Jon Kyl

Mr. KYL

Mr. KYL. Mr. President, I ask unanimous consent to speak for no more than 2 minutes on the nomination of David Campbell upon which we are about to vote.

Mr. KYL

Mr. KYL. Mr. President, I am pleased to address one of the most important issues I think we are going to be talking about all year. I hope our colleagues will permit us to conclude our debate with a vote so we can actually adopt some legislation to deal with this crisis of lawsuit abuse in the United States. Some call it medical malpractice reform. Whatever you call it, we have to deal with it. Unfortunately, what we have heard is that some of our colleagues are going to prevent us from having a vote on the bill that is before us, S. 11. It is a bill that addresses one of the most fundamental problems we have, and that is access to available quality medical care by a lot of people in our society today. We need to reform this flawed medical malpractice system which is prohibiting people from getting the quality medical care they need and deserve. We debated just before the Fourth of July recess Medicare reform to provide prescription drug benefits to all of our senior citizens. We took a lot of time talking about why our senior citizens needed access to care and how we were going to improve that access. But all of that will go for naught, it will do no good, if there are no hospitals and there are no pharmacists, if there are no physicians and other health care providers--or an insufficient number of those providers--to help those people in need, whether they be senior citizens or others, because of the high cost of malpractice premiums and therefore the inability of these providers to continue to serve the people in their communities. Last year, the American Medical Association released a study on this lawsuit abuse problem. It concluded that 12 States were having a full- blown crisis and that 30 States were seeing serious problems in terms of the ability of physicians and hospitals to stay in practice to take care of their patients. Today, just a year later, that study has been updated and the AMA has now concluded that 19 States are having a full-blown crisis in dealing with the medical malpractice insurance rates just for physicians. Let me give some examples of how this is affecting different communities around the country so you can see it is truly a nationwide problem. In my State of Arizona, health care providers have experienced dramatic increases in their insurance rates. Between 2001 and 2002, two hospitals in Phoenix saw a threefold increase in their malpractice premiums, paying more than $1.7 million. Meanwhile, in Winslow, AZ, the hospital premiums have more than doubled, to $1.8 million. Some of you know the town of Winslow, AR, from a famous song by the Eagles. It is a town with great history and rich in tradition in Arizona but it is not very big. It doesn't have the patient base to support a hospital that has to pay almost $2 million a year in medical malpractice premiums. It is not just in my State of Arizona. Methodist Hospital in south Philadelphia recently closed its maternity ward and prenatal program because of its medical liability insurance rates. Greenwood Hospital in Mississippi was unable to keep its level II trauma center rating because the neurosurgeons in the area had left citing the high cost of liability insurance. I spoke with a woman whose husband had been very seriously injured in an automobile accident in Mississippi. She told the story of how-- because of the lack of physicians and because of the high cost of premiums--her husband has suffered so terribly as a result of that accident and the inability to get quick medical attention. Back to my home State of Arizona, the Copper Queen Community Hospital in Bisbee, AZ, was recently forced to close its maternity ward because the family practitioners in that community were looking at a 500- percent premium increase. Expectant mothers now must travel more than 60 miles to the closest hospital, which is either in Sierra Vista or in Tucson. According to the recent news accounts, four women have since had to deliver babies en route. To cite the news accounts, Time magazine has a June 9 cover story about the doctor being out and why so many patients are losing doctors to the rising cost of malpractice. This is now truly a national event. In the Time magazine piece dealing with this question of physicians having to leave the practice, there is a particularly interesting story about a woman in Arizona whose name is Vanessa Valdez. The title of the story is ``Taking the Highway to Have a Baby.'' The story points out that Vanessa has to drive about 50 miles to see her OB/GYN and to have a baby. She lives in the town of Douglas, which is on the Arizona- Mexico border. But there is no obstetrician within an hour's drive to deliver her child. There were six family practitioners in that community but they couldn't afford the soaring malpractice premiums. As a result, the hospital was forced to close its delivery room, and suddenly rural Cochise County has but one delivery room for the 118,000 residents. That is in Sierra Vista, 50 miles from Valdez's home of Douglas. This is beautiful country. It is a great place to live. But it is no place to live if you are going to get sick or you know you are going to have a baby because you have an hour's drive to get to a doctor. That is not right. It is not as if this is out in the middle of nowhere and you chose to live there with all of the attendant risks involved. No. There are a lot of communities in this area but none of them had physicians able to continue to practice because of the medical malpractice premiums they had to pay. One other example: Nevada was very much in the news last year because of the crisis in that State. Nevada's top level trauma center was recently closed for 10 days after 58 orthopedic specialists in Las Vegas temporarily quit because of the skyrocketing insurance costs. Also, a lot of the physicians delivering babies and performing high- risk surgeries have indicated that they won't be able to continue to practice without some kind of relief. Ultimately, this destructive lawsuit abuse hurts the patients. Yes. The doctors can't make it, so they leave. But ultimately it is the patients who are the ones who suffer. Therefore, we are trying to deal with that through legislation that will make it a little bit more difficult for this kind of lawsuit abuse to occur so that the insurance companies won't have to charge quite as high a rate, so the physicians and hospitals can stay in business, and so the people of the communities can continue to be served. Also, the threat of lawsuit abuse often forces doctors to perform a lot more in the way of tests and surgeries and other kinds of treatments than they otherwise would do simply to protect themselves from a claim that they weren't doing enough for the patients--sometimes expensive tests, sometimes invasive procedures. All of this is called defensive medicine--trying to do everything they can to make sure some smart lawyer out there doesn't try to pick at what they did and find some kind of fault with it and find a client who is willing and able to hire a lawyer to bring a lawsuit against the doctor. That is another effect of this lawsuit abuse. Another is the fact that a lot of times doctors are no longer willing to perform risky procedures that may be necessary to really help somebody or even save somebody's life. Obviously, the more serious the condition, frequently the more risky the procedure. You want to be served by a physician who is willing to go to the mat for you in that case. But if the physician is looking at a big medical liability suit, if the result doesn't happen to work out right, then that physician is going to be less likely to try to treat you. All of this results in an inferior quality of medical care for American citizens, which is wrong. It is not at all uncommon for these lawsuits to be brought and the lawyers to get over half the settlement. That is wrong. That is one of the issues with which this legislation deals. The Congressional Budget Office determined that the House bill, which passed and which was pretty similar to S. 11, would reduce direct Federal spending for Medicare, Medicaid, and other Federal health programs by almost $15 billion over the next 10 years. Since the Federal Government is a payer for many of the medical services, particularly for our seniors who are indigent, it is a saving to the Federal Government as well for this lawsuit abuse to be addressed. Because employers will pay less for health insurance for their employees and more of the employees' compensation will be in the form of taxable wages and other fringe benefits, including, of course, money that could be plowed back into greater health care for the employees, the Congressional Budget Office estimated that enacting this legislation would increase Federal revenues by about $3 billion over the next 10 years as employees receive higher wages. Just a note about the legislation itself, there are a lot of different ways you can do this. I had actually cosponsored a bill somewhat different than this. But the basic idea is the same, even though we might want to change specific provisions of this legislation. It basically sets sensible limits on the noneconomic damages that can be obtained in these lawsuits. The noneconomic damages are those damages that go above and beyond the bills that have to be paid. When you get sick and the physician allegedly committed malpractice, you had to go to another doctor to get the problem resolved. Those are economic damages as you lost wages, and any other expenses that you have. And those economic losses are fully compensated. But above and beyond that, you are entitled and juries will award substantial damages for noneconomic losses, mostly called pain and suffering because of what you had to go through. Certainly people recover something for their pain and suffering. The question is how much. In order to avoid lawsuit abuse, some States--for example, the State of California has put a $250,000 limit on those noneconomic damages. That is precisely what this legislation does as well. However, states with higher caps can keep those under this legislation too. It also reserves punitive damages for cases that justify it. Part of lawsuit abuse is very large punitive damage awards which have nothing whatsoever to do with either the economic or noneconomic losses but nevertheless help to enrich the lawyers. There are some other features of the legislation as well. But the point I wanted to make is whatever the specifics of the legislation, we need to act. I hope our colleagues will permit us to conclude the debate and have a vote on this legislation so we can get together with the House of Representatives, which also passed a bill, have a conference committee work out any differences, all have a chance to vote on that, and then hopefully have a bill we can send to the President. If we are never able to have a vote on this, it is not just the doctors, hospitals, and other providers that are going to suffer; it is the American people because they will not have access to the quality of medical care which they need and deserve. I hope we cannot only debate this legislation but also permit it to come to a vote so we can address this serious crisis in America today.

Mr. KYL

Mr. KYL. Mr. President, I rise today to submit a resolution calling on the government of the People's Republic of China to release Dr. Yang Jianli, an internationally renowned scholar and pro-democracy activist, who has been detained in China since April 2002 without access to legal counsel, contact with his family, or a trial. Dr. Yang, a U.S. permanent resident, is a mathematician and economist who lives in Massachusetts. He heads the Foundation for China in the 21st Century, a group that advocates democratization in China. On June 3, the U.N.'s Working Group on Arbitrary Detention condemned China's detention of Dr. Yang, finding that the Chinese government has violated his rights as a citizen of China and as a resident of the U.S. The panel declared that, ``The nonobservance of Dr. Yang's right to a fair trial is of such gravity as to give his deprivation of liberty an arbitrary character. Therefore, his arrest and detention is arbitrary being in contravention of Article 9 of the Universal Declaration on Human Rights and Article 9 of the International Covenant on Civil and Political Rights.'' In recognition of the U.N. working group's conclusions, as well as the Chinese government's blatant rejection of them, the State Department officially called for Dr. Yang's release, stating, ``We are particularly disturbed now by China's public rejection of an accepted international process and the findings of the independent and impartial panel of jurists, so we are urging China to comply fully with international obligations that it has assumed, and we urge that Dr. Yang be released and allowed to return to his wife and children in Boston.'' The resolution that I am submitting with my colleagues goes hand-in- hand with the State Department's support for Dr. Yang. It expresses the sense of the Senate that the U.S. should: 1. make the immediate release of Dr. Yang Jianli a top foreign policy priority; 2. make clear to the Chinese government that the detention of U.S. citizens and permanent residents is not in its best interests; and 3. express the deep concern of the U.S. regarding the imprisonment of Dr. Yang and other U.S. citizens and permanent residents, as well as discuss their legal status and humanitarian needs. I would like to note that a similar resolution--submitted by Representatives Cox and Frank--is expected to be considered today by the House of Representatives. As I have stated repeatedly, if China wants to become a productive and respected member of the international community, it must begin to adhere to accepted norms of behavior. China's leaders seem to be oblivious to the understanding that all people deserve certain basic freedoms and that violation of such fundamental rights is an appropriate concern of the United States and the world at large. We should make clear that the Chinese government's continued detention of Yang Jianli and others--in violation of these international norms--will adversely impact our bilateral relations. Without such pressure, the behavior of China's leaders is unlikely to change, and the voices of those who have devoted their lives to the cause of freedom--like Yang Jianli--will continue to be silenced. I hope that my colleagues in the Senate will join me in strongly supporting this resolution and in calling for Dr. Yang Jianli's release.

Mr. KYL

Mr. KYL. Mr. President, this is a second-degree amendment to the Baucus-Grassley amendment. I will explain it in just a moment, but while the majority leader is still in the Chamber, let me compliment him, not only for the fine presentation he just made based upon his personal knowledge of how the medical health care system in this country works but also for his leadership and the enormous amount of time and effort he has put into crafting this legislation and working with Members to try to resolve the many disputes that have arisen. I think without the patience he has shown in dealing with all of the Members, we would not be to this point that we are today, literally on the brink of passing, in the Senate, very historic legislation. So I compliment the majority leader and personally thank him for his patience in dealing with some of my concerns about the bill and the good work he has done in working with those problems. I also want to thank Chairman Grassley, who has shown a lot of patience and has worked hard in a very bipartisan way to put together a plan that could pass this body. I know that people on both sides of the aisle would prefer that it be closer to their particular points of view, but the chairman was always cognizant of the fact that in order to get a bill passed, it had to be done in a bipartisan way. So I compliment the chairman and ranking member for working in that fashion. I also want to compliment and tell my colleagues a little bit about the efforts of the Secretary of HHS, Tommy Thompson. He, too, has become very personally involved in this effort and has worked very hard to effect the President's goals and plans in ensuring that we can strengthen, protect, improve and preserve Medicare. I appreciate his strong role as well. I say all of that to make it clear that the amendment I offer is in the spirit of this bipartisan work, hopefully my work will be deemed to be cooperative with our leadership, although there is one element of the amendment Chairman Grassley and Senator Baucus have laid down that I disagree with and this is what I am proposing to amend. What I would like to do is explain the history of this and then come to my amendment. The amendment is very simple. It strikes a sunset provision, but that does not mean anything unless one knows the context, so let me speak for a moment about that context. When the President first proposed this year that we legislate to add a new prescription drug benefit to Medicare, he said we should do it in the context of a real effort to strengthen Medicare so that we can preserve and protect it for the future. It has served our seniors well, but we are now in the 21st century and two things basically have occurred. First, we now know that medicines, prescription drugs, are used as the preferred treatment for many illnesses and diseases, which was not the case back in 1965 when Medicare was first created. So all of us have become convinced that we need to add a prescription drug benefit to Medicare. This was the President's first great goal. The second thing he said was, there is no way we can sustain the current promised benefits under Medicare if we do not create some new opportunities for Medicare beneficiaries, if we do not really strengthen the Medicare system we have. Among the things we can do to ensure that it will continue to work is to provide some choices for seniors, and so what he proposed was those people who would like to keep the existing Medicare, with a new prescription drug benefit, would be able to do that. But, especially for those younger seniors, people who have been in the workplace and are familiar with a PPO, or preferred provider, insurance plan or perhaps an HMO or Medicare+Choice kind of plan, we would provide that alternative as well so that the senior could choose. The idea was that a lot of the people that will be coming into the senior market, being used to an employer-provided plan, might like to keep that kind of plan rather than go into traditional Medicare. So we want to provide a choice, and it will be up to the senior to decide. So that is the direction that we sat down to work in as we developed this legislation. I would have preferred that in creating this private market alternative, or the preferred provider organization--which we will hear referred to as PPOs--to the traditional Government Medicare system, we had made it much more like the FEHBP, the Federal Employees Health Benefits Program. That is a medical insurance plan that most of the people who are in this Chamber today have. It serves about 10 million Federal employees including family members and retirees. This is also the health plan for Members of Congress. I would like to tell my seniors, if it is good enough for Members of Congress, then the seniors ought to take a look at it. It is a pretty good program. In fact, it is a very good program. I would have liked to have made this new Medicare Program alternative very much in the mold of the FEHBP, especially in the way that the preferred provider organizations work, bid, and are paid. We could have done that. The way it works in the FEHBP is we do not have any limit on what kind of a bid the PPOs have to have. If they meet the basic criteria, providing the care we have mandated by statute, they can bid and provide the service and they can try to sell it to us. The federal government's share of the cost is determined by the use of a weighted average of all the health plans' costs. If it is a good deal, federal employees and Members of Congress will sign up. If it is not a good deal, we will not. Generally, we do not tell the PPOs how much they can bid or how much they can charge. If they bid too much and charge too much, nobody is going to buy it. So they all have pretty reasonable bids and pretty reasonable costs, but theoretically they could bid themselves out of the market. It is up to them. These insurance actuaries are pretty smart. They know how they can meet all of the requirements that they have. They have to be sure they cover the benefits they have promised. They have to provide those. They have to make a little profit, of course. They have to make sure the premiums are low enough so that people will sign up and, of course, most importantly in the beginning, they have to win the bid. If they do not win the bid, if they are so high that nobody will sign up, well, then, there is no reason for them to be in the game in the first place. They look at all of those things, and they figure out how much they can afford to bid, what the premiums will be, and so on. It is a pretty good plan, and I wish we could have been able to offer that to our seniors. But instead, the determination was made by Chairman Grassley and others that we would take the key component of the President's plan with respect to the PPOs and write that up into the legislation, draft it up, and that section of the legislation says we are going to limit the number of bids because we really want to control the cost, and so we are going to say only the three lowest bids are going to succeed, and then the President proposed to pay the PPOs at the middle bid of the three bids. So the insurance companies that bid have to figure out, how much is it going to cost us to provide care to each senior, and that is what they bid, but they have to be sure the bid is low enough that they win because only the three lowest ones will be accepted. That is what President Bush proposed, and it is deemed to be a way of both providing a lower cost to the Government kind of care but a quality care because obviously people are not going to sign up and utilize it if they do not think it provides quality care. There are a lot of things about the way PPOs operate that ensure good quality care. This is a good idea. The President proposed it, and that was the original idea in drafting this. But then a very arbitrary thing happened. The people in this building know that everything we do has to be under the rules of the CBO, the Congressional Budget Office. Everything has to be scored by CBO. That is to say, we send it to CBO, and they tell us how much it is going to cost in their mind. When we said we were going to allocate $400 billion over 10 years to this new prescription drug benefit, we had to make sure that the CBO score fit within the $400 billion. Well, CBO came along and they said this competitive bidding system was going to cost a lot more money--it was over a $100 billion--it was way more than Chairman Grassley and Senator Baucus wanted to allocate to the preferred provider organization part of the system. So they said, we have to do something that does not cost anything or does not cost very much. So they decided to solve the problem CBO had created by simply writing in, in effect, a limitation that said this will not cost anything because we are going to set it at the very same level as traditional Medicare payments. There is a complicated formula. I am not going to get into all the details, but essentially it is the higher of the Medicare+Choice payment rate or the traditional fee-for- service Medicare reimbursement level. The bottom line is, they said we are going to cap the amount the PPOs could be reimbursed. If you want the contract, you can bid anything you want to bid, but you can't be reimbursed over a certain amount, and that amount is defined in statute. By definition, therefore, the score did not cost very much and therefore it could fit within this $400 billion. So they thought that might solve the problem. But the problem with this is, it will not work. A lot of people realize it won't work, but we still have to comply with the CBO score, they say. I will get to a solution in a moment. How do we know it won't work? CBO, the same organization that did the score, says all of 2 percent of seniors will sign up for this PPO alternative. Two percent. Why? Because this arbitrary capped rate is not going to be enough to provide the coverage for them that we promise. So why would they want to sign up with a PPO when they can get the coverage under traditional Medicare? When I am eligible for Medicare, that is what I would do. I would not sign up if a plan cannot deliver the goods. CBO says only 2 percent will sign up. As a result, obviously, we have to find an alternative. Let's go back to this question that CBO raised by its scoring and whether or not an arbitrary limit will actually work. CBO says it won't; only 2 percent are going to sign up. Why do they say that? First, we have the experience of Medicare reimbursement over the last many, many years. Sadly, the government has a cap on what it pays the doctors and hospitals and other health care providers, too. We do that by statute. We say we are only going to pay you X amount if you do certain things and you cannot go above that. What happens? After a while, there is so much upward pressure on that amount because it does not begin to keep track with inflation, especially health care inflation. Pretty soon the doctors are saying, we not only cannot make any money getting reimbursed at this low level, but we cannot pay our nurses, we cannot keep our doors open, there is no way we can stay in practice providing services to our senior citizens if you are going to pay this ridiculously low amount. In fact, a lot of doctors have retired, gotten out of the business, discouraged their kids from going into medicine, and we see real shortages, especially in certain specialties. There are other factors that lead to that as well, but this is a big one. So every year or two, Congress, responding to that pressure, says: My goodness, we have to change that reimbursement level. It is too low. So then we have these big fits and starts where we hold it down for a while and then all of a sudden we raise it up to the level necessary to compensate the hospitals and the doctors and nurses to take care of our senior citizens. We did this for the physicians just a few months ago because they were getting cut significantly in the reimbursement rate and CBO said we paid $54 billion to fix the physician problem for basically one year. That is one-eighth of the amount of this entire bill, over a 10-year period, just to make sure that the cut did not go into effect last year for the doctors so they could stay in business. We find there is supposed to be another cut in physician reimbursement levels this year, and again we are most likely going to have to make an adjustment. The problem is artificial government controls, price controls, do not work. They do not work in Medicare any better than in rent control or the gasoline price controls we had in the 1970's or any other price controls. Free market countries like the United States have learned that lesson. Socialist countries have not. I would have thought we would have learned the lesson. But that is the way the Medicare system works. It is the perfect exhibit A if you want evidence of the fact these controls in providing health care services do not work. Just look at the reimbursement providers in Medicare today. I mentioned it is a lot like rent control. There is always the inexorable pressure. Is it any wonder when you finally remove the rent controls that in some places the rents actually go up? The owners get enough to refurbish the place to keep it up and people are willing to rent the places that look a lot nicer and better than back when there were rent controls. Sometimes the prices do go up. That is the price of quality health care. We should never get into the situation in this Congress where we are going to shortchange our seniors by trying to put artificial caps on what we pay the people who take care of them. It will not work. There is no such thing as a free lunch. If you want quality health care, you are going to have to pay for it one way or another. It may work to have a price control for a little while, but it does not work for very long. We found that out, and that is why every couple of years we have to make the big adjustments. So why would we think the price controls would work with the new preferred provider organizations that we are trying to establish as a credible alternative to traditional Medicare? A lot of people will find the benefits of those PPOs to their liking. Why do we think the price controls will allow them to work? CBO says it will not happen; only 2 percent will sign up. Clearly, we had to find a way out of this dilemma. The bottom line is, under CBO's rationale, either nobody bids because they cannot get reimbursed or we have to do the constant adjustment. There is no adjustment provided for in this legislation. Or there is a modest adjustment, but not an adjustment that will take care of this problem. What do we do to solve the problem? We do not want to create the PPO option and then destroy its effectiveness before it can even work. I am very worried, to digress a moment, we will create some expectations on the part of our seniors that we cannot satisfy. That will be fundamentally wrong. It would be very wrong to suggest that we are going to do something for our seniors that, in fact, we are not doing. I, for one, am simply not going to be part of that. We cannot promise seniors an option that, in fact, we know, in advance will not work. What is the solution? Obviously, the solution is to go back to the way we were going to do this in the first place, back to the President's proposal, and not have the arbitrary cap. Simply allow competitive bidding. Let the market decide what the right levels are. These people are smart. They will find the right level. It may be, in some areas, some time, below the Medicare reimbursement. That is what the Centers for Medicare and Medicaid Services, the organization that oversees these programs, believes. It may be the same. It may be more. It will be different from region to region and year to year. Let the market decide that. Now, there was not enough money in the $400 billion to do this. So what happened was Chairman Grassley and Senator Baucus were able to conclude that about $12 billion was available in the bill to be allocated for some purpose. Very candidly, many Democrats did not want to do what I am suggesting. So they said you can only have half of the $12 billion to try to make your plan work. We want to use the other half to do something we want to do. What they want to do in the bill is perfectly reasonable, and I don't have any objection to the Grassley-Baucus amendment in that regard. In fact, I don't have any objection to most of the Grassley-Baucus amendment. I think it is a good amendment except for one thing. What the amendment does for the $6 billion I spoke of, it says, starting in the year 2009, the Secretary of HHS can use competitive bidding that does not have this arbitrary payment cap on it, up to spending $6 billion if you have to spend it. The CBO scoring would suggest you could probably cover one or two of the 10 regions of the country if there were going to be 10 regions during one of the bidding cycles. It does not give us much of a chance to do this, but at least it establishes the principle. The Secretary will at least have one chance, in one region, during one bidding period, to say at least in this situation we are going to eliminate our caps and see what happens. Theoretically, if the bids come in below that cap, he still has the $6 billion to do that in another region. It is like somebody guaranteeing a loan. If the loans get paid off, then the person who guaranteed it never has to pay off. This is like $6 billion to guarantee the loan. This is $6 billion to see that the preferred provider organizations get paid, if in fact their bids exceed the Medicare cap level. It may exceed it; it may not. Chances are, if it does not happen until 2009, which is the way the amendment is written, it will exceed it because of this pressure that inevitably builds when you have price controls keeping the prices down. So for 4 years the prices are going to be tamped down and finally then in the fifth year we get to go out to bids, and my guess is they probably will be higher and the proponents of the competitive bidding will say: See, we told you it would cost a lot of money. Of course. It might. If you tamp down something that the market would cause to rise a little bit every year and you tamp it down for 5 years and don't have some opportunity to adjust it, then naturally if you take the cap off it is going to rise. So CBO is probably correct, it probably will cost some money. That is the inevitable result of lifting the price control after you have kept things tamped down for too long. The alternative, of course, is that there may not be any PPOs bidding because they cannot provide the services we have promised to seniors. But there is a little bit of an opportunity here to provide this unrestricted opportunity for bidding. That is what the amendment originally said that was drafted. I was originally going to be a cosponsor of the Grassley-Baucus amendment because even though it did not reestablish the competitive bidding process very much, there is a little sliver in there and at least we could go to conference, to the conference committee between the House and Senate, and argue that we had established the principle and we wanted to make sure that principle could continue on. But, again, a funny thing happened. There were objections on the Democratic side to this process extending beyond the 5 years that it was in effect. What they said was you have to spend the $6 billion in that 5-year period. There will not be any money after that. I said that's OK. But then they said: And the authority to do this has to sunset at that moment, after 5 years. You cannot have the authority to do this, regardless of the cost, later on. Later they said: Well, as long as it is cost neutral, but as I pointed out that is probably a false promise because of the price controls keeping the prices tamped down. So my amendment eliminates that sunset clause. It says: No, if this is a good idea, let it continue. Ironically, if the CMS is correct, then it is not going to cost any more. And if CBO is correct, it is going to cost more and, as a result of that, we are going to have to have some alternative to the competitive bidding process with the price caps on it because there are not going to be any PPOs to offer the health care benefits. If, in fact, they cannot make it work under the money that is then available, there has to be an alternative available. That is why this should not sunset. It is why the authority to do this should continue on. As to this point I just want to say I cannot imagine, after all the work that has gone into this--people have looked at how complex this is--we would think that we are smart enough in the Senate to know exactly what the price of this insurance contract ought to be for every Medicare beneficiary 10 years down the road. How do we know that? We cannot possibly know that. How do we know what a fair price for a Mercury automobile is going to be in 10 years? A price that is just exactly fair, that lets, say, Ford Motor Company make some money, just low enough to entice us to buy the car. We don't know that. That is why we have a free market. You charge whatever you want to charge and if it is a good deal, people will buy it; if it is not, they will not. It is the same thing here. We are not smart enough to fix these prices and we are playing with the quality of health care of our senior citizens. My fear is we are going to keep this ratcheted down so much that we will have an experience like we had not so long ago with the HMOs of this country, where they were squeezing the benefits and patients got pretty angry about it. They said, we don't want to have to go to a doctor we don't know, we don't want to have them tell us they can't see us for 6 weeks. We don't want them to say it would be nice to have a MRI or CAT scan but all we can give you is a X-ray. That is where the call for the Patients' Bill of Rights came in, and I supported it because I don't think patients should get squeezed down in their health care just because we are trying to save money. Of course we want to save money. We are talking about taxpayer money here. But the whole concept of the preferred provider option, the private sector option, was to be able to save money in the long run for the Medicare system. That is why the President proposed it and why we, especially on the Republican side, said this is something we need to do to strengthen Medicare. We need to provide an option that will enable us to keep the costs of this under control as Medicare goes into the future. And for the reasons the majority leader articulated so well a moment ago, we believe these preferred provider organizations will be able to do that. So they can balance good quality care with efficiencies and effectiveness at cost control as well. That was the whole idea for it. But we cannot get into a situation where we tie both hands behind their back and then tell them to go out and serve our senior citizens. We say: You can go do that but you can't get paid any more than X, and X doesn't go up unless we cause it to go up. That is the reason for the fix that I proposed. It was in the amendment originally but then it was determined that this had to be sunsetted. My amendment eliminates the sunset, allows the authorization for the pure competitive bidding to continue on. That is as simple as it is and is the primary reason why I did it. Let me note a couple of other items. Some people, especially my friends on the Democratic side, have said, wait a minute here, this has to be balanced. And I said I agree. The drug benefit, according to CBO, right now in the bill, the underlying bill, is $402 billion over 10 years. It slightly exceeds the $400 billion. In the same bill we are spending $7.8 billion over 10 years on the PPOs and Medicare+Choice, which are the HMOs. So it is $402 billion on the drug benefit, $7.8 billion on the PPOs and HMOs. I think we could afford to put a little bit more money toward ensuring that the PPOs can be successful here, that they will bid and provide these services to our senior citizens. Another point: When we put these price controls on the providers, as we do today under Medicare, as I said, there is no free lunch. Somebody has to pay. What happens is that the private sector health insurance in our society is subsidizing Medicare. The hospitals and the doctors and all the other providers have to make it up somewhere and that is where they make it up. This raises the cost of private insurance. A lot of people find that very hard to pay. In fact, it takes some people out of the private insurance markets. So, ironically, one of the reasons not as many Americans are insured as should be is because the premiums are too high because the private sector has to subsidize the care that we are providing on the Government side of the equation through Medicare and Medicaid. This price cap is going to further that subsidization, ironically at a time when millions of retirees are going to be leaving the private market because their employer will no longer want to provide a benefit that the Government is providing for at a taxpayer subsidy. So there is going to be a lot smaller private sector market to subsidize a lot bigger amount, which will cause more people to lose their insurance because of the higher cost of premiums. It does not make sense to underfund Medicare. The final problem: Remember at the very beginning I mentioned the FEHBP, the Federal Employees Health Benefits Program. It is interesting that throughout the history of the FEHBP we have not had any of the problems I have been talking about here. Congress has rarely had to do anything to modify the FEHBP system. It works very well. Yet every year or so we have had to modify the reimbursement to Medicare providers in response to what we did through the Balanced Budget Act of 1997. We have had to do it ever since because we are not smart enough to know what every doctor in this country and every hospital ought to get paid to take care of us. Yet that is what we tried to say in the statute. So we have to keep changing it. Why would we want to not go with a system that we know has worked very well? We can do that by allowing this open bidding and allow the free market to work. I think for all of these reasons it would be very wise for us to remove the sunset on the Grassley-Baucus amendment and let this process work, even a little bit, and show our colleagues in the House of Representatives and, frankly, all the country that we are committed to this principle of the free market ensuring the best deal for the American taxpayers but also the best deal for our senior citizens. I am just going to close with this thought: Medicare is a mandatory system in the United States of America. There is essentially no option. When you are 65 years old, it is Medicare or no care. A doctor cannot take care of you outside of Medicare after you turn 65. There is only one exception, and that is if the doctor says: I will not treat any Medicare patients for a period of 2 years. Now, we do not want to force our doctors into doing that. We want them to stay in Medicare, taking care of Medicare patients. But the only way a doctor can treat people outside of Medicare is to swear-- there is a formal process for doing it--that he will not treat any Medicare patients for 2 years. We do not want them to do that, but that is the only way. You would have to find such a doctor. If your condition is diabetes, and that doctor is an orthopedic surgeon, you probably will not have too good of luck. So most seniors do not have the option of searching around trying to find a doctor who works outside of Medicare because most of them do not do it. Fortunately, most of them stay in Medicare. But this is the only circumstance under which you can find a doctor outside of Medicare. Since we are saying--literally mandating--that our moms and dads-- pretty soon some of us--have to take the Government program for our health care after we turn 65--and nothing is more important to us than our health and our family's health--my mom's health--it bothers me a lot that we are setting up a system to take care of my mother that we know in advance is bound not to work. It promises a benefit it cannot deliver. But because of the scoring problem, we have to do it that way. There is a better alternative: to take the time to do it right, to make the personal commitment to do it right, to understand there is no such thing as a free lunch--that I want to deliver the best quality care for my mother as I can because she does not have an option. If she had an option to go into some other system, as they do in Great Britain, then I would not be quite as concerned. But we are forcing everybody into a system, and then we are saying-- as we tie its hands behind its back--now you make sure you can go out and serve, when CBO says only 2 percent of the people will sign up for that. So that means everybody is going to continue on with traditional Medicare. Now, maybe that works for them, but we know there are going to be some huge problems not too far down the road with traditional Medicare. Are we going to be able to deliver the benefits we promised? If you look at the numbers, we are going to have big tax increases or we are going to have to go deeply into debt in order to do that. There is an alternative, and that is this option I have been talking about. Because we are playing with real people's lives, and because the ultimate value here is the quality of medical care we are going to ensure our senior citizens get--because it is the only way they can get medical care--we have the highest obligation to give this matter our most serious attention and not simply rush it through because we want to finish the bill before the July Fourth recess--although I certainly understand the Secretary and our leadership's desire to try to do that to get the bill in conference--but to take enough time and to give it enough thought to do it right. This is forever, in a sense. It is for a long, long time. And for those friends of mine who say, ``Oh, don't worry about it; we are going to make a lot of changes in this,'' how many changes have we made in some of the sort of ``sacred cow'' laws in the United States--things that everybody supports and so nobody wants to even suggest to change: Social Security, Endangered Species Act, Medicare itself? It is easy to demagog these issues, and, as a result, Members are not very keen to make changes with them; you are accused of trying to destroy the program or whatever it might be. So I think my colleagues who say, ``Oh, don't worry; we'll fix it later,'' miscalculate the courage they are going to have later when they realize it has to be fixed. The time to do it is now. The time to get it right is now. The President is right, this was the way to do it. And so, to support the President's program, I am offering this amendment to get back to what that program was. I hope my colleagues will support me in this because nothing less than quality health care for my mother and the rest of the senior citizens in this country is at stake. Mr. President, I appreciate your patience, and I yield the floor.

Mr. KYL. Mr. President, I ask unanimous consent that the reading of the amendment be dispensed with.

Mr. KYL. Mr. President, I have an amendment at the desk.

Mr. KYL

Mr. KYL. Mr. President, the Congressional Budget Act, Rule 21 of the House of Representatives, and Rule 16 of the Senate are all designed to establish a balance between authorizing legislation and appropriations bills that would allow Congress to consider authorizing legislation in a timely and thoughtful manner, and prevent the year-ending appropriations process from degenerating into a venue for policymaking and provincialism. Yet, according to CBO, over the past several years, the total amount of unauthorized appropriations has ranged between about $90 billion and $120 billion annually, and since 1998, the number of earmarks has risen by 150 percent to 10,540, which cost $44.6 billion in 2002 alone. This trend has made a mockery of our institutional arrangement and beckons us to take action to fix the system. The bill introduced today is not perfect, but it recognizes the deficiencies in current procedure and represents an earnest and thoughtful attempt to correct them. It would improve Rule 16 to close the loophole that currently insulates Senate appropriations committee- reported bills containing unauthorized appropriations and legislative language from points of order, while preserving the Senate's ``defense of germaneness'' to amend legislative language in House-passed appropriations bills. It would also preserve balance between the Houses by allowing any Senator to raise a point of order against unauthorized appropriations included in a House-passed appropriations bill, conference report, or amendment between Houses. Finally, the bill attempts to regulate the practice of using committee or conference report language to earmark funds. We have a problem; I think that much is clear. If other Members of this chamber do not agree with specific provisions of this bill, I ask that they offer constructive suggestions as to how best to breathe life back into Rule 16 and the institutional balance between authorization and appropriations. In the midst of the War on Terrorism and projected budget deficits, it would be an abrogation of our role as elected officials to allow the status quo to persist.

Mr. KYL

Mr. KYL. Mr. President, I rise to address this historic opportunity for strengthening Medicare and providing prescription drug benefits for our seniors. I am pleased that as a member of the Finance Committee I was able to participate in the construction of the legislation which is before us now and to be able to speak to this historic legislation on the first day we are considering it. My understanding is that as of Wednesday we will be able to begin offering amendments to the legislation, and I know it is the leader's intention that we complete it before the end of the following week so that the bill can be merged with the House bill which should be adopted at roughly the same time. We can go to a conference committee, iron out whatever differences we have, and get this bill to the President as soon as possible. It is the President who has led on this initiative and who has promised the American people that we are going to provide both a new prescription drug benefit for America's seniors and a strengthening of Medicare so that we know that this program can continue on into the long-distant future and not be troubled by financial problems that we can see on the very short-term horizon. So this Medicare reform legislation, S. 1, that is before us now offers us a historic opportunity, one I think we must be very careful not to squander. In that regard, let me discuss, first of all, the problems we are going to be trying to deal with here, the way the Finance Committee bill attempts to deal with them, and then I will conclude with some concerns I have about some changes I believe we are going to need to make to ensure this will work for the benefit of our Nation's seniors. First, let me discuss the need. There are a couple of key things to keep in mind here. Just as with the Social Security system, of which Medicare is actually a part, Medicare cannot continue to pay the benefits we have promised America's seniors, primarily because of the good news that America's seniors are living longer, and we are finding more and more ways to treat their diseases and illnesses, all of which, of course, costs money. But we should not consider that bad news. In fact, we consider it a very fortunate dilemma that we face, in which we are not only able to prolong life but enhance the quality of life for our seniors. That is the reason we want to deal with this problem now. But as seniors are living longer, this is going to provide a greater financial burden on taxpayers, and we find that the number of taxpayers paying for it is actually decreasing in relative size. Therefore, we see a financial insolvency for Medicare not too far down the road. In fact, by the year 2026, the system will be, technically, out of balance. By 2012 or 2013, we are going to have to begin paying out of the trust fund for Medicare, which means that the general fund is going to have to be tapped to help to pay for the Medicare funding and the hospital insurance program is going to be in debt. The long-term costs for Medicare are staggering when you stop and think about it, although, again, this can be looked at as good news since we are finding ways to treat our illnesses. And while it costs money, it still preserves our quality and length of life. Therefore, we should be happy for this condition. But it will cost money. To give you an idea, over the next 75 years, the average deficit of the hospital insurance program is 2.4 percent of taxable payroll, which is 71 percent greater than the projected funds coming into the program over the same period. So we have a huge deficit we are going to face in how to fund our Medicare commitments to seniors. In addition, when Medicare was created in 1965, it was a very different program than Americans have become accustomed to now. For one thing, it didn't have a drug benefit. We are all committed, I think, to the proposition that we have to add a drug benefit to Medicare, among other things, because now, unlike in 1965, treating through prescription drugs, through medication, has become really the preferred option in most cases. We no longer need acute surgical care, for example, to treat many situations. We are able to control the illnesses through the use of medications. Isn't that a much more humane and satisfying way to treat diseases than through some intrusive kind of treatment, such as surgery? So medical advances have permitted us to accomplish a great goal. We are going to have to add this benefit to Medicare, however, if we are to achieve the degree of success we would like to achieve. Nobody who has health insurance in the private sector has a structure like Medicare does today. For example, in the private sector, you usually only have one deductible for your insurance. And then your copayment-- if it is for drugs or some other kind of benefit--is usually at the front end of most of those services. Most of the time in the private sector, people have catastrophic insurance coverage. In other words, you will pay a deductible and there will be some copayment for the other services you derive along the way. But if your illness is so severe as to cause huge medical costs, that catastrophic care is paid for with your private sector insurance premium. Not so with Medicare. With Medicare, it is almost exactly the opposite. There are two deductibles, one for part A and one for part B, for hospital stays and physician services. It is especially complicated for hospital stays. And you have high copayments under Medicare that are toward the back end of the coverage. You have no catastrophic coverage at all, as a result of which seniors have had to go through a distribution of Medigap insurance, private sector coverage, coverage sometimes from their employer, and the Government's Medicare Program and, in some cases, some even do without. There is no drug benefit today as a part of Medicare. So all of this has to be dealt with. Clearly, we cannot continue to work with a program that is not going to be able to treat our senior citizens as we have moved into the 21st century, which is the historic opportunity we are presented with. The first way to respond to that is to add a drug benefit to Medicare. Clearly, as I said, we are all committed to doing that. S. 1 provides a generous universal benefit for prescription drugs. I think, given our budget constraints, the bill put together by the chairman and ranking member of the Finance Committee is a very good start to providing that kind of universal benefit of covered pharmaceuticals. Now, importantly, the way the bill is constructed, no senior will have to leave the traditional Medicare. The first option is you can stay right where you are, and there is a drug benefit added to traditional Medicare. It will have the same actuarial value as the drug benefit added to the alternative choices that will also be provided now. For those who are satisfied with Medicare, except they would like to have a drug benefit, that is precisely what will be available to them. For those who would like to or are used to having a private sector insurance plan, that option or alternative will be available as well. You don't have to choose it, but if you do choose it, it will have a drug benefit with the same actuarial value as that provided or added to the traditional Medicare. But it will also have a variety of other kinds of options. For example, you will probably have just one premium, one deductible, and copayment then for some of the services at the front end. There will probably be catastrophic coverage at the back end. In other words, you will be protected against the very large medical expenses you may face. That catastrophic coverage will be part of the premium and part of the subsidized care from the Government. This new option that is being provided is primarily being structured like the preferred provider organizations, or PPOs, which currently serve a lot of our population in the private sector today. If you are part of an employer-based insurance plan, for example, chances are you are enrolled in a PPO, or preferred provider organization. What is this? It is an insurance plan that pays you benefits with a premium, deductibles, and copays, as I said. There is provided a list of physicians you can go to, including specialists, generalists, and so on. Ordinarily, you can even go to a physician not on the list, but you may have to pay a little bit more for the coverage. In other words, the insurance will pay up to a certain amount and you may have to pay the difference. It is your choice. If you want to do that, you can. If you don't want to, you don't have to do that. That is what a lot of us are used to. There is a third kind of insurance, called the HMO, or managed care. Some people are very happy with the Medicare version of that. It is called Medicare+Choice. That is only available in certain parts of the country. We are not touching that. If you are happy with Medicare+Choice and you are in that, you will be able to continue to participate in that. As a matter of fact, it is hoped there will be more of those kinds of plans operating as a result of the private insurance option that will be made available. But nobody has to participate in that if they don't want to. The drug benefit that will be provided will have the same actuarial value as that of the PPOs and of traditional Medicare. Think of it in terms of traditional Medicare on one hand, plus a drug benefit and this new option of PPOs on the other hand. It, too, will have the same actuarial value drug benefit. On the PPO, however, there will be more integrated care. In other words, there will be a group of physicians who are taking care of you and they may have you do more preventive care, more tests. It would be to their benefit to not have to pay a lot of money for your heart attack, for example, so they want to keep you healthy and not get that heart attack. It enables you to take care of yourself in such a way that, hopefully, you will not have the heart attack. Under traditional care, you may not go to the doctor until you are really sick, at which point, of course, then are you not only going to be in trouble but there will be higher bills to pay. The idea of PPOs is maybe to reduce the overall cost of providing the care by taking care of you better so, of course, you will be more healthy, which is to the benefit of everybody. It is not going to work out that way for everybody, but at least the alternative or the option is there. Therefore, if you decide this is a better option for you, you will be able to participate in the PPO. I identified the need briefly, and I went into some description of the alternative plans provided in this legislation. Let me turn now to the one concern I have because I think we all want to make sure that if we are going to provide an alternative, it works. If we are really going to strengthen Medicare so people will have options or have choices, we expect those choices to provide better care, perhaps for a lesser amount of money, perhaps not, but better care should be the primary goal here. If we are going to attract people to enroll in that option, then we have to make sure it works. One of the concerns some of us have is that the way the bill is structured currently, it is less likely to succeed than it would if it were as the President originally proposed it. Let me go into a bit more detail what I am talking about. One of the problems with Medicare today is that we have price controls on the health care providers. The Government decides exactly how much it is going to reimburse doctors, for example, and that is how much they get reimbursed. The problem with that is we are trying to control costs, and so the Government keeps ratcheting down what we pay the doctors until we find the doctors are deciding not to treat Medicare patients anymore, until they decide they just cannot afford to continue to be part of Medicare. At this point, because we want to make sure seniors have plenty of health care providers available to take care of them--and, frankly, we do not want to put any of the health care providers out of business, obviously--then all of a sudden we are going to pay more to allow them to stay in operation, and that costs a lot of money. We put that back into the system. Then we begin to ratchet down what we pay again. It is the traditional problem of price controls. Nobody knows better than the market what the price of a good or service ought to be, but some bureaucrats, the idea goes, know better than the market. Whenever it is tempting for us to think that, we ought to look to history for a lesson. Price controls never work. Think of it in the way earthquakes occur. We have the great tectonic plates of the country, and they are constantly under stress. We may go for quite a long time without an earthquake, but if we have those tectonic plates stressing, all of a sudden, it is going to get to the point where they just cannot stand to be together anymore, and they are going to move. That creates an earthquake. It is a lot like that when it comes to price controls. We may be able to keep the lid on prices for a while, but the inevitable pressure will increase to the point that eventually something has to give. One thing that can give is that we no longer have the providers willing to provide the service because they are not getting paid enough to stay in business. Therefore, we have a little revolution on our hands where people say: Look, they are all leaving the practice. We want to be cared for; can't you pay them more money? The Government says: OK, we will do that. We provide the money. What have we saved? It would have been much simpler to have allowed the market to work along the way so that the providers could be reimbursed what they need to stay in practice, the beneficiaries of care continue to be provided that care, and we have a more stable financial situation as well. Price controls simply do not work, and they have not worked in Medicare where we have tried to control the prices of the providers. What makes us think that controlling the prices of the PPOs is going to be any more successful? It clearly is not going to be, and yet that is, in effect, what we have in this bill. We have said we want to provide a private sector option, and then we place price controls on how much we are going to pay the providers. Some people say we might as well just stick with the current system of price controls on the providers. If we are going to provide a real private sector alternative, then do not turn around and cap the prices we are going to pay. The Government has a legitimate obligation to keep prices down, and I will get to that in a moment. But by the same token, we have an obligation to provide high-quality health care. If we are going to make the decision to provide an alternative to traditional Medicare, one which provides choices for people and relies upon the private sector to design plans that best meet the needs of different seniors all over this country, then we need to let those plans work. The way the administration designed it was that in deciding which PPOs would be allowed to provide the services, they would simply allow a competitive bid process. The plan is to have approximately 10 regions in the United States, to have the country divided; 50 States divided into 10 regions. Think of it as roughly 5 States per region, although that is not exactly how it will work out. In each region, if you are an insurance company and you want to provide this alternative to Medicare, you would bid and the three companies that provided the lowest bids would have the opportunity to provide this care. They would then be reimbursed by the Government at the level of the middle bid. In other words, if you had $10,000 for the top bid and $9,000 for the middle bid and $8,000 for the third bid, then all three companies would be reimbursed at the $9,000 per patient level, speaking hypothetically, of course. That competitive bidding process would enable the insurance companies to figure out how much money they need to make to stay in business, but also how little they can charge in order to get the business. It is the same process that any company undergoes. For example, a construction company wanting to build a highway bids on the highway. If they bid too high, they are not going to get the job. If they bid too low, they are not going to be able to pay all their workers and make a go of it. So they have to calculate what it is going to take to stay in business, to make a little profit, and still get the business. That is what encourages them to be careful with how they spend their money--to be economical, frugal, and thoughtful with what they do, and keep the customer happy. The same thing happens with insurance companies. When the Government comes along and says, We are not going to take the three lowest bids, we are going to put a cap on how much you can bid, they have totally distorted the process. So if the Government came along and said, for example, that $10,000, $9,000 and $8,000, no, we are not going to do that, we are going to say no company can bid more than $8,000, what is that going to do? The company that bid $10,000 is going to say: We cannot make any money at that; we cannot even serve the patients; and we are not going to try to fool anybody and go into debt. So we are not going to bid. The company that bid $9,000 is going to say: I do not know if I can make it work. We had better not bid for the same reasons. The company that bid $8,000 is going to say: We can make a go; the Government says we cannot bid more than $8,000; we are going to bid that. What kind of choice do the consumers have? One company. What if the Government decides it knows best and the bureaucrats decide to set the level at $7,000? Then how many companies are going to bid? This is precisely the problem the Congressional Budget Office identified. The Congressional Budget Office said when you set the bid at the Medicare payment level, which is the way the bill is constructed, that is what the level is going to be, you may end up with nobody bidding. Do you know what the Congressional Budget Office says the participation rate is going to be under the bill? Two percent. Effectively nobody is going to bid. Nobody is going to be able to participate because the Medicare level--remember the price control level I talked about before--that level is going to be the level set under the bill. What they are saying is almost nobody is going to be able to work under that artificial capped rate. So only 2 percent of the people are going to participate in these plans. The plans are not going to be able to provide a robust enough benefit, a benefit that attracts people into the plan. What are the plans going to do? Obviously, they are not going to participate. What kind of option have we created? There are some on the far left, I suppose, who will say that is great; that proves the only thing that works is a Government, one-size- fits-all medical benefit, and we can finally get to the single-payer system some wanted to do all along. Those, on the other hand, who want to see the private market system work, will say: No, let's try to adjust the bill; it will not take a huge adjustment, to be sure it can actually work. The way we would adjust it is we would simply substitute this Medicare capped rate, the price control rate, for that which the President originally proposed; mainly, take the three lowest bids. The bids still have to be low enough to get the business, so there is still a big incentive to keep the cost down, but at least you know you are going to get some people bidding. The estimate in this instance is the participation would be somewhere between 30, 40, or maybe even more than 40, 48 percent, something like that, 43 percent. That is a lot more people participating in the plan. It at least would have a chance to work then. It seems to me, if we are dealing between estimates of 2 percent on one hand and over 40 percent on the other hand, that is too big a difference for us to be rushing to pass this bill. Nobody knows for sure what the answer is. Will it be 2 percent? Will it be 40 percent? If we are dealing with that kind of uncertainty, it seems to me we should not be rolling the dice, especially since what is at stake is the quality of health care for our senior citizens. We ought to take our time and do it right. As I said, fortunately we have the answer in front of us. It is what the President originally proposed, take the three lowest bids and then use the middle of those three bids. We could easily substitute that for what is in the bill today. If I had my druthers, we would even go one step further. Those of us who say what we are providing for our seniors is very much like what Members of Congress get in health care are almost right but not quite. Under the FEHBP, the Federal Employees Health Benefits Plan, all of us, plus the other 10 million Federal employees, get a chance to enroll in one of several PPOs. Do the PPOs that provide the care for Federal employees, including Members of Congress, have price caps on them? No. Do they even have to take the three lowest bids? No. Whatever companies would like to bid that will offer the benefits that the Government promises to its employees, if they are qualified companies and they offer the benefits, it does not matter what they bid; they get to offer those benefits to the employees. Now, if they bid way too high, they can still bid and they can still offer the plan, but none of us are going to join because it will cost too much money. So they still have to be reasonable. But if they want to participate at a rate higher than some of the other plans, they can try. If they can sell their product, then who is hurt? Not so with Medicare. What the President has said is in order to keep the costs down, we are going to take the three lowest bids. Well, that is not as good as what the Federal employees have, but we believe it is a system that can be made to work. What cannot work is to go to the lowest common denominator, and that is the Medicare artificially controlled, capped price control rate that CBO says will not work. That is the change we are working with the chairman and the ranking member of the committee and the administration to effectuate in this legislation. We have to get the score from the Congressional Budget Office; that is to say, they have to tell us how much the two different versions would cost so that we would know and be able to fold that into the $400 billion budgeted amount with which we have to work. It is my hope over the next few days that we will be able to do that and be able to offer an amendment that can be supported by all of us that would permit a more plausible scenario for the preferred provider organizations to succeed so that we can honestly say to our seniors they have two legitimate options. They can stay in traditional Medicare or there is a good PPO option, their choice, and have some confidence that the PPO option will actually work and will be a good option for them. I am going to close with this thought: Whenever there is a third party paying for something that is near and dear to you, you have to be very careful because that third party is going to have a dual loyalty. If it is an employer or the Federal Government, let's say, and they are buying your health insurance, they want to take care of you, your employer wants you to be happy and healthy, and in a plan like Medicare, the Government certainly wants to take care of the senior citizens, but there is another motivating factor for either the employer or the Government. What is it? It is, how much does it cost me? The employer can only afford to pay so much for the health care of his or her employees. The Government, because it is taxpayer money, can only afford to pay so much for the care it provides to senior citizens under Medicare. So you always have to ask the question: If I am relying upon my employer's provided insurance or the Government's provided insurance, am I getting the best quality care I can get? Reasonably. Am I getting affordable, high quality care? It is a question you should always be asking because when a third party pays, there are mixed loyalties. If I am paying for it all out of my own pocket, and I can afford to do that, then I am going to pay for good care for me and my family. But if I am paying for a complete stranger's care just ask yourself: Do I care quite as much? Am I going to be quite as concerned about the quality of care or am I going to be at least equally motivated by how much it costs? Being concerned about saving money, am I going to maybe skimp and save a little bit? What is the result of that skimping and saving? Is it going to be a lower quality care? When we set a price and say you can only bid so much, what is the potential effect of that? It is lower quality care. That is the tradeoff we have to be very careful of. We are buying care for senior citizens and we have to be very careful that in our concern about wasting taxpayer dollars and being able to afford this quality care, that quality does not suffer as a result. I submit the best way to do that, when the third party, the Government, is paying for the bulk of this care, is not to set a price cap because the inevitable result will be the ratcheting down of the prices and very uneven, if not poorer, quality care but, rather to allow the insurance companies to bid what they think they have to to win the contract but enough to provide high-quality care. Will that cost less than traditional Medicare? A lot of people at CMS, the Government-run Medicare system, think it will be actually less than traditional Medicare. Will it be more than traditional Medicare? It might be. CBO thinks it will be more. The experts are not sure. I suggest that actually there is no one answer. It will depend upon how things evolve. So we cannot know for sure one way or the other. So why should bureaucrats or Senators think we are so smart as to be able to predict this in advance when, again, one Government agency says 2 percent and another one says over 40 percent? Clearly, the experts are in disagreement. Why would we be so arrogant as to think we know best and can set those prices? Let the market work and determine what can be bid for companies to stay in business but provide high-quality care. Then let the customer, the consumer, the seniors, decide are they getting their money's worth or not. If they think this is a good deal for them, they will choose that option. If they think it is not, they always have the traditional Medicare option to stick with. So it is the best of all worlds. That is what this is all about, not trying to shoehorn everybody into a one-size-fits-all plan. Regions of the country are different. Urban versus rural is different. The needs of seniors are different. There are so many different factors that we should not presume to know best. We need to be willing to spend what it takes for high-quality care. The only way we are going to know what that amount is, is to let the market work, not to impose an artificial control on it. That is why I think we are going to have to make a change in this bill. Fortunately, it is a relatively modest change, but I think it is a critical change because it could mean the difference between a successful Medicare Program and one which is not, and we will have missed a historic opportunity to strengthen Medicare if we fail to address these kinds of issues in the legislation that we are dealing with over the course of the next 2 weeks. I thank the chairman and ranking member of the Finance Committee for their hard work, the administration for the work it has put in, my colleagues who have worked a lot on this, and I am hoping over the next several days we will be able to come together in a bipartisan way to craft a plan that truly provides new drug benefits for our seniors, choices that they will like and appreciate, and a private sector alternative that has a chance at working.

Mr. KYL

Mr. KYL. Mr. President, what kind of energy policy does this country need? There is little argument about the need for affordable, reliable energy from diverse sources. The bill before us seeks to achieve that laudable goal in the worst possible manner: on the back of the American taxpayer. This bill subsidizes two types of energy. That which few consumers would be willing to pay for and that which companies would produce and consumers would pay for in the absence of subsidies. I ask my colleagues if this makes any sense? Let's let the competitive market determine our energy future. Let's let the market, with millions of individual consumers pursuing their individual energy needs, based on their own unique situations, steer this country's energy economy. Let us not dictate to consumers and taxpayers how they should spend their energy dollars. Recently this body voted on a tax bill that allows taxpayers to keep more of their hard-earned money in an attempt to jump-start this economy. The tax cut was passed on the premise that consumers and businesses are better suited than government to make sound economic decisions that translate into economic growth. That same premise applies to energy. Yet the Energy bill under debate tosses that premise out the window. Suddenly the consumers and businesses of this country, which we are trusting to make sound economic decisions to put the whole economy back on track, cannot be trusted to make sound energy decisions. Instead, we are dictating their energy choices for them. No body of persons, not even a panel of 100 of the world's most brilliant economists, let alone the Senate of the United States, has the knowledge, wisdom or foresight to make such decisions rationally for millions of American citizens. Let's take a look at what this bill would do. It mandates greater use of ethanol, a fuel that is already heavily subsidized. Without subsidies and mandates, ethanol would virtually cease to exist as a motor fuel. It subsidizes renewable energies such as wind power, which again would not survive in the competitive marketplace due to the high cost and low value of the electricity produced. It subsidizes coal, already the most plentiful and affordable energy source in this country. Coal power will continue to thrive in this country whether subsidized or not, as long as we don't regulate it out of existence, yet we are providing subsidies for coal power. This bill subsidizes nuclear power, which would probably be competitive were it not for the onerous regulatory restrictions that needlessly burden that industry. The list goes on. Let me suggest that the greatest obstacle to affordable and reliable energy in this country is the U.S. Government. Before this body looks outward for solutions to our energy problems, it should look inward. It should identify those laws, regulations, and other Government impediments that prevents this country's citizens and businesses from making sound energy decisions. We encumber the U.S. energy economy with all sorts of onerous and often unneeded and outmoded rules that raise the cost of energy and distort energy markets. Instead of fixing this state of affairs, this bill compounds these errors by further raising the cost of energy to American taxpayers and further distorting energy markets through subsidies.

Mr. KYL

Mr. KYL. Mr. President, first, I agree with the comments of the Senator from Alabama that we ought to be promoting nuclear power. I am a strong advocate of that. I compliment the chairman of committee, Senator Domenici, for being very strong in his support for nuclear energy and for being totally consistent in the positions he has taken. I want to argue against hypocrisy. An environmental group handed me a sheet of paper a while ago. They are very much against subsidies. As it turns out, a subsidy for nuclear energy would be very bad. They are right about arguing against subsidies. That is why I am going to support this amendment. But all of the environmental arguments I have seen have been for subsidies when it comes to ethanol, solar power, biomass, wind energy, and you name it. The point here is that we ought to be consistent. If you think subsidies are a wonderful idea for these other things, then maybe you ought to support the loan guarantee for this additional method of producing power. But if you think subsidies are wrong, then you shouldn't support them for anything. As the chairman of the committee knows, I opposed all of these subsidies in the Finance Committee. I will offer amendments again to try to strip them out of the finance part of the bill when it is added to the Energy bill on the floor. I wish to make the point that if you want to be hypocritical--I am talking about these organizations and not Members of the Senate--then fine. Oppose this subsidy for nuclear and continue to support it for all of the rest. But if you want to be honest about it, like the chairman and I, though we have come to a different conclusion, but at least the chairman has been consistent and I hope I have been consistent. I oppose these subsidies, even for those sources of energy which I think are critical for this country to continue to develop, and that includes nuclear energy. I support the amendment in order to remain consistent in opposing subsidies.

Mr. KYL

Mr. KYL. Mr. President, I rise today with Senators Bingaman, Rockefeller, McCain, Frist, Alexander, Lincoln, Bunning, Smith, Bob Graham, Santorum, Kerry, Kennedy and Hatch to introduce a modest but important piece of legislation, the Safety Net Hospital Pharmacy Access Act. This legislation would correct a small error in current law that prohibits safety-net hospitals from being able to negotiate with pharmaceutical companies for the lowest prices they can get. Let me provide some background on this problem. In 1990, Congress established the Medicaid drug-rebate program to ensure that the Medicaid program pays no more than a pharmaceutical manufacturer's ``best price'' for a covered outpatient drug. So whatever was the lowest price the manufacturer offered to anyone, this becomes the price Medicaid pays under this ``best price'' rule. Unfortunately, this rule provides an incentive for pharmaceutical manufacturers not to offer deep discounts to anyone, given that these prices may become the new price that Medicaid pays. Given this, in 1992 Congress exempted some organizations from the Medicaid best price calculations so that pharmaceutical manufacturers would offer them lower drug prices. These organizations include the VA, the Department of Defense, and section 340B covered entities. These 340B hospitals are so called because they fall under section 340B of the Public Health Services Act, which defines 12 categories of publicly funded safety net providers. There are approximately 160 hospitals in the country that fall under the 340B program. These hospitals often bear the burden of providing a substantial amount of uncompensated care in dealing with the indigent or the uninsured. Unfortunately, the Center for Medicare and Medicaid Services interpreted the 1992 law as only applying to outpatient drugs purchased by these entities. Therefore, drugs purchased for inpatient use at the 340B hospitals are covered by the Medicaid best price rule. This means these hospitals actually pay more for these drugs than for drugs that they can negotiate their own prices for in the outpatient setting. The legislation I am introducing today corrects this problem by allowing the 340B hospitals to also negotiate for lower drug prices in the inpatient setting. This is an important correction since these hospitals are often providing free care to the indigent and the uninsured. And let me be clear that this legislation would not require pharmaceutical companies to provide discounts to these hospitals. All this legislation would do is allow the hospitals to negotiate for lower prices. However, in my discussion with representatives of hospitals that would be affected by this law, they believe they would be able to save money. For instance, the Maricopa County hospital, which is the public hospital for the city of Phoenix, believes that it could save up to $1 million a year. Since this hospital constantly runs in the red because of the massive amount of uncompensated care it is required under federal law to provide, such savings would be very helpful. I want to thank the bill's cosponsors. I also want to urge my colleagues to take a close look at this important legislation. I am going to work to see that it is passed this year.

Mr. KYL

Mr. KYL. Mr. President, I rise today with Senators Bingaman, Rockefeller, McCain, Frist, Alexander, Lincoln, Bunning, Smith, Bob Graham, Santorum, Kerry, Kennedy and Hatch to introduce a modest but important piece of legislation, the Safety Net Hospital Pharmacy Access Act. This legislation would correct a small error in current law that prohibits safety-net hospitals from being able to negotiate with pharmaceutical companies for the lowest prices they can get. Let me provide some background on this problem. In 1990, Congress established the Medicaid drug-rebate program to ensure that the Medicaid program pays no more than a pharmaceutical manufacturer's ``best price'' for a covered outpatient drug. So whatever was the lowest price the manufacturer offered to anyone, this becomes the price Medicaid pays under this ``best price'' rule. Unfortunately, this rule provides an incentive for pharmaceutical manufacturers not to offer deep discounts to anyone, given that these prices may become the new price that Medicaid pays. Given this, in 1992 Congress exempted some organizations from the Medicaid best price calculations so that pharmaceutical manufacturers would offer them lower drug prices. These organizations include the VA, the Department of Defense, and section 340B covered entities. These 340B hospitals are so called because they fall under section 340B of the Public Health Services Act, which defines 12 categories of publicly funded safety net providers. There are approximately 160 hospitals in the country that fall under the 340B program. These hospitals often bear the burden of providing a substantial amount of uncompensated care in dealing with the indigent or the uninsured. Unfortunately, the Center for Medicare and Medicaid Services interpreted the 1992 law as only applying to outpatient drugs purchased by these entities. Therefore, drugs purchased for inpatient use at the 340B hospitals are covered by the Medicaid best price rule. This means these hospitals actually pay more for these drugs than for drugs that they can negotiate their own prices for in the outpatient setting. The legislation I am introducing today corrects this problem by allowing the 340B hospitals to also negotiate for lower drug prices in the inpatient setting. This is an important correction since these hospitals are often providing free care to the indigent and the uninsured. And let me be clear that this legislation would not require pharmaceutical companies to provide discounts to these hospitals. All this legislation would do is allow the hospitals to negotiate for lower prices. However, in my discussion with representatives of hospitals that would be affected by this law, they believe they would be able to save money. For instance, the Maricopa County hospital, which is the public hospital for the city of Phoenix, believes that it could save up to $1 million a year. Since this hospital constantly runs in the red because of the massive amount of uncompensated care it is required under federal law to provide, such savings would be very helpful. I want to thank the bill's cosponsors. I also want to urge my colleagues to take a close look at this important legislation. I am going to work to see that it is passed this year.

Mr. KYL

Mr. KYL. Mr. President, I ask unanimous consent that the ``Global Internet Freedom Act of 2003'' be printed in today's Congressional Record.

Mr. KYL

Mr. KYL. Mr. President, let's make it clear that every State still has to comply with the Clean Air Act. The question is how they each choose to do so. In Arizona, the Department of Environmental Quality, the department of the State that is required to cause the State to be in compliance, says this mandate will actually cause two of our larger communities, Yuma and Tucson, to be in noncompliance with the ozone standard during the summer months. Each State can meet the requirements in the ways they deem best under the amendment of the Senator from California. Let's not mandate a one-size-fits-all--oh, excuse me, except for Alaska and Hawaii--for every State. Give the Governors who are responsible people the ability to decide whether this is the best way for their State to meet the Clean Air Act standards.

Mr. KYL. Mr. President, can we have order?

Mr. KYL. Mr. President, at this point I want to talk to the general subject of the two second-degree amendments offered by the Senator from California which will be pending for us to vote on later this afternoon. They both have to do with the requirement under the underlying amendment to impose an ethanol requirement for gasoline throughout the country and to not allow States to opt in or opt out of that mandated ethanol requirement. One of the amendments by the Senator from California is to allow an opt-in, so that States that believe this will help them deal with their problems of ozone and the environment or other environmental pollution can opt into this program and take advantage of it; but for those States that believe it would be harmful to their environment, they would not have to opt in. The other amendment would require findings with respect to whether or not it would help the environment. I want to comment about that because the State of Arizona is one of the States that would be adversely affected by a requirement to use ethanol. Partly, this is as a result of the fact that the climate in Arizona is very warm, shall we say, particularly in the summertime. Our summer runs essentially from April through October. During that period of time, ethanol does not work well in communities such as Yuma, AZ, and Tucson, AZ, because of the way it interacts with the surrounding hot air, and the product that is produced, the moisture from the tailpipe of the automobile, interacts with the air to in fact produce ozone, which is the very thing we are trying to prevent by the use of oxygenated fuel. As a result, Arizona has used an MTBE substitute oxygenate that doesn't create the same problem ethanol creates in the hot environs of the climates in Yuma or Tucson, AZ. As you know, MTBE is associated with some environmental damage to aquifers, where MTBE has spilled into them inadvertently and, as a result, MTBE is being phased out. Arizona receives all of its gasoline from refineries in California. Therefore, decisions California makes pretty well impact on what Arizona has available to it for its vehicle use. This is why, naturally, the points of the Senator from California are exactly the points I make, because they apply to the refineries in her State and the same kinds of climatological requirement that my State of Arizona has with respect to environmental protection. So let me refer to several points with respect to the ethanol mandate and begin with that point of environmental impact. Ethanol is an extremely volatile fuel. It breaks down very quickly. In fact, it is virtually impossible to transport by pipeline because of this. It has to be transported by truck. Obviously, it is not produced in the West, in States like Arizona. It would have to be trucked in from other places such as the Midwest. This adds to the cost of the fuel, but that is another matter. Ethanol has been used as an additive in gasoline sold in the Phoenix and Tucson areas. But according to the Arizona Department of Environmental Quality, the State agency of the State of Arizona that is responsible for environmental protection in the State of Arizona, this mandate would be very bad for communities, as I said, like Yuma and Tucson, probably causing those areas to violate the 8- hour ozone standard under the Clean Air Act. This would have dramatic effects in Arizona. Those communities would be out of compliance. There are a whole host of economic negative effects from finding a violation of the ozone standard. How can it be that the use of an oxygenate such as this would create more ozone? Because of the unique climate in Arizona in the summertime where, instead of reducing the amount of ozone particulate, it increases it. Given the fact that there is no evidence that the use of oxygenates like ethanol would help improve the quality of air in Arizona, it seems to me a finding from the Arizona Department of Environmental Quality that says Arizona communities would likely violate the 8-hour ozone standard by being forced to use ethanol is a very powerful argument for the Governor of the State of Arizona having the option of opting into this program. Why would the other States force on Arizona a program which our own Department of Environmental Quality says is going to make the air worse, not better--in fact, so much worse it will be in violation of the Clean Air Act? It is not as if the committee and the proponents of the underlying amendment have not understood that the mandate should not apply to all States. In fact, two States are specifically exempted--Hawaii and Alaska--from this mandate. Why, if it is appropriate to exempt two States, is it not appropriate to at least afford other States the option of submitting themselves to this mandate or not, depending upon whether this mandate would make their air quality worse or better? It seems to me if we are really talking about environmental quality here, rather than a subsidy for the corn industry in the Midwest, then we would be looking at the environmental impact of a mandate of this sort. Since we have already decided that two States should not be required to comply with this mandate, we have already crossed the bridge of saying it is appropriate to exempt some States. Why not allow those States, with their departments of environmental quality having said they would be harmed, the ability to opt out, or the requirement that they opt in, in order for the program to be effective in the State? Why not allow that option for those States? What is so important about this mandate that every single State, except two--and I don't know why these two were exempted--is not at least given the opportunity to exempt itself from the provision? It seems to me there has to be something else involved here. I suspect it has to do with the desire of the corn producers and the people who transform the corn into an ethanol kind of product to make a buck. But we already provide them a lot of bucks through the subsidy for ethanol that has already been voted on by the Congress, has already been in existence for many years, and which will increase in this bill. I could understand--I would not agree with it--a subsidy to try to produce more of something we think we want to produce. Even though I don't think that is a good idea, I could at least understand the theory that if we want more of something, we are going to have the Government provide a subsidy to produce more of it. I could also understand the alternative, which would be that this is such a good idea that we are going to force people to do it; we are going to mandate it because we in Washington know best, of course, and therefore irrespective of what the environmental quality people in your own State believe, by golly, we know better, so we are going to make them do it. What is a little hard for me to understand is why we still need the subsidies if we are going to have this mandate. The purpose of the subsidies was to try to encourage this production, but we do not need the subsidies if people are going to be required to use ethanol. It is a mandate. We do not need the incentive or the encouragement anymore. Clearly, this is about special interest money influence, and I will be that specific because the environmental benefits, especially to an area such as mine, have not been demonstrated. At least the point is made by an agency of my State that it would actually degrade the air quality of some parts of the State--in fact, pull them out of compliance with the Clean Air Act, and yet the mandate would be imposed at the same time we continue to provide this subsidy. Something is drastically amiss here. There is an old phrase, ``Follow the money,'' so maybe that is what we should do here. Let's take a look at the money part of this issue. Currently, refiners use approximately 1.7 billion gallons of ethanol annually, and the underlying provision would increase that to 5 billion gallons annually by the year 2012. There is no question that gasoline prices would increase, based on data from the Energy Information Administration. It has been estimated that the increase in gas prices caused by this mandate could be between $6.7 billion and $8 billion a year. So that is the price we as a country, as consumers of this product, will be paying simply to enrich the people who produce the product. Arizonans will, according to this estimate, be paying on average 7.6 cents more per gallon of gas. Is that fair, Mr. President? I speak very plainly about the subsidies to the ethanol industry. According to the Congressional Research Service--this is an unbiased source--the ethanol and corn industries have received more than $29 billion in subsidies since 1996 and could receive another $26 billion more over the next 5 years. CBO, another unbiased source, has a different estimate for a different time period. They have estimated, based on a review of S. 791, the basis of the underlying amendment we are debating, $2.3 billion just between the years 2004 and 2008. We also know there is an impact on the highway trust fund because every gallon of gas containing ethanol--10-percent blend--gets a 5.3- cent subsidy in the form of reduced gas taxes. This amounts to a 53- cent-per-gallon ethanol subsidy to the industry at the expense of the highway trust fund, and the Energy Information Administration has estimated that this will reduce the annual gasoline excise tax collections by an average of $892 million between the years 2006 and 2020. Again, my State is a donor State already. Arizonans send $1 in taxes to the Federal Government and for highway transportation-related needs receives in return only 90.5 cents. So to the extent total revenues to the fund are reduced, the Arizona highway program will obviously be significantly impacted. There are a lot of general points that I could discuss. There are disputes between authorities on the subject of whether or not it takes more to produce a gallon of ethanol than the gallon actually contains in terms of Btu content; in other words, do you actually have a net loss in net energy value. There are disputes about that. Some experts say about 29 percent more energy is used to produce a gallon of ethanol than the energy in a gallon of ethanol. The National Corn Growers Association, not exactly an unbiased source, disagrees with that. I do not know where the truth lies. Clearly, it seems to me the science is at best in dispute. In any event, we would all have to agree that taking into account all costs, not just the energy cost, that clearly it costs a great deal to produce a gallon of ethanol or they would not need the subsidy which Congress has generously provided for its production. I have already talked about the environmental benefits being questionable. It is not just my own State environmental agency but also a National Research Council report found that oxygenates have little or no impact on ozone formation, and there are a lot of refineries that claim they can actually produce similar environmental gains without the use of oxygenates. In fact, that is what we are going to have to do in Arizona because we cannot use MTBE, and we would hope not to have to use the ethanol, as a result of which we would have to find a different blend and would be committed to doing that. It seems to me the ethanol industry, which enjoys this 5.2-cent-per- gallon exemption on the ethanol blend, or gasohol, from the 18.4-cents- per-gallon Federal excise tax on motor fuels, with the resulting mandate that the Congress is going to impose for the increase in the number of gallons used, would no longer need to be supported by this subsidy, which, as I said, works out to be 52 to 53 cents per gallon for pure ethanol. The General Accounting Office estimates the tax exemption has deprived the highway trust fund--a slightly different number than I gave before--of between $7.5 billion and $11 billion over the 22 years it has been in place. This is a very costly subsidy and would be a very costly mandate. Because the underlying amendment is costly, is not necessary, is contradictory with the subsidies that are already provided, and because the amendment of the Senator from California would simply provide the opportunity for States that would be adversely affected by this mandate to deal with their pollution problems in some other way--remember, they still have to comply with the Clean Air Act; nobody is exempting anybody from the Clean Air Act; they simply have to find a different way to comply--it seems to me it would be appropriate for us to support the amendment of the Senator from California and allow States to tailor their blends to the unique situation in their particular States. Everybody would still have to meet the Clean Air Act but we could each do so in a way that best suits our individual purposes. For that reason, I hope my colleagues will support the amendment of the Senator from California.

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

Mr. KYL

Mr. KYL. Mr. President, I rise today to express my support for H.R. 2, the Jobs and Growth Tax Relief Reconciliation Act of 2003. Former President Ronald Reagan often said, ``If you want more of something, subsidize it. If you want less of it, tax it.'' In recent polls, the American people have consistently said they want more job creation and more economic growth. This legislation, which President Bush is expected to sign into law this weekend, is specifically tailored to achieve these very important goals--by reducing taxes in the right way, it will enable businesses to create jobs and it will spur greater economic growth. It will also help American families keep more of their hard-earned money to spend or save, as they see fit. One of the most important things the legislation does is accelerate the tax rate cuts already scheduled to take effect. In 2001, Congress passed a law that set in motion a series of income tax rate reductions that were scheduled to be phased in over the next several years. Because of the slow phase-in, the 2001 tax cuts had a muted impact on the U.S. economy and taxpayers felt little benefit. The bill we pass today will make all of those rate reductions effective this year. Taxpayers will see their withholding adjusted almost immediately and will begin reaping the benefits right away. A key component of this provision is that it brings the top tax rate down to 35 percent--the same rate that corporations pay. While opponents claim this will only benefit wealthy taxpayers, I suggest that they look at what kind of taxpayers fall into the top bracket. The overwhelming majority--nearly 80 percent--of taxpayers in the top bracket have small business income. Small businesses, which are pass- through entities that are taxed at individual rates, are responsible for the creation of at least half of all jobs in the economy; reducing their tax burden will help them expand and create more jobs. Fairness and sound economics dictate that we should not tax small businesses at a higher rate than we tax big corporations. This bill fixes this so that the top small business rate will be the same as the top corporate rate. Our bill also significantly reduces the taxes individuals pay on dividends they receive from corporations. In order to change investment behavior--and we know that the ongoing economic troubles are almost exclusively related to a collapse in business investment, not to a problem of consumer demand--taxpayers must see a meaningful and permanent reduction in rates at the margins. The bill we pass today does that. Under current law, a corporation pays taxes on its earnings, usually at a rate of 35 percent, and its shareholders will pay ordinary income rates--currently, the top rate is 38.6 percent, on any dividends distributed by the corporation. President Bush said we should end this double taxation by eliminating entirely the tax on individuals. I fought hard for the original Senate bill that would have done this, and I still believe that is the best tax and economic policy. However, the conferees from the House were unwilling to agree. The compromise we settled on will reduce the individual tax rate for dividends to 15 percent--a significant improvement over current law. I will continue to work to eliminate the double tax on dividends. The bill we pass today also reduces the capital gains rate from 20 percent to 15 percent, the same rate we will now apply to dividends. I believe this is also good policy and I hope we can work to eliminate the tax on capital gains too. The dividend and capital gains tax relief should boost stock values significantly and should make it much less costly for businesses to expand and create jobs. Nearly 420,000 Arizona taxpayers will benefit from the dividends and capital gains tax relief. This legislation also includes a number of provisions designed to provide much-needed tax relief to American families. It increases the child tax credit to $1,000 per child, with a good portion of the tax benefits being sent to families as early as this summer. It also provides additional relief from the marriage penalty. In Arizona alone, nearly 450,000 families will benefit from the child credit increase and more than 600,000 will benefit from the marriage penalty relief. As I have said, I believe this is a very good bill that will do much to encourage job creation and economic growth, but I believe it could have been better. If the House had been willing to accept some offsets, we could have paid for the $20 billion in temporary State aid this bill provides. I also believe we should have held firm to the Senate position and eliminated the double tax on dividends. Regardless, I am very proud of the business, individual and family tax relief we have provided in this bill.

Mr. KYL

Mr. KYL. Madam President, I appreciate the cooperation of my colleagues. This is a very serious debate. We need to be careful of the language we use and the arguments we make. I would like to respond to a couple arguments just made. I think we can clearly be sending some very bad signals to some very bad countries of the world in the Senate. When a Member of the Senate speaks about low-yield nuclear weapons as ``nuts,'' we make a grave mistake. The majority of the Armed Services Committee of the Senate, the Secretary of Defense, the Chairman of the Joint Chiefs of Staff, the Secretary of Energy--these are very serious people who have a very serious reason for asking that this language be retained in the bill. The reason low-yield weapons research is being sought is because the world has changed since the time we developed these huge megaton nuclear weapons that can kill millions in just a few seconds. Instead of wanting to use those kinds of weapons, the United States would prefer, if it had to, to use a much smaller weapon, a low-yield weapon. There are several potential uses for this kind of weapon. To digress for a moment, we used to have a lot of these. They are called tactical nuclear weapons. Russia still does. The United States got rid of ours. Russia says it is going to be getting rid of its tactical nuclear weapons as well. Tactical nuclear weapons are not new. Low-yield nuclear weapons are not new. But the United States, in order to have a credible deterrent against a strategic nuclear attack, developed these very robust weapons that can take out cities, that can take out huge military targets with one weapon. One of the reasons was because we were not very accurate 20 years ago when the weapons were designed. We could get pretty close but nothing like the precision with which our weapons can be targeted today. In the most recent conflict in Iraq, we literally saw missiles flying through windows of buildings in downtown Baghdad. The kind of precision we have today enables us to use much smaller yield weapons to achieve the same results that large conventional weapons are being used for today. But they can do so much more effectively. For example, we know that some so-called conventional bunker busters were used in an attempt to decapitate the Iraqi leadership in the early stages of the war. We were impressed with the fact that these missiles could actually go through a hole in the floor board by one missile and then three or four more in the same hole and destroy a lot below. But it did not do the job. As good as they were, apparently the leadership of the Iraqi regime lived on. So we cannot say we have the capability, even in dealing with that regime, to destroy those kinds of targets. What we know from intelligence is that there are a lot of other nations in the world that know one thing: If you get deep enough underground with enough concrete and steel above your head, they can't get you. That is exactly the kind of facility being built by our potential enemies today. There is only one way to get those, and that is through a precise low-yield nuclear weapon. The design of those weapons is certainly in the mind of our scientists. And if they are allowed to think about this, to do some research on it, we think at least we would be prepared, should the Pentagon decide that it wants to ask the Congress for the authority to go forward with the program, to be able to do so. The point has been made adequately, this does not authorize anything. This merely removes a self-imposed prohibition on the United States. No other country in the world is suffering under this same prohibition. We legislated this restriction on ourselves. Russia does not have it. China does not have it. Great Britain does not have it. France does not have it, nor do the countries of the world that are proliferating or building weapons of mass destruction, including nuclear weapons in violation of the Nuclear Non-Proliferation Treaty. There may be a reason for us to need these kinds of weapons in the future. It has also been noted that they could be very useful in the destruction of chemical and biological agents or weapons which are not easily destroyed by conventional weaponry and in any event where the fallout can be more dangerous than the weapon just sitting there on the ground. If you put a large conventional explosion on top of chemical or biological agents, you could end up dispersing those agents in a very dangerous way over a far greater area than if the enemy actually tried to use the weapon. But with a precise low-yield nuclear weapon, you might well be able to destroy that biological or chemical agent or weapon. In this new world there may well be reasons to have these weapons. For somebody to suggest it is nuts is simply an uneducated approach to this very serious issue. I made the point that this is not an authorization. All we are doing is removing a self-imposed restriction on thinking about this, on doing research. If the researchers conclude it could be done and the Pentagon decided it should be done, Congress would still have to authorize such a program and fund it through appropriations. So I don't think we should be against thinking in the Senate, against researching something that we may well wish we had down the road. This could save lives. Think about the application of such a weapon as we have today on one of these targets. We would risk killing millions, and there is no point in doing that. It would be immoral to do that. A second point made earlier was to demonstrate the ICBMs that have been destroyed and to suggest that if we now move forward with rebuilding some nuclear weapons, we would be signalling to other nations that it is OK to build these nuclear weapons. Let's parse that a little more carefully. The reason we are destroying nuclear weapons is because we want to get rid of some of these very large nuclear weapons that we don't think we need anymore because circumstances have changed. Frankly, I don't think it is a very credible deterrent for us to say--I will say this regarding Iraq because that is over and so I think one can safely talk about the situation there. I don't want to talk about potential future situations--to Saddam Hussein, if you use chemical weapons against our troops, since we have foresworn chemical weapons and we have foresworn the use of biological weapons--we don't even have them; our only big ticket type here is a nuclear weapon--we won't take any option off the table. We just might use a nuclear weapon if you use biological or chemical weapons against us. We threatened that once before, and some say it worked to deter his use of those chemical weapons. Would it work today? Does anybody really believe the United States would kill maybe 3 or 4 or 5 million innocent Iraqi citizens by bombing Baghdad with one of our big nuclear weapons today? Those are the kinds of weapons we have. They kill lots of people real fast. As a deterrent when the cold war was going on, we wanted to let the Soviet Union know that they better not launch against us because they would suffer just as much destruction as we would and, therefore, we could deter their actions. Would it really deter a Saddam Hussein from using biological or chemical weapons against us? Would he really think we would use one of our great big nuclear weapons? I don't think so. So, ironically, these great big weapons are too big to use. The deterrent may not be credible. As a result, it makes sense for us to destroy a large number of those weapons, to take them out of our inventory and keep only enough that we think would really be necessary in the event we needed to deter a nuclear-armed country, such as Russia or China today. The other legal nuclear countries, of course, are France and Britain. In addition, we have India and Pakistan, which are not part of the Nuclear Non-Proliferation Treaty. So we say we can deter an action by a Saddam Hussein with a far smaller, less destructive kind of weapon. If he knows that we have a low-yield nuclear weapon that can bust his bunker and all of the other leadership, maybe he will think twice before he orders the use of chemical or biological weapons. Today, the experience in Iraq shows that we could not get the leadership of Iraq. So what does this teach other potential enemies? If you burrow deep enough underground and put enough steel and concrete over your head, like Saddam Hussein apparently did, you are not going to be able to get him, or get us, and therefore we have nothing to fear. That is another reason we need these weapons. We are willing to get rid of our great big weapons; that is the signal we are sending. We also will continue to have a credible deterrent with much smaller kinds of weapons. I mentioned the Nuclear Non-Proliferation Treaty. I will make this point. The nuclear countries of the world that signed the NPT agreed we would be the nuclear powers; but in exchange for other countries that signed up, including countries such as Iran, we said we would provide them with information and assistance regarding atomic energy--the peaceful uses of nuclear energy. We have done that. When countries have come to us and asked, we have provided that assistance because that is what the NPT calls for. We have abided by it; they have not. What makes anyone think that a self-imposed congressional limitation on the United States has deterred countries such as North Korea and Iran--or India and Pakistan for that matter-- from developing weapons in contravention of the NPT? Obviously, our action hasn't prevented them from developing these weapons. So what kind of an argument is it that this law on the books has been effective at stopping other countries? It didn't stop Saddam Hussein, Iran, or North Korea; and other countries are also trying to work on a nuclear capability. So let's not kid ourselves. This isn't stopping proliferation. What will stop it is a strong signal from the U.S. that it will not be countenanced, because if you have signed the NPT, like Iran, you don't have any right; you signed that right away for something we gave you. We are going to have a credible deterrent to your use of such a weapon. Finally, I am astonished at the argument that was made earlier that we should be ``setting our priorities straight,'' we should be willing to spend money on hunger in Africa rather than defending the United States of America. That was the argument made on this Senate floor. I am concerned that we are sending the wrong signals to the world-- especially our potential adversaries--if that kind of a statement is left unresponded to. The U.S. Government has an obligation above all others, and that is to protect and defend the people of the United States of America. That is our primary obligation as Members of this body. If it is necessary not to spend one nickel but simply remove a provision of the law that prevents our scientists from even thinking about this problem, and if we are saying that has a lower priority than spending money on hunger in Africa, then something is gravely wrong. Fortunately, we are not going to do this. The Armed Services Committee understood the need to remove the restriction on thinking. The Secretary of Defense, the Chairman of the Joint Chiefs, and Secretary of Energy have said to remove that restriction so our people can think about this problem. I think that is the priority here. That is why we should support the action of the Armed Services Committee. It should not be illegal to think of ways of defending America. I will conclude with this statement. Everybody would like to see a day when there are no nuclear weapons. But we cannot disinvent the nuclear weapon. Either we have confidence in the United States of America as a power that can help do something to stop the wrong people from acquiring these weapons and using them, or we do not. If we have so little confidence in America that we don't trust ourselves with these weapons to be used as a way of stopping the likes of Saddam Hussein, then we have lost our way indeed. Americans must have the confidence that we will do the right thing as a government. Members of the U.S. Congress make this kind of policy. Do we have so little confidence in ourselves that we are not willing to let our scientists think about this problem? We hold the decision in our hands to authorize a program, to appropriate the money for a program. So it is not as if we are giving anything up by allowing our scientists to think about this. Yet that is what the opponents of the committee bill would have us do. I find it incredible that we would, like the Luddites of old, say we don't want to know any more about this because nuclear weapons are really icky things. Well, they are not nice, but somebody needs to have the ability to deter others from gaining their capability or, God forbid, invoking the use of these weapons. Only a country that is willing to think about what kinds of deterrents may be required in the future is going to be able to provide that degree of stability in the world. That burden rests upon the United States of America. I gladly accept it as a representative of the Government that I think we can trust. That is what it boils down to today. Do we trust the President, the Secretary of Defense, the Chairman of the Joint Chiefs of Staff, and a majority of the Committee on Armed Services or don't we? I think we can put our trust in them. I do, and I urge my colleagues to support the committee action and defeat the amendment against the committee action.

Mr. KYL. Senator Akaka would be after me, and then Senator Allard, then Senator Reed.

Mr. KYL. It is my understanding that the debate has been going back and forth. Senator Allard was in the queue but has graciously allowed me to get in front of him. What I would like to do is propound a very limited request. I ask unanimous consent that after I speak, Senator Akaka be recognized to speak, and after he has completed, Senator Allard be recognized to speak.

Mr. KYL

Mr. KYL. Mr. President, I have spoken to the Senator from Louisiana. I know the chairman is appreciative of her efforts along with the Senator from Alabama. He is anxious to continue to work with her on this matter. He appreciates their very strong interest in trying to rectify this situation. On behalf of the chairman, I can say he will be willing to work with her.

Mr. KYL. Mr. President, I move to reconsider the vote.

Mr. KYL. Mr. President, I move to waive the provision. I ask for the yeas and nays.

Mr. KYL. Mr. President, this is the amendment that would return money to the States from the tobacco company payments to trial lawyers, money that exceeded reasonable fees as determined by a common standard in the courts and an IRS Code provision. What we have done in this amendment is to apply it only prospectively, not retroactively. The fee is a reasonable fee plus 500 percent, and in any event the lawyers are guaranteed--and, colleagues, please note this--$20,000 per hour. That is what the lawyers are guaranteed in those cases, those 10 to 15 cases per year to which this would apply. Those fees were not set by contract. They were not set by courts. The money is going to be paid by the tobacco companies. The only question is, are these excess fees going to be paid to the tobacco lawyers or are they going to be paid to the States? I will have at both desks a chart which shows how much money each of the States would receive. It is between $6 billion and $9 billion in total. You can see the amount listed on this sheet. I ask you to consult that because that is money your States would receive if this amendment is adopted.