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The Presiding Officer: The pending business is the Cornyn amendment. Who seeks recognition?

The Senator from Tennessee is recognized.

Mr. Alexander: Mr. President, I ask unanimous consent to speak as in morning business for 5 minutes.

Mr. Kyl: Mr. President, I wonder if my colleague will first allow me to lay down an amendment but not speak to it.

Mr. Alexander: Yes.

The Presiding Officer: The Senator from Arizona is recognized.

Mr. Kyl: Mr. President, is there a pending amendment?

The Presiding Officer: Yes, it is the Cornyn amendment.

Mr. Kyl: Mr. President, I ask unanimous consent to lay aside the pending amendment.

The Presiding Officer: Without objection, it is so ordered.

Amendment No. 866 to Amendment No. 849

Mr. Kyl: Mr. President, I simply ask unanimous consent to call up as a second-degree amendment to the pending amendment my amendment No. 866.

The Presiding Officer: The clerk will report.

The assistant legislative clerk read as follows:

The Senator from Arizona [Mr. Kyl] proposes an amendment numbered 866 to amendment No. 849.

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

The Presiding Officer: Without objection, it is so ordered.

The amendment is as follows:

(Purpose: To protect classified information)

At the end, add the following:

SEC. ___. UNLAWFUL DISCLOSURE OF CLASSIFIED REPORTS BY ENTRUSTED PERSONS.

(a) In General.--It shall be unlawful for any person who is an employee or member of the Senate or House of Representatives, or who is entrusted with or has lawful possession of, access to, or control over any classified information contained in a report submitted to Congress under this Act, the USA PATRIOT Improvement and Reauthorization Act of 2005 (Public Law 109-177; 120 Stat. 192), the Intelligence Reform and Terrorism Prevention Act of 2004 (Public Law 108- 458; 118 Stat. 3638), or an amendment made by any such Act to--

(1) knowingly and willfully communicate, furnish, transmit, or otherwise makes available such information to an unauthorized person;

(2) publish such information; or

(3) use such information in any manner prejudicial to the safety or interest of the United States or for the benefit of any foreign government to the detriment of the United States.

(b) Penalty.--Any person who violates subsection (a) shall be fined under title 18, United States Code, imprisoned not more than 10 years, or both.

(c) Information to Congress.--Nothing in this section shall prohibit the furnishing, upon lawful demand, of information to any regularly constituted committee of the Senate or House of Representatives, or joint committee thereof.

(d) Definitions.--As used in this section--

(1) the term "classified information" means information which, at the time of a violation of this section, is determined to be Confidential, Secret, or Top Secret pursuant to Executive Order 12958, or any successor thereto; and

(2) the term "unauthorized person" means any person who does not have authority or permission to have access to the classified information under the provisions of a statute, Executive Order, regulation, or directive of the head of any department or agency who is empowered to classify information.

The Presiding Officer: The Senator from Tennessee is now recognized.

USCIS Naturalization Test Redesign

Mr. Alexander: Mr. President, I thank my colleagues for giving me 5 minutes.

As my late friend Alex Haley, the author of "Roots," said, "Find the good and praise it." We talk an awful lot about illegal immigration here in the Senate. The majority and minority leaders have both said that before Memorial Day, we will bring up immigration reform in a comprehensive manner. I hope very much that we do that. That is our responsibility. It is too big a problem for one party to solve, and we should work on it in a bipartisan way.

Today, I want to talk about legal immigration as opposed to illegal immigration. About 650,000 individuals become U.S. citizens every year. Each of us has attended ceremonies where this happens. This is at the very heart of our Nation. This is why we call the United States of America the Nation of immigrants. What is so important about them is that no one becomes an American based upon his or her race or where their grandparents came from. In fact, that is constitutionally impermissible. One becomes an American by a remarkable oath of allegiance to this country as opposed to some other country, and then demonstrating good character, being here for 5 years, and showing that you know our common language, English, and an understanding of the U.S. history.

The importance of that was brought home to me last week when I was visiting in Nashville. About 30 percent of all of the students in Tennessee who have limited English proficiency happen to be in the Nashville School District, and Pedro Garcia, the superintendent of schools, was telling me that many of those students who are not now American citizens want to make sure they learn enough U.S. history in middle school and high school so they can pass the citizenship test and become Americans when they graduate.

Today, the U.S. Citizenship and Immigration Services, USCIS, is formally releasing the Citizen's Almanac. I call it to the attention of our colleagues. It is a collection of American symbols of freedom and liberty to be given to every newly sworn citizen, and that would be 650,000 this year. It is built upon action that was taken earlier this year by the USCIS to create a new and better citizenship test.

At the conclusion of my remarks, I ask unanimous consent that a fact sheet about the naturalization test redesign be printed in the Record.

The Presiding Officer: Without objection, it is so ordered.

(See exhibit 1.)

Mr. Alexander: Mr. President, the purpose of that test is to simply give new meaning to what it means to be an American. That oath of allegiance which these 650,000 new citizens will take is basically the same oath that George Washington and his officers took at Valley Forge in 1778. It has a great deal of meaning. Other countries in the world have not had the experience we have had helping people from around the world become Americans. The English, the French, the Japanese, and the Germans are struggling with that right now, as people move in who are not Japanese, German, English, or French. It is hard for them to become part of that national identity. We have not had that problem. We welcome everyone based upon their understanding of the symbols and documents represented in the Citizen's Almanac. So if we don't teach about these things in our schools or immigrants don't learn it in the naturalization process, then we are not a united country.

As I have said many times on this floor, diversity is a great strength of the United States of America, but it is not our greatest strength. Our greatest strength is that we have been able to take all of this diversity and mold it into one country, not because of race or ethnicity but because of a belief in a few principles and our common language. We are able to say we are proud of where we came from, but we are prouder to be Americans.

I salute the U.S. Citizenship and Immigration Services for this document, and the National Endowment for the Humanities for its hard work on it. The Citizen's Almanac includes the patriotic anthems and symbols of the United States, Presidential and historical speeches from Presidents Lincoln, Washington, Roosevelt, Kennedy and Reagan, and Martin Luther King, Jr., and landmark decisions of the Supreme Court. It ought to be in every Senate office. It will be in every home of every new citizen. It will be a good document to be in every school in America.

I yield the floor.

The Presiding Officer: The Senator from California is recognized.

Mrs. Feinstein: Mr. President, I ask unanimous consent that Senator Feingold and I be permitted to speak for up to 10 minutes as in morning business.

The Presiding Officer: Without objection, it is so ordered.

Senate Campaign Disclosure Parity Act

Mrs. Feinstein: Mr. President, I rise in my capacity as chairman of the Rules Committee to speak about a bill that the Committee heard and passed out unanimously a short time ago. That bill is entitled the "Senate Campaign Disclosure Parity Act." It is sponsored by Senators Feingold, Cochran, and 32 other Senators. It would require that Senate campaign finance reports be filed electronically rather than in paper format. That is all the bill does.

Currently, House candidates, Presidential candidates, political action committees, and party committees are all required to file electronically, and they do. But Senators, Senate candidates, authorized campaign committees, and the Democratic and Republican Senate campaign committees are exempt. As a result, we have a very cumbersome system in which paper copies of disclosure reports are filed with the Senate Office of Public Records, which then scans them, makes an electronic copy of them, and sends that copy to the FEC on a dedicated communications line. The FEC then prints the report and sends it to a vendor in Fredericksburg, VA, where the information is keyed in by hand and transferred back to the FEC database. All of this costs about $250,000, and it is a waste of money, a waste of staff, and a waste of time.

At our hearing on February 14 on this bill--and this bill is just on this point--it was clear that there was no public opposition to this proposal, only public support. The bill has been hotlined. It has cleared on the Democratic side. It has not cleared on the Republican side.

Now, again, this bill says we will just allow us to electronically file our quarterly reports. I just electronically filed my quarterly reports. I then gave a paper copy to the Secretary of the Senate. This is exactly the type of good-government law the Senate can adopt as a stand-alone measure.

I hope we move this legislation today, without burdening it with other items. It is really long past time to bring the Senate into the modern era. So I hope my colleagues on both sides of the aisle will join me in ensuring timely access and disclosure of Senate finance campaign activities and bring that information before the public.

I will now yield to the author of the legislation, the distinguished Senator from Wisconsin.

The Presiding Officer: The Senator from Wisconsin is recognized.

Mr. Feingold: Mr. President, I thank the Senator from California. I am very pleased to be here with her today. I sincerely thank the Senator from California for moving the Senate Campaign Disclosure Parity Act through the Rules Committee so that we are now in a position to finally pass this legislation. As the Senator from California indicated, at last count, we now have 35 cosponsors for S. 223, 20 Democrats and 15 Republicans, and no known opposition.

The bill fixes the anomaly in the election laws that makes it nearly impossible for the public to get timely access to Senate campaign finance reports, even though most other reports are available on the Internet within 24 hours of their filing with the Federal Election Commission, FEC. This bill will finally bring Senate campaigns into the 21st century by amending the section of the election laws dealing with electronic filing to require reports filed with the Secretary of the Senate to be filed electronically and forwarded to the FEC within 24 hours.

This step is long overdue. There is no excuse for keeping our own campaign finance information inaccessible to the public when the information filed by House and Presidential candidates, PACs, parties, and even 527 organizations is readily available almost immediately. The Washington Post has called the outmoded Senate campaign reporting system "obviously unjustified," and Roll Call has called it "indefensible." I couldn't agree more.

The current system means that the FEC's detailed coding, which allows the press and the public to do more sophisticated searches and analysis, is completed over a week later for Senate reports than for House reports. It means that the final disclosure reports covering the first 2 weeks of October are often not available for detailed scrutiny until after the election. That is scandalous and there is no good reason for it.

Let me just say that I know that the election laws have a big impact on campaigns and all Senators have a strong personal stake in vetting changes to those laws. I am very familiar with controversial and contested campaign finance legislation. This isn't that kind of bill. This bill is as close to a no-brainer as you can get in this area.

In addition to bipartisan support here in the Senate, major media outlets have endorsed it, as have bloggers on the left and the right. No one that I know of opposes it. And yet, it has now been nearly 3 and a half years since I first introduced it. That is nearly half as long as it took us to pass McCain-Feingold. I know McCain-Feingold. You might say McCain-Feingold is a friend of mine. This bill is no McCain- Feingold.

As I understand it, this bill has cleared the Democratic side. Given the strong support for it from across the political spectrum, and cosponsorship from many Republican Senators, and I especially thank Senator Cochran for being the main author along with me. I sincerely hope there won't be an objection on the Republican side. It would be wrong to hold this bill up as some kind of bargaining chip. It is time for the Senate to pass this bill, and I hope that can be done today.

Once again, I thank the Senator from California, and I yield the floor.

Mrs. Feinstein: Mr. President, if I may, I will ask a question of the Senator from Wisconsin. First, I thank him for his leadership on this issue.

If I can ask the Senator, is there any item in this bill other than electronic filing?

Mr. Feingold: No, there is not.

Mrs. Feinstein: Doesn't this bill simply enable Members of the Senate, just as every other political office does, to file directly electronically their finance reports?

Mr. Feingold: That is all it does.

Mrs. Feinstein: I thank the Senator.

Mr. President, this is such a simple, direct bill with respect to transparency. It is an idea whose time has long come. It happens everywhere else except for the Senate, Senate committees, and the Senate campaign committees. The time is long overdue to pass this bill. It is such a simple, good-government issue. It is very hard for me to understand who could oppose this and what their reason for opposing it could be. I hope that if there is opposition in this Senate, the Member would be willing to come down to the floor and express why they would oppose this bill.

We have the solid support of the entire Rules Committee. This bill was easy to pass out of committee. It was easy to hotline on the Democratic side, and it should be easy to pass by unanimous consent.

Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of Calendar No. 96, S. 223, a bill to require Senate candidates to file designations, statements, and reports in electronic forms; that the committee-reported amendment be considered and agreed to; that the bill, as amended, be read three times, passed; and that the motion to reconsider be laid upon the table, with no intervening action.

The Presiding Officer: Is there objection?

Mr. Alexander: Mr. President, on behalf of a Republican Senator, I object.

The Presiding Officer: Objection is heard.

Mrs. Feinstein: I yield the floor.

Mr. Rockefeller: Mr. President, I suggest the absence of a quorum.

The Presiding Officer: The clerk will call the roll.

The assistant legislative clerk proceeded to call the roll.

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

The Presiding Officer: Without objection, it is so ordered.

Action on Amendments Nos. 856 and 859 Vitiated

Mr. Rockefeller: Mr. President, I ask unanimous consent that the previous action on amendments Nos. 856 and 859 be vitiated.

The Presiding Officer: Without objection, it is so ordered.

Mr. Rockefeller: I yield the floor, and I suggest the absence of a quorum.

The Presiding Officer: The clerk will call the roll.

The assistant legislative clerk proceeded to call the roll.

The Presiding Officer (Mr. Brown): The Senator from West Virginia is recognized.

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

The Presiding Officer: Without objection, it is so ordered.

Mr. Rockefeller: Mr. President, I ask unanimous consent that at 5:45 p.m. today, the motion to proceed to the motion to reconsider be agreed to, the motion to reconsider be agreed to, and without further interning action, the Senate proceed to vote on the motion to invoke cloture on S. 372, the Intelligence authorization bill; further, that Members have until 4:45 p.m. to file any second-degree amendments.

The Presiding Officer: Without objection, it is so ordered.

Mr. Rockefeller: Mr. President, I should say this has been cleared on both sides.

Mr. President, I suggest the absence of a quorum.

The Presiding Officer: The clerk will call the roll.

The assistant legislative clerk proceeded to call the roll.

The Presiding Officer: The Senator from Iowa is recognized.

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

The Presiding Officer: Without objection, it is so ordered.

Mr. Grassley: Mr. President, I ask to speak as in morning business for half an hour, although I probably will not speak that long.

The Presiding Officer: Without objection, it is so ordered.

Medicare

Mr. Grassley: Mr. President, earlier this year I gave a series of statements on this floor on the Medicare prescription drug benefit. Back then, I said I was informing my colleagues because in the near future Congress would consider some fundamental changes in how the benefit works.

Well, for the entire Senate, the future is now. Last week the Senate Finance Committee marked up legislation on the so-called prohibition on Government negotiations under the Medicare prescription drug benefit. When I gave these four statements during February, I said it was important for the public and also for Medicare beneficiaries to understand the proposed changes, and that it was equally important to explore the effects these changes would have.

Those reasons still hold true this very day. They are even more important now as the Senate gears up for action on that ill-advised legislation. I will inform my colleagues on this topic today, tomorrow, and the rest of the week, if I need to, because I want to make sure everyone understands the consequences of this legislation that is going to change the Medicare Program and hurt the Medicare Program, a program that is working; that if it ain't broke, don't fix it. I am willing to talk about this issue until I am blue in the face.

First, everyone should recognize that political opponents of the drug benefit that we call Part D of Medicare have tried for 4 years to tear this benefit apart since day one. Day one dates back to December 2003, when the President signed the bill. These naysayers feel Government can always manage better. They want a Government-run benefit program of drugs in Medicare, and they want the Federal Government dictating drug prices, as if the Federal Government can dictate drug prices.

Thankfully, the naysayers lost when that legislation was being considered. But that has not stopped them from constantly whining and carping about the drug benefit that is now law. The naysayers said there would be no prescription drug plans. Then when there were plenty of prescription drug plans coming into the system, approved by the Secretary of HHS to administer to the seniors of America, they said there were too many plans.

The naysayers said it was too confusing, that the seniors would not be able to choose plans, even arguing that there would be a small number of seniors signing up.

But the seniors have enrolled. In fact, 92 percent of the seniors in America are covered by a prescription drug plan. And what about their satisfaction? Interviews show a great deal of satisfaction on the part of seniors with the plans.

Then the naysayers suggested plans could change their prices and the drugs they cover at the drop of a hat, which has not happened. So the naysayers were wrong again. They did all they could to taint beneficiaries' views of the benefits before it even got off the ground. But the naysayers' biggest criticism of the drug benefit is that, according to them, the Government does not negotiate with drugmakers for lower prices.

Now I will show you how silly that is and how wrong that is and, more importantly, how misleading that is. I say according to "them," meaning according to the naysayers, because they have gone to great lengths to make it sound as though nobody is negotiating with drug companies. If you believe the naysayers out there, you would think that drug companies name their price and Medicare is forced to pay it. That is so wrong that it truly boggles the mind. It seems to me, as I see these arguments, there is no embarrassment on the part of the naysayers' part.

Now, it is correct, of course, that the Secretary of Health and Human Services himself does not negotiate with drug companies, but it is absolutely not correct to say there are no negotiations. That is complete and utter nonsense. It is embarrassingly wrong. Under the Medicare drug benefit, multiple drug plans compete against each other for the membership of seniors and disabled people covered by Medicare. These plans compete to get the lowest prices from manufacturers, for you as a member, because they want to keep you as a member.

In fact, these plans want to be the best negotiators and to offer beneficiaries the best possible drug plan with low premiums, low cost sharing, and even with additional benefits. They compete to be the plan that beneficiaries want to join.

Now, is this something new? No, it is nothing new. This is the same approach used for health care benefits for every Member of Congress, and 3 million Federal employees, under what we call the Federal Employee Health Benefit Program. If beneficiaries do not like the job their plan is doing, you can fire your plan. You can leave it, join another plan. You can choose a better plan. Yet, you see, it is actually very simple how this works; very simple. Harnessing the power of competition among plans gives the Medicare Program beneficiaries and the taxpayers access to better negotiation than anything the Government could do on its own.

In fact, there are five negotiators out there that are negotiating in a bigger way than even the Federal Government can. Can you imagine that, there are five negotiators that are bigger than the Federal Government that were negotiating this? Competition, then, is the mainstay of our free market economy. Businesses compete every day in almost every sector of our economy to produce the products consumers most want at a price that consumers pay, which is probably what consumers can afford.

But the naysayers of the drug benefit somehow do not like that. They are uncomfortable with the free market. They want the Government to run everything. They want the Government itself doing the negotiation. They find it hard to believe anyone could do a better job negotiating than big Government.

Of course, along the lines, they are ignoring the simple fact that competition is working. They are ignoring that competition has led to lower premiums, $22 this year instead of $23 last year, instead of $37 when we wrote the legislation.

They are ignoring that competition is bringing choices to beneficiaries, those who said we would never have choice, that you could not use plans because plans would not work. You know what. Those very Members of Congress are wrong, because in my State there are 43 plans. Will there always be 43 plans? No, I imagine there are some that are small, will weed themselves out, will be bought. These people are ignoring that the Government is not actually very good at figuring out what it should pay for drugs. They are ignoring the fact to carry on with the political scam that they committed against beneficiaries and against the public.

I have a chart I used a month ago that I want to show again. On it is a quote from the Washington Post, recognizing as well, when it wrote the following in an editorial, that this is a political scam and that governments don't do a very good job of negotiating:

Governments are notoriously bad at setting prices, and the U.S. Government is notoriously bad at setting prices in the medical realm.

We knew this because of the Government's experience paying for drugs covered by Medicare Part B. There are not very many drugs covered by Medicare Part B, but there have been a few and over a long period of time. What did we learn from that experience of Part B Medicare? These happen to be the drugs that are given during a physician's office visit or other drugs such as oral cancer drugs. Medicare payments for these drugs were based on what is called the average wholesale price, AWP. It is similar to a sticker price for a car. No one actually pays that price on the sticker of a car. The joke was that average wholesale price or AWP actually stood for "ain't what's paid." Over the past decade, reports issued by the inspector general, by the Department of Justice, and by the Government Accountability Office found that by relying on average wholesale price, Medicare was vastly overpaying for these drugs. Recommendations were made to change payments so they reflected actual market cost. The Clinton administration tried to make some of these changes but after pushback from providers, it backed off.

Congress took another run at this issue in 2003 in the Medicare Modernization Act and was successful. Congress reformed how Medicare pays these drugs under Part B, not Part D. Medicare now bases its payment for many of these drugs on a market-based price, a real price, not the average wholesale price, not the "ain't what's paid" price because it wasn't paid. This change, believe it or not, is saving the taxpayers and beneficiaries, but it took years to get that fixed. In all that time, Medicare and taxpayers paid too many dollars for drugs, wasted money, billions and billions of dollars wasted. So using the Part B tradition, we don't want to make the same mistake. We don't want to repeat that experience under the new Part D of drugs for Medicare.

We also knew Medicare overpays for a lot of other services and equipment. The bookshelves are full of other reports from the General Accounting Office, from the inspector general, from the Medicare Payment Advisory Commission, from the Congressional Budget Office, and others, about how Medicare is paying too much in too many areas. For example, Medicare overpaid for durable medical equipment for years until the Republican- led Congress made changes in the 2005 Deficit Reduction Act. In addition, each year the Office of Inspector General issues what is called the Red Book, which presents cost savings recommendations. The books are usually 50 or more pages long, and the recommendations span all aspects of Medicare--hospitals, physicians, home health care plans, and others. This is more evidence of the many areas where Medicare doesn't get the best deal.

Congress has even created the Medicare Payment Advisory Commission, called MedPAC, to provide advice to Congress on payments for services. Every year, Congress hears recommendations from MedPAC to address Medicare overpayments, but many times it takes years for the Secretary of Health and Human Services or for the entire Congress to act to save the taxpayers money. In making recommendations, MedPAC looks at profit margins, for example. One type of provider had been found to have margins of 17 percent off of Medicare payments. The Congress has been able to act on many MedPAC recommendations, but it can be very hard to accomplish these changes. I remember when I was chairman of the Senate Finance Committee over the last 4 years. I received letters from Members saying something like: Please don't cut payments for this provider group or that provider group.

In fact, on the Senate floor just before recess, I fought to prevent this very Senate from freezing a Center for Medicare Services' rule that would have prevented wasteful spending in the program we call Medicaid. Is the rule a good thing or a bad thing? We didn't bother to hold the first hearing on the subject. The only thing that mattered was that a group of providers complained. Like the Clinton administration found, letters and complaints such as that can make it difficult, in the very short order, to do anything about a problem, despite the compelling evidence of overpayments, despite the high profit margins, despite the fact that a proposed change could save taxpayers billions of dollars.

Those of us who wrote the Part D Medicare drug plan passed 4 years ago--and that was mostly Senator Baucus for the Democrats and me for the Republicans--were concerned that this same kind of dynamic might happen with this Part D program. Political pressures on Medicare drug benefits would tie the hands of the Secretary of Health and Human Services. If that happens, the programs would be unmanageable and costs would skyrocket. Instead, Congress put competing private plans in charge of negotiating. These plans and their negotiators have years of experience in this arena. This is what they do for a living. Health and Human Services has had very little experience and a very dismal track record.

On this chart, these plans and their negotiators and managers have powerful bargaining clout in the market. They manage the drug coverage for tens of millions of people. There are plans that cover upwards of 50 million people--75 million, in one case--far more than the 41 million Medicare beneficiaries. Clearly, Medicare beneficiaries account for a large number of all prescriptions filled each year, so some might argue that 41 million beneficiaries have more clout than 75 million nonbeneficiaries, but numbers alone do not necessarily translate into lower costs.

As evidence of that, we had all sorts of experts come before the Finance Committee in January on this very topic. In response to questions I asked, particularly of Professor Scott Morton of Yale University, he said it doesn't matter whether you negotiate on behalf of 1 million or 43 million people; what matters is what leverage you have and how you use that leverage.

I think I ought to emphasize that. It is how you use the leverage. So it is what is done to leverage those numbers, then, that leads to lower costs. That leverage comes from the plan being able to say to a drug company something such as: I can get a better deal on drug A from a different manufacturer that has the same clinical effect as your drug B. If you can't match it or do better, then I am going to leave the table.

Some plans will get a better deal on drug A and put it in their formulary. Some plans will get a better deal on drug B. But many experts agree--and experience suggests--that it would be difficult for the Government itself, our Government, to walk away from the table. There would be enormous pressure to cover everything. If it did, the negotiating power lies not with the Government but with the manufacturers.

Here is what Professor Scott Morton said would happen if someone negotiating drug prices couldn't have a formulary:

Each manufacturer would know that, fundamentally, Medicare must purchase all products. The Medicare "negotiator" would have no bargaining leverage, and therefore, simply allowing bargaining on its own would not lead to substantially lower prices.

At the same hearing, we had another witness. That witness was Mr. Edward Haislmaier, of the Heritage Institute. I would like to quote him from his written testimony:

[that] volume purchasing encourages manufacturer discounting, it is not, in and of itself, sufficient to extract large discounts. Manufacturers will only offer substantial discounts if the buyer combines the "carrot" of volume with the "stick" of being able to substitute one supplier's goods with those of another.

In drug negotiations, that stick is called a formulary. Plans participating in drug benefits can use that stick. Expert after expert agrees it would be difficult, if not impossible, for the Government, however, to use that stick under Medicare. In fact, in a November 2 Wall Street Journal opinion piece, Dr. Allen Enthoven, an economist at Stanford University, wrote:

When the government negotiates, its hands are tied because there are few drugs it can exclude without facing political backlash from doctors and the Medicare population, a very influential group of voters.

Let's be honest with each other. What do you think would happen in the Senate if the Center for Medicare Services, CMS, tried to cut a large drug company headquartered in New Jersey or North Carolina, for example, completely out of Part D because they wouldn't meet the Government's price demands? Would Senators from those States say something such as: Oh, well, that is just too bad? Would any of you say that if it was in your State that a manufacturer was being cut out? Again, let's be honest with each other.

What are we left with then? At the January Senate Finance Committee hearing, Professor Scott Morton said that without a formulary--the "stick," as I refer to it--the Secretary would have about as much negotiating power as you would get by calling a drug maker and saying something such as: I would like you to offer a lower price. Their answer might be: Why should I? You have to buy my drug, so why would I offer you a lower price? About all you have left after that is: Please, won't you give me a lower price? That is not going to get you very far.

If my friends on the other side of the aisle think this bill is going to achieve real savings for consumers or the Federal Government, they must have some ideas in mind. I can't believe my friends would come to the Senate floor with a bill that is truly as "do nothing" as CBO describes it.

Here is what the Congressional Budget Office said about S. 3. It would have "a negligible effect on federal spending." Another quote:

Without the authority to establish a formulary, we believe that the Secretary would not be able to encourage the use of particular drugs by Part D beneficiaries, and as a result would lack the leverage to obtain significant discounts in his negotiations with drug manufacturers.

So let me repeat that other quote: It would have "a negligible effect on federal spending."

The bill we are considering and voting on tomorrow cannot possibly be as innocuous or inconsequential as what the Congressional Budget Office said. Certainly, there must be creative ideas out there to find savings we have not considered.

Since the Finance Committee's markup of S. 3 the other night, I have been considering how a Secretary might use his imagination to find savings. One of the first places we looked at was H.R. 4, the bill that passed the Senate.

H.R. 4 struck the language in the statute that prevents the Secretary from instituting a price structure for reimbursement of covered drugs. Did the House strike the ban because they want an imaginative Secretary to use price controls as part of negotiations? Because all we have heard is they do not want price controls.

Last Thursday night, we offered an amendment to S. 3 to prevent the Secretary from using a preferred drug list, or PDLs as they are called. A preferred drug list is just a formulary under a different name. It is essentially a Government-controlled list of drugs that you can or cannot have.

While I do not think there is a difference between formularies and preferred drug lists, we have seen the courts rule that a State can use one in Medicaid even though Medicaid bans the use of formularies.

So Thursday night, we had an amendment to prevent the Secretary from using preferred drug lists. After all, we do not want the Secretary coming up with a list of drugs you can or cannot take, do we?

To my surprise, the Democrats on the committee rejected my amendment. So what is going on? Perhaps they think that having the Government establish a preferred drug list is one of the imaginative ideas a Secretary will be able to use to save money.

I think this bill is a Trojan Horse. It is dressed up as a do-nothing message bill. But before the week is out, we are going to look inside that horse and see all the bad that could be waiting to hurt beneficiaries. We will see what is bad in this bill that will hurt access and choices beneficiaries currently have in this Medicare drug benefit program.

Maintaining access and choice--access and choice--is critical because beneficiaries have different drug needs. The way the benefit is structured now is that plans can have different formularies. Some might get a good price on one drug; another might get a better price on another drug. They can have different formularies, and beneficiaries can have choices that meet their needs.

When Congress finished work on the new drug benefit in 2003, we knew it was an experiment. Nothing like this had ever been tried. Here is what we learned: Private competition works. It has been successful at keeping costs down. The 25 most used drugs by seniors cost 35 percent less. Plan bids have come in lower than expected. This year, they were down 10 percent from last year's bids.

Premiums are lower than they were estimated to be. Before 2006, Medicare's chief actuary estimated the average monthly premium would be $37, but it was actually $23 in 2006. That is 38 percent lower than expected. Because of the strong competition between plans, the average premiums for beneficiaries is expected to be about $22 in 2007, not the $39 that had been estimated.

Why? Private competition works.

The net cost to the Federal Government is also lower than expected. In January, the official Medicare actuary announced that the net 10- year cost of Part D has dropped by $189 billion over the original budget window used when the Medicare Modernization Act was enacted. That is 2004 to 2013. That is a 30-percent drop in the actual cost compared to the projection.

Why? Because private competition works.

The savings are unheard of for a Government program of any kind. Where else have you ever heard of a cost underrun in a Federal program?

The Presiding Officer: The Senator's time has expired.

Mr. Grassley: Mr. President, could I please have 4 more minutes? I ask unanimous consent for that additional time.

The Presiding Officer: Without objection, it is so ordered.

Mr. Grassley: I wish to emphasize: We have a cost underrun in a Federal program. When have you ever heard of that?

You could not get those lower prices and lower costs unless the prescription drug plans are being strong negotiators with the drug makers. States are also saving money in lower contributions, better known as "clawback" payments. State clawback payments are now projected to be $37 billion less over a 10-year period. That is 27 percent lower. Just in 2006, States saved $700 million.

Why? Because private competition is working.

The plans are negotiating lower prices for drugs. I have said so many times, for the top 25 drugs used by seniors, the Medicare prescription drug plans have been able to negotiate prices that on average are 35 percent lower than the average cash price at retail pharmacies--35 percent lower.

Why? Because private competition is working.

Here are some examples: Lipitor is 15 percent lower, Atenolol is 63 percent lower, while Fosamax is 30 percent lower. I could go on down the list.

Now, when the drug benefit was signed into law, we believed it would work and hold down costs. That is certainly happening today even more than we expected because private competition works.

We also said that if it did not work--if the negotiating model used for the drug benefit did not hold down costs--then Congress would need to reexamine things. If costs grew too fast, then the whole idea would have to be revisited.

Maybe we would have to restrict access to drugs. Maybe we would have to rely more on mail order pharmacies instead of liberal access to local retail pharmacies. Maybe more drastic cost-cutting measures would be needed.

But that is not the position we are in today. Why? Because private competition works.

I hate to sound like a broken record, but I think the naysayers out there need a little repetition therapy. Everyone has heard the old saying that "if it ain't broke, don't fix it." It certainly applies here, and the evidence shows it.

I would like to be the first one to say that the Medicare drug benefit is not perfect. There are improvements that can be made. Congress should look at ways to make it easier for low-income beneficiaries to get the additional assistance they need by reexamining the low-income subsidy asset test.

We need to look at payments to pharmacies and make some reforms in that area. We need to look at ways we can simplify the enrollment process. And there are other areas where we can make improvements.

But one area that is working very well is the negotiating power of Medicare drug plans. They have shown their ability to hold down costs. It is working.

The pleas from the naysayers to put the Government in charge of negotiating are about politics, not policy. These voices have not given up in their misguided quest to score political points with the drug benefit. It saddens me the Democratically controlled Congress has devoted so much time to this issue rather than looking at some of the improvements we can make in Part D that I mentioned.

Why they have put politics ahead of constructive changes is beyond me.

In January, I had hoped we could put politics aside and focus on some of the real improvements we could be making with the drug benefit. But, sadly, that is not the case, and that is why I am here today.

Under the drug benefit today, with the plans negotiating with drug makers and competing with each other, we have lower drug prices for beneficiaries, lower program costs for the Government--saving the taxpayers money--and prescription drug choices for beneficiaries.

Private competition works.

Mr. President, I urge my colleagues to oppose S. 3. It is a big government takeover of the private market that is working for the Medicare benefit.

I yield the floor.

The Presiding Officer: The Senator from Massachusetts is recognized.

Mr. Kerry: Mr. President, I ask unanimous consent I be permitted to proceed as in morning business for such time as I may consume.

The Presiding Officer: Without objection, it is so ordered.

Mr. Kerry: I thank the Chair.

Mr. President, let me just comment. I did not come to the floor to speak about the bill specifically. I wish to speak about the alternative minimum tax in a moment. But I cannot help, since I am a member of the committee--listening to the ranking member talk about Medicare and what the impact of allowing Medicare the possibility of being able to negotiate might or might not be--but speak to that for a moment, if I can.

I think most Americans understand, as a matter of common sense, that when an entity that represents their tax dollars has the ability to go out into the marketplace and negotiate for a price, the probability they are going to have saved tax dollars is pretty real, if there is a good and decent negotiation.

The resistance of the Senator from Iowa and others is interesting because it is a resistance that represents the power of big companies in the country--the drug companies--to sort of say: Hey, we kind of like the system the way it is--which we understand because the profits are enormous. But our job is to represent the taxpayers' dollars. Our job is also to use the marketplace thoughtfully.

I do not know what it is that suggests, on the one hand, it is legitimate for the Veterans' Administration to go out as a Government entity and negotiate a lower price for the drugs it purchases to distribute to veterans--which we do--but it is not OK for Medicare-- which is another Government program that costs the taxpayers a lot of money--to be able to go out and negotiate a lower price for seniors. It is illogical.

What they do is come in and try to scare people and say: Well, we have given this special privilege to the Veterans' Administration, but if all of a sudden we allow somebody else to negotiate it, then the veterans are not going to get as good a deal.

Well, nobody knows that until you go out into the marketplace. The Veterans' Administration and Medicare together still do not represent the entire market. You are going to have an incredible number of private citizens still purchasing through private health care plans or their HMOs or other plans--private as they are--also.

The marketplace is still going to have its capacity to work. This is not such a large block that it represents a complete and total eradication of a marketplace, No. 1. No. 2, there are other countries where you have this kind of negotiated fee for the service being provided which has worked very effectively.

I think the bottom line is that people have to remember that this legislation we are talking about does not order the Secretary to do this. It is pretty obvious under this administration it is not going to happen because they do not believe in it. All we are doing is lifting the prohibition against the Secretary doing it. So if all the negative things the Senator talks about are true, a smart Secretary is not going to do them because they are negative.

But why would you put in place a prohibition? Why do you specifically say: No, the Secretary can't go out and negotiate the price. You are stuck with the status quo. You are stuck with the current system. The reason is very simple: because it is a lot of money out of the pockets of taxpayers into the pockets of the big companies. That is it, and they are here protecting that.

This is a question of whether we are simply going to lift the prohibition, let the Secretary make the judgment. Can you go out into the market? Can you do this without hurting veterans? Can you do it without upsetting the marketplace? Can you do it and still have the kind of resources you want put into the research of new drugs and other things? I am confident a Secretary is going to make a smart decision.

It is interesting to see the people who usually spend the most time arguing in this country "don't let the government interfere" are the ones who are standing up to let the Government--excuse me, not let the Government, force the Government, in effect, to interfere with the marketplace. Actually, what they really are doing is putting in place a prohibition against the Secretary actually letting the marketplace work or testing whether the marketplace could work more effectively. In effect, we leave it in a state where the companies are dictating effectively what the price is going to be and the citizen, as a result, winds up paying an unfair burden.

We are not doing the best job possible as Government trustees of taxpayer money in taking care of that money and in representing the interests of our taxpayers. That is what is at stake here. Are you prepared to trust the discretion of the Secretary to analyze this, to look at what is best for the country, best for the delivery system, and make that judgment? All we are doing is lifting an unfair special interest prohibition to allow a full analysis of what the better alternative might be.

Alternative Minimum Tax

Mr. President, as Americans prepared their taxes this year, millions of families in Massachusetts and across the country found a very unpleasant surprise. Beyond their regular income taxes, families found another hidden income tax, which is the alternative minimum tax. It costs those families many thousands of dollars. Most taxpayers are accustomed to computing their income tax liability in the usual way: adding up their income, making whatever deductions they are entitled to, subtracting exemptions for their dependents, and then checking their tax bracket to find out how much they owe. But this year, many of those same taxpayers discovered another tax that ate up any exemptions and deductions they might have claimed. It is a hidden income tax, and it affects the wrong people. It affects people we never intended to affect, and each year that we don't address it, it grows worse.

This alternative minimum tax is a tax that made sense once upon a time. When it was first enacted in 1969, it had a rationale, but since then, it has become bloated and illogical. The tax was first put in place when Treasury Secretary Joseph Barr, during his 1 month as the shortest tenured Treasury Secretary in history, told Congress about 155 wealthy Americans who had paid no income tax in 1966. Congress was overwhelmed with mail expressing outrage that these 155 rich Americans weren't pulling their weight. In response, Congress passed the first version of the AMT. So the AMT was put in place to address Americans' concerns with 155 of the richest Americans at a time when 155 represented a large block of those who were among the wealthiest Americans. Urging tax reform, Secretary Barr coined the phrase "taxpayers' revolt" and that is exactly what we are likely to see unless we get this right now.

In 1970, 20,000 taxpayers were affected by the alternative minimum tax. This year, about 4 million Americans will pay it, and next year that number could rise to 23 million Americans. What was originally a small fix at the edge of our Tax Code has now ballooned into a massive inconvenience and unfairness at the center of our Tax Code. Instead of serving its original purpose, the tax cuts we saw passed into law a few years ago, illogical and deceptive as they were, are winding up targeting the very people we are supposed to be helping. The very people we hear most of the rhetoric about--those who need help in America and the middle class being unfairly taxed--are the very people who are being unfairly taxed by this hidden tax people don't want to talk about. The fact is the middle class has seen an enormous shift in the burden away from the wealthiest Americans onto the middle class, the very people the AMT was designed to protect.

The AMT is now poised to make a dramatic shift from the wealthy to the middle class. In 2006, taxpayers earning more than half a million dollars will pay 47 percent of the tax. By 2010, that number will drop to 16 percent. We are going to go from 47 percent of the people who earn more than half a million dollars who are supposed to be the targets of the alternative minimum tax--that will drop to 16 percent-- and the people who are going to pick up the difference are going to be Americans in the middle class who are struggling with increasing tuition costs, increasing energy costs, increasing health care costs, and wages that are either frozen or going down. Meanwhile, investment income will not be impacted by the alternative minimum tax, and the top alternative minimum tax rate is lower than the top marginal tax rate, which is what people pay on their income.

So a tax designed to cover or apply to the wealthiest Americans has become a solidly middle-class tax.

This tax also punishes certain States in our country more than other States, and particularly a State such as mine--Massachusetts--but other States in the Northeast and large industrial States. In 2007, 24 percent of Massachusetts taxpayers, up from about 5 percent last year, will be hit by the alternative minimum tax, so that Massachusetts will be No. 4 in the rankings of all the States in the country. I don't think we ought to be putting an undue burden on the middle class, and we certainly shouldn't be putting one unfairly on certain States while other States are exempt.

Worse still, the tax penalizes families with children because it eliminates any dependent exemptions. So here we are talking about family values, but the family values are stripped away for those middle-class families because they lose their exemptions for their dependents.

In 2007, the alternative minimum tax will impact a family with four children and an income of $57,000. Married couples will be more than 12 times as likely as singles to face the alternative minimum tax in 2010. So those of us who argued strongly about the marriage penalty need to note that the marriage penalty is, in fact, growing larger as a consequence of the alternative minimum tax. We wrote the exemptions that we had specifically to help families to get away from that problem, and my question is, do we now want to burden them with this additional tax.

President Bush has acknowledged, at least rhetorically, this is a failed policy. There is room for bipartisanship here. Congress and the President need to work together to address what has become a major structural problem in our Tax Code. I commend my colleague from Massachusetts, Congressman Neal, who is working in the House on this issue and showing important leadership in order to try to address it, and I look forward to seeing his proposal.

In fixing this tax, there are two major pitfalls we have to avoid. The first is: Don't simply repeal the tax without paying for it. We can't afford to do that, and it is clearly not fiscally responsible. Finally, it doesn't solve the problem. Second, we need to find a permanent solution. The alternative minimum tax itself was originally a small fix for a different tax issue. It is the accumulation over time of stopgap measures that has brought us to the current problem. So I don't believe it serves us well at all to push this issue down the road, as has been the practice of the Congress in these last years.

We also need to make the tax policy of our country simpler and more straightforward and fill it with a little more common sense and a little less special interests. Our tax problem as a nation was, in fact, made significantly worse by the Bush tax cuts, and the alternative minimum tax has been used quietly, more and more, to ask middle-class families to pay the burden of the wealthiest Americans' tax cut.

We can all agree the main reason this tax has grown out of proportion is that it wasn't indexed to inflation. The same money we talk about today went an awful lot farther in 1970. The movies back then cost $1.65. The fact is we haven't adjusted the tax brackets to rise with inflation.

Another major problem has been the alternative minimum tax interaction with the Bush tax cuts. This administration and the Republican Congress purposefully allowed the tax system to become unbalanced. This was done in order to hide the true cost of the tax cuts. Normally, sound tax policy involves changing the alternative minimum tax to reflect changes in regular tax cuts. For example, in 1993, we raised rates for both taxes simultaneously. But under this President, in 2001 and in 2003 and in 2004, we cut the regular income tax rate without making corresponding significant changes in the AMT. Instead of paying upfront through the regular income tax, this administration used the AMT to finance tax cuts for the very people the AMT was designed to tax. The AMT quietly takes back a portion of the Bush tax cuts by 2010, about 29 percent, transferring the tax burden from the top tax brackets to largely middle-class tax families.

If we had a vote on the floor of the Senate which specifically said: Are you going to tax middle-class families in order to pay for a wealthy tax cut and shift the burden by about 29 percent, almost everybody here would vote no. So it is the hidden tax cut that has the impact. Before the Bush tax cuts, 17 million taxpayers would have been affected by the alternative minimum tax in 2010, but with the Bush tax cuts, that number almost doubles to 31 million. If we let the Bush tax cuts expire in 2011, at least the number of AMT taxpayers would drop dramatically. I am confident that will be an important debate down the road here. In 2007, a family with 2 children and an income of $80,000 will see 59 percent of their tax cut taken back by the alternative minimum tax. Tom Waits, the 1970s singer and songwriter, once said the large print giveth and the small print taketh away. Well, the small print, my friends, is the alternative minimum tax, and it is taking away America's families' tax savings.

We need to be honest about the cost of our tax cuts. Back in 2001, I tried to offer an amendment that exempted all taxpayers with incomes under $100,000 from the AMT. At that time I warned that the AMT is encroaching on middle-class taxpayers and that the tax cuts would only make things worse. The fix for the AMT problem at that time was estimated to cost $110 billion over 10 years, money that instead is now being paid by middle-class families. The amendment at that time was revenue neutral. It offset the cost by delaying some of the Bush tax cuts. It cut the 39.6 rate down to 37 percent, instead of 35, but unfortunately, the amendment failed.

I don't believe we can continue to put this problem off. Unless we reform our tax system for the sake of middle-class families--and we simply can't afford not to reform it--we are going to pay one way or the other, with the debt that is passed on to our children or with taxes passed on from the wealthiest to an ever-growing part of the middle class. We need a bipartisan, fiscally responsible, permanent approach, not one that masks the costs of irresponsible cuts or becomes a burden for the middle class, and not one that gives more and more families an unpleasant surprise on tax day.

Mr. President, I yield the floor.