Floor Statements

Mr. President, I am pleased to join my colleague, Senator Hatch in the introduction of the REIT Improvement Act of 2003. Through this legislation we hope to remove a number of uncertainties in the tax laws that hinder the management of REITs, and to improve the investment climate for REITs, particularly with respect to their ability to attract foreign capital.

Real estate investment trusts (``REITs'') were created by Congress in 1960 as a means of enabling small investors to invest in real estate through professionally managed companies. While REITs remained a very small sector of the real estate industry for many years--primarily as mortgage owning companies--with the enactment of tax reform in 1986, and the collapse of the real estate markets in the late 1980s--the REIT structure rapidly grew in the 1990s as an attractive means of owning real estate. Unlike the traditional form of real estate ownership, REITs are publicly traded corporations that go to the public capital markets to raise capital for their operations. Today, REITs are corporations or business trusts that combine the capital of many investors to own, operate or finance income-producing real estate, such as apartments, storage facilities, hotels, shopping centers, offices, and warehouses.

Because REITs are publicly traded corporations that must show results to the financial markets, the REIT structure injects better market discipline into the real estate sector. This minimizes the wild valuation swings that have characterized the real estate sector in the past. It also limits the exposure of federally insured depository institutions that have been traditional lenders to private real estate companies.

The legislation that we are introducing today, the REIT Improvement Act of 2003 (RIA), has three objectives. Number one, to make a number of minor corrections in the REIT tax rules, including most importantly fixing an unintended problem arising from the REIT Modernization Act of 1999 that now causes a company to lose its REIT status by holding ordinary debt, e.g., a loan to a small tenant to finance tenant improvements.

Number two, to eliminate a major barrier to foreign investment in publicly traded REITs that now treats portfolio investors as doing business in the U.S. merely because they receive REIT capital gains distributions. The change would parallel the existing Tax Code rule for a foreigner's sale of a publicly traded REIT's stock.

Number three, to replace the penalty for reasonable cause violations of REIT tests from a loss of REIT status to a monetary penalty. This is similar to a test that was enacted as part of the REIT Simplification Act of 1977, as well as ``intermediate sanction'' legislation Congress passed a few years ago for tax-exempt organizations.

Twenty-nine members of the Ways and Means Committee are cosponsoring identical legislation in the House of Representatives, H.R. 1890. I expect we will eventually have similar support for this legislation in the Senate Finance Committee. I invite may colleagues to join us as cosponsors of this legislation in the weeks ahead.

Mr. President, I am pleased to join my colleague, Senator Hatch in the introduction of the REIT Improvement Act of 2003. Through this legislation we hope to remove a number of uncertainties in the tax laws that hinder the management of REITs, and to improve the investment climate for REITs, particularly with respect to their ability to attract foreign capital.

Real estate investment trusts (``REITs'') were created by Congress in 1960 as a means of enabling small investors to invest in real estate through professionally managed companies. While REITs remained a very small sector of the real estate industry for many years--primarily as mortgage owning companies--with the enactment of tax reform in 1986, and the collapse of the real estate markets in the late 1980s--the REIT structure rapidly grew in the 1990s as an attractive means of owning real estate. Unlike the traditional form of real estate ownership, REITs are publicly traded corporations that go to the public capital markets to raise capital for their operations. Today, REITs are corporations or business trusts that combine the capital of many investors to own, operate or finance income-producing real estate, such as apartments, storage facilities, hotels, shopping centers, offices, and warehouses.

Because REITs are publicly traded corporations that must show results to the financial markets, the REIT structure injects better market discipline into the real estate sector. This minimizes the wild valuation swings that have characterized the real estate sector in the past. It also limits the exposure of federally insured depository institutions that have been traditional lenders to private real estate companies.

The legislation that we are introducing today, the REIT Improvement Act of 2003 (RIA), has three objectives. Number one, to make a number of minor corrections in the REIT tax rules, including most importantly fixing an unintended problem arising from the REIT Modernization Act of 1999 that now causes a company to lose its REIT status by holding ordinary debt, e.g., a loan to a small tenant to finance tenant improvements.

Number two, to eliminate a major barrier to foreign investment in publicly traded REITs that now treats portfolio investors as doing business in the U.S. merely because they receive REIT capital gains distributions. The change would parallel the existing Tax Code rule for a foreigner's sale of a publicly traded REIT's stock.

Number three, to replace the penalty for reasonable cause violations of REIT tests from a loss of REIT status to a monetary penalty. This is similar to a test that was enacted as part of the REIT Simplification Act of 1977, as well as ``intermediate sanction'' legislation Congress passed a few years ago for tax-exempt organizations.

Twenty-nine members of the Ways and Means Committee are cosponsoring identical legislation in the House of Representatives, H.R. 1890. I expect we will eventually have similar support for this legislation in the Senate Finance Committee. I invite may colleagues to join us as cosponsors of this legislation in the weeks ahead.

I am also concerned about criminal liability as it applies to oil spills. In fact, during the 106th Congress, I introduced legislation to address a long-standing problem which adversely affects the safe and reliable maritime transport of oil products. The legislation was aimed at eliminating the application and use of strict criminal liability statutes, statutes that do not require a showing of criminal intent or even the slightest degree of negligence, for maritime transportation-related oil spill incidents.

As stated in the Coast Guard's environmental enforcement directive of 1997, a company, its officers, employees, and mariners, in the event of an oil spill ``could be convicted and sentenced to a criminal fine even where [they] took all reasonable precautions to avoid the discharge.'' Accordingly, responsible operators in my home State of Louisiana and elsewhere in the United States who transport oil are unavoidably exposed to potentially immeasurable criminal fines and, in the worst case scenario, jail time. Not only is this situation unfairly targeting an industry that plays an extremely important role in our national economy, but it also works contrary to the public welfare.

To preserve the environment, safeguard the public welfare, and promote the safe transportation of oil, we need to eliminate inappropriate criminal liability that otherwise undermines spill prevention and response activities. I

pledge my support to work with my colleagues to address these environmental liability issues.

Mr. President, I strongly support the Singapore and Chile Free Trade Agreements and believe they will promote domestic growth in manufacturing and exports. I look forward to seeing these agreements enacted into law. However, I am concerned about the current U.S. negotiating objective of restricting, limiting or otherwise eliminating drawback and duty deferral rights for U.S. manufacturers and exporters in free trade agreements, FTA. The administration's current policy places U.S. companies at a significant competitive disadvantage in the global market.

Free trade agreements should include no language that eliminates or otherwise restricts the application of duty drawback and duty deferral programs to U.S. manufacturers and exporters. The language in the United States-Singapore and United States-Israel FTAs, for example, have no such restrictive language and we should model future agreements after these FTAs. This issue is of significant importance to many U.S. manufacturers and exporters, including those in my home state of Louisiana.

Duty drawback and duty deferral programs reduce production and operating costs by allowing our manufacturers and exporters to recover duties that were paid on imported materials when the same or similar materials are exported either whole or as a component part of a finished product. Duty drawback positively affects nearly $16 billion of U.S. exports each year. Additionally, nearly 300,000 U.S. jobs are directly related to exported goods that benefit from drawback, and these high quality jobs could be adversely affected by eliminating or restricting drawback. In my own home state of Louisiana, drawback and duty deferral programs provide substantial benefits to local industries, allowing them to compete on a level playing field in the global market.

Drawback makes a significant difference to U.S. companies at the margin when exporting to our FTA partners where they compete against foreign producers that either have substantially lower costs of production or enjoy low or zero import duty rates. This export promotion program is one of the last WTO-sanctioned programs' which provides a substantial advantage to U.S. companies participating in the export market. The application of these programs to U.S. manufactures and exporters should not be restricted in future free trade agreements that we negotiate with our trading partners.

We need to work hard to complete free trade agreements that provide as many competitive advantages as we can to U.S. manufacturers competing in the global market, encourage growth in U.S. exports, and create U.S. jobs.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

I thank the Chair. Mr. President, I would like to make a couple comments before we begin voting.

This legislation is historic. It is incredibly important. It is the first reform in a major way to the Medicare Program since we wrote it over 35 years ago in 1965.

To get this legislation adopted by the Congress and signed into law by the President, there obviously has to be a great deal of work, a great deal of legitimate compromise among the various parties that have put this package together. That is what this bill does.

There are some Members of Congress who argue the Federal Government should do nothing with regard to Medicare--that the private sector should do everything and that the Federal Government should do nothing. There are others, on the other hand, who take the position that with regard to Medicare the Federal Government should do everything and the private sector should do nothing.

What we have been able to put together, under the leadership of the chairman and ranking member and many others who have worked so hard, is a compromise that says let's combine the best of what the Government can do with the best of what the private sector can do and put that package together. That is why we have gotten to the point we are today.

We saw a bill come out of the Senate Finance Committee in a bipartisan fashion with 16 votes in favor; only five votes against it. I predict when the final vote comes on this bill, we will see the same type of bipartisan representation with a significant number, maybe over three-fourths of the Senate saying, yes, this has sufficient improvement and reform in it for me to support it.

It has enough Government involvement to make sure it is paid for, enough Government involvement to make sure it is run properly but not micromanaged, and it has enough private sector involvement to deliver, for the very first time, through a competitive private delivery system, prescription drugs for all seniors regardless of where they are or in what program they happen to be.

It also says the private sector will offer, for the first time on a voluntary basis, to seniors who want to move into a new system a private delivery system that will cover drugs, will cover hospitals, and will also cover physician charges under the program. This is a historic opportunity to combine the best of what Government can do with the best of what the private sector can do.

There is going to be a very important amendment offered by Chairman Grassley and the ranking member, Senator Baucus. Because we were able to get a score that said there is $12 billion extra money available, the question then became, How do we divide it? I never thought we would have such a difficult time spending money. We normally get into fights when we do not have enough money. Lo and behold, we found there was $12 billion in extra funds.

The question then for the Senate is how are we going to allocate that money? Senator Baucus and Senator Grassley, working with Senator Kennedy and others, came up with a plan that is fair.

It says to the Republican Members: Take half of it, and they want to utilize it for a demonstration program to determine whether PPOs or the provider networks in the private sector will work. We are not certain. We think they will. But let's do a test. And if it costs more, there will be $6 billion available to pay for it starting in the year 2009. That is what many Republicans thought was the right way to use half of the money.

On the other hand, Members on my side said, We need to do more for traditional fee-for-service. If they are going to experiment with the preferred providers in the private sector, we want to also know what will happen if we are able to put in more money for preventive health care and for people who want to stay in the old program.

What Senator Baucus and Senator Grassley did, working with Senator Kennedy, was to say to people who are inclined to the Democratic perspective, we are going to let you use $6 billion for people who want to stay in the old program. Here is what you can do with it: You can use the money to provide enhanced benefits for people who stay in traditional Medicare. What we mean by that is to give them additional care for chronic care coordination, for the chronically ill, to coordinate better how they are getting their health care.

We have more money for disease management, which is incredibly important. When we are talking about saving money and giving people a better quality of life; disease management is important. Also, they can use the money for other benefits and services that the Secretary determines will improve preventive health care for the beneficiaries.

What we have crafted is an effort to take the extra money and allow for a legitimate experiment, a legitimate test of whether the preferred provider system will cost less money--I think it will; they can provide services that I think are better and at a better price, but we do not know that for sure, so let's do some testing on it in certain regions of the country. If it saves money, hallelujah for everybody. But if it costs money, they will have $6 billion to help pay for those extra charges.

The Democrats, on the other hand, have the provisions to have $6 billion over the period in order to provide disease management and preventive health care services in the traditional Medicare Program. That is as fair as it can be in a divided Senate. If one side had their way, they would do it all with the preferred providers. If our side perhaps had their will, it would provide all the money to be put back in traditional Medicare, but we all know in a divided Senate that is not possible.

So the best possible compromise has been crafted by the chairman, Senator Grassley; by the ranking member, Senator Baucus; and by Senator Kennedy's involvement and many others who have worked on this issue.

This is a good amendment. It is an important amendment. We are on the edge of an historic day in being able to enact real Medicare reform with prescription drugs for all of our Nation's seniors. We cannot let that goal be lost while we fight over how to divide extra funds. I think this division is as fair as it possibly can be, and I urge all of our Members to vote for it. In fact, I think the vote should be approximately like it came out in the Finance Committee. We lost a few what I would say were on the left, we lost a few what I would say were on the right, of the political spectrum. But in the end the vast majority supported this legislation in the committee and will do so on the Senate floor.

I certainly ask them to support the Grassley-Baucus amendment when it is voted on as well.

I yield the floor.

Mr. President, this morning one of the very able legislative assistants who has worked on this legislation for almost 7 years, going back to the time on the Medicare Commission when we first started doing Medicare reform, was on the floor working with me on amendments in this legislation. She had to temporarily leave because at 5:47 this afternoon she had a little baby girl. That is a very good excuse to not be on the Senate floor. But my legislative director, Sarah Walter, is doing fine. It is a baby girl. The name is yet to be determined, but I wanted to bring that to the attention of my colleagues and all of her colleagues on the professional staff.

I yield the floor.

Mr. President, I yield myself whatever time we have in opposition to the amendment.

Off of the chairman, Senator Grassley's time.

Mr. President, I start off by commending the authors of the amendment for a real serious effort to try to improve the bill. But I rise in opposition because there is not any segment of the senior population that you could not isolate and target and say we can make, for this particular group, a better deal than they have in this bill. That is not the purpose of this legislation.

The purpose of Medicare is that it is universal. It is not a welfare bill. It is not just for low-income individuals. It is for every American citizen who has reached the age of 65, or older, and qualifies for the program. That is one of the greatest features of the Medicare Program--that everyone is essentially treated equal.

So it is easy, if you want to isolate a low-income group and say we are going to give them a better deal. But when you are looking at the entire population of almost 40 million Americans with whom we have to deal, that, indeed, is the real challenge, and that is why the content of this bill is far superior than to narrowly isolate only low-income people and say we can do a better deal for them. Of course, but you are not going to be able to do that in keeping with the general theme of what Medicare is all about and taking care of all Medicare seniors with the best possible deal.

I think that is what the goal of this Congress should be, and that is why what we have in the provisions here to give them prescription drugs, which would be within the Medicare Program, that people can voluntarily continue to accept the traditional Medicare or, if they would like, move into an expanded Medicare Advantage and get all of the benefits through a private, competitively delivered system.

What we have is the beginning of a program that can be improved upon and will be. But we have essentially an insurance-type program, similar to what we have as Federal employees, which can be improved upon. But it is for everybody. We, too, give special attention to lower income individuals, and maybe they can do it better, but it is going to have to come from somewhere else, and the somewhere else is the vast number of other seniors who would have some of their benefits diluted and reduced in order to make this a little better than what is in this bill.

The goal is to try to create a universal program across the board, and one that is fair to everyone. I think that is what is in the bill as it now stands.

Yes, I am happy to yield.

I am not sure whose time this is on. I will respond to the Senator's question. We have a health delivery system supervised by the Federal Government, and the beneficiaries are going to contribute to it. Those benefiting from it are going to have an average premium of $35 a month, a $275 deductible, and 50 percent copayment.

I yield the floor.

Mr. President, how much time remains?

Mr. President, I would just say, in conclusion, protections in this bill are exactly the same we have as Members of the Senate. The Administrator could not approve a premium unless it reasonably and equitably reflects the value of the prescriptions they are getting. A Government agency makes the decision on whether it is a reasonable premium.

When you have a deductible that is fixed, it cannot be varied at all. And the catastrophic cut-in cannot be raised. It can be lowered. You have to have something left to compete on, and the premium will be one thing, although it still has to be approved by the Administrator.

So I think the balance we have in the bill is a good one. It is equitable, and I think it can work.

Mr. President, let me first express my appreciation for the very kind remarks of the chairman of the Senate Finance Committee. I think it is only appropriate to acknowledge that had it not been for his perseverance and determination, we would not be here today. He set a very tough timeline on the Senate for considering this bill. He took it through the appropriate hearing channels in the Senate Finance Committee to bring it to this point. We had extensive staff briefings and discussions among Republican staff and Democratic staff. We had a markup that many people said was really very pleasant. We had differences of opinion, but everybody had an opportunity to be heard. I credit creating that atmosphere to the leadership of the Senator from Iowa. We have had situations during the year--the tax bill is one of them--where we did not follow that process. As a result, perhaps the product was not as good as it should have been.

In this case, I think the Senate Finance Committee, in particular, rose to the challenge, and under the leadership of both Senator Grassley and our colleague Max Baucus on our side, we were able to create a cohesive group of men and women who were dedicated to producing a product in a bipartisan fashion. That is exactly what happened with a 16-5 vote on a Medicare reform and prescription drug bill, which would not have been possible had it not been for his strong leadership.

To the Senator from Maine, I offer my congratulations for her involvement, dedication, and her willingness to step outside the traditional boundaries and take some chances politically, as well as substantively, in order to help produce a product which, in the end, ultimately will be something of which we can all be very proud.

I think all of us realize the time has come that it is necessary for us to step out of the traditional boundaries that may put us at risk with some constituents we all represent in order to produce a better product for those very constituents who may say don't go there; but for those who had the courage to go there, we now have a product of which we can justifiably be proud. The Senator from Maine has been a major player in all of these efforts. We appreciate that very much.

Mr. President, let me take some time, from my perspective, to try to present where we are with regard to the Medicare reform and prescription drug bill. It was in 1965--38 years ago now--that the Congress of the United States did something that had never

been done. The Congress and President Lyndon Johnson at that time made a fundamental decision that older Americans were going to receive health care benefits, and that the Federal Government had an obligation to help provide those benefits. As a result of that commitment, the 1965 Medicare Act was adopted.

Ever since then, for 38 years, seniors knew when they reached the age of 65, they would have access to a Government-run health care program. That health care program was principally designed to do what medical science said was necessary back in 1965. It provided hospital insurance coverage for seniors who went to the hospital, and it provided doctor coverage for seniors who had to see a doctor.

In 1965, those were the two fundamental ways in which people received health care in the United States. You went to see your doctor and, if you were sick enough, the doctor put you in the hospital. So for the very first time we said to senior citizens, 65 or older, when you reach that age, you are going to be part of a Government-run insurance program on your behalf.

For a long period of time it was a state of the art, as far as health care was concerned, with regard to our Nation's seniors. It has really worked. It has sort of been the envy of many parts of the world because many countries did not have the quality health care we had for our Nation's seniors. That, as I say, was back in 1965, and today is today.

While health care has changed dramatically, while science has improved incredibly so, the program that was designed in 1965 is still pretty much the same program that seniors look to in order to receive their health care.

It has been a good program, but it is not nearly as good as it should be nor nearly as good as we can make it. That is why we are here today: To create a better program, to build on what was the best in 1965, to create the best in the year 2003.

Medical science has advanced dramatically. The health care delivery system that brings about that health care for our seniors has not advanced very much at all. It is still what I call frozen in the 1960s.

Some have argued: All you have to do is put more money into the program and it will work fine. I suggest just putting more money into a 1965 model program is like putting more gasoline in a 1965 model automobile. It is going to still run like an old car no matter how much gas you put into it.

No matter how much money we put into the Medicare Program that was built in 1965, it is still going to run and operate as a 1965 model. Today, in this body, and this period of time before the Fourth of July, hopefully we will have an opportunity to do something that is as important as what was done in 1965 when the Congress made that fundamental decision to provide health care for seniors.

With what we have before us, we can create a 21st century program which takes the best in science and the best in medical care and puts it into a quality delivery system.

It is interesting to note when I talk about why the current system is deficient, one of the most important issues I bring to mind is the fact that the Medicare Program today only covers about 47 percent of an average senior citizen's health care costs they experience every year. That means 53 percent is covered by the Federal Government, but it also means 47 percent is not covered.

Where do seniors go for the 47 percent of their health needs that are not covered in this 1965 model program? If they are poor enough, they also get Medicaid, or if they look for help from their children or their grandchildren, that makes up part of the difference. Or if they are fortunate enough to have enough funds, they can buy extra insurance, called the Medigap Insurance Program, to cover the 47 percent of their health care costs Medicare does not cover.

No one I can think of in the private sector--certainly including Members of Congress--has a health insurance program that does not cover 47 percent of their health expenses. No one would want to go out and buy a health insurance program that did not cover on average 47 percent of their needs. It would be a terrible buy. You want something that covers as much as possible, and Medicare does not do that.

People are forced to buy the extra insurance or become so poor that they qualify for the Medicaid Program or have their children or grandchildren or perhaps just their friends help them with their Medicare costs that the program does not pick up.

In addition, one of the most important fundamental advances in health care is the advent of the prescription drug program that has saved lives and allowed people to live better lives. The correct and proper use of pharmaceuticals today can keep people out of hospitals or it can make their hospital stay shorter. It can treat diseases that are prevalent today and make our lives better and our families more comfortable. Yet pharmaceuticals are not even covered by Medicare unless you happen to be in the hospital and physicians give you the pharmaceuticals in the hospital. Once you leave the hospital, the Medicare Program does not cover the pharmaceuticals.

It is a perverse incentive to stay in the hospital longer so you get your drugs paid for, when really you ought to use drugs to get out of the hospital sooner or to not have to go there at all.

The Medicare Program is full of deficiencies. It does not cover eyeglasses. It does not cover pharmaceuticals. It does not cover many of the preventive health care measures we should cover. In addition, the Medicare Program does not do something that today is one of the most important functions we can do in health care, and that is preventive medicine.

We talk about how high health costs are in this country today, and one of the principal reasons is because people generally do not go to the doctor until they are sick. In reality, they ought to be going to the doctor when they are well to find out what they should be doing in terms of preventive care to make sure that whatever they are prone to have later in life is pushed back as far as possible or perhaps even eliminated. Preventive care can do that, but the Medicare Program does little, if any, preventive care, and it should not be like that.

In fact, private health care systems work very hard to create preventive health care measures to keep the cost of health care down, to get people to live healthier lives now so their health care costs later are less or perhaps even eliminated. Medicare does not do that.

The one thing Medicare does not do very well is to bring about innovation. We have to have an act of Congress to do many functions that the private sector can do automatically. The Medicare Program requires an act of Congress, as I have cited many times before, to try to bring about new innovative ways of delivering medicine.

We actually had people come to our office and say: We need an act of Congress because we now have a medicine that can be orally administered instead of intravenously injected, but Medicare does not pay for it unless it is intravenously injected. So we need an act of Congress to allow Medicare to pay for something that can be orally administered in the form of a tablet. That is not how medicine should work in the 21st century.

We have before us a medical program for our Nation's seniors that was state of the art in 1965. It has been a wonderful program. It has been a program that has saved lives and a program that has made people's lives much better, but it is a program that is frozen in the 1960s.

We have today the opportunity to create a modern 21st century health care delivery program that looks out over the country and decides what is the best way of delivering health care; how can we make it work better. That is the proposal before us.

When I had the great privilege of chairing the Medicare Commission in 1998, we had numerous witnesses give us their suggestions. We had the time to listen to the theory about what we ought to do with the Medicare Program. To a large extent, the groups that came before the commission fell into two different groups. The first group said: The Federal Government should do everything in this area, the Federal Government should run the program from top to bottom, and the private sector should not be involved at all because we cannot trust the private sector, which has a profit motive as their main goal, to be involved in

delivering health care to our Nation's seniors. That camp, therefore, said the Federal Government should do everything.

On the other hand, a second group of folks who came before the committee took the position: The Federal Government should not do anything in delivering health care. We should turn the entire program over to the private sector, and the private sector ought to run the program, deliver the health care benefits, because they can bring about competition, they can bring about innovation, and the Federal Government cannot do that. So the Federal Government should not be involved at all.

We had a fundamental difference between the two camps that said the Federal Government should do everything and those who said the Federal Government should do nothing at all. The beauty of what we have today is that we attempt to combine the best of what the Federal Government can do with the best of what the private sector can do into a single delivery system and present that to our Nation's seniors as a vast improvement.

For me, it was never an either/or choice. It was never let the Federal Government do everything or require them to do nothing at all, but, rather, to bring the two sides together. I think by doing what we did is why today we see so much bipartisan support for this concept.

There were many of my Republican colleagues who had a preference for letting the private sector do it all and many of my Democratic colleagues said, no, the Federal Government should do it. But when we have combined the best of what both can do, we have created a system whereby I think we will have bipartisan support with a very large number of Members being able to vote for this on final passage. That in itself is a great victory.

Many people thought it would never be possible. Had we taken the position of one or the other, it probably would have been a very divided vote. On the other hand, by combining the best of what both sides could do, we have, in fact, created a better system, both from a fundamental standpoint of good government, and we have also created a political proposition with which both sides can feel comfortable.

What we have attempted to do--and I tried to take hundreds of pages of legislative language and put it all on one chart which in itself is a pretty difficult job--but what we have done, as my chart indicates, is to say that the beneficiary, of course, being our older Americans eligible for Medicare, starting in January, because we cannot get this thing started overnight, every Medicare beneficiary will be able to get some help and assistance on their prescription drugs under the current program; every beneficiary will start with a basic discount card available to all Medicare beneficiaries where they will be able to take that medical beneficiary card that is a product of the Federal Medicare Program to their drugstore, or to wherever they happen to purchase their pharmaceutical drugs, and get a basic discount which is estimated to be somewhere around 20 or 25 percent on the drugs that they have to pay for that have been prescribed to them by their medical doctor. That would be available to all Medicare beneficiaries starting in January.

Also, starting in January there will be a special assistance to low- income beneficiaries who would receive approximately a $600 subsidy in addition to the discount card. So we are saying all beneficiaries would get the discount card. They could go to the drugstore, get their pharmaceuticals filled, but if they are a low-income beneficiary they would also receive an additional subsidy of approximately $600.

It is really interesting to note, when we talk about drugs for seniors--and the fact is that most seniors on average have approximately a little over $2,000 a year in prescription drug costs. It is projected to go up to a little over $3,000 by the year 2006 when the big program kicks in. That is what the average senior has to pay for drugs. Many of them currently are low-income seniors and Medicaid pays for all of those drugs, or many of them have bought Medigap insurance which covers those drugs. Many of them, like my father, have a drug plan from a former employer, so they cover their drugs.

A substantial number of seniors right now have some coverage for prescription drugs, but it is not under the Medicare Program. It is by buying extra private insurance, it is by being fortunate enough to have a plan from their former employer that pays for their drugs, or many of them receive it from the Medicaid Program if they are a low-income beneficiary. That is certainly not good enough. Medicare should cover it.

So immediately starting in 2004 through 2006, under our plan, every Medicare beneficiary would get the basic discount card, plus low-income beneficiaries would get extra assistance.

Beginning in the year 2006--and I know my distinguished Democratic leader was talking about that is a long time, and 24 months is a long period of time, but we have to do it right. We have to set this new program up on a national basis. Beginning in the year 2006, every Medicare recipient would be able to stay right where they are today if they like their current Medicare Program.

I have given some of the good things it has done, and I have also tried to point out where it is deficient. There are a lot of deficiencies. If a senior is happy with the traditional Medicare Program, they can stay right in the traditional fee-for-service program that we call the Medicare Program. They can stay in this program as long as they would like it. And, yes, for the first time beginning in that year 2006, they would also be able to stay in the traditional Medicare Program and get prescription drugs because we would establish a stand-alone drug program for everybody who stays in traditional Medicare.

That stand-alone drug program would not be a Government-run and Government-micromanaged plan. For the first time, it would use a private delivery system for seniors to be able to receive pharmaceuticals they would receive as a Medicare beneficiary. Just like I get my pharmaceuticals covered under my Government health plan, seniors would have a private delivery system. This is not turning the seniors over to the mercy of the private sector. This is still a Government-regulated program in the sense that the Medicare officials and HHS would be responsible for making sure this stand-alone drug program for seniors is run properly; that the companies that are offering the plans have the financial ability to offer those drugs.

They would utilize what we call pharmacy benefit managers to construct programs. Insurance companies would come in and offer the seniors a pharmaceutical stand-alone drug plan. The companies would utilize the pharmacy benefit managers to try to get the best possible deal they could get from the pharmaceutical manufacturers. They could utilize formularies; they could utilize a blend where it is possible to choose between brand name and generic drugs. They would be able to get the best possible financial deal that they could offer to the seniors in a drug program.

Like I said, it would combine the best of what Government can do, which would be to make sure it is being run properly, with the best the private sector could do, which is bring about competition and tough negotiation with the pharmaceutical companies and manufacturers in order to present to the senior the best possible product. The Federal Government would still be involved in overseeing it but not micromanaging it.

For the first time they will also have another option they do not have now. Beginning in 2006, every senior could stay in traditional Medicare just like it is, but at their choice they would also have an opportunity to go into a new program called Medicare Advantage. Medicare Advantage would, in fact, be a combination Federal/private sector program which would deliver to every Medicare recipient who wants to join an integrated health plan, which would provide them hospital coverage, doctor coverage, and prescription drug coverage. They would also utilize the private sector delivery system for all of those areas, not just the drugs that they would get under traditional Medicare.

To a great extent, their plan would be based on what we have as Federal employees under the Federal Employees Health Benefits Plan, where the Federal Government, through the Office of Personnel Management, sets up

a benefit plan for all of us in that plan and the Federal Government would set the standards as to what has to be met, what has to be provided, and then private insurance companies would come in and offer that coverage like they do for all of us as Federal employees.

Every year we would get a book, and the book shows us what is available, and we have to pick and choose. We pick the plan that is best for ourselves and our families. That is, in essence, what we are talking about in the new Medicare Advantage. Preferred provider organizations such as those in the Federal system would come in and offer different plans and different options to our Nation's seniors.

We want to have some standards but we also want to have enough variations so people have a choice to pick the plan best for them.

Our drug plan has a $275 deductible, a 50 percent copayment, and an approximately $35 premium. I happen to believe some variation is important in order for people to have a choice. Some plans may offer a higher deductible or should be able to offer that. We are working ultimately on trying to make sure there is some flexibility yet also some definitiveness about what, in fact, it is going to cost. That is important. We have achieved that appropriate and proper balance.

Beginning in 2006, seniors will have choices of staying in traditional Medicare if they want. No one will force them into picking anything else. Younger seniors, people not quite 65, moving into the new program will be used to utilizing the new delivery system and will be comfortable with it. AARP, which represents the largest number of senior citizens in this country, has taken polls of their members and has found men and women between 55 and 65 years of age prefer these options and choices and feel comfortable with preferred provider organizations which more and more citizens in this country are in.

Preferred providers are just that: a selection of preferred doctors and hospitals that can deliver these services. If you want to go outside of that system, you can go outside of that system, but it may cost you a little bit more.

By creating these preferred provider organizations you can negotiate financial deals with them that help reduce costs and help reduce prices. There are a lot of people in the country that want us to reduce prices, reduce costs, but don't want us to do anything to bring about lower costs and better prices. They say they want cheaper drugs but do not want restrictions on how much and what type and where they can get them. We cannot do both. The same with doctors and hospitals.

If you try to reduce prices, you have to get doctors and hospitals to negotiate the best price. By doing that, you may restrict to some degree where you might go to get those medical services. You can always go outside the system, but you may have to pay more for that choice outside the preferred provider system.

I want to address the point some made: we have tried this experiment with health maintenance organizations, HMOs, and they have not worked. One of the reasons they have not worked is the way Congress constructed them and the way we reimbursed them has not been very good at all, causing a lot to move out. Some HMOs are doing well in some areas and some HMOs have gone bust in other counties.

What we are talking about is not doing this new system on a county- by-county basis. That was one of the big problems why HMOs did not work. What this bill does is create 10 geographic regions in the country. The preferred providers will come in and offer their services in a region. By creating a region, you create not just a rural area-- whether it is Wyoming, Montana, or North or South Dakota, where a lot of our colleagues have expressed concern this would not work--we have created geographic regions in the country that will combine more urban areas with more rural areas so you get a better blend, a better mix. They will be required to provide those services in the entire geographic region, which gives people who provide these services a better opportunity to try and make sure it will work. In rural counties, they all pulled out because there were not enough people to make it work. We have created 10 geographic regions around the country to make it much more likely this new system will, in fact, work and work very well.

There will be a lot more debate and a lot more amendments. Our colleagues in the other body are also moving forward with this type of legislation today and for the next couple of weeks. I am ultimately comfortable that we will, in fact, be able to pass a program in this Congress and hopefully complete it before the 4th of July recess that will create a new Medicare Program for our Nation's seniors which will provide prescription drugs but also will provide a better delivery system, one that is balanced, one that combines the best of what government can do with the best of what the private sector can do. We have accomplished that.

Can this be improved? Of course. There is nothing we do that cannot be improved. We are restricted to some degree by the fact we do not have as much money as I think is truly needed and necessary in order to create a program that is one that is even better than the one I have described. The facts are, we have $400 billion in the budget. If we had $500 or $600 billion or even $800 billion we could create a program that is much better than the one we have created. But there will be time to improve. We will have the opportunity to make this an even better program in the future. Obviously, we have to take the first step. This is truly the first step in 38 years that we have had the opportunity to take, which will bring to our Nation's seniors a better program we can always work to improve as time guess on.

I yield the floor and suggest the absence of a quorum.

I ask unanimous consent that the order for the quorum call be rescinded.

I ask unanimous consent the time during this quorum call be equally charged.

I suggest the absence of a quorum.

Mr. President, I would respond, Senator Dorgan wants 15 minutes, and then that is it.

It may work out. How much time do we have, I ask the Chair?

That is fine. Go ahead.

I say to the Senator from North Dakota, the Senator wants to complete his statement.

Two more minutes.

Mr. President, I yield 15 minutes to the distinguished Senator from North Dakota.

Mr. President, I yield to the Senator from Vermont 10 minutes.

I yield the remaining time we have to the Senator from Michigan.

Mr. President, at this time, I ask unanimous consent that the following fellows and interns on the Finance Committee be granted floor privileges for the duration of the debate on the Prescription Drug Medicare Improvement Act of 2003: Patrick Straub, Nadija Porobic, Kathy Laubach, Autumn Engellant, Constantine Tujios.

Mr. President, I rise today to extend my congratulations and best wishes to Mr. William M. (Bill) Coffey on his retirement as president and chief executive officer of Volunteers of America Greater Baton Rouge.

It is my privilege to recognize Bill's dedicated service to the people of our State. During his nearly 40 years as a public servant and a nonprofit leader, Bill has helped countless individuals and families in need.

Born in 1940 on a small farm in north Louisiana, Bill began working for the State Department of Health and Human Services in 1964 after earning a master's in social work from Louisiana State University. His distinguished career as a State employee spanned 25 years and a day, before his retirement in 1987 as deputy director of the Department of Mental Retardation.

He then joined Volunteers of America--one of our Nation's leading human services charities B and in 1989 was appointed president /CEO of the organization's Baton Rouge affiliate. Under his leadership, Volunteers of America expanded its vital mission of service, opening new programs in Lafayette, Lake Charles and many smaller communities across south Louisiana.

Today, Volunteers of America serves more than 14,000 south Louisiana residents every year--abused and neglected children, at-risk youth, the elderly, homeless families, people with mental illness or mental retardation, people living with HIV/AIDS, victims of hurricanes and other disasters, and many more.

Above all, Bill has been a community-builder, bringing together those in need with those who have a need to serve.

My wife Lois and I have experienced the joy of service through Volunteers of America many times, especially on our visits with the children at Parker House in Baton Rouge, a therapeutic setting for young victims of the most severe abuse and neglect. We were honored to be part of a recent $1.2-million fundraising campaign to acquire a new residence for these children, and a center to prevent child abuse. The outpouring of support for this new facility helped fulfill one of Bill's long-term dreams. It will surely be the crowning touch of his life of service, and his legacy for generations to come.

For all Louisianans, I wish to express our thanks and best wishes to Bill and his family--his wife, Cooky, and their children, Pam and Blake--for many happy years ahead.

(At the request of Mr. REID, the following statement was ordered to be printed in the Record.)

Mr. President, I am proud to serve as ranking member of the Senate Special Committee on Aging, a position which allows me to focus on issues important to older Americans. One of the most critical concerns of our Nation's seniors is the need for long- term care services. And though the lack of available long-term care service is a substantial problem today, the demand for long-term care services will overwhelm an already-strained system as our Nation's 77 million baby boomers age.

Family caregivers are the cornerstone of our long-term care system, providing 80 percent of all long-term care in this country. Most older and disabled Americans prefer to remain in their own homes or in the community and many do so, thanks to the support and love of family caregivers. But we all know that family caregivers cannot provide around-the-clock care--many have jobs and children to raise. Caregiving is stressful and it places heavy emotional, physical and financial burdens on caregivers. Research shows that caregivers need a variety of services to support them in their caregiving roles. One innovative and valuable service to family caregivers is the ``Faith in Action'' program sponsored by the Robert Wood Johnson Foundation.

The Robert Wood Johnson Foundation, one of our Nation's leading philanthropic health care organizations, has been supporting creative programs for the delivery of health care for many years. Their Faith in Action program is a faith-based initiative which enables elderly and disabled individuals to continue to live in their homes with the support of coordinated efforts between interfaith coalitions and social service agencies including senior centers, parish councils on aging, area agencies on aging, and hospitals.

The Faith in Action program provides grant money to help these groups provide services, including organizing outreach to the homebound; training group leaders who oversee outreach ministries; locating homebound people who have lost touch with their communities; recruiting volunteers from church congregations and communities; connecting with local medical and social services; and providing emotional support services to community members. All of these organizations share a common goal--to provide long-term care to their neighbors in need.

Next week, the 14 Faith in Action grantees in Louisiana and interested faith and community leaders will join me in New Orleans for an event where we will honor the current grantees and volunteers and encourage other interested groups and individuals to become Faith in Action grantees. Together they can use their expertise and energy to make a real difference in the lives of Louisiana seniors and disabled persons.

Mr. President, today I want to recognize these 14 existing grantees in Louisiana: Rapides Station Community Ministries, Inc., The Shepherd Center, Inter-Faith Caregivers of the Greater Baton Rouge Federation of Churches & Synagogues, The Mental Health Association of Louisiana, Faith in Action of Acadiana, Love Inc., of Acadiana, Volunteers of America Inc., Boys & Girls Club of Minden, Inc., Alzheimer's Disease and Related Disorders Association Northeast/Central Louisiana Chapter, G.T. Consultants Services, Inc., St. Francis Medical Center, Uptown Area Senior Adult Ministry, Inc., H.O.P.E. Ministry, Inc., and Shreveport-Bossier Community Renewal Inc.

Thanks to their contribution to their communities, these grantees have enabled over 1100 elderly and disabled persons in Louisiana to remain at home. Keeping families together and allowing our seniors and disabled persons to live independently saves money, improves quality of life and strengthens our communities. Again, I applaud the Louisiana Faith in Action grantees, community partners and volunteers for their contribution to Louisiana families and to broadening long-term care options for the people of Louisiana.

Mr. President, I say to the managers of the Energy bill, I would like to speak for a couple minutes on a subject that is going to be coming up in the Senate next week and in the Senate Finance Committee on tomorrow. The subject is Medicare. I do not want to interfere with anybody who has a pending amendment, but I think this would be an appropriate time to make a few comments on this subject.

Mr. President, my colleagues, the Senate will begin, this week in the Finance Committee--on Thursday, tomorrow--marking up a historic reform piece of legislation dealing with the subject of Medicare and prescription drugs for our Nation's older Americans. I think it is a historic opportunity for the Senate, in a bipartisan fashion, to come together and produce a product that is something of which we can all be proud.

Many Members of the Senate, when you talk about Medicare, would like the Federal Government to do everything and the private sector to not be

involved at all. There are other Members, on the other hand, who would like the private sector to do everything and the Federal Government to not be involved at all. The answer to how we craft this legislation really is by trying to combine the best of what Government can do with the best of what the private sector can do.

My colleagues, the bill that will be brought before the committee tomorrow, in a bipartisan fashion, under the leadership of Chairman Grassley and Ranking Member Baucus, does exactly that. I would like to take just a minute to try to explain what the bill will do in more general terms so everybody can get an idea what they are going to be looking at next week.

A Medicare beneficiary, beginning next year, will have the opportunity to have a prescription drug discount card. That will be something they will start with at the beginning of the year. They will be able to take that card to their local drugstore and get anywhere from a 20-, 25-percent discount on the drugs they buy. In addition, we will provide a subsidy to low-income seniors, in addition to that discount card, to help them buy drugs.

While that is happening, the Government will be engaged in trying to set up a process whereby, in the year 2006, Medicare beneficiaries will have more choices than they would otherwise.

Under the principle of saying the Government should do what it does best and the private sector should do what it does best, we have established in the legislation a Medicare Program that says to seniors, if they want to stay right where they are in traditional Medicare, they will have the opportunity to do that, and they will also have the opportunity to get prescription drugs under their traditional Medicare Program.

If they think that a new program being offered will be a better opportunity for them, they can voluntarily move into what we call Medicare Advantage, where they would also have access to a prescription drug plan.

It is important to note that both of these opportunities, both of these choices, are Government-run programs. Both of those programs will be under HHS, Health and Human Services. Both of them will have the Federal Government supervising how the program is being run, to make sure no one in the private sector is scamming it or is not capable of producing the programs they are saying they can produce. That is what Government can do best--as well as help pay for them.

If you are in traditional Medicare fee-for-service, all your doctor and hospital programs will be just like they are today. Then you will have the opportunity to have a prescription drug program which will have a standard benefit package spelled out in law. What we are talking about is a program with about a $35-a-month premium, with about a $275 deductible and a 50 percent coinsurance for seniors for the drugs for which they pay.

That is a generous plan that is very similar to what we have as Members of Congress and Members of the Senate. That drug program, unlike the hospital and doctor benefits, will be provided by the private sector to bring about competition, to have companies come in and say: We will provide it at this amount. They can vary the premiums as long as the Federal Government would approve it. For example, someone may like a higher deductible, someone may like a lower deductible. They could make those adjustments within a range, but the Government would have to make sure that is acceptable and that is approved by HHS.

If a senior--for example, most younger seniors and seniors going into the program in the future--would like to go into that type of program for everything--for doctors and hospitals and for drugs--if they think that is the good program for them, that gives them choice, they will start selecting the Medicare Advantage Program where they will get doctor coverage, hospital coverage, and prescription drug coverage.

This will still be in HHS, but it will be run by a new, competitive agency within HHS--not micromanaged, not price fixing, as we have now, but a new, competitive agency within HHS which will be created in order to make sure that the new program is being run properly. It will be run very similarly to how our program is run that is for Federal employees. We have Federal health insurance, but they use a private delivery system, and the Government makes sure everybody follows the rules and that there is competition, there is choice--that some plans may be better than others--and they have an opportunity, every year, to take a look at what is being offered; and sometimes they will pick this plan, sometimes they may pick another plan, but they will have the choice to pick the plan that is best for them.

So I think, in summary, what we have before the committee is a plan that combines the best of what the Government can do with the best of what the private sector can do. The programs will still be under Health and Human Services, whether you take this plan or that plan.

I think when you have private companies competing, you will have private companies that will be more involved in doing risk management and preventive medicine, preventive health services for the individuals who are involved. The Federal Government does not do any of that.

We simply fix prices and we do nothing with regard to risk management or preventive health care. So we will have an intense debate. We will have a markup in the Finance Committee on Thursday. Then this bill will come to the floor.

I think we will have an opportunity to do something that I think, for the first time, gives seniors an opportunity to have a federally run program that provides private sector delivery, with choices that will benefit seniors. I think in the long term it will benefit all of us who are concerned about this.

I commend Senator Baucus for his work and for working with the chairman, Senator Grassley, in putting together this package. The only way it is going to get done is bipartisan. Some will argue it is not enough, and I understand that, but this is 100 percent more than seniors have today. Congress should not walk away from a $400 billion program for providing prescription drugs to seniors because it is not more money, because that simply is not looking at what is possible and what is likely to happen in the real world.

This is a once-in-a-lifetime opportunity. I encourage my colleagues to work with us to produce this package.

I yield the floor.