Ron Wyden

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, the House will consider H.R. 1555, the Communications Act of 1995 after the Fourth of July district work period. If done properly, telecommunications legislation will open the doors to radical advances in technology for our constituents. In reshaping America's telecommunications laws, the Congress must consider as many potential applications of telecommunications technology as possible. After all, it's been 60 years since the last rewrite to telecommunications law. During Commerce Committee consideration of H.R. 1555, the Communications Act of 1995, I raised the issue of telemedicine in an effort to expand the use and development of this exciting health care technology. Telemedicine is a diverse collection of technologies and clinical applications. The defining aspect of telemedicine is the use of electronic signals to transfer information from one site to another. Telemedicine's potential is immense; including for rural care, emergency care, home care, medical data management, and medical education. I offered and withdrew an amendment to allow licensed physicians in one State to conduct consultations with licensed health care practitioners in another State. I withdrew the amendment at the request of Members who sought additional time to explore the issue with the objective of crafting a bipartisan floor amendment. Bipartisan discussions continue today. It remains my objective, working with colleagues from both sides of the aisle, to produce bipartisan legislation to bring telemedicine's many benefits across State lines to the American public. I call the attention of my colleagues to the report printed below titled, ``Telemedicine and State Licensure.'' The report outlines current problems facing telemedicine and the need for a bipartisan solution. H.R. 1555, the Communications Act of 1995 is our opportunity to free telemedicine from the regulatory morass which threatens to keep this technology from the American people. The American Telemedicine Association--Telemedicine and State Licensure Introduction The primary purpose of telemedicine is to give all citizens immediate access to the appropriate level of medical care as disease or trauma requires. Currently, each state must license each physician or dentist who desires to practice medicine within its borders. This mode of licensure, while appropriate for practices limited by state boundaries, unduly constricts the practice of telemedicine. As a result, medical services today stops at state boundaries. American consumers are blocked from accessing medical care available in other states absent their ability to travel away from their own homes and communities. The challenge facing all concerned with advancing medicine, and the sincere intent of our effort, is to preserve the credentializing and monitoring efforts of each state while providing instant and immediate access to appropriate levels of care where not otherwise available. The Current State of Physician Licensure in the United States In some states, there are limited exceptions to the rule that a physician or dentist must possess a license in each state to which he practices medicine. Statutory ``consultation exceptions'' allow an out-of-state physician or dentist to enter a state to see a patient at the behest (and in the presence) of a locally licensed physician or dentist. However, consultations are often required to be limited in duration, and a number of states which possess them are acting to close them for telemedicine practitioners. In 1995, Colorado, South Dakota, and Texas have considered amendments to their consultation statutes prohibiting out-of- state telemedicine practitioners from ``entering'' without being licensed in their state. Utah repealed its consultation exception effective in 1993, and the Kansas Board of Healing Arts passed a regulation (which conflicts with its statutory consultation exception) which requires out-of-state telemedicine practitioners to be licensed in Kansas. Additionally, a number of states prohibit out-of-state consultants from establishing regularly used hospital connections. If consultants cannot use telemedical facilities at out-of-state hospitals, this limits the availability of specialized healthcare to underserved areas. The ``consultation exceptions'' are simply not useful or dependable for the future of telemedicine. They are easily amended to exclude telemedicine practitioners, they require the presence of a locally licensed physician (which may not always be possible), and only one-half of the states possess exceptions broad enough to be used by telemedicine consultants. While some have argued that the distant patient is ``transported'' to the physician or dentist via telecommunications, this is a weak legal argument unlikely to stand up in trial. It is instead probable that a majority of state courts would find that a telemedicine practitioner is practicing medicine in the patient's state. If the telemedicine practitioner is not licensed in the patient's state, this would have an extremely negative impact upon the physician's malpractice liability, malpractice insurance coverage, exposure to criminal prosecution, and potential loss of licensure in his home state as well as remedial legal recourse for an injured patient. Licensure by reciprocity and licensure by endorsement have long served physicians or dentists who wished to be licensed in two or three states. However, reciprocity and endorsement fall short of the needs of physicians or dentists practicing via a telecommunications network. Today, reciprocity is rarely used, and licensure by endorsement still requires that applications, personal interviews, fees, pictures, school and hospital records, and even letters from locally licensed physicians or dentists be submitted to each state where a license is desired. Each state's requirements are minutely different, and the expense and time involved in receiving licensure by endorsement in more than one or two states makes it prohibitive, if not impossible, to achieve. Is Individual State Licensure Required? The Tenth Amendment of the U.S.Constitution reserves to the states the power to protect the health and safety of state citizens, hence the ability of the states to regulate and license healthcare providers. Almost every state statutorily defines the practice of medicine, and a typical statute reads: ``The practice of medicine means . . . to diagnose, treat, correct, advise or prescribe for any human disease, ailment, injury, infirmity, deformity, pain or other condition, physical or mental, real or imaginary, by any means or instrumentality.'' It appears that despite the presence of a primary/referring physician, the physician consulting via telemedicine who attempts to diagnose the patient is practicing medicine where the patient is located. The phrase ``by any means or instrumentality,'' while not common to all states, frequently appears in state definitions. Courts would determine that telemedicine was the ``instrumentality'' used to reach a diagnosis, and find that the state definitions bring telemedicine consultants under their jurisdiction. States guard their power to regulate for health and safety purposes, and the U.S. Supreme Court has upheld their ability to do so.2 Therefore, it is unlikely that state courts would surrender jurisdiction over an out-of-state physician or dentist who practiced medicine via telecommunications on a patient located in their state. Courts will find that the medicine was being practiced where the patient was located, and therefore the physician or dentist should have been licensed in the patient's state. Such a finding would have a chilling effect on telemedicine, since licensure cannot be obtained in every state by every specialist who participates in even one consultation. The means for attaining these goals are to have the patient under the care of a physician licensed in the same state of residence but allowing consultative evaluations of the patient by specialists licensed in another state. Other health care professionals, such as physician assistants, must be under the supervision of a licensed physician. is interstate transmission of telemedicine required? Just as the technology for the transmission of sound and images has witnessed revolutionary change, so too has medicine. These advances in telecommunications and medicine have made advanced medical care available where not thought possible before. Today, there are compelling needs to use interstate transmission of telemedicine from medical, social welfare, and economic perspectives: The unpredictable immediacy of eruptions of disease or trauma may command the services of unpredictable types of specialists requiring licensure reciprocity in all 50 states. Epidemic outbreak of disease is not limited to state boundaries. The interstate mobility of specialty expertise is needed throughout the United States to meet the demands for combating injury or illness wherever and whenever it may occur. Medicine has witnessed the emergence of super-specialized medical care centers in numerous critical areas. These centers are located in regional tertiary care facilities serving multi-state areas. Receiving medical attention through these centers currently requires the transport of most referred patients out of state. In addition, the lack of proper recuperative care in their home community after a patient returns home has prohibited the patient from returning home sooner. The development of telemedical links to local primary care facilities will enable many patients to remain in-state under the primary responsibility of physicians or dentists licensed in their home state. The development of telemedical links to specialty care centers can reduce the cost of transport and can lead to substantial reductions in the costs of patient care. Developing metropolitan-wide systems of care for many cities also requires crossing one or two state boundaries. There are 25 major metropolitan areas in the United States that include more than one state. In each of these areas, state licensing requirements effectively limit the ability of physicians or dentists and other health care practitioners to serve the health care needs, via metropolitan wide telemedical systems, of the population base residing in their own communities. This limitation can lead to great disparities in access to health care due to the consumer's place of residence. The widespread shortage of health professionals in many parts of rural America has long been recognized as a critical public policy issue. In many cases, access to health care could be greatly improved with the development of telemedical links with health facilities located in nearby states. conclusion Statutes are being considered among the states which would require out-of-state physicians or dentists treating patients across state lines via telecommunications to possess licenses in the state ``entered.'' Already in the vast majority of states the telemedicine practitioner would be considered to be practicing medicine upon a patient located there, thus providing the patient's state with jurisdiction over any malpractice action. Additionally, malpractice insurance coverage is generally predicated upon the physician being licensed where he practices. In other words, a physician sued for malpracticing via telemedicine in a state where he is not licensed might find himself without coverage, as well as responsible for his own defense costs. Failure to possess a state license would be used to establish negligence upon the part of the consulting physician. Criminal prosecution for practicing without a license could result, and the physician's home state could institute disciplinary action against him for his actions in the distant state. Telemedicine possesses incredible potential to increase healthcare accessibility, but is severely hampered by legal impediments of which licensure is one of the most obvious. Fortunately, licensure problems have the greatest potential to be alleviated by the passage of statutes aimed at addressing these issues. Emerging from these careful considerations is the need to preserve the credentializing and monitoring efforts of each state while providing instant and immediate access to appropriate levels of care where not otherwise available. Such actions should allow for immediate response to instances of disease and trauma while securing for each state and its citizens the continuance of the credentializing and monitoring of quality within its boundaries with additional specialized back-up as needed. footnotes \1\ALA. CODE Sec. 34-24-50 (1975). \2\Geiger v. Jenkins, 316 F.Supp. 370 (N.D. Ga. 1970), aff'd, 401 U.S. 985, 91 S.Ct. 1236, 28 L.Ed. 2D 525 (1971).

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, today I am introducing the Comprehensive Survey of Young Offenders Act. While Congress has spent much time and effort, and is about to spend vast sums on measures to address crime committed by adults, it is juvenile crime that is increasing exponentially. Particularly ominous, experts in the field report that while one can collect voluminous information on the national patterns and problems of adult crime and the adult criminal justice system, basic statistical data on the juvenile justice system is sketchy at best. Congress, States and localities have little or no comprehensive data on what the career record of a young offender looks like or how juvenile offenders flow through our country's juvenile justice systems. A 1994 FBI study on major crimes reported that while the number of murders committed by adults 25 or older dropped 20 percent, the number of homicides committed by 18-24-year-olds increased 65 percent, and those by 14-17-year-olds increased 165 percent. However, according to several experts who study juvenile crime, by the year 2005 the number of teenagers in this county will increase 23 percent, and youth crimes will increase dramatically as well. To effectively address youth crime, the Federal Government and the States need clear, straightforward data on how the current juvenile system functions. I have worked closely with Dr. James Q. Wilson, the noted UCLA criminologist, to meet this need through the legislation I introduce today. Dr. Wilson correctly pointed out that instead of fighting youth [[Page E1239]] crime with grandiose rhetorical statements like harsh treatment and mollycoddling, it is time to address the issue with a commonsense look at the facts. There is a substantial amount of anecdotal evidence that indicates the juvenile system is in trouble. For example: In Portland, my hometown, the Oregonian, described a case where a child committed 50 crimes, 32 of which were felonies, before the juvenile justice system took action to protect the community. According to New York magazine, in New York State, 30,000 juveniles picked up for misdemeanors in 1993 were issued youth division cards and then released--essentially the paperwork was filed and the child walked out. In Chicago, in the case of Yummy Sandifer, Newsweek reported that he averaged a felony a month for the last year and a half of his life (23 felonies and 5 misdemeanors in all). He was actually convicted of two felonies in juvenile court and nothing ever happened to him. Finally, he killed someone and was killed himself. A system like this neither serves the children who commit crimes nor the community it is supposed to protect. Nationally, only 50 percent of juvenile cases even go to juvenile court. Most cases are handled by some form of social services division. The majority of juveniles who do go to court are given probation. While this information indicates a system that is overwhelmed with violent offenders and doesn't have the legal remedies necessary to deal with such an influx, a broad overview of the problem is missing. The Comprehensive Survey of Young Offenders Act, would help Congress, States, and localities fill the holes in our knowledge of juvenile crime and our country's juvenile services. Right now there is little or no comprehensive data on the patterns of crime for young offenders, how many times a young offender goes through the juvenile justice system or which punishments or programs effectively protect the community and reduce recidivism. This legislation would require the Bureau of Justice Statistics [BJS] to look into these issues--to survey available data on the crimes juveniles commit, to examine how young offenders flow through the juvenile justice system, and to report the outcomes of juvenile cases that are both petitioned to juvenile court and those that are handled informally. Additionally, my legislation would require the BJS to design and estimate costs of a program that will improve data collection on young offenders in the States. While many States are moving in the direction of juvenile reform, few systematically evaluate the outcomes in their juvenile justice programs. It is obvious that the rate of juvenile crime is climbing. What Congress now needs to do is take a comprehensive look at how our country's juvenile systems are handling that increase in crime and then evaluate where our national policy needs to go to address this enormous challenge.

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, let us take a moment today to remember one of the great advocates for justice who died at the age of 89 on April 22-- my friend and Gray Panthers colleague, Margaret Eliza Kuhn. I had the pleasure of knowing Maggie for 20 years. She was the inspiration for the Oregon Gray Panthers, pioneer advocacy organization that has worked to bring seniors and young people together in Oregon since 1975. Maggie is truly an American hero. Maggie Kuhn founded the Gray Panthers in response to her forced retirement. Her goal was simple: unite the generations to serve as advocates for fundamental social change that would reduce injustice, discrimination, and oppression in our society. Maggie was given a sewing machine to celebrate her retirement, a seemingly appropriate gift, but she never even found time to open it. She was too busy. Instead, she served as a tireless champion for those without a voice in our society. Maggie Kuhn led the fight to root out discrimination against older Americans. Kuhn thought it was absurd to waste the valuable talents of older Americans, and helped to shatter the myth that growing older is synonymous with powerlessness, decrepitude, and weakness. Kuhn saw a natural connection between young and old. She said that the mind needs exercise to stay healthy. Kuhn encouraged seniors to return to school. She encouraged older Americans to teach children, based on their vast life experiences. Maggie Kuhn and the Gray Panthers have always had an aggressive agenda of social action. Maggie refused to let government and society stunt the productivity of seniors by forcing them to retire at age 65. She argued that forced retirement damages self-esteem and leads to feelings of uselessness. She felt it was unconscionable that this physical and psychological damage could be forcibly imposed as a person ages. Maggie fought mandatory retirement until she won. Maggie Kuhn would be outraged today by the recent attacks on the role of seniors in our society. When talking about Medicare much of the media says seniors, not out of control health costs, are the problem. When talking about Social Security, seniors, not the use of the Social Security surplus to fund other programs, are again described as the problem. When it comes to the economy, again seniors are described as the problem and held out as takers, not producers. The fact is millions of seniors are producers, not takers, and Maggie led the way for older people to use their skills to make our communities better places every day. Seniors are part of the solution, not problems as so often portrayed in today's media. Older Americans are making valuable contributions every day in many ways around the country. Stop in at your local blood bank, school lunch program, or your favorite charity. You'll see that seniors are the glue that holds these programs together. They are the National Senior Service Corps, the Peace Corps, the Retired and Senior Volunteer Program [RSVP], and AmeriCorps. Just look around--seniors are helping-- because Maggie Kuhn helped open the doors for older Americans. Maggie's credo was age and youth in action, and I'm pleased that this House is beginning to understand the need for policies that bring the generations together. Recently, the House voted for my amendment to promote kinship care, which gives seniors and other adult relatives the opportunity to support and raise children, as an alternative to forcing children from broken homes into foster care run by strangers. Enacting a national plan to promote kinship care would be an ideal way to honor Maggie Kuhn, who led the fight to bring younger and older people together. Maggie hated waste and foolish bureaucracy. Democrats and Republicans alike can work together to reduce fraud and waste in vital government services and protect consumers. In support of this objective, Congress should pass the bipartisan legislation introduced by the chairs of the House Older Americans Caucus that would attack fraudulent and unethical practices in the sale of private long-term care insurance. In the days ahead, Congress will debate many important issues of social justice. Let us remember Maggie Kuhn's life and support government policies that empower and liberate our citizens. Maggie Kuhn led a life of unselfish service to others. She felt that the greatest sin was to waste time and to waste human potential. She lived her life to the fullest. Millions of Americans, young and old, have been touched by her work. Maggie Kuhn was once asked how she would like to be remembered. She recited her favorite epitaph: ``Here lies so-and-so, under the only stone she left unturned.'' Maggie Kuhn, a true American hero, will be much missed.

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, the technology of drugs and medical devices has reached a new frontier. Through emerging sciences such as bioengineering we can anticipate truly monumental breakthroughs in the way we treat, and conquer, dread diseases which for centuries have plagued mankind. It is crucial, absolutely critical, that the Federal regulatory system so integral to the development and commercialization of these new products change, improve, and advance in step with this technological revolution. In support of this effort, I am today introducing H.R. 1742, the Food and Drug Administration Modernization Act of 1995. This bill offers reasonable, progressive, and user-friendly approaches toward making the FDA drug and device approval process more efficient and cost effective. Most importantly, it accomplishes these goals while preserving the Agency's critical mission to assure the safety and effectiveness of new drugs and medical devices. It ensures that our multibillion-dollar medical products industry continues as the preeminent international competitor. Here are the salient features of this legislation: The bill grants the agency authority to grant early, conditional approvals for promising drugs and devices which appear to be effective in fighting serious or life-threatening disease. Full and final approval would rest upon the manufacturer's ability to demonstrate that the initial promise of effectiveness was proven out in broader use. the Agency to use third parties--unbiased, independent panels under FDA supervision--to approve and oversee early stage trials of new drugs and devices. The bill relaxes some restrictions now barring the exchange of scientifically valid material--professional journal articles, medical textbook excerpts, research compendia--between manufacturers, clinicians, and health insurers. This change will make it easier for knowledgeable observers to receive information on promising, though unapproved, new uses of drugs and devices which have already been approved by the FDA for at least a single use. At the same time, the legislation gives the Agency authority to require that persons disseminating these articles provide appropriate supportive scientific data and respond on its balance. The bill fundamentally revamps and modernizes FDA review processes for biologics, therapeutics which are manufactured or propagated through bioengineering. The bill offers reasonable relaxation on current restrictions on the export of drugs or devices which are not approved by the FDA, but which meet the importing nation's approval regime. This flexibility would be limited to exports to member nations of the World Trade Organization. The bill modifies current reporting and approval requirements for minor manufacturing changes in devices of low to moderate risk. In essence, a manufacturer would be required to report, but not obtain prior approval for manufacturing changes which would improve the product's quality. This would allow manufacturers to make swift, useful, and perhaps even lifesaving changes in products without having to wait out an FDA approval decision. Mr. Speaker, there is no doubt in my mind that the FDA is a premier public health care agency with many extraordinarily dedicated employees. This Agency has a crucial health and safety mission that this Congress must not allow to be undermined. But I firmly believe that these vital safety missions can be preserved, and better products can be brought to consumers more rapidly and at lower cost, through the modest reform proposals contained in this legislation. It's time to make a good agency better. I urge my colleagues to support H.R. 1742, the FDA Modernization Act of 1995.

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, I have a parliamentary inquiry.

Mr. WYDEN. Mr. Speaker, does House rule XXI(c) requiring a three- fifths vote to increase Federal taxes apply to the $17.4 billion tax increase contained in the Republican budget resolution due to the consumer price index cut?

Mr. WYDEN

Mr. WYDEN. Mr. Chairman, I rise in opposition to the budget that my colleagues on the other side of the aisle, the Republican side, are offering. Now, a few minutes ago, the gentleman from Oklahoma said that it is time for America to tighten its belt. Now, surely there are many Americans who can tighten their belt, but I am here to talk for a moment about my constituent, Mrs. Arlene Farwell, who if she is asked to tighten here belt any more is going to find it pretty tough to breathe. She is a senior, she is retired, she is disabled. Because of a bureaucratic snafu, she is paying more than $80 a month for her Medicare part B. And if the deductibles and the copayments and the premiums go up any more, she simply is going to have nowhere to turn. She put it really very well for me today when she said, ``There is just too much month left at the end of the money.'' So I say to my colleagues, Medicare badly needs reform, and all Members understand that. But there is a right way to do it and a wrong way to do it. And I would submit that cutting Medicare spending, as the Republican budget does, by 15 percent, without saying how you are going to do it and still protecting Mrs. Farwell, is the wrong way to go. Now, many of my colleagues on the Republican side have some interesting theories about managed care. The irony is over a 20 year period, we have made many of those theories work. In Portland, OR, we have the highest percentage of managed care now in the country among seniors in our area. It is close to 50 percent. But you cannot turn the system around on a dime. What is going to happen to the seniors of our country, and I have seen this again and again since my days as co-director of the Gray Panthers, when you theorize about Medicare, as the Republicans do, what happens in reality is the seniors get more copayments, more deductibles, more premiums, while everybody waits to see if the great theories are ever going to pan out. So I offer to my colleagues on the other side of the aisle that if rescuing part A of the Medicare trust fund is really what you seek to do, let us honor the Speaker's pledge to deal with this outside the budget. If that is the principal concern of my colleagues on this side of the aisle, let us work together on a bipartisan basis to deal with this, as Speaker Gingrich suggested, outside the budget. I think there are many Members on both sides of the aisle who would like to take that route rather than the route my colleagues on the Republican side propose, which is to reduce Medicare spending 15 percent, try to turn this system around on a dime, and still protect seniors. I would also offer to my colleagues, and we heard some testimony on this yesterday in the Subcommittee on Oversight and Investigation, that if you try to turn the system around on a dime and make the savings you are talking about overnight, what is going to happen is you are going to create juicy new opportunities for fraud and abuse. If you do not believe that is going to happen, go talk to the people of south Florida, because when they tried to go to managed care overnight, when they tried some of the ideas that the Republicans are talking about advocating now, what happened was the sleazy rip-off artists, who are already exploiting the program, and we certainly agree on that, saw a great new opportunity, and instead of producing savings, we saw more waste, fraud and abuse. If you look at south Florida, you will see how it happened.

Mr. WYDEN

Mr. WYDEN. What I am saying is the standard to protect you as a homeowner is far weaker than the standard that protects the developer. The developer, for example, gets compensated if their property value is just diminished as a result of the activity that this bill addresses. You, as a homeowner, do not get any concern under this bill if your property value is reduced. You actually have to have the flooding in your basement before there is any consideration.

Mr. WYDEN. Mr. Chairman, I offer an amendment.

Mr. WYDEN. I thank the gentleman for yielding. I would just like to respond, if I might, to my friend from Pennsylvania. First, let me tell my colleagues that this amendment is far narrower in terms of protecting the rights of homeowners than any similar issue ever discussed on the floor. We have stipulated, for example, that there must be damage to the adjoining homeowners of $10,000 or more. Second, and I want the Members to understand exactly what the double standard is which no more favorably treats developers than it does homeowners, in the bill, the developer is compensated if their property value is merely diminished. The neighboring homeowner has to meet a higher standard which requires actual physical damage such as the flooding to their basement. So there clearly is a double standard here. I share the view of the gentleman from Pennsylvania that a developer deserves a fair shake. Certainly there are takings in our country, and developers warrant fair treatment. Let us as we finally move toward the closing of this bill produce some balance and say the millions and millions of homeowners who live next door to these developments have some rights as well. They should not just have to go out and take their chances in some local court. This bill says that the developer gets a fair shake at the Federal level. Let us make sure that the adjoining homeowner gets a fair shake at the Federal level as well.

Mr. WYDEN. I am happy to yield to my friend, the gentleman from Illinois.

Mr. WYDEN. Mr. Chairman, this is a straightforward amendment to protect the rights of private homeowners whose property values would be reduced by $10,000 or more when a developer fills in a wetland. Right now the bill creates a double standard. There are one set, a generous set of rules for protecting the rights of those who want to develop property, and a far weaker set of rules for the neighboring homeowners who live nearby. If we do not vote to correct this double standard, Members will find citizens coming up to them and asking, Why did you vote to lower the property value of my house? Here is why Members are going to get that question: By voting for this bill there are going to be more wetlands filled. Wetlands help limit flooding by acting as a huge sponge that can soak up water and rainfall. When a wetland is filled, the excess water has to find someplace to go, and that could be the basement or the backyard of the homeowners living downstream from the development. That is why Members are going to get asked, if we do not vote to correct the double standard in this bill, why they have been willing to go along with reducing the value of their neighbor's house under this bill. In addition, for those who are concerned about the deficit issues in this bill, this amendment should also be appealing. A 1992 congressional budget analysis estimated the cost of compensating wetland owners for not developing their property could be as high as $10 to $15 billion. The entire corps regulatory budget is in the millions. Let us make sure that we recognize that those who develop property in our country deserve fair treatment. But let us also recognize that the homeowners who live next door to wetlands that are going to be filled under this legislation also deserve fair treatment. Vote to give those homeowners a fair shake by supporting this amendment.

Mr. WYDEN. Mr. Chairman, I demand a recorded vote.

Mr. WYDEN. Mr. Chairman, will the gentleman yield?

Mr. WYDEN. I thank the gentleman.

Mr. WYDEN. Not only is the gentleman correct, but let us remember there are many more homeowners situated in the fashion the gentleman has described than there are those who want to develop property. There are 65 million private homeowners in this country. They enjoy the benefit of environmental laws. Certainly not all of them obviously live next door to a wetland, but there are many, many more homeowners like the ones the gentleman's question addresses than there are those who want to develop property.

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, every Member of this body knows that Medicare needs reform. But Medicare reform is a heat-seeking missile, and the purpose of this bill is to have Republicans avoid taking any heat. It is a last-minute idea to get someone else to make massive cuts in Medicare that are going to hurt seniors. It cannot be done in 30 days in a reasonable fashion. It stops the trustees from looking at health care reform as it should be, in a systematic way. It is a mistake. It is going to be bad for the Nation's older people. I urge my colleagues to vote against it.

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, I rise in opposition to the rule, and specifically would like to address the comment that the gentleman from California [Mr. Thomas] made earlier about the views that somehow Democrats are a little bit frightened of managed care or skeptical of its benefits. I come from an area with one of the highest concentrations of Medicare and managed care in our country, and we know that there can be good managed Medicare. But in our programs, there is real choice. There are real options. And that is why we are concerned about this rule, because we think it takes away needed options from senior citizens. Frankly, because I believe that when we come back the other side will be proposing major cuts in Medicare that are going to take additional choices and options away from seniors, I think it is very important that in Medicare select we build in some more choices and some more consumer protections. For example, my friends on the other side are not worried about attained age pricing in their bill. What that means is that the prices the senior citizens pay go up with the age of the older person. A lot of these older people have no idea about the rate hikes that are going to hit them with Medicare select. We hear that seniors are happy at this point about Medicare select. Of course they are, because the product is new. A lot of these older people may have only had it for 18 months. They got a statement, maybe a disclosure form, that said there was going to be attained age pricing. It did not prepare them for the rate shock that is coming. Let us vote against this rule, let us fashion an alternative, that provides real choice to older people. Let us offer an alternative that protects senior citizens against draconian rate hikes. Mr. Speaker, I urge my colleagues to vote against this rule, and then fashion a bipartisan program that will protect the rights of older people in our country.

Mr. WYDEN

Mr. WYDEN. I want to thank the gentleman for his good work. Let me start by saying that I brought to the floor a can of infant formula which costs a little bit over 30 cents a can to manufacture and sells retail in our stores for maybe $2.70 a can. As a result of the free enterprise system that we brought to WIC on a bipartisan basis in 1989, as my colleague has said, we get 1 billion dollars' worth of taxpayer efficiency on this program every year. But what I want to say to my colleagues is that after all the talk of free enterprise that we have heard from the other side this session, as a result of this bill, even with the Roukema amendment, we will be going back to the old days of closed markets and backroom contracting. We ought to note that the gentlewoman from New Jersey wanted to do this right and to keep competitive bidding. What will happen even with this amendment is a lot of States will not have to do sealed bids which is the way to have real competition. We will also see the infant formula companies going about this country offering inducements to the States to reject competitive bidding and go with cost containment. I would like to mention that the Federal Trade Commission, the experts there, are alarmed not just about the negative aspects for WIC of eliminating competitive bidding, they have written to me and they have said that by eliminating competitive bidding, we will reduce competition for infant formula in our stores and for the general market. The reason that is the case is the way these giant infant formula companies get known is to move into the WIC market and get the public familiar with their product. I just say to my colleagues, particularly on the other side, let us reinvent Government where it does not work. This is an example of a program where free enterprise, that the parties worked on together in 1989, has worked. As a result, we are going to be eliminating competitive bidding. That is going to take milk from the mouths of poor infants and it is going to give cookies and cream to the infant formula companies and that is wrong. Mr. Chairman, I include the following for the Record. Federal Trade Commission, Washington, DC, March 16, 1995. Hon. Ron Wyden, U.S. House of Representatives, Washington, DC. Dear Representative Wyden: Chairman Steiger forwarded a copy of your March 8, 1995 letter to me and asked that I respond to your inquiries. In that letter, you indicated that the House Economic and Education Opportunities Committee had voted to end the competitive bidding requirement for infant Supplemental Food Program for Women, Infants and Children (``WIC''). You also noted that three companies dominate the infant formula industry and you pointed to a possible effect in the general retail market from eliminating bidding requirements in the WIC Program, namely, that it might discourage new companies from entering the infant formula market. In this regard, you asked that, based on our experience in dealing with competitive issues related to the WIC and general retail market for infant formula, we respond to a series of questions. I should point out that while I have not studied the proposed legislation to which you referred, I have been involved in lengthy litigations relating to the WIC and general retail markets for infant formula, and I am able to provide you with my views on the questions you have raised. These views, of course, are my own and do not necessarily reflect the views of the Commission or any individual Commissioner. This response does not provide any non-public information and, accordingly, I do not request confidential treatment. 1. Do you believe that eliminating competitive bidding for infant formula in the WIC market will discourage competition in the general market for infant formula? Please explain. I agree with your assessment that competitive bidding in the WIC program makes entry into the infant formula market easier. I also agree that to the extent that competitive bidding in the WIC market is eliminated or made less likely, then competition in the general retail market for infant formula would be adversely affected. The infant formula market is highly concentrated, with three companies accounting for the vast majority of sales. As I describe below, concentrated markets, sometimes referred to as oligopolies, often result in higher prices for consumers whether or not the companies have engaged in unlawful collusion, particularly where the companies sell a homogeneous product and there are high barriers to entry. Entry into a concentrated market can have significant procompetitive effects in a variety of ways. First, new entry into a concentrated market will make it more difficult for the existing companies to collude. For example, in a given market otherwise susceptible to collusion, a price-fixing agreement among three companies is easier to achieve and maintain than would be an agreement among four companies. The fourth company not only adds a forth party that must be convinced to violate the law, but it also is likely to have different incentives than the other companies by virtue of its smaller market share. Expansion may be a more profitable strategy than collusion if the company's share is small. Second, even absent collusion, companies in an oligopoly act interdependently. That is, each company recognizes that its pricing decisions affect others in the industry. For example, if one firm raises prices above the competitive level in an oligopoly, the other firms independently recognize that they have two choices. They can raise prices a similar amount, resulting in each company increasing profits. Alternatively, they can maintain their prices, resulting in the price leader being forced to withdraw its price increase so as not to lose market share, resulting in each of the companies forgoing the opportunity for increased profits. Prices in an oligopoly, accordingly, are often higher than they would be in a competitive market. If new entry occurs in such a market, the likelihood of the incumbent firms being able to continue their interdependent conduct is lessened. Finally, in general, when additional productive capacity and supply created by a new firm is added to the market, that additional supply will also have a downward effect on price. Other things being equal, as the supply of a product goes up, prices tend to go down. Competitive bidding in the WIC Program makes entry into the market easier because a new or small company can, by winning one bid, assure itself of a large portion of the market for an extended period of time. The WIC segment of the market accounted for approximately 40% of infant formula sales in the early 1990's. Winning a WIC bid also effectively assures the winning company of obtaining significant shelf space at retail outlets, which can result in what the industry refers to as ``spill-over'' sales in the non-WIC retail market. The brand name recognition resulting from the significant shelf space typically given to the WIC bid winner is a substantial benefit to the winning company. Finally, obtaining a large WIC contract also can help the company achieve economies of scale in the production of formula, allowing the company to sell at lower prices to non-WIC consumers. 2. What is your best estimate of the impact of eliminating competitive bidding for WIC infant formula contracts? Please explain the likely effects on WIC users and federal taxpayers. Early in the history of the WIC Program, the USDA observed that individual state WIC programs that used sole source competitive bidding systems obtained larger savings than those that used ``open market'' systems preferred by the infant formula companies. Under an open market system, all companies can participate in the program, and WIC participants can choose any company's product. Because of competitive pressures associated with bidding for a sole source contract, where sole source bidding was required the amounts of rebates offered by the formula companies escalated over time. These rebates allowed the states to add additional families to the WIC Program, thereby serving more people with the federal grant. These sole source rebates benefitted people in other states as well. Under competitive bid procedures, the states often received rebates that were high enough that the state itself did not need the entire amount of the rebate. In such cases, rebate funds were returned to USDA where the money was reallocated to other states. As described below, some state WIC programs, in the absence of a federal requirement that there be competitive bidding, preferred that open market systems be utilized. This preference for open market systems in some states existed despite the understanding that competitive bids resulted in lower infant formula prices and despite the understanding that the federal government preferred competitive bidding. Competitive bidding has been shown to result in many millions of dollars in savings to the federal taxpayer. If competitive bidding requirements are eliminated, states may again choose to forego competitive bid programs in favor of open market systems that provide significantly lower levels of rebates. In other words, states may choose to opt for programs, paid for by the federal government, that result in higher infant formula prices. 3. What are the factors that tend to increase the likelihood of anti-competitive collusion by companies and are these factors present in the infant formula market? Anticompetitive behavior is more likely in markets where sales are concentrated in the hands of few sellers, where the product at issue is relatively homogeneous, where the firms selling the product are relatively homogeneous, and where there are high barriers to entry. The infant formula market has these very characteristics. The top three firms accounted for in excess of 90% of the market in the early 1990's. Federal standards for nutritional quality and safety make infant formula a relatively homogeneous product. Each of the top three firms selling infant formula is a pharmaceutical company; each is similarly integrated; and each markets formula in a similar fashion. Finally, barriers to entry into the manufacture and sale of infant formula are high. 4. Last year, the state of California decided rather than bid out a new WIC formula cost containment contract, they would extend the existing contract for another year. However, because of the 1987 competitive bidding statute, the USDA required them to re-bid the contract at the end of the year. This process saved the taxpayer $22.4 million in the cost of infant formula. A similar situation in South Carolina ended up saving taxpayers $8.97 million in the cost of infant formula. From past FTC investigations and current information you may have available, what pressures and incentives do the infant formula companies use to keep states from bidding out infant formula contracts? Under the sole source competitive bid procedures, with exceptions being made for physician prescriptions, WIC participants must use one brand of formula. Although all of the brands meet statutory nutritional requirements, some parents prefer one brand over another and made their feelings known to the state WIC director. To avoid dissatisfaction of some WIC participants, some WIC directors prefer the open market system under which parents can choose any brand of formula. Because the infant formula companies preferred the more profitable open market system, they were willing to provide the state WIC programs with rebates under an open market system. These open market rebates, though in some cases convincing state WIC programs to opt for open market programs, were considerably lower than the rebates that could be obtained through competitive bidding. In addition, formula companies and state WIC programs can structure open market rebates in a way that may meet the state's needs but that result in smaller savings for the federal government. For example, in 1990 in Puerto Rico, a system was put into place under which an open market was permitted by the local WIC program as long as the companies were willing to provide payments, outside of the WIC program, to the Puerto Rico health care system. These side payments were not returnable to the federal government as would be rebate payments not used by the program. Under this system, the formula companies offered WIC rebates equal to approximately $6.5 million in 1991. In 1992, after a competitive bid, the winning company's bid was estimated to result in an annual rebate of approximately $23.4 million. Thank you for giving me the opportunity to provide you with my views. If I can be of further assistance to you, please do not hesitate to call me at (202) 326-2821. Sincerely, Michael E. Antalics, Assistant Director for Non-Merger Litigation.

Mr. WYDEN

Mr. WYDEN. I yield to the gentleman from Florida.

Mr. WYDEN. Mr. Chairman, this amendment would encourage our States to utilize the Nation's grandparents, with their vast treasury of love and practical experience, to help our youngsters who might otherwise be abandoned or put in foster care facilities, or put up for adoption. From across the country in recent months I have heard from grandparents who often are not informed at all by child protection agencies in their States when their grandchildren are moved to foster care facilities or put up for adoption. We all know that when children are separated from their parents, it is usually a painful and traumatic experience. Living with grandparents they know and trust gives them a better opportunity in the world. This amendment would strengthen the ability of families to rely on their own family members as resources, and would promote self-reliance within our families and within our communities. Mr. Chairman, I would like to emphasize that this amendment is not prescriptive. It is a permissive one. It would simply offer to the States to use the Nation's grandparents when those grandparents meet child safety protection standards. This amendment is supported by the American Association of Retired Persons, the National Coalition of Grandparents, and grandparents organizations from across the country. Mr. Chairman, I would like to say that the majority has been extremely helpful in the developing of this amendment, for which I appreciate their assistance.

Mr. WYDEN. Mr. Chairman, I offer an amendment.

Mr. WYDEN

Mr. WYDEN. I would be happy to do that, Mr. Chairman.

Mr. WYDEN. Mr. Chairman, this amendment stipulates that if there is a major fraud perpetrated at a corporation and corporate management refuses to correct the abuse, the corporation's accountant would be required to report the fraud to government regulators. This amendment is important to the legislation we are working on, because fraud and abuse often result in securities litigation. By providing new tools to root out financial fraud, Congress can help prevent securities lawsuits from ever being filed. Now, we all know that it is simply impossible to wave a wand and prevent greed. The taxpayers and investors have a right to expect that corporate management, to whom they entrust their savings, will not go out and steal from them, and our citizens have a them to outright egregious cases of fraud, the public accountants who audit the corporate financial statements, will be at their post and ready to blow the whistle on a rogue executive. The Resolution Trust Corporation estimated that 40 percent of the savings and loan failures were attributable to fraud, but yet time after time the public accountants either did not know what was going on or simply did not tell anyone. The files now bulge with examples of companies that were shut down after receiving a clean audit. For example, the General Accounting Office found that 28 of 30 savings and loans went bankrupt in California in 1985 and 1986 after receiving clean audits shortly before they went under. A most notorious example involved Mr. Keating and Lincoln Savings and Loan. The judge, when this case went to court, issued a blistering opinion and asked, ``Where were the professionals when these clearly improper transactions were being consummated? Why didn't any of them speak up or dissociate themselves from the transactions?'' Had the accountants blown the whistle when they should have, Mr. Keating could have been shut down much earlier and taxpayers and investors could have been saved a lot of money. This amendment will provide the investing public with a truth serum for the corporate financial statements. The fun-house mirror that is used by ripoff artists and those with fraudulent intentions can be shattered. The word ``public'' in the title ``certified public accountant'' means that the auditors work for the public and not for management. They are not paid to compile a company's financial statements. That is the job of the internal auditor. The public auditor is paid to certify to investors and creditors that the statements that are compiled by the firm are accurate. Let me close by saying that the Securities and Exchange Commission and the State securities regulators have long supported this amendment. To their credit, the accounting profession is now in support of the legislation. I think that the staff on both sides, both the majority and the majority, probably can recite the language of this amendment by heart. We have worked cooperatively on this for many years. Mr. Chairman, I yield to my friend, the gentleman from Texas [Mr. Fields].

Mr. WYDEN. Mr. Chairman, I offer an amendment.