Chuck Grassley

Mr. GRASSLEY

Mr. GRASSLEY. Well, can I ask a question without answering the Senator's question?

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I am pleased to speak today to honor the career of Dr. Philip Royal Shipp, Jr., a devoted public servant who has served the Congress for nearly 30 years at the Congressional Research Service, CRS. During his tenure at the CRS, Dr. Shipp has served in several key management and leadership roles, demonstrating extraordinary levels of competence, intelligence, and intellectual creativity in each of these positions. Most recently, Dr. Shipp has served as the Director of the Domestic Social Policy Division. The Domestic Social Policy Division offers the Congress research and analysis in many programs and policies that under the jurisdiction of the Senate Finance Committee, including the Medicare, Medicaid, and State Children's Health Insurance Programs, as well as Social Security, pensions, welfare, child welfare programs. I have been honored to serve as chairman of the Finance Committee for 4 years and am pleased to continue my service as the ranking Republican on the committee. Analysts under Dr. Shipp's supervision have worked closely with my Finance Committee staff, briefing them on complex programs and policies, helping them in the drafting of legislation and participating in Senate Finance Committee hearings. We Members of Congress simply could not do our work effectively without the support we recelve from organizations like the Congressional Research Service. There is simply no other organization with the reputation and the credibility of CRS. The work provided by CRS is always first rate, oftentimes quantitative and impeccably nonpartisan. Dr. Shipp, throughout his career, has embodied these characteristics. Dr. Shipp began his Federal service in 1964 as an economist with the Federal Reserve. He was subsequently a progr analyst with the Office of Management and Budget and later the Acting Administrator of the Food and Nutrition Service. Dr. Shipp made significant contributions to the Food and Nutrition Service, including an expanded view of the public policy purposes of food assistance programs such as food stamps. He also was instrumental in establishing and expanding the agency's in- house capacity to analyze programs, study their effects, and estimate the impact of legislative and regulatory changes. Dr. Shipp joined the Congressional Research Service in 1977 as a Senior Specialist in Social Legislation in the former Education and Public Welfare, EPW, Division. He spent a significant part of the next decade leading teams of CRS analysts in high-level, committee- requested, legislatively relevant research studies focused on health and income issues. Topics included health insurance for the uninsured, retirement income for an aging population, and work incentives in income support programs. Under Dr. Shipp's direction, CRS developed a framework and quantitative model to compare legislative options for a new retirement system for Federal workers; this model was used in the development of the Federal employee retirement system that is in place today. During this period, in 1984, Dr. Shipp also served as Executive Director of the Congressional Panel on Social Security Organization, which was charged with developing an organizational and management framework for an independent agency for Social Security. The panel's principal recommendations were reflected in the legislation that eventually created the independent Social Security Administration. In 1989, Dr. Shipp became Associate Director of CRS for Research Planning and Coordination, where he guided efforts to evaluate and improve CRS services and operations and led several of tge agency's first strategic management reviews. He returned to EPW as Division Chief in 1994 and became head of the expanded Domestic Social Policy Division in 1999. As Assistant Director for Domestic Social Policy, the largest research division within CRS, Dr. Shipp emphasized the building of analytic capacities, with a special focus on empirical analysis, as a way to enhance CRS' legislative support to Congress. He was instrumental in building CRS capacities in all areas of domestic social policy, in particular health policy analysis, Social Security and disability analysis, homeland and border secur, public health preparedness, and housing and welfare policy. He organized and staffed the division to respond to new challenges, in particular the heightened need for expertise in domestic intelligence and counterterrorism after the attacks of September 11, 2001. Dr. Shipp also conceived and implemented an initiative to enhance CRS' strong analytic work in issues associated with the aging of the population, by expanding the division's staff to include new analysts with expertise in specific relevant disciplines. Under Dr. Shipp's leadership, CRS also obtained and developed the capacity to use a micro-simulation model for analysis of the distributional impact of alternative policy options for Social Security reform. I am informed that Dr. Shipp was an exceptional manager with a clear vision of how CRS should be of service to the Congress. He leaves a strong legacy that will have a profound effect on the Congress for years to come. I know that my colleagues join me in thanking him for his service and wishing him well as he embarks on new challenges ahead.

Mr. GRASSLEY

Mr. GRASSLEY. Madam President, I ask unanimous consent to add time to the order for morning business so I can speak for 25 minutes.

Mr. GRASSLEY

Mr. GRASSLEY. Madam President, it is a very important issue that is going to be coming before the Senate very shortly, and it deals with the Medicare prescription drug benefit and whether the Government ought to negotiate prices as opposed to what is in the Medicare Part D bill. I wish to speak on that subject because this issue is very important to the seniors of America. It is important for the public and for Medicare beneficiaries to fully understand these proposed changes. It is equally important we explore in depth the effects these changes are going to have on this program and particularly the negative impact on the senior citizens of our country. So I am going to spend some time this week dealing with this issue. First, everyone should recognize that political opponents of the drug benefit have, in every way, done everything they can to tear apart and denigrate this new benefit that the vast majority of seniors find to their liking, based upon a lot of different polls that have been taken over the last 7 or 8 months. In fact, the opponents of this legislation have done this ever since the ink was barely dry on the bill we called the Medicare Modernization Act of 2003. First they said that no plan would offer--meaning no benefit plan; the people, the administrators of the program--that none of these plans would offer the new drug benefit in the first place, that eventually the Government was going to end up doing it. Of course, we know that is not the fact. The plan is up and running, and the plans are offering so many. Then, after it was up and running, these opponents of the legislation said, well, there were too many plans. They said it was too confusing, seniors would not be able to choose a plan. But 91 percent of seniors are covered by some plan that has prescription drugs in it, and surveys show overwhelming satisfaction by seniors with their plans. Opponents suggested plans could change their prices and the drugs they cover at the drop of a hat without even almost any notice. This did not turn out to be the case. The opponents tainted beneficiaries' views of the benefits before it even got off the ground. You wondered whether the millions of people who signed up would ever sign up, hearing so much negative stuff about it. But they did sign up. And, as we have heard from the opponents over and over again, one of the biggest criticisms about the drug benefit is that the Government does not negotiate with drugmakers for lower prices. So they have gone to great lengths to make it sound as if nobody is negotiating with the drug companies. It is, of course, correct that the Secretary of Health and Human Services does not do negotiation with drug companies. But it is absolutely not true there are not negotiations going on with drug companies. People who say that are completely nonsensical in their understanding of the legislation or maybe they have some ulterior motive of wanting to continue to degrade and denigrate a piece of legislation that seniors have accepted. The idea behind the drug benefit is that multiple drug plans would compete with each other to get the lowest prices from manufacturers, to be the best negotiator, and to offer beneficiaries the best possible drug plan. The pattern for this was the 40-year-old Federal Employees Health Benefit Plan that has worked so well for Federal employees. We patterned this program, Part D, after that: plans negotiating for Federal employees, getting a good price; plans that have membership of senior citizens negotiating with drug companies to get the best possible price for senior citizens who are in a particular plan. But the opponents of this legislation do not like plans negotiating. They think the Government directly can do a better job of negotiating because they have a belief about Government always doing good, Government always doing the best. Their faith is in big Government because they lack faith in the American people. They find it very hard to believe anybody other than the Government could do a better job of negotiating. Last week on the Senate floor, the senior Senator from Illinois said the law ``took competition out of the program so that [the drug companies] could charge what they want.'' Well, it did not take competition out of the program. Competition is what this program is all about. In fact, the competition is working. Plans have no restrictions on the tools they can use to negotiate with drug companies. And, remember, these plans must be approved by the Secretary of Health and Human Services. Not every Tom, Dick, and Harry can go out and offer a plan and hoodwink seniors. There is control over these plans. But once the plan is approved, there are no restrictions on the tools they can use to negotiate. And, of course, this is very important because one thing we had learned is that Government is not actually a very good entity at figuring out what it should pay for drugs. I have a chart in the Chamber with a quote from the Washington Post. They recognized this fact, that the Government cannot do a very good job of negotiating, where they said: ``Governments are notoriously bad at setting prices. . . .'' And then, as a matter of emphasis, it said: ``and the U.S. government is notoriously bad at setting prices in the medical realm.'' I will add to that: especially when it comes to medicine policy. Now, we knew this because of the Government's experience for paying for drugs under another Medicare program, not Part D as in ``Donald,'' but Part B as in ``Bob,'' the one that pays for doctors. Those drugs are given during a physician's office visit, and they could be drugs such as oral cancer drugs. Medicare payments for these drugs were based on what is called the average wholesale price. ``AWP'' is the moniker that is used for that. AWP is a little bit like the sticker price of a car. The sticker price on a car is not what you pay for the car. And the average wholesale price, AWP, is not what you pay for drugs. The joke was that AWP actually stood for ``Ain't What's Paid.'' Over the past decade, reports issued by the Office of the Inspector General, the Department of Justice, and the Government Accountability Office found that by relying on AWP, Medicare was vastly overpaying for these drugs. So the Federal Government sets the price, and we end up wasting a lot of taxpayer money under Part B with the few drugs that Medicare was paying for before we passed Part D. Recommendations were made to change payments so that they reflected actual market cost. The Clinton administration tried to make some of these changes, but after push-back from providers, it backed off. Congress took another run at this issue in 2003 in the Medicare Modernization Act, and we were successful. Congress reformed how Medicare pays for these drugs under Part B as opposed to the drug program Part D. Medicare now based its payments for many of these drugs on what it ought to, a market-based price. This change is already saving taxpayers and beneficiaries, but it took years to get fixed. All that time Medicare and taxpayers paid too much for these drugs. Billions and billions of dollars were wasted. I compliment President Clinton for trying to do something about it, but he couldn't get it done. Congress had to act. But when we had all of this track record, as we were writing the prescription drug bill, I, for one, didn't want to repeat that experience under the Medicare drug benefit. We also knew that Medicare overpays for a lot of other services and equipment. The bookshelves are full of other reports from the Government Accountability Office, from the Inspector General, from the Medicare Payment Advisory Commission, from the Congressional Budget Office, and others, about how Medicare is paying too much in too many areas where the Government pays for health care through Medicare. For example, Medicare overpaid for durable medical equipment for years until the Republican-led Congress made changes in 2005 in what we called the Deficit Reduction Act. In fact, just 12 months ago, now, that was a big issue before the Congress. Each year, the Office of Inspector General issues its Red Book which presents cost-saving recommendations. The books are usually 50 or more pages long, and the recommendations span all aspects of Medicare-- hospitals, physicians, home health, the Medicare Part D plans, among others. And this is more evidence on many areas where Medicare doesn't get the best deal, where the Government doesn't get the best deal. So Government doesn't always know best. In fact, the situation is so bad that several years ago, Congress created what is called the Medicare Payment Advisory Commission, also known as MedPAC, to provide advice to us in Congress and to the Center for Medicare Services on what we ought to pay for services. And every year Congress hears recommendations from MedPAC addressing Medicare overpayments; yes, trying to do something about wasting the taxpayers' money, paying more than we should for health care for our senior citizens. But even though we have MedPAC, experts studying this, coming out with recommendations, it takes Congress or the Secretary of Health and Human Services far too many years to make the changes to save the taxpayers money--more evidence that Government doesn't always know best when it sets prices. In making recommendations, MedPAC looks at profit margins as an example. One type of provider had been found to have a margin of 16 percent off of Medicare payments. Congress has been able to act on many MedPAC recommendations, but it is not easy. There is always some special interest out there fighting saving the taxpayers money. As chairman of the Finance Committee, I received letters from Members saying, ``Please don't cut benefits for this provider group or that provider group.'' So as the Clinton administration found, letters like that, where they come to Congress or to the administration, can make it difficult in very short order to solve a lot of these overpayment problems, despite compelling evidence of overpayment, despite the high profit margins, despite the fact that the proposed change could save the taxpayers billions of dollars. The architects of the drug benefit--and I am one of them--were concerned that this same kind of dynamic would happen again. So 3 years ago, when we wrote the bill, we tried to deal with that problem. Political pressures on the Medicare drug benefit would tie the hands of the Secretary of Health and Human Services. If that happened, the program would be unmanageable, and the costs would skyrocket, just as they have in many of these other instances where the Government is setting the price. So, instead, Congress put competing private plans in charge of negotiating; again, following on the pattern of 40 years of the Federal Employees Health Benefits Program. So under the Part D Medicare prescription drug program, these health plans and their pharmacy benefit managers, because they have years of experience in this arena--it is what they do--they negotiate, and Health and Human Services has had very little experience and a very dismal track record in doing it. These plans and managers have powerful bargaining clout in the market. They manage the drug coverage for tens of millions of people. There are plans that cover upwards of 50 million people--75 million in one case--far more than the 41 million Medicare beneficiaries. So, clearly, Medicare beneficiaries account for a large number of all prescriptions filled each year. Some might argue that 41 million beneficiaries have more clout than 75 million nonbeneficiaries. But numbers alone do not necessarily translate into lower cost. It is what is done to leverage those numbers that leads to lower costs. That leverage comes from the plan being able to say to a drug company something like: I can get a better deal on a different drug that has the same clinical effect made by manufacturer Y. So thank you for your offer, but I am leaving the table. Some plans get a better deal on drug A and put it on their formulary. Some plans get a better deal on drug B. But many experts agree, and experience suggests, that it would be difficult for Medicare itself to walk away from the table; in other words, the Government people doing the negotiating. There would be enormous pressure to cover everything and, if it did, the negotiating power lies then with the manufacturers and not with Medicare. In fact, in a November 2 Wall Street Journal editorial, Dr. Allen Enthoven, an economist at Stanford University, wrote: When the government negotiates its hands are tied because there are few drugs it can exclude without facing political backlash from doctors and the Medicare population, a very influential group of voters. Yesterday's New York Times quoted Dr. Alan Garber, the director of the Center for Health Policy at Stanford University, on the same subject. Dr. Garber said: To obtain drugs at low prices, a purchaser must be able to say no to covering a particular drug. He went on to say: [I]f you cannot walk away from a deal, there's no way you can be sure of obtaining [the lowest possible] price. Dr. Garber's point is exactly on point. The Medicare drug benefit recognizes that the Government would be a weaker negotiator. So as we set it up, it relies upon private sector plans to do the negotiating, as has been done for 40 years under the Federal Employees Health Benefits Program. We believed then that the private sector could be a tough negotiator, and we had a way to make competition work. When Congress finished work on the new drug benefit in 2003, we knew it was an experiment. Nothing like this had been tried on this scale. Here is what we learned: Private competition works. It has been very successful in keeping costs down. These plans that negotiate their bids have come in lower than we even expected. This year they were down 10 percent from last year's bids. How many commodities do you see in America where you are going to find something 10 percent less this year than last year? It happens that premiums are lower for people joining these plans; the premiums that they pay are lower than they were estimated to be. Before 2006, Medicare's chief actuary estimated that the average monthly premium would be $37 a month. But because of competition, it was actually $23 in 2006. That is 38 percent lower than expected. And because of the strong competition between plans, the average premium for beneficiaries is expected to be about $22. That is $1 cheaper this year than in 2006. The net cost to the Federal Government is also lower than expected. Just today the official Medicare actuaries are announcing that the net 10-year cost of Part D has dropped by $189 billion over the original budget window used when the Medicare Modernization Act was enacted in 2003. That is, in fact, a 30-percent drop in actual cost compared to what was projected when the bill was being written. Cost overruns is the name of the game with most people doing business with the Federal Government. In this particular case, this is an exception to cost overruns. This is where things are coming in $189 billion less than bureaucrats projected they would cost when the bill was written. Of course, States are involved in this as well because they had a lot of senior citizens on what we call Medicaid for low-income people. States are saving money in lower contributions. These are referred to as clawback payments. So State payments are now projected to be $37 billion less over a 10-year period, and that is 27 percent lower than what we thought they would be when the legislation was written. Just in the year 2006, the 50 States saved $700 million. The plans are negotiating lower prices for drugs. Let's take the top 25 drugs used by seniors. Using them, the Medicare prescription drug plans have been able to negotiate prices that are, on average, 35 percent lower than the average cash price at the retail pharmacies. That is 35 percent lower. Some examples: Lipitor is 15 percent lower; Anetol, 63 percent lower; Norvas, 28 percent lower; Fosamax, 30 percent lower. When the drug benefit was signed into law, we believed it would work. We believed it would hold down costs. That is certainly happening today, now going into the second year of experience with this legislation. At the time it was signed into law, we also said that if it did not work, if the negotiating model we wrote into the legislation did not hold costs down, then Congress would need to reexamine the whole setup. That makes sense. But if costs grew too fast, then the whole idea, obviously, would have to be revisited. Maybe we would have to restrict access to drugs. Maybe we would have to rely more on mail- order pharmacies, instead of liberal access to local retail pharmacies. Maybe more drastic cost-cutting measures would be needed. We thought of all those things as we were writing this legislation. But as it turns out now, 3 years later, since the President signed the bill, that is not the case. Everyone has heard the old saying, ``If it ain't broke, don't fix it.'' That certainly applies here, and the evidence shows it. I would be the first one to say the Medicare drug benefit is not perfect. There are improvements that can be made. The Senate version of the drug bill had some important features that I hope we can revisit at some point. Congress should look at ways to make it easier for low-income beneficiaries to get the additional assistance they need by eliminating the low-income subsidy asset tax. We need to look at payments to pharmacies and make some reforms in that area. We need to look at ways to simplify the enrollment process. And there are other areas, too, where we can make improvements. But to emphasize one area that is working very well, it is the negotiating power of the Medicare drug plans. They have shown their ability to hold down costs, so it is working. The pleas from the drug plans' opponents to put the Government--because they believe in big Government--in charge of negotiating are, quite frankly, about politics, not policy. These voices want to score political points with the drug benefit. It saddens me that we are going to start off this year with a new Democratic-controlled Congress playing politics with Medicare and raising issues that could harm our senior citizens as opposed to benefiting them. But that is what this issue is all about; it is about politics. It is not about saving money because this program, through negotiations by the drug plans, is already saving money. It is surely not about improving the program. In fact, the Congressional Budget Office looked at the proposals made last year to have the Secretary negotiating drug prices, and they concluded they would not achieve any savings. So around here the Congressional Budget Office is like God. If they say something costs something and you don't have an offset for it, they are so much of a god around here, if you try to get it done, you have to have 60 votes to get it done. Now we have the Congressional Budget Office saying there are no savings, because the Government negotiates instead of having the plans negotiate. During the debate on the Deficit Reduction Act of 2005, Senators Snowe, Wyden, McCain, and Stabenow offered an amendment to give the Secretary authority to negotiate with drug companies. Here is what CBO said about that amendment: It would produce zero savings. So what is this amendment all about? If you are going to save senior citizens some money by having Government negotiate instead of the plans, you should not get a big zero out of the CBO. I want to have a second chart observed by my colleagues. This is a person a lot of people 3 years ago were expressing was competent when he was judging that this bill would cost more than the CBO said it would cost, and that somehow the administration was playing games with these figures. All these figures ended up being too high because they are $189 billion lower than they were saying they were going to be. There are no cost overruns in this program as in every other program. I am going to refer to the chief actuary for Medicare who examined these proposals we are talking about and having the Government negotiate. He came up with the same conclusion: Direct price negotiations by the Health and Human Services Secretary would be unlikely to achieve prescription drug discounts of greater magnitude than those negotiated by the Medicare prescription drug plans responding to competitive forces. Competition in the marketplace is what getting the consumer the best buy for the money is all about. Every day consumers benefit from competition. We wrote competition into this program 3 years ago, and that competition is working for the seniors. Now we have people who want to come out here and screw it all up for the senior citizens of America. I hope we can put politics aside here and focus on some of the real improvements we could be making in the drug benefit program that I pointed out today that need to be made, and not deal with things that are working. ``If it ain't broke, don't fix it.'' Madam President, since no other Members are here, I suggest the absence of a quorum.

Mr. GRASSLEY

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

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I rise to pay tribute to a fallen soldier from Greenfield, IA, LCpl Clinton Jon (C.J.) Miller, who was killed while serving his country as part of an improvised explosive device detection team in Iraq. My thoughts and prayers go out to his wife Jackie, his mother Susan, his father Kerby, and all his family and friends. I am sure I speak for all Iowans when I say that I am proud to call C.J. one of us. By all accounts, he was a fine marine who felt called to, and liked, military service. Family members say that he joined the Marines during wartime because he just felt he had to serve. Where would our country be without patriotic young Americans like C.J. who feel a call to serve their country? All Americans owe a debt of gratitude to this brave Marine. As his father said, ``He was a hero.'' Lance Corporal Miller's tremendous service and sacrifice should never be forgotten. Sergeant James P. Musack

Mr. GRASSLEY. Mr. President, I rise to pay tribute to LTC Paul J. Finken who has given his life for his country while serving in Iraq. He was 40 years old. Paul Finken was raised in Earling, IA, and I know all Iowans share my pride as we also mourn his loss. As a career Army officer, Lieutenant Colonel Finken had dedicated his life to the service of his country and we can never thank him enough for his service and his final sacrifice on behalf of our freedom. In remembering Paul Finken, his family said, ``Paul was a devoted husband, loving father and respected leader. He loved being a soldier and respected the soldiers he worked with. He always set the example and would never ask his soldiers to do anything he wouldn't do himself. He will be greatly missed by his family and by all who knew him.'' My thoughts and prayers are with his wife Jackie and his three daughters, Emilie, Caroline, and Julia, for their loss. I hope it will be of some comfort to them to know that Paul died a hero.

Mr. GRASSLEY. Mr. President, I rise to pay tribute to SGT James P. Musack of Riverside, IA, who tragically died as a result of a noncombat related incident while serving his country in Iraq. I am sure that all Iowans shared the same sense of sadness I felt when learning of the death of this young Iowa native. According to family and friends, he had found his calling in the military and all Americans owe him our deepest thanks for his service. Everyone joining the military knows the risks involved, but all Americans are indebted to brave patriots like James Musack who voluntarily assume those risks in order to defend our freedom and way of life. My prayers go out to his mother Yvette, his father Jim, and all his family and friends. Lieutenant Colonel Paul J. Finken

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I would like to take this opportunity to offer my congratulations and gratitude to an extraordinary Iowan. Marvin Van Haaften is stepping down from his distinguished position as director of the State of Iowa's Office of Drug Control Policy. He assumed this position after being named by Governor Tom Vilsack in 2002 and has served the State with honor and distinction since accepting the appointment. I would like to take this opportunity to show Marvin Van Haaften the appreciation that the country, the State of Iowa, and myself personally have for his extensive commitment as a public servant. With more than 32 years of law enforcement experience, Marvin has taught extensively in the field of rural law enforcement, particularly death investigation and domestic violence crimes. He has provided local and national leadership on the role of law enforcement in strategic victim safety and offender apprehension, and is presently on the board of directors of the National Center for Rural Law Enforcement. Marvin also served on many local and State committees such as the Iowa Criminal and Juvenile Justice Planning Advisory Council, the board of the Mid-Iowa Narcotics Enforcement Task Force, the board of the 18-county South Central Iowa Clandestine Laboratory Task Force, and was the third vice president on the board of directors of the Iowa Association of Counties. Marvin was named Sheriff of the year in 1991 by the Iowa State Sheriffs' and Deputies' Association and served as its president in 1996. He is also a graduate of the FBI National Academy and has attended the National Sheriffs' Association's National Sheriffs' Institute and the FBI Law Enforcement Executive Development Institute. In 1997 he became a licensed Iowa medical examiner investigator. Marvin knows firsthand the true value and significance of a loving family. He has been married to his wife Joyce for 42 wonderful years and has the blessings of 5 grown children and the joy of 11 grandchildren. It is through Marvin's love of family and law enforcement experience that enabled him to expose the destruction that drug abuse wreaks on families. I share my appreciation for Marvin Van Haaften along with my fellow Iowans for the invaluable service he has provided to our State and country. He has proven himself to be versatile and fully capable of accepting and mastering the tasks placed before him. His enduring commitment to the safety of Americans is cause for admiration. Again, I offer my congratulations and sincere appreciation to Marvin Van Haaften for his remarkable achievements throughout his extensive and highly regarded career. His hard work and determination will be missed in Iowa and throughout the Nation.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, in connection with H.R. 6111, the Tax Relief and Health Care Act of 2006, the nonpartisan Joint Committee on Taxation has made available to the public the following document: Joint Committee on Taxation, Technical Explanation of HR. 6408, The ``Tax Relief and Health Care Act of 2006,'' as Introduced in the House on December 7, 2006--(JCX-50-06)--December 7, 2006. This technical explanation expresses the Senate Finance Committee's understanding of the tax and other provisions of the bill and serves as a useful reference in understanding the legislative intent behind this important legislation. Senator Domenici wants a few minutes. How much time do I have?

Mr. GRASSLEY. Mr. President, I will reserve the remainder of my time.

Mr. GRASSLEY. Mr. President, I rise in support of the Haiti trade provisions in this legislation. And I want to respond to some of the criticisms leveled at these provisions. Right now over two-thirds of Haitian apparel exports to the United States are made from fabric made in either the United States or a beneficiary country under the Caribbean Basin Initiative. Under the bill, it is true that Haiti can use fabric from third countries to produce apparel exports for duty-free entry into the United States. But to be eligible for such duty-free treatment, at least 50 percent of the value of the apparel must be attributable to Haiti, the United States, or another regional qualifying country. If, for example, Chinese-origin fabric is used to manufacture apparel in Haiti, only the value of the cutting and sewing counts toward the 50-percent value-added requirement. The value of the Chinese fabric itself does not count toward the requirement. And because fabric generally accounts for more than 50 percent of the value of a garment, the 50-percent value-added requirement will often mean that qualifying apparel must be made from fabric produced in a regional qualifying country to be eligible for preferential treatment. Moreover, the benefits are capped in the first year at 1 percent of United States apparel imports, which is less than current apparel imports from Haiti and equal to only 20 percent of the total level provided under the African Growth and Opportunity Act. Now, the bill does include a tariff preference level, but it is limited to woven apparel, not knits. And the level of the tariff preference level is equal to only 0.23 percent of United States apparel imports. The Commissioner of Customs wrote a letter to Chairman Thomas of the House Committee on Ways and Means stating that Customs remains committed to enforcing all textile trade laws. The Commissioner further indicated that Customs can, and will, enforce the textile provisions in this bill if they become law. The bottom line is that the Haiti trade provisions in this bill will help to spur economic growth and prosperity in the most impoverished country in this hemisphere. At the same time, these provisions do not threaten to significantly impact our domestic industry in an adverse manner. In addition, these provisions have been endorsed by a number of non- governmental organizations, including Oxfam America and the International Policy Committee of the United States Conference of Catholic Bishops. I urge my colleagues to support the Haiti legislation, as well as the other trade provisions in this bill. Mr. President, I ask unanimous consent that my remarks be printed at the appropriate place in the Congressional Record, and I yield the floor.

Mr. GRASSLEY. Mr. President, I would like to discuss a tax policy matter that is important to several Senators. Although it is not a priority for me, I pursued the issue for those Senators during the ``trailer'' bill negotiations. On my side of the aisle, the interested Senators included Senators Smith, Lott, Cornyn, Dole, Graham, and Vitter. I know Senators on the other side of the aisle have similar interests, including Senators Lincoln, Pryor, Landrieu, Cantwell, and Murray. Under current law, the tax treatment of capital gain income from timber activities varies. The variance depends to a great degree on the form of the business entity that holds the timber. The top individual capital gain rate of 15 percent applies to capital gain from timber if the timber is held by pass-through entities. By contrast, capital gains from timber held by regular ``C'' corporations are taxed at the top corporate rate of 35 percent. Senators Smith and Lincoln filed an amendment for the Finance Committee reconciliation tax relief markup last year. The amendment aimed at addressing the differential treatment of timber capital gains among entities. A form of that amendment was included in the first round of negotiations on the trailer bill. The final form of the trailer bill agreement did not include the timber capital gains amendment. Since this issue was not fully resolved, and many Members remain strongly interested in the issue I would like to ask my friend, the ranking Democrat and incoming chairman, Senator Baucus, if he plans to further examine the issue in the next Congress.

Mr. GRASSLEY. I will give 4 minutes to the Senator from Louisiana.

Mr. GRASSLEY. How much time do I have?

Mr. GRASSLEY. I should have 2 minutes left. I gave the Senator from Louisiana 4.

Mr. GRASSLEY. Mr. President, I ask for the yeas and nays.

Mr. GRASSLEY. The Senator can have 2 minutes.

Mr. GRASSLEY. Mr. President, I want my colleagues to understand that if this budget point of order is not waived, this legislation that we have been working on for a period of 8 months, and should have been passed in July--probably should have been passed in May, but for sure in July, and here we are still doing it--will not be passed. I want to comment on why, without hearing my colleague yet--and going before him, but anticipating from some statements that have been in the press--why he is wrong about his point of order against this legislation. Earlier today, there were comments made by my Republican colleague regarding the tax extenders bill. I would like to take a few minutes to clarify the record regarding the tax extenders bill. Three points: First is the claim that tax cuts are a budget buster, that it is tax cuts that are putting us in the red. Nothing could be further from the truth. We have seen tax receipts going up by a record amount. From 2004 to 2005, receipts went from $1.8 trillion to $2.1 trillion. The calculators at the Treasury needed new batteries to count the new dollars coming in this year, increasing from $2.1 trillion to $2.4 trillion--an 11.8-percent increase. These tax receipts far outpace what was projected in the budget, and, most importantly, the budget resolution we are currently operating under. The bottom line: Taxpayers are sending checks to the Treasury well over $100 billion in excess of what was expected under the budget resolution. We are now taking action to prevent what is effectively a tax increase. I never thought I would hear a Republican advocating we ought to have a tax increase. If we do not pass this legislation, 19 million people are going to have tax increases. And let my colleagues absolutely be clear in understanding that failure to pass this legislation, then, is not just about nothing, it is about allowing tax increases to go into effect. And they would go into effect without even a vote of the Congress. Taxpayers, then, will be writing checks even bigger than this unexpected amount of money that is coming into the Treasury already, if this legislation does not pass. Teachers, parents of college students, working families will all have to dig deeper into their pockets to pay for out-of-control spending in Washington. Taxes are pouring into the Treasury. As I said earlier, it is not for the lack of tax receipts that we are seeing a deficit. It is because of the inability to control spending. In my time here in Washington, DC, I have never seen that the way to control spending is to keep taxes high. Higher taxes is a license to spend more money. And that is borne out by the facts. While tax receipts have gone up 11.8 percent in 2005-2006, spending has increased 8.6 percent. It is important for my colleagues to also understand that much of the tax cuts that are in the tax extender package were expected to be included in the $70 billion tax cuts passed in the budget resolution-- the budget resolution out of the Budget Committee. I find it extremely frustrating that those who come to the floor and decry this bill fail to note it is because we made room for other priorities, priorities they championed, such as capital gains and dividend cuts in the tax reconciliation bill, that we were unable to include the tax extender provisions in that reconciliation bill last spring. And it is for that reason that we now have to consider an extender bill. It reminds me of the fellow who complains about not being able to get a BLT sandwich after he ate all the bacon. And speaking of bacon, one of the major pork products, I would now like to turn to the second point: the discussion on the floor earlier about earmarks. I know my colleagues who serve on the Appropriations Committee have familiarity with the term ``earmark.'' Earmark is something that goes to one individual or one company. That is not what this bill is about. But they have tried to characterize it that way. This bill provides tax relief, and these provisions provide tax relief that is not for one individual or one company. They are not earmarks. For example, the deduction for tuition will help--let me take a State at random. Let's take New Hampshire as an example. It helped 23,124 taxpayers in the year 2004. These tax policies, then, are not earmarks when you are helping 23,000 taxpayers in New Hampshire. And failure to extend the tax extenders means that these taxpayers are going to have an increase in taxes. Earlier we heard on the Senate floor discussion about a tax provision that benefited songwriters. Again, this is not an earmark. As most Members who have been to a record store recently are aware, there is more than one songwriter in this country. But I raise the songwriter provision to respond to another point, which is that there are provisions in this bill that because of the Senate rules, Members will be prevented from effectively raising concerns. The songwriter provision, supported by several Members on both sides of the aisle, was voted on by Members earlier this year in the tax reconciliation bill. It already passed the Senate. The extenders bill is now making that provision permanent. Members had ample opportunity to raise concerns about this provision when it was considered 6 months ago. Not a discouraging note was heard. In fact, colleagues who discussed this provision earlier today actually voted for the legislation that contained the songwriter provision. Talk about saying one thing and doing another. So I think those who sang the first verse earlier in the year should be cautious about complaining that we are now singing the second verse. Finally, I want to comment about the point raised on the sales tax deduction. Again, you call that an earmark, when people in nine States who would not be able to deduct their State sales tax from their Federal income tax have the opportunity to do it? It is affecting 10 million people, and that is an earmark? I find the statements made about the sales tax to be of concern and a misrepresentation of policy. First, my colleagues earlier heard complaints about the cost of the sales tax provision but then in the same breath complain that the sales tax provision does not cost enough, that the sales tax provision's flaw is it should be expanded to both itemizers and nonitemizers, which then would cost billions more. The easy answer is that the intent is to roughly mirror the deduction for State income tax that residents of the rest of the States have. The State income tax deduction is only for itemizers. So why would you want the sales tax deduction to be expanded to include nonitemizers? Second, the deduction for sales tax is only allowed in lieu of a deduction for the income tax. So the benefits that it provides to residents of States such as New York and California, who have both a State income tax and sales tax, is limited. But it does certainly provide real benefits to taxpayers who live in States without a State income tax but do have a State sales tax. The provision means that the Federal Tax Code will not treat similarly situated taxpayers differently based on how the State decides to raise revenue. The Finance Committee has seen no evidence that States have responded to this provision by raising the sales tax. I appreciate the opportunity to clear the record and separate facts from fantasy when it comes to this tax extender bill. These are important provisions that we need to act on now to ensure that taxpayers can properly file their tax returns and receive much-needed tax relief. Finally, the Congressional Budget Office has scored the total health package as costing $1.7 billion over 5 years. The $1.7 billion stems from the cost the Congressional Budget Office has attributed to making the Recovery Audit Contractor Demonstration a permanent part of the Medicare Program and implementing it on a nationwide basis. The 3-year demonstration project was authorized in the Medicare Prescription Drug Act of 3 years ago and requires the Center for Medicare Services to contract with the recovery audit contractors to detect Medicare overpayments and underpayments and to recoup overpayments. Typical overpayments involve improper coding or billing for services for which there is no medical necessity. Also, Medicare inadvertently pays for services when another payer, such as a worker's comp or auto insurance, should be a primary payer. Despite being implemented for a limited time in three States, this demonstration has already shown enormous potential for the identification of overpayments and underpayments and the recoupment of overpayments. In fiscal year 2006, this demonstration identified around $300 million in improper payments in three States. It is estimated that implementing this program on a permanent basis nationwide would result in approximately $8 billion in recovered funds being returned to the Medicare trust funds over 5 years. And somebody is bellyaching about investing $1.7 billion to bring back $8 billion. CBO has assigned a cost to this provision because of a budget scoring rule--some scoring rule that somebody ought to do something about-- called rule 14, which says that ``no increase in receipts or decrease in direct spending will be scored as a result of provision of a law that provides direct spending for the administration or program management activities.'' As a result, even though they are real and substantial, savings from this program will not be recognized for budget purposes. Despite the potential of a budget point of order, we have included this provision in the package because it is simply good policy. It will recover billions that would otherwise be wasted in the Medicare Program--some of it fraudulently wasted. For all these years, Medicare has not been able to effectively detect payment errors. The nationwide adoption of this program will result in real savings for the Medicare Program and, ultimately, the taxpayers. Mr. President, I wish to talk briefly about the issue of Red Cross reform. The Red Cross is one of the great institutions in this country. It is supported by millions of Americans with their volunteer work and contributions. Americans have a right to expect the best from this proud organization. On Monday, I shared with leadership staff on both sides of the aisle as well as interested members copies of legislation that brings much needed reform to the governance of the Red Cross. The Red Cross is congressionally chartered and therefore any reforms to the governance require changes in statute. As many of my colleagues know, I have been active in oversight of the Red Cross since problems came to light with the organization after the tragedy of 9/11. However, it was after the Katrina hurricane that it became evident that fundamental change was needed in how the organization was managed and governed. In response to my oversight, the Chairman of the Board Ms. Bonnie McElveen-Hunter called for an Independent Governance Advisory Board. I thank her for her leadership and responsiveness to the concerns raised. This board recently issued its report ``American Red Cross Governance for the 21st Century'' which can be found on their website. This report is based on the fine work of its Chair, Karen Hastie Williams as well as Peter Clapman, Professor Charles Elson, Margaret Foran, Professor Jay W. Lorsch, Patricia McGuire and Professor Paul Neuhauser. I thank them all for their service. The legislation that I shared with colleagues on Monday is based on the findings of the report from the Independent Governance Advisory Board which was approved by the Red Cross Board of Governors and released to the public on October 30, 2006. The legislation deals with such vital issues as the size and role of the board; the characteristics of who should serve on the board; the role of cabinet members in Red Cross governance; the creation of an ombudsman; the responsibilities of the Government Accountability Office and many other important matters. However, while the statutory changes are important, much of the hard work of changing the culture and governance of the Red Cross will have to be done by the management and board of the Red Cross. I expect them to look to the findings of the report as a close guide for their actions on the details. I am hopeful that this legislation, which has the support of the Red Cross, can be passed by unanimous consent quickly so that we can have in place a Red Cross that has effective and modern leadership for this Nation. However, I am deeply discouraged that despite the fact that this legislation has been cleared for several days on the Republican side it still has not been cleared on the Democratic side, and this despite the fact that the legislation has been originally cosponsored by Democrat Senators Kennedy, Landrieu and Akaka as well as Senators on this side of the aisle, Santorum, Enzi, Isakson, Martinez and Dole. As my colleagues all know, Senator Dole was the former President of the Red Cross. I am pleased to have all their support. But I am very frustrated that I have received no response or courtesies from the Democrat leadership of why this commonsense and needed legislation cannot be passed. I have been informed that staff in the other body have stated to Red Cross officials that they do not want to pass this legislation because they want it to be an early victory for the new Congressional leadership. I do not want to believe that that is the reason why there is no action on these reforms. The failure to act on these reforms is having a very real and very negative impact on the vital work of the Red Cross. I met with the Chairman of the Board of the Red Cross just two days ago and she informed me that the failure to pass this legislation quickly is hurting their efforts to successfully recruit and bring into place a new CEO. In addition, the needed changes to the governance structure at the Red Cross are also frustrated by the failure to make the necessary statutory changes. We saw with Katrina the need for strong leadership and governance at the Red Cross. The Red Cross has taken the right steps to make reforms, reforms that will lead to better service for the American people in times of need. The Democrat leadership should be placing those same priorities first. I call on them to allow us to go forward with passing this legislation.

Mr. GRASSLEY. Mr. President, I move to waive the budget point of order on the appropriate sections of this pending legislation.

Mr. GRASSLEY

Mr. GRASSLEY. I wish to engage my colleague Senator Baucus in a colloquy concerning the Tax Relief and Health Care Act of 2006. This bill contains a N O T I C E The Government Printing Office will publish corrections to the Congressional Record as a pilot program that has been authorized by the U.S. Senate and House of Representatives. Corrections to the online Congressional Record will appear on the page on which the error occurred. The corrections will also be printed after the History of Bills and Resolutions section of the Congressional Record Index for print-only viewers of the Congressional Record. By order of the Joint Committee on Printing.

Mr. GRASSLEY. Under current law, beneficiaries can decide to stay in the traditional fee-for-service program or enroll in Medicare Advantage plans during the annual open period, which lasts from November 15 to December 31. They can also make certain changes one time between January and March of the following year. I remember how much time and effort we spent designing these enrollment policies when we worked together on the Medicare Modernization Act of 2003. Wouldn't you agree this provision is a significant policy change?

Mr. GRASSLEY. That is exactly my concern, too. I am also disappointed in the process that led to the provision being included in the final bill. We had an understanding that we would only include agreed-upon extensions and must-do health items in the package and not make major policy decisions that had not gone through the regular process. This provision does not meet that standard.

Mr. GRASSLEY. It disturbs me, that this major policy change--one that treats some plans unfairly--was included at last minute by the House rules committee. I do not operate like that, and I know you do not, either. Unfortunately, we are stuck with this provision for the time being. But I assure of my commitment to working with you as soon as possible next year to revisit this provision.

Mr. GRASSLEY. Thank you, Senator Rockefeller. We share an interest in making sure that States have adequate Federal funding to cover children through CHIP. No one wants to see children lose coverage, and we hope the provisions in this bill will help States on a temporary basis until we have time to work out a more permanent solution to the CHIP financing structure. Now I know that there are a lot of concerns about this package. And I want to make it clear that Senator Baucus and I thought this was what we could pass right now. We are hopeful that we can pass this package here in the Senate and then get House agreement tonight or tomorrow so that we can forestall these shortfalls for the first part of the year. I want to make it clear, however, that nothing in this package binds us for CHIP reauthorization next year. There is discomfort with the CHIP provisions on both sides of the aisle. But Senators are willing to compromise in order to get something done for children before we go home. Therefore, we should put aside our differences and individual gripes in order to get something productive passed.