Chuck Grassley

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I rise today to co-sponsor legislation, the ``Tax Shelter Transparency and Enforcement Act"to address the continuing proliferation of tax shelters. This bill reflects tax shelter measures that have been passed by the Senate Finance Committee in the Jobs and Growth Tax Relief Act of 2003, the CARE Act, the JOBS Act, and the Energy bill. The full Senate has passed these shelters provisions twice this year. We have known for many years that abusive tax shelters, which are structured to exploit unintended consequences of our complicated Federal income tax system, erode the federal tax base and the public's confidence in the tax system. Such transactions are patently unfair to the vast majority of taxpayers who do their best to comply with the letter and spirit of the tax law. The Finance Committee produced its first draft of tax shelter legislation in 1999, and has produced several subsequent bills, each of which were enhanced to attack new developments in abusive tax shelters. The most recent Finance Committee bill was the Tax Shelter Transparency Act in May 2002. Today's bill builds on that 2002 legislation by adding certain corporate governance provisions, the recommendations from the Finance Committee's tax shelter investigation of Enron, and a proposal to clarify the judicial economic substance doctrine. The Finance Committee has worked exceedingly hard over many several years to develop a legislative response to tax shelters, and the bill we offer today may not be the final word in that response. Thoughtful and well-considered comments on the provisions in this bill have been greatly appreciated by the staff and members of the Finance Committee, and will be considered in further refining today's bill, particularly with respect to clarification of the economic substance doctrine. In our ongoing efforts to end tax shelters, we have attacked the issue on several fronts. We have introduced numerous measures to end specific shelter abuses as they are discovered. We have offered legislation attacking corporate inversions, individual expatiations, and corporate deductions for phony leases of tax-payer funded subways, bridges, and water lines. I have pursued public disclosure of the differences in the income on financial statements reported by public companies to their shareholders, and the income the company reports to the IRS on its tax return. I have written to the President, Treasury and SEC to encourage them to consider this idea. During the Senate's 2002 deliberation of the Sarbanes-Oxley bill, I attempted to add an amendment that would have prohibited auditors from opining on the financial statement results of tax shelters that they had sold to an audit client. I was blocked in my attempt to offer that amendment, with several members expressing skepticism about the need for such a measure. I suspect that today, however, few members would have such reservations. On October 21st, 2003, the Senate Finance Committee conducted a hearing to determine if tax shelters were a continuing problem. Not only are they continuing, they are now expanding to mid-level companies and wealthy individuals, many of whom have been duped into engaging in shelter transactions. During our hearing, we heard testimony from taxpayers who relied on reputable tax professionals and accounting firms for sound tax advice, but unknowingly purchased tax shelters that were peddled by those trusted professionals through a web of collusion and deception. We also heard from employees of large accounting firms and major corporations who testified regarding the pressure exerted on them to bless transactions that, in their professional opinions, would constitute abusive tax shelters. The price for their integrity was the loss of their jobs and the ruin of their career. Tax shelter abuse must be stopped for the sake of fairness, the integrity of our tax system, and the protection of honest tax professionals. Our years of work on this issue was recently reaffirmed in a hearing before the Permanent Subcommittee on Investigations, which explored abusive shelters that were promoted by purportedly reputable tax lawyers and accounting firms. Following that hearing, there has been considerable discussion of promoting an amendment similar to the one I offered in 2002 during the Sarbanes-Oxley debate, and I am appreciative of that effort. I hope we are able to construct a measure that can be readily enforced by the Public Accounting Oversight Board and the SEC, even though that agency lacks expertise in, or jurisdiction over, federal tax matters. At its core, however, the problem is not an SEC matter, but is a problem of ongoing abuse of the tax code by very smart people doing some very ugly business. The only way to end this problem is to put it out in the open. Even the most cynical tax advisor does not want their dirty laundry in the public eye, particularly if that public includes the IRS. That is why disclosure of abusive or potentially abusive transactions is so important in solving this problem. The Tax Shelter Transparency and Enforcement Act requires taxpayer disclosure of potentially abusive tax avoidance transactions. It is surprising and unfortunate that taxpayers, though required to disclose tax shelter transactions under present law, have refused to comply. The Tax Shelter Transparency and Enforcement Act will curb non-compliance by providing clearer and more objective rules for the reporting of potential tax shelters and by providing strong penalties for anyone who refuses to comply with the revised disclosure requirements. The legislation has been carefully structured to reward those who are forthcoming with disclosure. I wholeheartedly agree with the remarks offered by a former Treasury Assistant Secretary for Tax Policy, that ``if a taxpayer is comfortable entering into a transaction, a promoter is comfortable selling it, and an advisor is comfortable blessing it, they all should be comfortable disclosing it to the IRS.'' Transparency is essential to an evaluation by the IRS and ultimately by the Congress of the United States as to whether the tax benefits generated by complex business transactions are appropriate interpretations of existing tax law. It is time to get this bill done. The Finance Committee has worked on rooting out tax shelters for nearly five years, and we have debated the issue long enough. The time to act is now. I will vigorously pursue enactment of an anti-tax shelters bill in the upcoming year. I think we can all take pride in the Senate's consistent action of passing the measures in today's bill. We must press forward to put a final end to the seemingly endless abuse of tax shelters.

Mr. GRASSLEY

Mr. GRASSLEY. The Secretary would have discretion to exempt a hospital that had completed architectural plans and initiated funding and, in making this determination, would consider the extent to which the other enumerated factors had been completed. It is my understanding that the language included in H.R. 1 is meant to provide guidance to the Secretary, and that the Secretary will ultimately determine to what extent the factors have been met and to what extent the hospital was ``under development'' as of November 18, 2003.

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

Mr. GRASSLEY. Yes.

Mr. GRASSLEY. Mr. President, I yield myself such time as I might consume, and probably all of it. Keeping the point of order means keeping the status quo. So I am asking my friends on the other side of the aisle, what is there about the status quo on Medicare that is good and acceptable? The lack of prescription drugs? The slowness in getting cheaper generic drugs out into the market? Arbitrary caps on physical therapists? Insufficient funding for rural hospitals and long waiting lines for seeing the doctors, if Medicare people can get in to see a doctor in rural America? I ask my colleagues, is this status quo acceptable? Apparently it is, at least to the Senators who are refusing to waive the point of order. I say nothing about Medicare's status quo is acceptable, not doctors' cuts, not decreasing hospital and home health payments, not the lack of access to health plans in rural areas such as mine. And most of all, seniors' lack of access to prescription drugs for all these years is what I find to be most unacceptable about the reality of the status quo. For those of you happy with the status quo, I say, try telling that to your doctors, your hospitals, and, most of all, to your seniors. You try telling these people that a technical point of order is more important than changing Medicare's status quo. I will not try, and I hope my colleagues will not try either.

Mr. GRASSLEY. Yes, it is my understanding that the Secretary would have discretion to determine to what extent the hospital was under development as of November 18, 2003. If the Secretary found that the hospital was ``under development'' despite not having completed all architectural plans, the Secretary could exempt that speciality hospital from the 18-month self-referral limitation.

Mr. GRASSLEY. I want to take 30 seconds and then yield 5 minutes to the Senator from Louisiana and then the Senator from Montana. Before I do that, how many times have we heard from the other side of the aisle about this being a 1,000-page bill? I want them to read, if they know how to read: There are 678 pages here. I want to know how you folks can raise a point of order when you can't even count the number of pages in a bill? I yield the floor.

Mr. GRASSLEY. I yield myself such time as I might consume. This may sound like a simple vote, to raise a point of order about a budget and how this fits into the budget. But what this vote is all about is whether or not we are going to have any bill whatsoever providing prescription drugs for seniors. That is what this next vote is all about because I believe if we get 60 votes like we did 70 votes on the cloture motion, we will be on our way to passage, in a bipartisan way--everything has been bipartisan on this bill, as far as I am concerned--in a bipartisan way, passage of this bill, so our seniors can have prescription drugs, so that the biggest hole that has ever existed in Medicare for the last 38 years is filled in. So all the arguments can be made about this little budget deal or that little budget technicality, but this is a vote about keeping the promises of both political parties over the last three elections. I do not think we ought to pooh-pooh keeping the promises of the last election. People are cynical about political leaders anyway-- overpromising, not delivering on promises. This is our opportunity. This is one of the last two votes for this bill to go to the President of the United States. So this vote is about our seniors, and also we can include Americans with disabilities. So a successful vote against overriding this point of order will gut the immediate funding we provide for prescription drug discount cards. Much has been said by the opponents of this bill about not providing help to seniors fast enough. How many times, in the last 3 days, 4 days of debate on this bill have you heard the point: ``Well, this bill is not going to take effect for 2 years. I don't know why it can't take effect sooner''? Now, that is not our choice. We pass a bill. You have to give some time for bureaucrats to implement it and write the regulations, and you want to do it right. So that is what they say: They need that amount of time, No. 1. No. 2, this bill takes effect immediately for part of it, and that part is the drug discount card for seniors and the disabled so they can get 15 to 25 percent discounts on drugs right away. So apparently a discount card available to all seniors in less than 5 months, and also with a direct $600 subsidy to those with the lowest incomes, is something that opponents of this bill--crying in their beer all the time about this not doing enough for seniors or not taking effect soon enough--is a reason to block this bill. They are talking out of both sides of their mouth when they say that. On the one hand, they say it is not going into effect soon enough, and then with the next vote we are going to have up, they are going to guarantee no drug benefit for years, and just with some little budget technicality on a procedure vote. That is pretty ironic, that they would take that stand over the course of 4 days--argue that this bill is not going into effect soon enough, ignoring the discount card that starts immediately, and saying we are not doing enough--and then they are willing to block it on a technicality. It seems to me that anybody who says we are not providing drug benefits quickly enough for our seniors and our disabled would vote to override this point of order so we can get to the next vote, final passage of this legislation. Also, I just heard some of my colleagues from the other side of the aisle say this bill, in some instances, does not do enough for rural health care delivery. We provide $25 billion in this bill for rural providers to deal with the inequitable situation of the 30 States below the national average. That is because the formulas for doctors and hospitals in rural areas treat them less well, less equitably than the formulas for urban areas, because the assumption is in rural areas you can deliver health care for less costs. But they are crying in their beer about maybe that is not doing well enough. And if they vote as 1 of the 41 who might keep us from overriding that point of order, then how can they talk out of both sides of their mouth--one time saying, ``We are not doing enough,'' and then, on the other hand, ``Kill this bill on this budget technicality''? Because just as soon as this bill passes, rural providers are going to get a great deal of help from this legislation. Now, that help is not just for our providers because we feel sorry for doctors or hospitals. We are not being able to recruit doctors and maintain our hospitals in rural America. This $25 billion in this bill will strengthen our hospitals. It will give us an opportunity to recruit doctors. So if you are 1 of the 41 who does not help us override this point of order, you are saying no to the recruitment of doctors in rural America. You are saying it is OK to close rural hospitals. Because you know what is going to happen right away if we do not pass this legislation--all the doctors of America are going to take a 4.5-percent cut in their reimbursement because of the way our formulas work. I do not know how formulas such as that were written, but those formulas have an egregious impact upon the doctors. I strongly disagree that that ought to happen and that we ought to have situations where medical doctors are fed up with working with Medicare patients and they just get out of the program. Then our seniors have fewer doctors to take care of their needs. But if this bill passes, it is going to give relief to our doctors, not only stopping that 4.5-percent cut, it will give them a 1.5-percent increase in reimbursement. It seems to me a vote against overriding the point of order is a vote against our rural hospitals every day because every day our hospitals are doing more with less. They serve our elderly. They serve the uninsured, those who live in some of the remotest parts of our country, and those who live in our cities as well because city hospitals have problems, too. Are we going to tell those hospitals what they do every day in saving lives and improving patients' quality of life is not somehow important? I certainly hope not. But a vote against overriding this point of order is a thumb in the eyes of health care providers, in the eyes of the people who run our hospitals, the nurses who work there. So this is going to be a vote against some of our neediest seniors. And the neediest of our seniors are those in nursing facilities who need physical therapy. They need occupational therapy, speech therapy. This bill, out of this $25 billion, provides a 2-year moratorium from the therapy cap that is in law today, which, basically, at $1,500 is saying, if you have a stroke, if you have some sort of major operation, you are only going to get physical therapy up to $1,500; and too bad after that. Well, we take care of that in this legislation. But the people who vote against overriding this point of order are saying no to those neediest of seniors in the nursing homes who will be hit by this $1,500 cap and will not be able to get the physical therapy services they need. We are at a point where all this effort about rural hospitals has been supported by an overwhelming majority in both the House and the Senate. We heard our colleague, Senator Bennett of Utah, speak passionately about his daughter. His daughter is a speech therapist and knows all too well how nursing home residents benefit from therapies after they have suffered a stroke, heart attack, or maybe just a fall. Are we going to say to Senator Bennett's daughter that we don't need to delay these caps? Are we going to say to our seniors that access to physical therapy doesn't matter? I certainly hope not. You will hear a lot about this vote being a comment on how we spend money in this Medicare bill. You will hear how this vote might be a vote against special interests in America. I ask my colleagues what they mean because if their seniors need immediate relief from high prescription drug bills, their hometown doctors need some help, their local hospitals need some help, their seniors recovering from stroke and heart attack need some help because they need more therapy, then I guess they should vote against these people. That isn't what I hear from the other side of the aisle. They are the great humanitarians of the American political environment. They are concerned about all these people. Well, this next vote will show how concerned they are because they are voting against all these people who have need, most often the seniors of America who need prescription drugs. I do not intend to vote against them and, in the process, hopefully get this bill to final passage. I reserve the remainder of my time and yield the floor.

Mr. GRASSLEY. Mr. President, first of all, I should find out how much time we have left.

Mr. GRASSLEY. Mr. President, I should not take more than 5 minutes, so please tell me when 5 minutes are up. This is the opportunity, a time of destiny, whether or not this Congress will deliver on the promises of the last three elections, the promises the other party has made as well. Thank God there are people in the Democratic Party who are working in a bipartisan way to deliver on the promises of that party as there are Republicans willing to deliver on the promises of the Republican Party. Nothing gets done in this body without bipartisanship. This is bipartisan. We are putting aside partisanship. It is time the other side put aside rhetoric and complete our work on this bill for which the AARP says seniors have waited far too long. This bill offers an affordable, universal prescription drug benefit. This bipartisan bill offers better coverage than today's Medigap policies plus Medicare. It also offers much more generous coverage for 14 million lower income seniors. And just to emphasize this point, this bill does not harm 6 million seniors, as the opponents of this legislation claim. That is political poppycock. In fact, this bill protects the benefits for these 6 million and then adds generous prescription drug coverage for an additional 8 million. It expands coverage for lower income seniors, far more than anything offered today. This means that for about two in five seniors, this bill offers drug coverage with lower or no premiums, no coverage gap, and coverage of 85 to 95 percent of the cost of prescription drugs. And it is voluntary. The opponents of this legislation happen to believe--and they sincerely believe--that Government should always force people into doing something. We want the right to choose for our seniors. Seniors can stay in traditional Medicare if they like what they have today and have full access to prescription drugs. There is also a guaranteed Government fallback if private plans might not go to all rural areas of America. This bill protects retiree benefits in the corporation from which they retired. Overall, we put $89 billion in this bill to protect retiree health coverage. This bill also creates new choices similar to what Federal employees have for beneficiaries in a new revitalized Medicare Advantage Program. With respect to drug costs, the bill speeds the delivery of new generic drugs to the marketplace, lowering drug costs to Americans and not just those on Medicare. Finally, the bill includes long overdue improvements in Medicare's complex regulations. It also revitalizes the rural health care safety net with the biggest package of rural payment improvements that Congress has ever done or seen. I urge my colleagues to put the interests of our seniors first and give them more choices and better benefits by supporting this bill. Most importantly, we have brought this bill as far as we have over the last 4 or 5 years because of bipartisanship. I hope this body will not let the narrow partisanship of a few on the other side of the aisle destroy our efforts. I yield the floor.

Mr. GRASSLEY. Yes, I believe you are correct in saying that the Secretary would have discretion to consider these factors, but would not be limited to or bound by those factors. The language states that the Secretary ``shall consider,'' which implies that the Secretary shall consider these factors but that he or she should use the factors to make a reasonable decision as to whether a speciality hospital was ``under development'' as of a certain date.

Mr. GRASSLEY. Yes, the distinguished Senator is correct. The intent of the conference report is to recognize that different Medicare Advantage plans are organized in different ways to deliver the new Part D prescription drug benefit and the benefits of the Medicare-endorsed drug discount card. The conferees understand that Medicare members of some Medicare Advantage plans fill their prescription in retail pharmacies and others in a plans' own pharmacies. For Medicare beneficiaries that will be using retail pharmacies to fill their prescriptions, the conferees understand that the prices negotiated between the prescription drug plan or the Medicare Advantage plan plus dispensing-related costs include the pharmacies' reasonable overhead costs. Similarly, it is the conferees' intention that Medicare Advantage plans whose Medicare members do not use retail pharmacies, but instead fill their prescriptions at the plan's pharmacies be reimbursed for the costs they incur in delivering the benefit when reimbursed for the same types of costs. section 507

Mr. GRASSLEY. Mr. President, I yield 6 minutes to Senator Breaux.

Mr. GRASSLEY. I yield the Senator 1 additional minute.

Mr. GRASSLEY

Mr. GRASSLEY. It would be good at the start of the third day of debate on this bill to remind people of the political situation that has gotten us where we are today. That is a very positive political situation. Last year, we were beginning to develop a bill in the Senate Finance Committee that would have had bipartisan support to get it out of the committee. Bipartisan support in the committee is a way to have a chance of success in the Senate where there can always be an extraordinary minority who can keep a bill from being passed because we protect minority interests in this body as no place else in our political system. So we must be bipartisan. About the time that was going to happen, the majority leader--the Senator from South Dakota, last year--decided we needed to talk about this in the Senate. But the bill never came out of committee. It was brought right to the floor. When bills are brought to the floor, there is no chance of developing bipartisanship. We discussed it for 2 or 3 weeks and no one could get the bipartisan majority it takes to get pieces of legislation passed. At that time, I surmised, and I think the outcome of the debate last year proves it, that the other side wanted more of an issue for the election rather than a product. They gambled and they lost because Republicans gained control of the Senate in that election and then we were right back to square 1 where we went to the Senate Finance Committee where there could be, even with a Republican majority, still a bipartisan working relationship that was able to report out a bill on 16-to-5 bipartisan vote. Then we brought that bill to the floor during the month of June. And it got through here 76 to 21. We are as successful as we are because the people made a change in the Senate. In the Senate, then, we adopted a bipartisan bill, and we were able to get through, for the first time on this issue in the history of the Senate, prescription drugs for seniors. We were able to match the House, where it had passed three times previously. We went to conference. We operated in the conference, at least from the Senate point of view, on a bipartisan basis, and we were able to produce a product where here we are doing the best improvement and the most sweeping improvement in Medicare in 38 years. We are able to do that because of bipartisanship. Now, all of a sudden, people on the other side of the aisle, at this last minute, are filibustering. I hope they do not get away with that filibuster. But, again, they are trying to be very partisan, as they were a year ago. I hope they learned a lesson from a year ago and will not try to be partisan on this very important social issue for the seniors and the disabled of America, and that they will not repeat the mistakes of last year when they wanted an issue instead of a product. We have a bipartisan product. I listed last night, in my closing remarks, all of the organizations that are supporting this bill. Other Senators have put charts up saying how many organizations are supporting this bill. We have this opportunity. Let's hope partisanship--that is demonstrated by the filibuster that was announced yesterday--does not keep this bill from passing. Democrats who want to filibuster ought to consider that is not the way to go. They should learn from the lesson of the past. That lesson is that last year when they wanted an issue instead of a product, they got a defeat at the polls. I yield the floor.

Mr. GRASSLEY. Mr. President, we have heard in the Senate today and last night that the comparative cost adjustment demonstration project, which some of the Members refer to as premium support, would end Medicare as we know it. I want to be very clear, nothing could be further from the truth. I have 10 facts about this demonstration to explain why this is not the case. We are talking about the comparative cost adjustment. Fact No. 1: It sunsets in 6 years. The demonstration will only be in existence for 6 years. It will not begin until the year 2010. During that time, there will be a 4-year phase-in period. Explicit authorization from Congress at the end of 6 years is necessary to extend the demonstration and/or expand it to other areas of the country. This proposal is significantly modified from the House of Representatives' original position. Congress weighs in before this becomes something other than a demonstration project and becomes policy for the entire country. Fact No. 2: Very limited areas of the country will be affected in the demonstration. Under the agreement, the Health and Human Services Secretary may select no more than six metropolitan statistical areas to participate in the demonstration. It is not easy to be put in that list of six because in order to be selected, a metropolitan statistical area must have at least two local coordinated care plans offering services in the area and at least 25 percent of the Medicare beneficiaries must be enrolled in these plans. That means the private PPOs we are setting up beginning in 2006 must succeed. I hope they succeed. But we do not know if they will succeed, and if they do not succeed, at least to the tune of 25 percent in two local areas, there will not be one. If that does happen, according to the Congressional Budget Office, somewhere between 670,000 and 1 million beneficiaries will be included in this limited demonstration. It is a demonstration. It is not something that could ever, without an act of Congress, encompass all 40 million seniors. Fact No. 3: Low-income beneficiaries are not affected at all. So if they are low-income, below 150 percent of poverty, none of them will see their Part B premiums increase. Fact No. 4: Premium increases for beneficiaries above 150 percent of poverty will be limited to 5 percent. For everyone else, if premiums go up, there is a cap of 5 percent. As an example, if the national Part B premium was, say, $100 in 2010, the fee-for-service premiums in the demonstration areas could not exceed $105 a month. The increase, by the way, is not compounded over that 6-year period of time. Fact No. 5: Other than the limited impact on the Part B premium calculation, the fee-for-service program is unchanged choice. Fee-for- service benefits, beneficiary cost sharings, payments to hospitals, and other health care providers are unaffected by the demonstration. The Medicare entitlement to benefits and payments to health care providers are unchanged in these same areas. Fact No. 6: Beneficiaries are not required to enroll in these private plans. The right for a Medicare beneficiary to remain in fee-for- service programs is maintained in the demonstration areas. The fee-for- service program will remain affordable for all beneficiaries. Fact No. 7: The prescription drug benefit is unaffected. The prescription drug benefit and the drug premiums are not changed. The demonstration only minimally affects the Part B premium, and that is the maximum of 5 percent increase. Fact No. 8: Over the demonstration period, enhanced payments to private plans are phased out to ensure that their payments to private plans are on a level playing field with the fee-for-service program. Fact No. 9: The preferred provider organization stabilization fund, referred to on the other side by my colleague as a ``slush fund,'' has no relationship to this demonstration. So one cannot talk about the demonstration and talk about a stabilization fund in the same breath. If you do that, you do not know what the bill does; you have not read the bill. Under the conference agreement, the stabilization fund may only be used to provide assistance to the newly regional PPO options. However, any enrollment in regional PPOs is not counted toward the 25 percent enrollment requirement in the metropolitan statistical areas. The extent to which beneficiaries enroll in the new regional PPO opposite will have no bearing on whether a metropolitan statistical area becomes a candidate for demonstration. Last fact, No. 10: Strict quality monitoring is required. The Health and Human Services Secretary is required to closely monitor access to care and quality and submit a report to Congress upon completion of the demonstration to determine if the demonstration has reduced Medicare spending and/or increased cost to beneficiaries; second, access to physicians and other health care providers has declined; and lastly, whether beneficiaries remain satisfied with the program. The evaluation would be on the basis of any congressional decision to extend that demonstration. Premium support, as has been described in the Senate numerous times in the last few days by the Senator from Massachusetts and by other Senators, is not in this bill. It is not included. This bill strengthens and improves fee-for-service Medicare. How much time remains?

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, tomorrow morning we will resume debate on the Medicare modernization conference report. Under the previous order, there will be approximately 3\1/2\ hours of debate prior to the cloture vote on the conference report which is locked in to occur at 12:30 p.m. The cloture vote on the conference report will be the first vote of the day. It is my hope and expectation that cloture will be successful. This issue deserves an up-or-down vote. I urge my colleagues on the other side of the aisle to allow this process to move forward.

Mr. GRASSLEY

Mr. GRASSLEY. I would be glad to yield for a short question or short comment and reserve my right to the floor.

Mr. GRASSLEY. Mr. President, Medicare contractor reform will not succeed if contractors are subject to unlimited civil liability in carrying out the payments, provider services, and beneficiary services functions expected of them. The conference agreement would therefore continue the past policy of limiting the liability of certifying and disbursing officers, and the Medicare administrative contractors for whom those officers serve, with respect to certain payments. In addition, the language contained in section 911 of the conference agreement clarifies that Medicare administrative contractors are not liable for inadvertent billing errors but, as in the past, are liable for all damages resulting from reckless disregard or intent to defraud the United States. Importantly, the reckless disregard standard is the same as the standard the standard under the False Claims Act. This standard balances the practical need to shelter Medicare administrative contractors from frivolous civil litigation by disgruntled providers or beneficiaries with the Medicare program's interest in protecting itself from contractor fraud. The False Claims Act, 31 U.S.C. Sec. Sec. 3729-3733, applies to Medicare fiscal intermediaries and carriers under current law. This legislation makes it clear that the False Claims Act continues, as in the past, to remain available as a remedy for fraud against Medicare by certifying officers, disbursing officers, and Medicare administrative contractors alike and that, among other things, the remedy subjects Medicare contractors to administrative, as well as trust fund, damages.

Mr. GRASSLEY. Over the last couple of days there have been many assertions from my colleagues on the other side of the isle that this bill does nothing to lower the cost of prescription drugs. I would like to take this opportunity to set the record straight. The conference report contains a number of significant reforms to lower the cost of prescription drugs for not just Medicare beneficiaries, but for all Americans. This bill provides immediate relief to 40 million Medicare beneficiaries by providing a discount drug card starting in April 2004. The voluntary drug card program will save beneficiaries an average of 10 to 25 percent on the cost of their prescription drugs. Beneficiaries will have the choice of at least two Medicare-endorsed drug discount cards. The drug discount program included in the Medicare Prescription Drug and Modernization Act also provides low-income beneficiaries with an additional subsidy of $600 to help with the costs of their prescription drugs. This program provides immediate relief to Medicare beneficiaries now paying extremely high prices for their prescription drugs. This bill also lowers the price of prescription drugs for Medicare beneficiaries, by eliminating the Average Wholesale Price, AWP, paid for prescription drugs. This provision significantly reduces the prices that Medicare and many private insurers pay for physicians-administered drugs. Under this agreement, Medicare reimbursements will now be based on actual prices paid by physicians, rather than fictitious numbers reported by manufacturers, providing a ripple effect lowering the cost of prescription drugs for not just Medicare beneficiaries but individuals in the private market. The conference report also contains a ``non-interference'' provision that will protect patients and deliver lower prices through market competition. The conference bill specifies that the Government ``may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors'' and ``may not require a particular formulary or institute a price structure.'' It is right here on page 53. Opponents claim that this provision, which originated with Democratic proposals, is a concession to the pharmaceutical industry. That is plain wrong. The noninterference provision is at the heart of the bill's structure for delivering prescription drug coverage through market competition that gets a good deal for consumers, rather than through price fixing by the CMS bureaucracy. As CMS Administrator Tom Scully explained in the November 21, 2003 issue of the Washington Post, if Medicare negotiated prices, ``I wouldn't be negotiating; I'd just be fixing the price. Let's get seniors organized into big purchasing pools that get bulk discounts and see how they fare.'' Ironically, this provision was created by the Democrats and first appeared in May 2000 in a bill sponsored by Senator Daschle and 33 Democratic cosponsors. In June 2000, Mr. Stark included the same language in his motion to recommit H.R. 4680. That motion received the support of 203 Democrats and Mr. Sanders. The provision protects patients by keeping the Government out of decisions about which medicines they will be able to receive. Under this section, CMS will not be able to dictate that drugs must be excluded from a PDP formulary or subjected to reimbursement limits that effectively deny access. The bill relies on market competition, not price fixing by CMS, to deliver the drug benefit. The bill's entire approach is to get seniors the best deal through vigorous market competition, not price controls. CBO scores the bill's approach of relying on at-risk private sector plans to deliver the prescription drug benefit as getting a higher cost management factor for Medicare than bills where private sector competition is handicapped by Government. The noninterference provision protects this approach, by preventing politicians and bureaucrats from getting into the middle of the very negotiations that drive these savings. Private plans have strong incentives under the bill to negotiate the best possible deals on drug prices, because they are at risk for a large part of the cost of the benefit. They also will have the market clout to obtain large discounts. By driving hard bargains, they will be able to offer lower premiums and attract more enrollees. The alternative is a command-and-control system that would not be responsive to consumer desires or marketplace realities. Bureaucrats would swing between adding benefit requirements without a means of paying for them and restricting choices and access in an effort to contain costs. This bill wisely rejects that approach. The noninterference provision is the fundamental protection against it. Finally, the conference report lowers the cost of drugs for all Americans by reforming the Hatch-Waxman drug pricing laws. The agreement will speed the process of allowing generic drugs to come to market, which will significantly reduce drug prices. The agreement will provide brand drug companies only one 30-month stay on the approval or a generic competitor. Generics would be forced to forego their 180-day generic exclusivity if they do not bring a product to market within a specified time period. These reforms are the most aggressive since Hatch-Waxman laws took effect in 1984. These reforms have also earned the strong endorsement of the Generic Pharmaceutical Association and dozens of allied groups who are advocates of increased generic usage and low drug prices. So to my colleagues who say there is nothing in this bill to lower drug prices, they are not talking about this bill. My friend and colleague on the Finance Committee, Senator Baucus, has come to the floor. He is primarily responsible for the legislation that is before us because he has been very willing to work in a bipartisan way to get things done. We would not be here today if it was not for the hard work of Senator Baucus, the ranking Democrat on the Finance Committee, and a person with whom I can work very well. I yield the floor.

Mr. GRASSLEY. Mr. President, I certainly think the cooperation we have had from the chairman of the Budget Committee, Senator Nickles, helped to move this bill along. Even though he has not liked some parts of the bill, he has been cooperative all the way through the process and, more importantly, through the crucial time of conference. There is a claim that pharmacies are concerned about beneficiary access to pharmacies, pricing transparency issues, and insurance risk. I understand the concerns of pharmacists with regard to local access. This bill provides several provisions to ensure that Medicare beneficiaries are provided with adequate choice and easy accessibility to local pharmacies. First, the conference report provides choice to beneficiaries by containing an ``any willing provider'' provision. This provision requires prescription drug plans to accept any and all pharmacies willing to agree to the terms and conditions of the plan. By adding this provision, we have given all pharmacies, big and small, the chance to participate in the modernization of Medicare. Second, the conference report provides beneficiaries with convenient access to pharmacies by adopting the TRICARE standard for prescription drug plans. In urban areas, 90 percent of beneficiaries would have a pharmacy within two miles of their residence; 90 percent of beneficiaries in suburban areas would have access to a pharmacy within five miles of their home; In rural areas, plans would be required to provide 70 percent of beneficiaries with a pharmacy 15 miles within their residence. By adopting this standard, beneficiaries are ensured adequate convenient access to pharmacies of their choice. The conference report also requires that plans permit beneficiaries the ability to fill their prescriptions at a community pharmacy rather than through the mail. Again, ensuring access to local pharmacies. In addition to providing convenient, local access to pharmacies, the conference report provides safeguards to ensure fair drug pricing and protects pharmacies from insurance risk. Under the report, pharmacy benefit manager's, PBMs, would be required to disclose all discounts, rebates, and charge backs given to them by drug manufacturers. This places local pharmacies on a fair playing field with PBMs. The report also prevents insurance risk to pharmacies by clarifying that pharmacies could not accept insurance risk. This conference report adequately addresses the concerns of pharmacies and pharmacists alike. It makes sure that beneficiaries have local and convenient access to pharmacies, provides transparency pricing, and protects pharmacies from insurance risk. Revisions to H. Con. Res. 95

Mr. GRASSLEY. Mr. President, the opponents of this bipartisan Medicare bill have made the claim that 6 million seniors are hurt by this bill. The other side has also claimed that 25 percent of seniors will be forced to pay more for their prescription drugs under this bill. I want to be very clear that this is not accurate at all. I'm here to tell the American public the truth. The truth is that 14 million lower income seniors and disabled Americans are benefited greatly by this bipartisan bill. These 14 million people will get very generous prescription drug coverage through Medicare in this bill. First, as you can see on this chart, 7.8 million seniors and disabled Americans get full coverage with no deductible, no gap in coverage, and would pay only $2 for generic drugs and only $5 for brand name drugs. And if these seniors reach the catastrophic coverage limit, then they will get their prescriptions fully covered with no copays. That's right, no copays at all. Next, as you can see on the chart, an additional 4.4 million lower income seniors will get even more generous coverage. These Seniors will pay only $1 for generic drugs and only $3 for brand name drugs. And if these seniors reach the catastrophic coverage limit, then they too will get their prescriptions fully covered with no copays. In addition, some of these people are enrolled in both Medicare and Medicaid and are living in a nursing home--about 1.3 million of them. This bipartisan bill creates a special benefit for these people. For them, Medicare will cover 100 percent of the prescription costs. They pay nothing. These groups of seniors in total represent 12.2 million seniors and disabled Americans. The bill also provides coverage to about 2 million more lower income seniors and disabled Americans. These seniors have 85 percent of their drug costs covered after meeting a $50 deductible, and if they hit the catastrophic coverage limit, they would pay only $2 for generic drugs and $5 for brand-name drugs. This is full coverage with no coverage gap and 85-98 percent of drug costs covered for about 14 million seniors and disabled Americans. That is about 36 percent of all Medicare beneficiaries. That is what this bill does. It provides very generous prescription drug coverage through the Medicare program for about 14 million lower income seniors and disabled Americans. And it provides this full coverage to 8 million lower income seniors who have no coverage at all today. On top of that, of course, this bill provides all beneficiaries with access to basic prescription drug coverage with protections against catastrophic drug costs. The average beneficiary who does not quality for the low income benefits I have just described will still have about half of their drug costs covered under this bill. Finally, no one is forced into this drug benefit. It is a purely voluntary benefit. No one is forced to enroll and any senior or disabled American that does not see the drug coverage offered as a good deal for them does not have to enroll. So this bipartisan bill before us does not harm seniors. That is an absurd charge to make by the opponents of this bill. This bill provides an affordable, voluntary and universal drug benefit for all seniors and disabled Americans in this country. And it provides very generous coverage to those 14 million lower income beneficiaries. It is time to put the partisan rhetoric aside and approve this bipartisan bill that the AARP calls ``an historic breakthrough and [an] important milestone in the nation's commitment to strengthen and expand health security for its citizens. I yield the remainder of this half hour to Senator Domenici.

Mr. GRASSLEY. Mr. President, before the Senator from New Jersey leaves, I want to speak about a couple of words which he mentioned. And I don't say it to take exception with what he said or to quibble with his description of the legislation before us. But if the President of the United States saw Senator Grassley speaking right after some words that the Senator from New Jersey used about legislation, the President would be offended because I found fault with the President using those very same words back on December 10 last year when I had my first meeting with the President on the Medicare issue. The words that the Senator from New Jersey used about the legislation before the Senate is that it is cobbled up. As everyone in this body knows, for about a year and a half I worked with five Members of this body on what was then called the tripartisan plan. The President started his lecture to me last December, something along this line: We have to have a dramatic change of Medicare. We have to provide prescription drugs for the seniors. We have to change Medicare for the future. He says: We do not want something like that cobbled-up tripartisan plan. Obviously, the President cannot know everything that goes on in the Congress of the United States about forming legislation, but if he knew the hours and hours, not only at the staff level but at the Member level, that went into the tripartisan plan that we unfolded here a year ago in July, the President would not use the words ``cobbled up.'' I never heard the President use the words ``cobble up'' after that because I tried to impress upon him there was a great deal of thought, a great deal of hard work, and most importantly, time, plus bill compromise that the word ``tripartisan'' implies to bring together where we were at that time. If he had appreciated it, he would see we have to have the same sort of thought and hard work go into what he was thinking about. I never heard him say that again. I am reminded of that story now that the Senator from New Jersey said this legislation is cobbled together. To some extent, I suppose every political compromise, for every piece of legislation, one could use those words to describe it. I know the Senator from New Jersey participates in a lot of very difficult legislation in the committees he serves on and knows what it takes to put a bill together. However, I look at this piece of legislation, the compromise it takes, the hard work it takes, all the long hours it takes, as not a perfect piece of legislation but surely not a cobbled- together piece of legislation. From that point of view I will respond not to the Senator from New Jersey any further but to speak about some of the aspects of this legislation as we get ready to vote on it tomorrow.

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

Mr. GRASSLEY. I surely appreciate the good nature in which the Senator from New Jersey just stated his feelings about this legislation. I wanted to give equal treatment to the President, as I did the Senator from New Jersey and vice versa. One of the aspects of this legislation that is misunderstood is the issue of health savings accounts, which is a new name for what people hear Congressmen talk about as medical savings accounts, only different in name, particularly, as it relates to people in my State, the benefit to farmers and small business people. This bipartisan agreement includes these provisions establishing health savings accounts. I will refer to them as HSAs. HSAs are tax-advantaged savings accounts that can be used to pay for medical expenses incurred by individuals, their spouse, or dependents. HSAs are similar to medical savings accounts. However, medical savings account eligibility has been restricted to employees of small businesses and the self-employed. HSAs are open to everyone with a high deductible health insurance plan. The only limitation on the health plan is that the annual deductible must be at least $1,000 for individual coverage, and $2,000 for family coverage. Contributions to the HSA by an employer are not included in the individual's taxable income. Contributions to an individual are tax deductible. Total yearly contributions to an HSA can be as large as the individual's health insurance plan deductible, between $1,000 and $5,000 for self-coverage, and $2,000 and $10,000 for family coverage. The interest in investment earnings generated by this account is also not taxable while in the health savings account. Amounts distributed are not taxable as long as they are used to pay for qualified medical expenses such as prescriptions, over-the-counter drugs, and long-term care services, as well as the purchase of continued health care coverage for the unemployed individual. That is legislation we passed a long time ago called COBRA. Amounts distributed which are not used to pay for qualified medical expenses will be taxable, plus an additional 10-percent tax being applied in order to prevent the use of HSAs for nonmedical purposes. These accounts are portable, so an individual is not dependent on a particular employer to enjoy the advantages of having an HSA, low- income individual retirement account. The HSA is owned by the individual, not by the employer, and if the individual changes jobs, the HSA goes with the individual. In addition, individuals over age 55 may contribute extra contributions to their accounts and still enjoy the same tax advantage. In 2004, an additional $500 can be added to the HSA. By the year 2009, an additional $1,000 can be added to the HSA. In regard to this legislation before the Senate beyond the health savings accounts, I point out what a great prescription drug benefit structure we have. First and foremost, it is important to point out that this is a voluntary program. If you currently have drug coverage and you like it, you can keep it or, if you do not have drug coverage and do not want it, you do not have to take it. If you are covered by Medicare fee for service today, and you are satisfied with it, you can stay right where you are. This drug benefit also offered through Medicare will be a comprehensive benefit that will provide real relief for our seniors. Seniors that now pay full retail price could see a 25-percent reduction in their prescription spending. Additionally, these seniors' overall out-of-pocket drug spending could fall by as much as 77 percent. This is real relief for real people, not some hypothetical. To provide relief to all seniors, the drug benefit is based upon income level. It is quite simple. Those who need more help because they are low income will receive more help under this program. We divide this up according to the levels of poverty under the official poverty indexes of the Federal Government. For those individuals and couples who are above 150 percent of the Federal poverty level, they can expect to see a monthly premium of $35, an annual deductible amounting to $250, a 75-25 percent cost-sharing up to a payment of $2,250, and a true out-of-pocket catastrophic cap at $3,600. Additional benefits, including help with both the premium and initial cost-sharing, are targeted to seniors with income levels below 150 percent of the Federal poverty level. These subsidies will be available at increasing levels for those between 135 and 150 percent of the poverty index, and those between 100 and 135 percent. And then there is still another category of greater help for those below 100 percent of poverty. I will explain how this differs for each of these categories. First, for individuals who are 135 to 150 percent of poverty, this group would have a $50 deductible, sliding-scale premium assistance, and 15 percent cost-sharing up to the benefit limit of $2,250, and $2 or $5 cost- sharing above the catastrophic level--$2 meaning for generic, $5 for brand-name drugs. For individuals who are below 135 percent of the poverty index, they would have no deductibles, no premiums, $2 and $5 cost-sharing up to the catastrophic limit, and no cost-sharing after the catastrophic level has been reached. Now, we go to the neediest of our seniors, the dual eligibles, those who are presently low income and getting help not only from Medicare but from the State Medicaid Program. They currently have their drug costs paid for by the Medicare Program that differs a little bit from State to State based upon the laws of those States. Our conference report calls for Medicare to pick up the cost of their prescription drugs. Most of this population will have a $1 and $3 cost- sharing up to the cost-sharing limit, and then, after that, no cost- sharing on the catastrophic. Now, that $1 and $3, again, is generic for the $1, and $3 for the brand-name drugs. By providing coverage to all seniors based on income levels, you can see that the number of individuals with no prescription drug coverage will fall from 24 percent in the year 2002 to 2 percent in the year 2009. Now let's make it clear. About over half of individuals today have some prescription drug coverage--some very good, some not so good--and then 25 percent, maybe 30 percent have nothing. Now, we expect this to go down under this program to just 2 percent of our population, after 3 years of phase in. Mr. President, 98 percent of the seniors receiving prescription drug coverage in 2009 will receive it from privately insured plans. Moreover, 33 percent of the beneficiaries will get their prescription drug coverage from integrated private plans, three times the rate in 2002. Additionally, seniors will see immediate benefits with discount drug cards. These are going to be available in the middle of next year, and through all of the year 2005. Then, after the year 2005, the new program, in its entirety, kicks in. So the discount drug card is for an interim period of time while it takes the Department of HHS a period of time to set up what we are going to pass tomorrow. These discount drug cards will pass on between 15 and 25 percent of savings on seniors' current drug prices. It is clear to see that the conference agreement has come a long way since we passed this bill in this body the first time in June. Many of my colleagues wanted a lower deductible. We have a lower deductible. Other colleagues were more concerned with getting the dual eligibles' drug costs out of the Medicaid Program and covering everybody by Medicare. We have done that as well. So this is a good, solid drug benefit that will provide real relief to all seniors. Not only is this a good bill, with a good benefit, this bill provides an incentive for employers not to drop their retiree coverage. Because there has been so much misinformation about corporations dropping employees, and since we have gone to such great strides in the conference report to overcome that problem and reduce that possibility, I want to spend some time on that and make clear that what we did in this respect--I think it is fair for me to say that the conference report, the compromise between the House bill and the Senate bill, is very much better than either the Senate bill, when it passed in June, or the House bill, when it passed the other body in June. So I would make these comments about whether or not employers are going to drop coverage of their retirees. Now, we have heard a lot from opponents of this historic bipartisan effort alleging that this bill will cause employers to drop their retiree health coverage. But one thing these opponents do not do is tell the people the whole story. So as Paul Harvey says, the rest of the story and the reality is that employers have been dropping retiree coverage for years. As you can see from this chart, there has been a gradual decline in the number of corporations providing coverage for their retirees. Since 1991, the number of larger employers offering health coverage to their retirees has dropped by nearly 20 percent, from 80 percent down to 61 percent. This chart shows what we have been seeing in our States and hearing from our constituents. So employers have been dropping coverage for their retirees, and this has already been going on for more than a decade. We know these days employers are finding it harder and harder to continue voluntarily providing health insurance coverage for their retirees. That is why we in the Medicare conference worked diligently--put resources behind it--to help employers continue providing coverage for retirees, not just to be nice to the retirees but to be nice to the taxpayers because it is a heck of a lot cheaper to keep these retirees in their corporate plans than have them go on our plan. That is our goal. Let me make it very clear; we have done a very good job of accomplishing that goal. So let me tell you the three important ways we have done it. First, the bill provides a 28-percent subsidy for the prescription drug costs for retirees so they will continue providing this coverage. That is about $750 per retiree, but that is just on average because every corporation has a different plan. Second, we exclude this retiree subsidy from the Federal corporate tax. This dramatically increases the value of this subsidy for retiree coverage and helps the employer continue offering this coverage. Third, the bill provides additional flexibility for employers to structure plans that complement Medicare's new drug benefit. Overall, the conferees agreed to put $89 billion in this bill to protect retiree health coverage. This funding makes it more likely--obviously not less likely--that employers will continue their retiree benefits. I think I ought to emphasize what $89 billion happens to be. That is 20 percent of all the money we are putting in this bill for prescription drugs for seniors. Now the Congressional Budget Office estimates that 17 percent of the retirees will not receive supplemental drug coverage from their employers beyond what is offered by Medicare in this bill. We have a different estimate from the Employee Benefits Research Institute that is outside of our government. It is a nationally respected organization that studies retiree benefits. They estimate that that number is going to be much smaller: 2 to 9 percent of the retirees might not receive supplemental coverage from their employer in the future if Congress passes the Medicare benefit. According to the Employee Benefits Research Institute, if Congress creates a Medicare drug benefit of any kind, some employers will want their retirees to take advantage of that new benefit. This is an important part of the rest of the story. The only way to prevent employers from putting their retirees in the Medicare drug program is if we don't pass legislation such as this, if we say we don't give a darn about the 25 to 30 percent of the people who don't now have prescription drugs and we don't care if they ever have it. That is not the attitude of Congress. That is why this legislation is before us, because we do care about people who can't afford or don't have available a plan for prescription drugs. For those people, particularly on this side of the aisle, who have been complaining about not doing enough or that passing this bill might cause some corporations to change their health benefits and prescription drugs for their seniors, do they think we should do nothing? No, they don't think so. They are crying because we aren't doing enough. I tell you honestly, we could put $400 billion, all of this bill, into just those 30 percent of the people in this country who retire from corporations that have a pretty good prescription drug program, probably better than most people have, and I couldn't guarantee anybody in this country that some corporation, big or little, wouldn't dump their programs, just dump them, as they have been doing for 20 years. Let me be clear, these retirees will not be left without drug coverage. Retirees are not going to lose drug coverage. Why? Because of this bipartisan bill before us. These retirees will still be better off than today, because today when their employer drops coverage, they are left with nothing--no coverage whatsoever. Because of this bill, these retirees will be getting drug coverage from Medicare, and their former employer will likely pay the monthly premium for them. They will still be better off than they would be today where there is no Medicare drug benefit to back them up. It is also important to recognize that keeping employers in the game lowers the Federal cost of the drug benefit. That is why we are concerned about the taxpayer as well as the corporate retiree. Obviously, if it is dumped, it is going to cost the plan more than if they stay on the corporate plan. So providing this 28 percent subsidy actually lowers the cost of the Medicare benefit. This generous 28 percent subsidy for retiree coverage is good policy. And because it is good policy, it is good politics. This bipartisan bill protects retiree benefits. That has been our goal, and we have accomplished it.