Phil Gramm

Mr. GRAMM

Mr. GRAMM. That is correct.

Mr. GRAMM. Not only would it have that effect, if we adopt Senator Kennedy's amendment, we are going to be asking moderate-income-working families to subsidize people in retirement who are making up to $125,000 per year. The program is voluntary. If they don't think it is a good deal, they don't have to do it. Can I have 1 additional minute, Mr. President?

Mr. GRAMM. Mr. President, in order to keep Medicare solvent, we are going to ask very high-income retirees to begin to pay more of the cost of a benefit which they receive. It is a voluntary benefit which no one pays for during their working life and for which they are currently paying 25 percent of the cost. We are going to phase that up to 100 percent of the cost for individuals with incomes of $100,000 a year and couples with incomes of $125,000 a year in order to keep the system solvent. The alternative is to ask moderate-income-working families to pay the cost. We don't believe that is fair. This is a voluntary program. Nobody is required to participate in part B of Medicare. It is a voluntary program. So if very high-income people do not want to pay the $1,577 they do not have to pay it. They can drop out of the program. They are not going to drop out because it is still a good deal.

Mr. GRAMM. I move to lay that motion on the table. The motion to lay on the table was agreed to. Amendment No. 440--Division I

Mr. GRAMM. It might be a substitute.

Mr. GRAMM. Mr. President, above the Speaker's stand in the House of Representatives is a quote from Daniel Webster which talks about doing something worthy of being remembered. I believe that if we defeat the Kennedy amendment, given what we have already done by changing the age of eligibility for Medicare, that we will have adopted two changes which will dramatically change in Medicare. They will be the first things we have ever done that will permanently strengthen the Medicare trust fund, and I believe that we will have done something truly worthy of being remembered. We do not do that very often around here. It is not very often that you see courageous votes cast. And I think we will have seen two major ones today. I thought some note should have been made of that fact. I do not want to congratulate us in advance of casting this vote. But I think we are doing something very important here, something that 10 or 20 years from now every Member who votes against this amendment and votes for these two important reforms will be able to say to their children and grandchildren they did something worthy of being remembered.

Mr. GRAMM. I yield to the Senator from Illinois for a unanimous- consent request, without losing my right to the floor.

Mr. GRAMM. Mr. President, I send an amendment to the desk and ask for its immediate consideration.

Mr. GRAMM

Mr. GRAMM. May I just ask a question? Are we going to have the full hour to debate this thing, so we will debate it some when we come back from lunch?

Mr. GRAMM. We killed the guy.

Mr. GRAMM. You voted for final passage on the bill on March 24. My point is, we are going to have to do this. Everybody knows we are going to have to do it. Should we wait until there is a crisis so that we will literally do what the Senator from Illinois says and make the change so it will go into effect immediately? That is what is going to happen when you look at the exploding deficit of Medicare. We will have a $1.6 trillion loss to the Treasury in trying to maintain the program in the next 10 years alone. Our colleagues are not telling us that by the year 2025 when we will be going into the final phase up, we will have to triple the payroll tax--triple the payroll tax--to pay for Medicare if we don't begin to make changes. They are not proposing today to triple the payroll tax. They are simply saying, ``Don't act now, wait until there's a crisis; wait until Medicare is flat on its back and then make the change.'' Let me tell you why we can't do that. We can't do it because the phase in is already underway in Social Security, something that both Houses of Congress approved, and the President signed. It was voted for on a bipartisan basis raising the effective retirement age for full retirement benefits to 67. That is already the law of the land, and that phase up begins very slowly, a matter of months each year, very slowly, but it begins in the year 2003. If we wait, we are going to end up doing what our colleague accuses us of today. But the truth is, by doing it now, for those who will have to wait an additional 2 years, they will have 30 years to adjust. This is the responsible way to do it. It is the way it should be done, and I hope it will be done. If we don't do it, we will be back here in 3 or 4 years doing it under crisis circumstances and doing it immediately.

Mr. GRAMM. Mr. President, let me first point out that when our colleague talks about people waking up and finding that age of eligibility is changed by 2 years, let me say that those people are 37 years old today. It will be between now and the year 2027 that this retirement age will phase up. One of the reasons we want to do this now is we don't want people to wake up and discover that this has happened and they have not had time to plan on it. By doing it now, this will affect the full 2-year increase; it will affect only people born after 1960. That is, they are going to have 30 years in which to change their life's plan in order to accommodate this change. Our colleague acts as if tomorrow they are going to wake up and discover that the eligibility has changed. Let me remind my colleague, unless the note I have been passed is incorrect, that in 1983, on March 24, our colleague voted to raise the retirement age for Social Security, is that correct?

Mr. GRAMM. I yield for an answer to that question.

Mr. GRAMM. Mr. President, when Social Security started in the mid- 1930's, the average person paying into Social Security, given the lifespan projections, was not projected to live long enough to get any of the benefits. In fact, we forget that when Social Security started, the average life expectancy of Americans was substantially less than 65. By 1983, Social Security had become insolvent. We were in danger, in the spring, of not being able to send out July checks. We had a crisis in Social Security, so we instituted a series of reforms to try to pull Social Security back in the black. One of those reforms was raising the retirement age beginning in the year 2003. Then over the ensuing 24 years it would be raised in small increments up to 67. We did it under crisis circumstances. I remember the vote. I was a young Member of the House at the time. It was adopted on a bipartisan vote. Nobody liked it, but everybody recognized that it had to be done. We did not make a similar change for Medicare then because Medicare was in the black. Today, our circumstances with Medicare are very, very different. If you look at this chart behind me, we currently are in this last small part of blue. Medicare is now in the process, very rapidly, of going bankrupt and the Medicare part A trust fund, which pays for hospital care, within 4 years will be insolvent. We expect Medicare, based on everything that exists now, to be a drain on the Federal Treasury of $1.6 trillion over the next 10 years. Our problem is not only exploding costs, but the fact that we have a baby boomer generation that was born immediately after the war which made Medicare possible as all these baby boomers came into the labor market beginning in 1965. But 14 years from today, the first baby boomer retires. We will go from 200,000 people retiring a year to 1.6 million people retiring a year. The number does not change for 20 years. We go from 5.9 workers per retiree in 1965, to 3.9 workers per retiree, to 2.2 workers per retiree. We are facing a very great crisis in Medicare. We also face a timing crisis. Everybody knows we are going to have to raise the retirement age for qualifying for Medicare as we did for Social Security. Everybody knows it is going to have to be done. If we do it today, we are going to have time for it to phase in. But if we wait another 3 or 4 years, the phase-in for Social Security will have started and we are going to be forced to tell people who have planned for retirement that their Social Security benefits and their Medicare coverage are not going to cut in when they plan to retire. If we make this change today, people will have time to adjust. For example, I was born in 1942. If we pass this bill today, I will know that if I plan to retire at 65, that my Social Security benefits and my Medicare coverage will not cut in until I am 65 years 10 months of age. So I have 11 years, if I were looking forward to that retirement, to plan for it. If we keep waiting, knowing we are going to have to do this, we are going to end up having to force change on people when they are not ready. The advantage of doing what we have done is that it phases in between now and the year 2027, and people have time to plan for it. It is the ultimate paradox that we have a point of order against this provision because we did this provision without claiming any savings for the budget. We made this change to save Medicare. We dedicate every penny of savings to the Medicare trust fund, we don't count a penny of the savings toward balancing the budget or funding tax cuts, and now we have a point of order against the amendment because we are not claiming savings. So we try to answer the charge that is often made on the other side of the aisle that you are cutting Medicare to balance the budget or you are cutting Medicare to cut taxes. We try to respond to that by taking a long-term view of saving Medicare. We do not count it toward reducing the deficit, we don't let any of it be spent, and we don't let any of it be used for tax cuts. We simply are trying to do something that is fundamentally important. Medicare is going broke. We have an unfunded liability for Medicare today of $2.6 trillion.

Mr. GRAMM. So nothing we are doing in going to lunch or listening to the rich people getting a tax break, none of that is limiting our time?

Mr. GRAMM

Mr. GRAMM. Mr. President, I want to join our distinguished colleague from New York in commending the chairman of the Finance Committee.

Mr. GRAMM. Mr. President, I want to join our colleague from New York in commending our chairman of the Finance Committee for his excellent work and leadership. I think it is a great testament to his leadership that we have before us a bill that will spend less money on Medicare than another bill we debated 2 years ago which was deemed to be a partisan effort which ruptured the bipartisan nature of our work on health care. Today we have before us a bill that is superior in virtually every way to that bill. And this bill that is now before us passed the Finance Committee on a unanimous vote and was strongly supported and praised by every member of the Finance Committee. I think it is a testament to the leadership and fairness of the chairman that we have achieved this goal. I can say, as a person who has watched now many chairmen work, both in the House and the Senate, I have never seen anybody be fairer to every single member of the committee from the most senior member to the most junior member than Senator Roth was. I think it is a lesson to all of us. That is, when you have heavy lifting to do, if you give people an opportunity to speak their mind, to have a fair hearing for their ideas, in the end they are a lot more willing to be part of that effort than if they feel you are trying to ram it down their throat or treat them unfairly. We have all heard, from our teenage years, if you want me with you on the landing, you need to have me there on the takeoff. But we often forget it in real life. And I think our chairman has reminded us of it again here. We have before us a very thick bill which is the composite of all of the so-called reconciliation bills that are supposed to save money. I want to note that there is only one bill in here that saves any real money, and that is the bill that we are talking about today, the bill that came out of the Finance Committee. Now, lest someone jump up and say the Commerce Committee saved money, what the Commerce Committee did was to sell spectrum, the right to broadcast. We had the Agriculture Committee that was actually ordered to spend $1.5 billion, and remarkably they had no trouble doing it. But the Finance Committee portion of the bill that is before us saves $100 billion with a ``b'' dollars. And it does it in some of the most sensitive programs of the Federal Government. I want to talk very briefly about some of these changes because they are important. We are going to have a lot of debate here in the Senate tomorrow when we start shooting real bullets and start having amendments offered about Medicare. We are going to have questions about the need for long- term reform. I am proud to say that the bill before us is the most dramatic reform of Medicare in the history of the program, and, in fact, if you combine all of the other reforms in Medicare that we have adopted in the last 32 years into one package, it is relatively insignificant as compared to this bill. I know there will be those who question the need for this dramatic reform, but I just want to remind my colleagues that over the next 10 years Medicare will be a $1.6 trillion drain on the Federal Treasury. If you take all the money we collect in payroll taxes and you compare that to how much money we are going to spend on Medicare over the next 10 years, we are going to fail to pay for the program by a cumulative total of $1.6 trillion. We have an unfunded liability in Medicare under the best of circumstances. With all the right reforms, if they could be made and done immediately, we still have an unfunded liability bigger than the current inflation adjusted costs of winning World War II. We have promised Medicare to two succeeding generations and we have set no money aside to pay for those benefits. As the baby-boomer generation-- 79 million people strong--begins to go into retirement 11 years from now, we are going to go from 5.9 workers to 3.9 workers to 2.2 workers per retiree, and the impact of it is going to be cataclysmic on the Federal budget. That is why this bill is so important because it takes the first step toward saving Medicare. I believe if we can save these reforms not just in the Senate but through the House and to the President with his signature, that every Member of the Congress will be able to say of this bill that they truly did something worthy of being remembered. Now, let me outline some of the major components of the bill that I think are important. First of all, this bill gives our seniors who qualify for Medicare a broad range of choices. Today they have two choices. They can stay in the old fee-for-service Medicare policy or they can go into a massive all-encompassing HMO. What we do is fill in all the areas in between by giving our seniors the same kind of competitive choices that are available in private medicine today. I think this is a dramatic reform. I think it is a reform that is going to enhance the quality of health care. It is certainly going to expand freedom. Since we know competition has an impact on health care costs because the competition of the last 8 years in the private sector has driven the medical price index that measures inflation in medicine below the Consumer Price Index which measures the costs of all goods and services in the economy, we are confident that expanded choice, expanded competition, and the efficiency that it will ultimately bring will benefit every Medicare beneficiary and will benefit the 110 million people that are paying Medicare taxes. This is a very important reform. It is a reform that now, I think, we can be proud to say, is virtually noncontroversial. One thing we have done in the bill which I say that had it been left up to me I would not have done is we have transferred home health care out of the trust fund into general revenue. Those who have wanted to be unkind have said it is a phony reform; not only are they unkind, they are correct. In fact, when we initially debated this so-called reform I said that you can buy 10 years of solvency in Medicare by taking the fastest growing item in Medicare out of the trust fund and putting it in general revenue and not counting it as part of Medicare anymore as part of the part A trust fund. If that is real reform, I can save Medicare for 100 years by simply taking hospital care out of the trust fund and putting it into general revenue and not counting it as part A Medicare, but would anybody believe that I had done anything when I did it? So, one part of this bill which was dictated by the budget agreement is the transfer of home health care. But there are two things that we have done as part of this transfer which really represents an accounting gimmick, but two things we have done are real. No. 1, we are going to build over time 25 percent of the cost of home health care into the Medicare premium that people pay for part B services or physician services after retirement; and also for the first time in this bill we have a $5 copayment for home health care. Now I know that there will be an amendment offered and that people will scream and holler that this $5 copayment represents the end of the world. But I want to remind my colleagues that home health care now spends more money than the National Institutes of Health. It now spends more money than the space program. This is a massive uncontrolled program. Some of you probably saw the big article in the Wall Street Journal about how people have gotten out of the garbage collection business and gone into home health care and become instant millionaires, how fraudulent much of this program is in terms of people who were providing services and overbilling and how the whole system is completely out of control. We are trying to begin to tighten up on that but there is nothing that will be better for tightening up on it than asking for a small nominal payment so that people will look at the cost, so that people will make rational choices. So it is a small copayment. But if we know anything about the world we live in, it is that small costs affect behavior on a substantial basis. We have very important long-term reform in this bill. The reform has already been denounced by most of the major special interest groups in the country that tend to speak out on these issues, and I want to talk about the two long-term reforms. The first reform has to do with retirement age. I remind my colleagues that we changed the retirement age in 1983 for Social Security. I remind you of the circumstances. We were on the verge of having Social Security go bankrupt. We were down to the point where we could not have sent out the July checks. We had a commission that had not reached any kind of conclusion, and under the leadership of Ronald Reagan we were ultimately able to get a recommendation to make some changes. The only real substantive change that the commission made and Congress adopted was changing the retirement age. They set out to change the retirement age over a 35- year period where, as we recognize that people are living longer, as we are healthier, as we are working longer, that ultimately Social Security had to change. People forget that when Social Security went into effect in 1935 the average American worker did not have a life expectancy that was high enough that they would ever receive any benefits from Social Security. It was the exceptional person who lived longer than normal who ever got a penny out of Social Security. Our lifetimes, thank God, have grown tremendously since 1935 due to improvements in public health, due to improvements in medical care, due to improvements in nutrition, and due to the improvements that would come as income has risen with our strong free-enterprise economy and we have all been able to do a better job taking care of ourself and our children. But we raised the retirement age to 67 for Social Security--that will become effective in the year 2027--but we did not raise the eligibility date for Medicare. In this bill we make the conforming changes so that Social Security and Medicare will again be brought together. What it means is for people who were born in 1960 and who are, therefore, 37 years old today, they will know, with 30 years to plan for it, that they are not going to qualify for Social Security and for Medicare until they are 67. So they have 30 years to plan for that change. In my case, I was born in 1942. So I know that if this bill is adopted, along with the changes that have already been made in Social Security, that I will not be eligible to retire until I am 65 years and 10 months old. So I have 11 years to adjust to the fact that under this bill I am going to be required and can expect to work 10 months longer. Now, we have a lot of people who are saying that this is unreasonable, outrageous, that the end of the world is going to come as a result of it, but this is the reality of the world we live in. We are healthier, we are working longer, and we are living longer. So if this program that we all depend on is going to be there to serve us, this is a change that needs to be made. I intend to defend it vigorously. The second change that was made had to do with asking very high- income retirees to pay the full cost of the voluntary part of this program. Some people will recall that the part A of the trust fund, the hospital part, you pay for during your working life by paying 2.9 percent of your wages into a trust fund, and that pay is for part A. Actually it is a long way from paying for it but that is the system. The part A section of Medicare which pays for hospital care, you do not pay for while you are working, you pay 25 percent of the costs of the part B premium. When the program was started in 1965 it was going to be 50 percent of the costs. What we do under this bill is ask our high-income seniors, who as individuals, make between $50,000 and $100,000 a year and as couples from $75,000 to $125,000, to phase up that part B premium from that 25 percent of the cost which is $526 a year to approximately $2,100 a year of costs, which is the full cost of that voluntary program. Now, again, some people will say this is an outrage, but the plain truth is this is a voluntary program. It is still a better buy than anybody can get in the marketplace. Nobody paid for this program during their working life. It makes no sense for my son in the labor market and 21 years old to be paying taxes to subsidize voluntary insurance for a senior who is making $125,000 a year. It is just not right. This is a good Government program. I note that the savings from this higher part B premium for very high-income seniors and from the retirement age change, that the savings from those two programs we do not even count them in this bill. They are not counted for budget purposes. We are not using them to balance the budget. We are not using them to fund tax cuts. We are simply doing them and dedicating all the savings to the Medicare trust fund to keep the system solvent. No one has ever done anything like this before in the name of trying to save Medicare. Finally, we did have a provision that would have used the higher costs for very high-income seniors as a deductible instead of as a payment. We have had so many questions raised about it that I have decided, along with others, to go ahead and simply charge the premium and then do a study and a test of using the deductible instead of the premium. I will submit for the Record two letters, one from the American Enterprise Institute and one from the Heritage Foundation, explaining why doing it where we would raise the deductible instead of the premium would be better and would save more money and would improve the efficiency of the system. The logic which seems to escape many people is that if I am a high-income retiree and I pay $1,577 more for an insurance policy, once I paid that, then the cost of medical care that I would then buy with that policy is totally unchanged. So all the Government did that helped Medicare was it got $1,577 out of my pocket and put it into the trust fund to help keep the program alive--good work, important work, but by doing it as a deductible, which I hope some day we can do when people understand it, you are going to get high income seniors who will be more cost conscious because they will be paying the first $2,100 as a deductible, and so they will actually be consuming medical care more efficiently, getting out their bills and reading them, and reporting when somebody over charges them. They will actually be shopping around for the best buy. That is what we want people to do. But this whole idea is so important, I don't want a new idea to threaten it. So I will submit these two letters for the Record. I ask unanimous consent that they be printed in the Record.

Mr. GRAMM. Madam President, I yield the floor. Mr. ASHCROFT addressed the Chair.

Mr. GRAMM

Mr. GRAMM. Mr. President, I ask unanimous consent that we may move from this quorum call into morning business for 20 minutes.

Mr. GRAMM. Mr. President, making two separate requests, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GRAMM. Mr. President, I ask unanimous consent that I can proceed for 20 minutes as in morning business.

Mr. GRAMM. Mr. President, I ask unanimous consent that following my speech, if it ever begins, that we go back into the quorum call, and I also ask unanimous consent that, without losing the floor, I might yield to Senator Inhofe so that he might get a staff member on the floor.

Mr. GRAMM

Mr. GRAMM. Mr. President, with all this folderol, I hope they are not conspiring against me or against Texas. If so, maybe we are in trouble.

Mr. GRAMM

Mr. GRAMM. Mr. President, I come to the floor today to talk about a very difficult subject that for the next couple years is going to be very unpopular. In the long history of the country it is one of the most important subjects that we have ever debated--and that is trying to save Medicare. I want to talk about what we did in the Finance Committee. We reported a bill that will be on the floor by the middle of next week. I want to explain to people exactly what we did and exactly why we did it. I want to talk about why it is important to the future of the country and why it is critically important to 38 million people who depend on Medicare. It is something that we have to do, and it was a courageous action taken by the committee. However, it will be a great blot on the courage and leadership of this Congress if we let this effort, started in the Finance Committee this week, die on the floor of the U.S. Senate or in the Congress. First of all, Mr. President, let me remind people that we have a terrible problem in Medicare. Medicare will be insolvent in 3 years. There are a lot things I may do in my political career that I do not want to do, but there is one thing I am never going to do. I am never going to call up my 83-year-old mother and say, ``Well, mama, Medicare went broke today. It went broke today because nobody had the courage to do something about it. I knew it was going broke, but I didn't want to tell anybody because I thought somebody might criticize me for trying to do something about it. So I just stood by thinking, `Well, when it goes broke in 3 years, maybe something magical will happen, and maybe nobody will blame me.' '' I am never going to make that telephone call. I am proud to say that we took two steps in the Finance Committee this week that will go a long way. If we continue to show the courage that we showed in committee on the floor of the Senate, then I will never have to call my mother and tell her Medicare went broke, and she will never be without the benefits that she has become accustomed to and that she needs. And let me outline the two things we did. First of all, as my colleagues will remember, we had a crisis in Social Security in 1983. We set up a commission which was almost unable to agree on what to do about putting Social Security back in the black. We were on the verge halting Social Security checks. However, one of the reforms which arose from the process resulted from a recognition that Americans are healthier, and are living longer. So as part of that Social Security solvency package, those of us who were in Congress at the time swallowed hard and voted to raise the retirement age from 65 to 67 over a 24-year period. I remind my colleagues that when Social Security started, the average American lifespan was less than the eligibility age for Social Security. So the Social Security system protected people who lived longer than the average. Obviously, thank goodness, the average lifespan of Americans has grown dramatically since 1935. So we now have in law where beginning in the year 2003 through the year 2027, we are going to very gradually raise the retirement age from 65 to 67. That was part of a program to keep Social Security solvent. It was heavy lifting at the time. Medicare was still in the black, and nobody wanted to make the lifting any heavier. Now we are reaching a point where this phase-in for Social Security is going to start in the year 2003. So the Finance Committee, in what I believe was a courageous vote, voted to begin phasing up the eligibility age for Medicare in the same way as Social Security. That is the first significant change we made. I think there is something historic about that change which goes beyond it being the most dramatic change we have ever made in Medicare's history to keep the program solvent. The second dramatic thing about this reform is that we did not do it to save money. We did not do it to fund tax cuts. We did not do it to balance the budget. We do not even count the savings that come from it in our budget. Every penny we save goes into the hospital insurance trust fund to protect benefits. Let me say to our colleagues who might be listening to this speech, with Medicare within 3 years of going broke, with Medicare within 7 years of having a $100 billion deficit per year, with a projected deficit in Medicare over the next 10 years of $1.6 trillion--counting both part A spending and part B spending--it is an absolute certainty that we will ultimately conform the eligibility age for Medicare with the retirement age under Social Security. That is a certainty. That is going to happen. But if we wait 2 or 3 more years before doing so, we are not going to have time for people to plan for the future. One of the cruelest things we could do is to wait and delay and let a crisis occur so that we find ourselves forced to change the eligibility age for those who had planned to retire in a year or 2 or 3. If we make this change now, people will have several years to adjust to an increase in the retirement age. The changes that will occur will occur very slowly over the next 24 years. The impact of this provision on the solvency of the Medicare hospital insurance trust fund is dramatic. It will reduce the projected deficit in the Medicare trust fund by about 10 percent in and of itself, by the year 2025. The second change that we made is an equally dramatic change and recognizes that there are two parts to Medicare. We all pay 2.9 percent of our wages in payroll taxes during our working lives in order to qualify for coverage under the Medicare Hospital Insurance Program. There is a voluntary part of Medicare that nobody pays for in payroll taxes, but that is funded by a payment that people make in a part B premium. Mr. President, there are two types of Medicare benefits. One type is the trust fund that we pay for during our working lives. We pay 2.9 percent of wages into that trust fund. That pays primarily for hospital care. Coverage for physician services is a separate system for which you do not start paying until you retire. When it was set up in 1965, the idea was for retirees to pay 50 percent of program costs in premiums, while taxpayers would pay the other 50 percent. Over the years that retiree payment has fallen to 25 percent of Medicare. Currently, there is a deductible of $100 which people have to pay before Medicare part B, the voluntary part of Medicare, kicks in. Under the second reform adopted by the Finance Committee, as income rises from $50,000 to $100,000 for an individual--or from 75,000 to $125,000 as a couple--very high-income retirees--that deductible would phase up from $100 to an amount equal to the full taxpayer subsidy of this voluntary health insurance program. That would make the deductible about $1,700 a year for very high-income retirees. Now, those are the two changes we have made. As was true with the retirement age phasein, none of the savings that come from having a higher deductible for very high-income retirees goes to the deficit. None of it goes to fund tax cuts. None of it is even counted in the budget. Every penny of the savings goes to protect the trust fund. Now, why do we need to do this? I read in the newspaper this morning where one of our colleagues said it is hogwash to say we have to make these kind of changes to save Medicare. Well, let me explain why we are going to have to make some dramatic changes and we are going to have to make them quickly if we are going to save Medicare. The two changes that we made in the Finance Committee will not save Medicare by themselves. They are major steps forward. They are the only real reforms we have made since 1965. I am sure when we debate this next week people will say, but we have savings in the budget. Well, we assume we are cutting payments to hospitals and providers. We have done that about a dozen times. It has never saved any money because they find a way to get around it. Then our biggest savings is that we take the fastest growing part of Medicare, home health care, out of the trust fund and put it in general revenue. Then we say, well, we have helped save the trust fund. So the only two real permanent reforms that have a long-term impact are the two reforms which we are not counting as part of the budget. We do have another major long-term change in Medicare by giving our seniors more choices. Let me, very briefly, go through the problems in Medicare. First, Medicare expenses are exploding. They are growing at over twice the cost of medicine in the private sector. We have a program that by and large was designed in 1965 based on an old Blue Cross-Blue Shield policy that is no longer available. Medicare is a system that has tremendous inefficiencies and has grown faster than any other major program in the Federal budget. We started off paying for Medicare with a 0.7-percent payroll tax on the first $6,600 of income earned. We are now paying 2.9 percent of every $1 they earn, and still Medicare will be broke in 3 years. So our first problem is exploding costs. The second problem is a time bomb we know as the baby boomer generation. I want to ask people to look at this chart because this explains what is going to happen and why there is nothing conjectural about it. It is not somebody merely claiming that the sky is going to fall; the sky is already falling. Currently, in 1997, we are at the point where all the babies born in 1932 are retiring. 1932 was not a banner year for having children in America. We were in the middle of a depression. The birth rate was very low--one of the lowest birth rates in American history. So for the next few years, as depression era babies retire, we are going to have relatively few people who are retiring. These should be great years in terms of solvency for Medicare. However, these are the years where Medicare is going broke. But notice what happens, beginning during the war and then immediately after the war we had an explosion in the birth rate in America. Fourteen million men came home from the war. They had defeated Nazism. America was the dominant power on Earth. People had new confidence in the future, and they made the greatest investment you can have in the future--they had babies, millions of them. Most Members of Congress were either in the sort of pre-baby-boomer generation during the war or they were in the generation right after the war. There was a huge explosion in the birth rate. When we created Medicare in 1965, we were looking at this huge avalanche of young people coming into the labor market. In 1965 we had about four times as many people turn 19 as we had had 2 years before. It looked as if this tidal wave of people would never end. Actually, had Congress gone down to the Census Bureau in 1965 and asked if this baby boom would ever end, they would have discovered that it already had. But when we wrote Medicare with this huge number of people coming to the labor market, they made a decision not to fund it. They opted for a pay-as-you-go system where young workers would pay into the system without building up trust funds to pay for the benefits. This baby boomer generation turned out to be a godsend for programs like Medicare. But now we come to the problem. This chart shows the projected increases in the population 65 and over. If you look at this chart, we are down here now where only 200,000 people are going to turn 65 this year, but within 14 years 1.6 million people will turn 65 and that number will not change for 20 years. We are going to go from 5.9 workers per retiree on the day Medicare started--we are down now to 3.9 and we are headed to 2.2--2.2 workers for every retiree in America. The financial impact of that is absolutely cataclysmic. If we do not act, the young people who are sitting down here as pages are going to have to pay a payroll tax three times the current level. We are going to have an average tax rate in America--average tax rate in America--of about 50 cents out of every dollar. America is not going to be America when you have that kind of tax burden. Now, this is a problem we must address. We know it is coming. We can fix it. We can preserve benefits. We can make the system better. But we are going to have to be courageous in order to do it, and we are going to have to make some tough decisions. Here is what the financial status of Medicare looks like. As you can see, we are in the last years of its solvency. We are looking at an explosion in the cumulative deficit of Medicare because we guaranteed two generations of Americans medical coverage during retirement, and nobody ever set aside any money to pay for it. Now the baby boomer generation is headed into retirement, they want these benefits, and there is no money to pay for them. That is the crisis. Let me give an idea of how big this is. If we reform Medicare right now, and change the system by improving efficiency, thereby bringing the cost of Medicare down to the general inflation rates, even under the best of circumstances, to pay off this debt to baby boomers, we would have to borrow $2.6 trillion. If we wait 10 years, it goes up to $3.9 trillion. If we wait 20 years, it goes up to $6.1 trillion. Now, the whole debt of the country today is less than $6.1 trillion. So this is a crisis. This is a crisis that is happening right now. We have made two changes in the Finance Committee which produce savings that are dedicated, every penny, to strengthening the hospital insurance trust fund. One is raising the eligibility age for Medicare as we have done for the retirement age under Social Security. I can guarantee you that is going to have to happen sooner or later. Within 10 years we are going to vote to do it. If we wait 10 years, we will have Americans who literally are on the verge of retiring who are going to find out they cannot retire. That is not fair, and it is not right. If we do it today, we will catch the political heat today but people will have 30 years to adjust to working 2 years longer. So it will be unpopular in the short run, we will be criticized for it in the short run, but within 10 years when people fully understand this, they are going to be very grateful that we did it, and it will be the right thing to do. Second, asking very high-income people in a voluntary program to pay more of the cost of providing that benefit is not unreasonable. Nobody is required to participate in part B Medicare. No one pays a penny in the part B Medicare during their working life. It is a voluntary program. I have been stunned when listening to the criticism of this that somehow there is something wrong with asking people who have income of $100,000 a year in retirement to pay a $1,700 deductible for the best medical care policy that money can buy. I do not think that is unreasonable. Let me tell you something. We are going to have to do it. But do we have to wait until our seniors are scared to death because they are not sure Medicare is going to be in place next month? Do we have to wait until the wolf is at the door, until the house is on fire, to make a tough decision? Can't we make the decision while there is time to adjust to it so that we can prevent the system from going broke? Does it have to go broke for us to have the courage to do something that we know has to be done? So, we are going to be debating these things next week, and we will have Members of the Senate standing up and saying we are breaching an agreement by asking people with $100,000 a year income to pay $1,700 for a voluntary health insurance program. We are going to have a lot of people say the world is going to come to an end because we are asking people to pay more if they can to save a system that is critical. I am ready to debate it. I don't know if we can save these reforms. But we are going to be awfully embarrassed some day if we don't. I yield the floor.

Mr. GRAMM

Mr. GRAMM. Mr. President, I came down at noon with my colleague from Texas, Senator Hutchison, and objected to bringing the Defense authorization bill to the floor of the Senate under unanimous consent. I then rushed back to the Finance Committee where we were finishing our markup on Medicare, Medicaid, and welfare reform. I did not have an opportunity when I raised the objection to explain exactly what all of this is about. I wanted to come over very briefly and do that now. Let me say I once had the great privilege of serving on the Armed Services Committee. I have always been a strong supporter of national defense. My dad was a career soldier, a sergeant in the Army. I was born at Fort Benning and I have always had a special place in my heart for people who wear the uniform of the country. So it produces no great happiness in my heart being in a position of holding up this bill. Let me also say that I never like to do anything that brings distress to the chairman of this committee, Strom Thurmond, who is the greatest man that I have ever served with in public life. However, let me explain to my colleagues why this issue is so important, although I do not want to get into a debate today about the issue. I am hoping we can work something out. I am hoping that reason and fairness will prevail, and like everything else in life, if you look at something from a different perspective, you see it differently. I do not have any doubt that our dear colleague from Oklahoma in his heart sees this thing differently than I do. I think one of the things that has helped me in public life is what an old Virginian, Thomas Jefferson, once said, ``Good men with the same facts are going to often disagree.'' So I never try to get personalities involved with issues. This is about what we want to achieve, in some cases for our States, in some cases for the country. Let me tell you how I see the issue. This is an old issue, in the sense that it has been building for several years. It started in the House with a group called the Depot Caucus. This is a group of Members of Congress who have depots in their district. For those who know more about trains than they do about military maintenance, a depot is a Government-owned facility where Government employees do work for the Defense Department--primarily work in maintaining defense systems. Now, we have had a longstanding debate about whether maintenance work ought to be done in depots, or whether it should be done by the private sector. You will hear people argue on both sides of the issue. Some people will say only these depots can be relied upon to maintain weapons systems that were built by the private sector, not the private sector. We have gone through three base closings, and we have now closed five bases in Texas. I was an original cosponsor of the base closing commission. I voted for the commission reports that closed all of those bases. I hated it. It seemed to me that we were penalizing the very people who won the cold war, but I understood it had to be done. Let me say to my colleagues that I am for another round of base closings. We have cut defense by a third; we have reduced the number of military bases by 18 percent. We have more Army nurses in Europe than we have combat infantry officers in Europe. Tell me that makes sense. We have a huge bureaucracy that was built in another era, for another time, for another conflict. And we all love parts of that bureaucracy. Part of it is in our State. But it is profoundly wrong for the country, and we have to have a bureaucracy that fits the military we have now. So I am not here trying to defend a base in Texas, Kelly Air Force Base. That is closed. It is closed. The case is over. I voted to set up the commission that closed it and voted for the report that closed it, even though I wish we had closed a base in someone's State who doesn't support defense as much as I do. So the issue we are debating here is not trying to keep a base open. It is going to be closed. I don't want to reverse the decision. It is done. I wish it had been decided differently, but it wasn't. Now, the issue before us is a very simple issue. The Defense Department, the Secretary of Defense, the Secretary of the Air Force, and those involved in procurement believe that we can save tremendous amounts of money through price competition. Surely, in America, that is not a revolutionary concept. What the Defense Department wants to do is to have competitive bidding between the three depots in the Air Force that are doing maintenance work and private contractors. I should also point out to my colleagues that my State, when Kelly is closed, will lose a minimum of 7,000 jobs that will go to the other three depots-- 7,000 jobs. Now, what Senator Hutchison and I want is simply to allow private contractors in our State or anywhere else to have the right to compete for this work and, if they can do it better, if they can do it cheaper, they would have an opportunity to do it. Quite frankly, the Air Force believes that we could have savings in the range of 20 to 25 to 30 percent by having price competition and by choosing the depots through Government employees to do the work when they are cheaper and choosing private companies to do the work when they are cheaper. I remind my colleagues, given that defense has been cut by a third since 1985, it ought to be welcome news that we can save that kind of money. We currently have a proposal out to privatize the maintenance of the C-5, the great big transport plane that is operated by the Air Force. We have all seen it or seen pictures of it; it is big. Now, that was a function at Kelly. So what the Air Force wants to do is to put it out for bids, and if one of the depots can do it cheaper, to move it there, or if a private contractor can do it cheaper, take the facility that has been turned over to the City of San Antonio and lease it to a private contractor, or even let a private contractor in any other city in the country do it, if they can do it cheaper. Now, the bill before us says that that contract would have to be stopped, that you could not have competitive bidding until the depots were operating at 75 percent of capacity, which would be most of all the work that exists in the Air Force today, so in effect there would never be another competitive bid. And it says, even if you had a competitive bid, nobody using facilities that used to be Kelly Air Force Base, or used to be McClellan Air Force base in California, could compete. Now, I understand give and take. I understand compromise. But I don't understand knocking people down and stepping in their faces. That is basically what we are talking about here. Now, if we were simply talking about Texas' interest, I am for Texas' interest. I get paid to represent it, and I try to do a good job at it. But the reason that I am adamant about this subject is this is not just Texas, this is America. Why should we not have price competition? I would like to remind my colleagues, when I was on the Senate Armed Services Committee--and two of my colleagues here sat with me every day I was on that committee--I always supported competition, I always supported privatization, and I always supported it, even though my State might have benefited if we had stopped competition, because it is something I believe in. It is fundamentally important to America. I know we have people who stand up and say, well, we can't contract out maintenance for the F-l6. You could not trust somebody who didn't work for the Federal Government to maintain the F-l6. Our freedom depends on it. Well, who built the F- l6? Private contractors. The plain truth is, if Government defense without the involvement of the private sector really worked, we would have lost the cold war. My point is this: We ought to have it as a matter of policy, and since I am standing on our side of the aisle, let me speak as a Republican. If Republicans believe in anything, it is competition. If Republicans stand for anything, it is that when we are spending the taxpayers' money, we ought to do it as efficiently as possible. We ought not to be concerned about where somebody lives that can do the work cheaper. We ought not to be concerned about what their gender is or their ethnicity. We ought to be concerned about the work they can do, the quality they can provide, and what they are willing to charge. I have tried to break this impasse. Let me explain what I have proposed and why I think it is more than reasonable, bending over backward, and then I will yield the floor. Obviously, if you wanted to be reasonable on this issue, you would simply say to the Defense Department, look, here are a set of criteria for looking at a fair competition with a level playing surface. Let me say, with all due respect, to the depot caucus in the House, the only fair competition to them is no competition. The last thing on Earth they want is competition. But we could set out simple criteria for a level playing surface to have competition between the public sector and the private sector to do this work. What we ought to do is to do that scrupulously and choose the low bidder for the highest quality and get the most defense we can for the money we have. That is logic. To try to break this impasse, I have made the following proposal. Have competitive bidding after you first set out the criteria for competitive bidding. If you want to look at the cost of the facilities they are using, to make adjustments for it, then look at everything-- look at retirement costs, look at every single cost, come up with a way of measuring it, and have a competition. And then, even if the depots lose the competition by less than 10 percent, give it to them anyway. In other words, let's say that we can maintain the C-5 through a Government depot for $109 million, and let's say that a private contractor can do it for $100 million. What I have said is, to try to break this impasse, cheat the taxpayer out of $9 million. Give it to the depot. But if the private sector can do it for more than 10 percent less, give it to them. Now, what that is saying is that the depots will win any close competition. If they are no more than 9.99 percent higher, they win. But if the private sector can do it for 10 percent or more less, can it be prudent public policy, can it make any sense to deny them the right to do that work? I think the answer is no. That has been a proposal that I have made. Some people have answered, well, you won't have a fair competition. The Air Force will cheat us. I am willing to try to set out criteria. I personally don't believe any of us are so important that the Air Force is out to cheat us. I have never believed in conspiracies. But the point is, all I am trying to do here is not keep a Texas base open. It is going to be closed. But what I want the workers there to have a chance to do is to go to work for private companies that might have a chance to compete for work. So I am not asking for anybody to give anything to San Antonio, TX. But I am demanding that we have an opportunity to compete. A problem we have here is we have a bill that bans that competition. And then we are going to conference with the House, which basically has the approach that whatever money there is belongs to us and we are not worried about how efficiently it is spent, and this is really defense welfare anyway. So what I am trying to do, and what I would very much like to do to move ahead, is to try to work out an agreement on the principle of competition, something we believe in, something that clearly works, and I am willing to give an edge to the Government. But I think a 10- percent edge is more than generous. I don't think most Americans would agree with that, especially when many of the people competing are small, independent businesses. But, again, I mention this not because I think it is what we ought to do, but what I am willing to do to try to break this logjam. So I thought it was important, having run over here from the Finance Committee and objected and then run back without having a chance to say anything, to get an opportunity to explain why this is important. This is a critically important issue. I feel like Senator Hutchison and I have not been treated fairly on this issue. I believe there is a fundamental national objective here, and I see it as the competition between special interests and the public interest and, in this case, the public interest is also the Texas interest. When you combine the two, I am getting paid twice to do the same work. So I want to be sure that I do it well. That is what this whole thing is about. Again, I want to apologize to my colleagues for inconveniencing the process. I know they want to move ahead with their bill. But I know that each of them, from time to time, have found themselves in a similar position. Thank God the Founding Fathers set up the Senate where one Member does have power; where one person can stand in the face of large numbers of others and say, ``no.'' Ultimately, they can be run over, but they can't be run over for a long time. I think we all benefit from that. So I am simply taking advantage of the rights I have as an individual Member, as any Member here would, I believe, under the circumstances. I thank my colleagues for listening. I yield the floor. Mr. LAUTENBERG addressed the Chair.