage successfully in the bidding contest. Today, it is $600 billion and heading up. My point is that, beginning with the chairman of the Finance Committee and the majority leader, we had Members saying last year that $311 billion would provide a wonderful program. The problem is, this year it is $600 billion, and that is a wonderful program. And it is not apples and oranges, it is a lot more apples. Secondly, I think where my colleague is leading on the death tax thing is kind of a circular argument. If you are willing to take away people's money, the only limit you get as to how much you can spend on Medicare or anything else is the amount of money that can be extracted without destroying the productivity of society. The point I had made earlier was that you are already committed under the existing program to take 30 cents out of every dollar everybody earns to pay for Social Security and Medicare. If you adopted your program, by some estimates you would be paying 40 cents out of every dollar that people earn, and the question is: Is that something that the economy can bear, and is that fair to young people? In terms of the death tax, we have a very different view of the death tax. Nobody in my family ever paid any death tax, and nobody ever bequeathed anybody anything because they did not have anything. But when somebody works a lifetime to build up a farm or a family business, the view of the Senator is that that belongs to the Government and my view is it belongs to the people who build it up. They build it up for their family, and it is not right for us to force their family to sell off their business or sell off their farm or sell off their life's work to give the Government 55 cents out of every dollar they earn. It is a perfectly legitimate position to say they ought to have to do that, but it is not something of which I am supportive. I think it is fundamentally wrong. There are other people who want to speak.

Mr. GRAMM

Mr. GRAMM. I am a little bit perplexed. Senator Kennedy is going on and on about the assets test for Medicaid, when he helped write the bill. I would say, Senator, if you are so unhappy about it, why did you write it that way?

Mr. GRAMM. Hold it. I am on my 1 minute.

Mr. GRAMM. Will the Senator yield? Senator Hatch, will you yield?

Mr. GRAMM. Just 1 minute.

Mr. GRAMM. We are not talking about Medicaid here. The Senator is talking about the assets test under Medicaid. I was not here when all that happened. It seems to me that it is an interesting point to make, but to suggest that has something to do with the Republican plan--it is a wonderful speech, and I am sure everybody enjoyed it, but it has little to do with the subject we are talking about. It has little to do with the Senator's plan. I am not for his plan, but I think to try to say that somehow it is responsible for the assets test in Medicaid just doesn't make any sense.

Mr. GRAMM. Mr. President, I thank the Senator for yielding. I remind my colleagues that the best chance we have had to give prescription drug benefits to seniors occurred on March 16, 1999. We had a Bipartisan Commission on Medicare. John Breaux was the chairman of that Commission. We had set the Commission up by law. The leadership in the House and the Senate appointed members, and President Clinton appointed members. We met that day to vote on a plan that would have reformed Medicare. One of the incentives to induce people to move out of the current Medicare system, where there are no incentives to contain cost, where Medicare pays for a walker three times as much as the Veterans Administration pays--not an agency especially noted for its efficiency, was to give them prescription drugs. When the roll was called, the four Clinton appointees--Altman, Tyson, Vladeck, and Watson--all voted no. And while we had a majority, 10 of 17, to make an official recommendation, we had to have 11. On that day, March 16, our chance of modernizing Medicare and providing prescription drugs died on a straight vote, where every Clinton appointee voted no. Then we started a process of bidding. I really believe much of this is more about the next election than it is about Medicare and the next generation. I want to remind people of this bidding. I say to Senator Hatch that the bill he supports would have outbid the Democrats last year, but it will not outbid them this year. In 1999, Bill Clinton said that if you gave him $168 billion, he would provide a Medicare prescription drug program second to none. Then, in the year 2000, Senator Robb's bill bid that up to $242 billion, and last year, the Baucus amendment to the budget called for $311 billion. I have quotes that go on for 4 pages, where every member of the Democrat leadership says: If you will give us $311 billion, we can provide a fine prescription drug benefit. Now, this year, they are saying that $370 billion--which we do not have--will not do it and that what is being offered by this tripartisan group is chintzy, when, in fact, it provides more money than the Democrats were asking for last year. This year, the Democrat's budget proposal provided $500 billion, and the Graham-Kennedy plan--which doesn't start until 2004 and ends 7 years later to try to hold down costs--costs up to $600 million. If you funded it for the whole 10 years, it would almost certainly cost a trillion dollars. How did this cost explode? Well, it exploded because each year the two political parties bid against each other for votes, and the Democrats are never outbid. As Senator Kennedy said, groups are for his plan because whatever it takes to get them to be for it is what he is going to offer. The current offer, on a 10-year basis, is really about a trillion dollars. There is only one problem: We don't have any money. Let me say this about the plan that has been offered by the Democrats. Let me make it clear that this is Graham from Florida, not Gramm from Texas. Currently, we are spending about 2 percent of gross domestic product on Medicare. Because we have not reformed and modernized Medicare and because its costs are exploding, by 2030 that number is going to be 4 percent. Under current law, we will have to double the payroll tax, from 15 percent of income to 30 percent of income in 2030, to pay for Medicare and Social Security. The Graham-Kennedy plan, which Senator Kennedy was talking about, would raise that to 6 percent of gross domestic product and raise that payroll tax to a figure approaching 45 cents out of every dollar earned by every working American making a moderate income level. Does anybody really believe that people can pay those taxes? I don't think so. But when Senator Kennedy is touting endorsements, those are not endorsements from people who are going to be paying for the program; they are from organized groups that claim to represent people who are going to be benefitting from the program. The Kennedy bill, when you have it for 10 years, is a trillion dollars. We don't have a penny, much less a trillion dollars, in terms of funding this new benefit. We are going to have to double the payroll tax to pay for the program we have right now. The tripartisan plan is superior to that program because the Kennedy plan relies on the same inefficient Medicare Program run by a bureaucracy that tries to hold down cost with Government regulation. At least the tripartisan plan tries to bring in competition and efficiency. The problem is, when you fill up this so-called donut in the tripartisan plan--where the government provides a benefit up to a point, and then there is a gap where you pay $1,850 alone, before you get the Government benefit again. When you fill all that up, the tripartisan bill costs somewhere between $700 billion and $800 billion over a 10-year period. I think, in the end, that is unaffordable. I am supporting the Hagel-Ensign bill for two reasons: One, we can afford it. It is within the budget we have, which is $300 billion. It is the only plan that is going to be offered where a budget point of order cannot be raised against it because it spends too much money. On the other two plans, a budget point of order can and will be raised. There is another point of order because it didn't come through the Finance Committee, but that was a decision made by the Democrat leadership to not bring it through the Finance Committee. The second advantage of the Hagel-Ensign plan is it is efficient. It helps the people who need the help most; that is, people with moderate incomes and very high drug bills. What the Hagel-Ensign bill basically says is, after you spend roughly $100 a month, and you have a moderate income, you are going to get Government help in buying your pharmaceuticals, and you are going to then pay only a very nominal copayment. That is help that people can understand. It doesn't start in 2005; it starts sooner in 2004 and doesn't end in 2012, it goes on forever. As your income goes up and you are able to pay more for pharmaceuticals, the amount you have to spend before you get Government assistance goes up. That is a perfectly rational policy because what is a crisis to one family is not a crisis to another. Finally, immediately, under the Hagel-Ensign plan, you have a choice among companies with which you will contract that will go out and try to buy your pharmaceuticals at the lowest possible cost. Estimates have been made by outside groups that this, by itself, could cut prescription drug costs by as much as 40 percent. So under the Hagel-Ensign plan, you have a plan that, A, is within budget, costing less than $300 billion; and B, gives a lot of help to low or moderate income people who have high drug bills. If you have higher income and low drug bills, you don't get any help. Senator Kennedy would say: But it doesn't help all Americans. That is true, it doesn't; it doesn't help all Americans. It will not help Gates or Perot, but they don't need help. It will help people with moderate incomes and very high drug bills, and those are the people we need to help. Is the Chair telling me my time is up?

Mr. GRAMM. We are going to be in session next year, and we can build on this beginning. I urge my colleagues, if the Kennedy bill does not get the budget point of order waived, and if the tripartisan bill doesn't get the budget point of order waived, please look at the Hagel- Ensign bill. I yield the floor.

Mr. GRAMM

Mr. GRAMM. We have a unanimous consent request and a request for the yeas and nays that I want to make while we have at least a handful of Members here. I ask for the yeas and nays on the Edwards amendment.

Mr. GRAMM. I ask unanimous consent that it be in order to request the yeas and nays on both pending amendments.

Mr. GRAMM. I ask for the yeas and nays on the pending Edwards amendment.

Mr. GRAMM. Mr. President, I will not get into a debate with the Senator. There is nothing ill-gotten in this amendment. This amendment does not belong in this bill. We have a provision in this bill. If you violate the law, then you have to give back what you have earned from the company in terms of any kind of incentive in bonus. But to say that people who work for a company that goes bankrupt has to give back compensation is to guarantee that a company that is in trouble would never get anybody to go to work for them. They would never have an opportunity to be saved. That amendment does not belong in this bill. It makes no sense in the logic.

Mr. GRAMM. I now ask for the yeas and nays on the Carnahan amendment.

Mr. GRAMM. The Democrat floor leader had a unanimous consent request he wants to propound.

Mr. GRAMM. S. 2673 includes provisions prohibiting insider trading of company stock during so-called blackouts--or periods during which pension plan participants are unable to exercise control over the assets in their accounts. In order to implement the insider trading prohibition, it was necessary to provide a definition of a blackout period. The Banking Committee also provided a 30-day notice requirement prior to a blackout, so workers and executives alike would know when the insider trading prohibition would be effective.

Mr. GRAMM. Reserving the right to object, the Senator started out with a unanimous consent request and then launched into a speech.

Mr. GRAMM. Maybe if the Senator would do his unanimous consent request and then yield, that would be fine.

Mr. GRAMM. I don't object to the Senator yielding. I wanted to be sure we had the time we were supposed to have.

Mr. GRAMM. Mr. President, reserving the right to object, let me say there is something on which I agree with the majority leader. That is, at some point we are going to make a judgment on this issue. But we are currently in a situation where we have 97 first-degree amendments that have been filed. We have 24 second-degree amendments. We have 3 different approaches to this issue. Senator McCain wants to make a decision and set a policy. Senator Levin, as I read it, wants a fair trial and then a hanging. And Senator Enzi and others would simply like to have a fair trial. What is the right outcome? I think that is subject to debate. That is why I think we ought to have the debate. The idea that when we have three different approaches, we are going to decide that one of them is going to be debated on, voted on, but not all three of them is something we should not expect to happen. I do not support Senator McCain's amendment, but he has every right, it seems to me, to have it considered. And I am certainly willing to vote on it. There may be people who do not want to vote on this issue, but I am not one of them. So I certainly do object. I object.