states had it, u.s. and that a majority of the commissioners would recommend it to be included and then it would be included. that is what i thought. i have never had any discussion on it. -- you and i have never had any discussion on it. .

i am very confident, mr. chairman, that if this committee does embrace this, we will have this debate on the floor of the senate with a different makeup, if you will, but this amendment is based on what was put into the help committee's mark, actually, their final one. about the free rider provision that is indeed mark, one of the things -- that is in the omark, discriminating against low- income workers, and it sets up the penalty. there is a pay system, and there is the free rider fee, as it is

called, but it is going to be based on what that person can do for themselves and the individual mandate based on their income, and the lawyers are perhaps going to -- and employers are going to perhaps think about that when hiring people, their income level, etc., etc.. now, the mark that you have, mr. chairman, does not include an employer mandate, so you have designed this free rider fee that applies to employeers with 50 employees, and they would be required to pay a fee. the fee is capped at an amount equal to $400, multiplied by the total number of employees in that firm. what my amendment does is

strikes a free-rder fee and replaces it with an employer mandate. for an importer that does not offer coverage, there rigby and excise the for each full-time employee and three under $75 for each part time employee, and the forest 25 -- the first 25 employees are exempt, so we are not talking about the smallest of small businesses. i used to cheer the small business committee, working very closely with senator snowe, trying to get some kind of capacity for small business to have health insurance, and i am fully cognizant -- i used to chair the small business committee.

i think this will it -- we works, and i will speak to that in a minute. the amount of the excise fee will be pro rated with respect to each month that an employee is without coverage, so it is not an automatic full-fledged feet because we know americans did not have coverage for a certain amount of time. it is pro rated to the amount of time that it would not have that coverage. if we are requiring individuals to be covered, we also have to address the other side of the equation, and i think you have got to require employers to offer insurance. but me just say. we have more than 160 million americans who get their health

insurance from an employe year. we decided during the course at the library of congress, and through all of the white papers, etc., that the employer based health insurance system in america is the cornerstone of our health-care system, and so what we want to do is preserve and build that. the truth is, employers insurance is eroding. as costs increase, more employers are dropping coverage and shifting costs to workers. there is not a worker that can go to one of these town halls. asked if you have had your benefits cut or if you have that your premiums go up or your copay stop without an affirmative answer to every one of those questions -- or your copay is up -- copays go up.

so everyone is feeling the pain of this, the employer, the employee, and the system that has to pick up them when they get dropped, and that cost of picking them up when they get dropped or do not have coverage in the first place gets distributed in a completely haphazard, unfair, cost das-shig away. you pick some of it up in medicaid and the private premiums that people pay. some people are unfairly shouldering the burden for other workers to cannot get health

insurance through their jobs. it actually adds $1,100 to the cost of premiums for everybody else. so the people who have insurance today are paying a higher premium to the tune of $1,100 because we do not effectively share these costs throughout the system. insurance is a hedge against something happening. that is not, in effect, what we do in the health-care system. ob/gyn, a brain surgeon, a specialist -- ob/gyn, brain surgeon, specialists end up paying more. if you are a homeowner in america, your homeowner fees are

spread actuarially through the whole system, risk of burning down, etc., and everyone else's fees are set on the basis. the same thing for car insurance. it is legitimate insurance. everybody pays the fee. we do not do that in the health care system. we want to make it more affordable for you to cover your workers. if you do not make it so you cover your workers, the and you have to provide part of the cost with providing them with decent insurance, and what we call this a shared responsibility. it is, in fact, increase in the concept of a free rider fee but not in a way that is going to provide the kind of certainty and breadth of coverage to the employer-provided system that the country needs.

we agreed to increase the cost of health insurance in america. $750 for each full-time worker, three tenths of $5 for a part- timer -- $375 for a part-timer. you can save money for everyone. why do i say that? because it is precisely what we're doing in massachusetts today. there is the director of the massachusetts business roundtable. the businesses in our state sign

onto it. the president and ceo of the greater boston chamber of commerce. our chamber of commerce signed onto this, and finally, the present ceo of the associated industries of massachusetts, in here is what they say to us. our four groups wanted to take strong support for health reform in massachusetts. this is shared responsibility among all parties, including the government. the key to the success is the combination of the individual m&a and brought employer mandate, as well as public subsidies for those who cannot afford coverage. in addition, in order to care for the small number of individuals who do not have health insurance, employers who

do not provide a minimum level of coverage are assessed and animal feed of $295 per employee. -- an annual fee of 2 ledroit $95 per employee. many have enrolled in employer coverage. i would say, mr. chairman, the market includes a penalty for individuals between 100% and 100 -- 300% of the poverty level and a different amount for others, so the penalty for families --

we are penalizing families, and we are not sharing responsibility in asking employers to strengthen what does work for 160 million americans. i think we can do better for that -- than that. this would provide a regular process of information, and that is time and cost. i think it is far more effective to strengthen the whole system. >> that is two minutes left. on the first vote. >> i appreciate your listening. i think senator bingaman may want to speak to this. >> ok, we are not going to

return until about 7:00. so we will reconvene at 7:00. >> thank you. i appreciated. -- appreciate it. my intention is to have this debate on the floor of the senate. >> ok. >> that is an oblique way of saying yes. ok. we will recess until 7:00. [captions copyright national cable satellite corp. 2009] [captioning performed by national captioning institute]

>> members of the finance committee taking a break. when asked about the committee's schedule over the next several days, senator baucus said the committee would continue to work late into the evening tonight and into tomorrow and assess where they are, but the committee is expected back for more debate and amendments at 7:00 p.m. eastern time. we will have more live coverage when they return here on c-span. earlier today, the committee rejected an amendment that would require drug manufacturers to give rebates for of medications used for low- income seniors under medicare part b. here is that.

>> this is an amendment that would produce over $106 million in revenue. it will allow us to fill the doughnut hole, and it will have, according to the cbo numbers, $50 billion left over after we fill the doughnut hole. is, to go back to the previous law, -- it is, to go back to the previous law, which six years ago allowed those who receive drugs from medicaid and had a discount offered to them by the pharmaceutical companies that is that medicaid-eligible person was also a medicare recipient,

that they would have the advantage of having those drugs under medicare at the same lower-priced because of the rebates -- of being medicaid eligible. we got the score from cbo yesterday, and, specifically, they said to us it fills the doughnut hole over and above what the chairman has already filled the doughnut hole with his mark. it feels it completely, and, by the way, that affects 17.5 million senior citizens that get their drugs under part d, part d medicare.

if you are in medicate person, you are one of 7.5 million also qualify for medicare, because the law was changed six years ago with the medicare prescription drug benefit, you cannot get this cheap drugs if you are getting them under medicare that you're entitled to under medicaid. that is wrong, -- i know it is

going to be a very difficult and close vote in this committee. there is a chance it is not going to prevail here. it might get support once it comes to the floor. if it is not a part of this.

here is clearly a place. there are some m&a feel that is not the case. medicaid and medicare eligible. this will lower the price of those drugs. -- there are some may feel that is not the case. -- some who may feel is not the case -- it is not the case. that gap between 2650 $500, called the donuts poll, that they do not get any support --

that gap between $2,600 and $500, called the donuts poll -- donut hole, that they do not get any support. i will reserve time as we go on into this argument to rebut the arguments that the very distinguished senator from iowa is going to make about how he thinks this is going to raise the price of prescription drugs, and i will be happy to rabat. >> senator grassley. >> well, first of all, you ought to know that if they're going to be involved in that deal, they are not going to do it, so i am cynical about any deal, and as a member of the group of six, i maybe ought to make it clear that i as not at any table when any negotiations were made with pharma.

i hope you understand that, and i would also like people to have a little patience with me because i did not say much tuesday night when this was debated, and i was not mad at anybody. i raised my voice. that is just the way i get sometimes, but i would go into some detail, and i would ask the senators from west virginia and florida to pay some attention to what i have to say, but i am surely glad we are revisiting this issue because i think some things need to be cleared up. first, everyone should recognize that political opponents of the drug benefit have tried to tear the benefit apart since day 15 or six years ago. these naysayers want a government-run benefit with the federal government dictating drug prices. thankfully, for the benefit of seniors, the naysayers have lost, but that has not stopped them from constant effort to tear apart and undermine the

drug benefits that we did pass. first, they said there would be no prescription-drug plans. then, when that did not happen, they said that there were too many plants. then they said that it was too confusing -- there were too many plans seniors have enrolled, and surveys show that they're very satisfied. the part d program is working for seniors and, by the way, working for the federal government and has probably helped more people in the state of florida than anywhere else. 27 million medicare beneficiaries have joined medicare part d. this means over 90% of medicare beneficiaries now have prescription drug coverage, quite a bit different from the period prior to 2004.

according to cms, plan premiums, is lower than biracially estimated, and the overall cost of the program is $237 billion or 37% less than the cbo's originally thought it would be. how many federal programs, and under what they are projected to be? every government program always has cost overruns, not cost underruns, and it seems seniors are happy. a "the wall street journal" online interactive pol pot shows that many are satisfied. now, tuesday evening, tuesday evening -- and online interactive poll shows that many are satisfied.

this would go back to the way it was before part d. the implication was that some injustice was done to do will eligibles by putting this into part -- to do all -- dual eligibles. you may be wondering how did drug coverage for they duals end up in part d anyway? in the process of setting the record straight, this is what i would like to relate to you about a little bit of history. background. they dual eligibles, i think everybody knows this, but let me just repeat this, they are eligible for both medicare and medicaid, and the medicare covers prescription drug coverage, so they proceeded

through state medicaid programs prior to 2003. in 2003 now, the regional bipartisan senate bill that created the new benefit was focused on providing drug coverage for people, can you believe it, that did not have drug coverage. following that principle, coverage for doyle eligibles was kept in medicaid -- for dual eligibles. this is when i was chairman. at that time, senator baucus and i, offered the senate bill, and, of course, it passed with strong bipartisan support. and also on the floor, the senator from west virginia was sharply critical of the decision to leave drug coverage for duals

where it was right there in medicaid. he offered an amendment on the committee and on the floor to move their drug coverage to part d, but that amendment was defeated in committee by a vote of 7-14 and on the floor by a vote of 47-51. now, there is an important point here, and that amendment championed by the senator from west virginia and by so many on that side of the aisle did not call for creating a medicare rebate program in part d, not at all. that amendment called for moving dual eligibles to the part d program and into the competitive model for drug prices, and, ultimately, senator rockefeller prevailed in these arguments because in the final conference report for medicare modernization act, it included the dual eligibles in the new

medicare drug benefit, as a do not give up on senator rockefeller if he loses in a couple of instances ahead of time. he eventually wins out in the ends. the argument was that medicare did not cover dual eligibles, bangladesh income beneficiaries would not have the same covered options as other beneficiaries, and the medicare part d benefits is much better than what the duals were getting in medicaid. many have stricter limits on what to get filled each month. that is not the case. there is no limit per month. they can pick the plan that is best for them.

the dual eligibles do not face a doughnut in their coverage, so the idea that the duaql eligibles were affected is revisionist history, honand it s interesting because we champion and moving them into part d in the first place, so that is the story about duals, and i am sorry to take up so much time, but it is important to set the record straight. now, on the gap in coverage, we could debate that four days. i am not going to do that. i am not happy that there is a gap in coverage. we work to maximize this in the

medicare modernization act so that it provided the best coverage possible while remaining within the allotted budget of that time, and that we minimize the gap to the greatest extent possible. they may be one of 8 million have additional recovered from retiree health plans that were

preserved under that act of 2003, or they might be part of the 6 million that of coverage from another source, like tricare or the federal employee health benefits program. some -- the gap in coverage. there is nothing wrong with the goal of the amendment, but eliminating the gap in coverage by implementing government price controls, and this is disguised, i hope you understand, by the word rebate.

there was a recent report that stated that a disadvantage of the rebates to part d is that over time, manufacturers would partially offset the rebates by charging higher prices for new drugs. cbo also said, quote, another disadvantage is that premiums could increase as a result of the decrease negotiated, and lastly, the cbo said that this policy might reduce the amount of funds invested in research and development of new products. this was all confirmed in a recent letter to cbo to the ranking member of the ways and means committee regarding the part d changes in the health reform bill, and i hope you understand closing the doughnut

hole would result in a 20% increase in premiums. i thought that this whole debate we're having this week about health reform was that we would lower costs for people, but always seem to be doing is raising prices through new fees, penalties, and rebates, but this is not the end of the problem that would be created by instituting a rebate program in part d, and as i said tuesday night, part d beneficiaries are not the on the people who would see their drug prices go up even further if the program is created, adding government price controls in part d driving up prices for people with private insurance, early retirees, kids,

people with chronic conditions. it will drive up prices for small business. it will even drive up prescription prices for other singers who are in retiring drug programs. we had a doctor, it was a respected young economist, testified before this committee -- a well respected yale economist, testified -- testify before this committee. remember that medicare is such a large purchaser of drugs that she said, quote, its prices are the average prices. her observation was, again, and i am quoting, if you are half of the market, you cannot get below average price. she went on to say that, quote,

seeking a prices is a good deal, -- seeking low-price is is a good deal, but thinking seniors are going to get a discount is not charismatic possible, which is not charismatic lead -- is not our arithmetically possible. a drawback to the size of part d is that the pricing becomes essentially impossible. part d is such a big purchaser that a price scheme does not work, according to the yale professor. she explained very clearly why this is the case. the reason is because part d is a big -- is so big, if the government requires a fixed

discount off of the price everyone pays, then manufacture rules will prefer to raise prices to everyone else rather than to sell medicare at a low price, said that is why they will do that, said that is what they will do. it would drive up everybody else's prices. there is the oversight of the food and drug demonstration. you also know that i cannot be considered to be a friend of the pharmaceutical industry, and you also know i have been a leading advocate for oversight of the drug companies, so i am not trying to do anybody any favors here. in fact, what we ought to do is lay out what works. if it ain't broke, do not fix it, and with the chairman has been involved in closing donut holes, we have been making rapid

progress, and we ought to continue down that road. i yield. >> mr. chairman, i mean to respond. >> senator rockefeller wants recognition, too. >> and then i want to hear from others. i am not sure i followed senator grassley's comments, because in this case, rebates in the chairman's mark our mandated -- are mandated at 15% to 23%. why there should not be that same rebate to lower the cost of drugs for medicare recipients, it simply does not make sense.

why should not in medicare recipient get the same drug prices as a medicaid recipient? now, that is the philosophical question here. now, the philosophical question is, do you want 44 million medicare recipients. this is translated into the rebates for the drugs. the nelsen amendment only applies to the dual eligibles.

the rebates do not go to them. they go to medicare -- the nelson amendment. medicare can use that money however it once. i am suggesting that one way they ought to do it is to close the doughnut hole, which helps everybody in medicare part d, 17.5 million senior citizens. i am not saying what you do with this you could take $50 billion and lower the whole price of the bill. you can apply it to the deficit of the united states government. you could apply it to different things that you have talked about here that you need.

i would certainly like to see some of applied to this amendment that i have coming, which is $26 billion, on grandfather and all of the medicare advantage, the medicare hmo recipients. so the philosophical question here is very clear. -- on grandfathering all of the medicare advantage. i just do not think that philosophically medicare recipients ought to be paying more for their drugs than medicaid recipients. i applaud pharma. what we need to do is encourage their research. we are the beneficiaries of the miracles of modern medicine. this has nothing to do with that. this has to do with to retreat senior citizens the same?

thank you, mr. chairman. >> senator rockefeller. >> two segments to this. first of all, i strongly support the nelson amendment and his expression of rapture as he talks about it. it should lift us all, because the amendment is that good, and the $50 billion, you know, chuck schumer wants to take and apply to hospitals in new york city -- am i right? and elsewhere? just a little bit? ok. anyway, it rebates that we're talking about, and i am not going to do revisionist history. i am not good at revisionist history. these were in place prior to the part d drug benefit. am i correct?

i did not vote for them when that came up. i did not vote for that, but you're m&a would help precisely what i was trying to do, as the ranking members of grich as the pointed out. there are the dual eligibles which i have long championed -- but your amendment would help precisely what i was trying to do. i have argued this, as i mentioned earlier and the other day here to president bush when he was president, because he had promised that southern illinois state university to make sure that they would be covered by prescription drugs. they were not. that was one of the reasons i voted against it. what this amendment would do

would be to help this most vulnerable part of our population. and i have to say that the part d program is not working for these. i have a bill, too, that fixes the program, but, we will see. if the senator's prevails, that may not be necessary. it is a one-two punch on dual eligibles. i do not like it. the chairman is obvious beginning in st. -- obviously getting antsy. >> do what you want to do.

>> no, senator grassley is a good friend of mine. is just on the wrong side of this issue. -- he is just on the wrong side of this issue. >> i would like to have a vote on this. >> mr. chairman, could we ask the staff -- i am told that there is no doughnut hole for dual eligibles. i have been told that by several experts. can we have somebody who is not sitting at this table to answer that? >> ok. >> and if they do, can they -- >> so the when the benefit is structured, the folks who are eligible for medicare and medicaid, their costs are covered. they have to pay a flat to a payment of $1 for generics and

$3 for brand-name drugs. >> so they do not have a donuts poll? -- a doughnut hole? >> with my colleague yield on that one point? is it not true that low-income seniors did not have a doughnut hole before? this is not about whether or not they have that. >> the point that senator nelson is making -- >> will the senator yield? >> ok. i just wanted to make sure. many make my point then.

dual eligibles, we have established that. we all agree. do you get a rebate like you would get in medicaid? let me make my point? my point is here, several. one is that if you require now through medicaid or whatever this, quote, rebates, which is basically a tax on the pharmaceutical companies, there are a couple of things that are going to happen there. one is that they can shift costs to non medicare recipients, the rest of america, the younger people, by the way, the younger people paying for the prescription drug benefits that seniors are receiving today that they never paid for. it was an additional benefit that young people are currently paying. this was a wealth transfer payment to senior citizens.

i believe we should have taken care of senior citizens, but that is a fact. we should have taken care of senior citizens know that only truly needed it and not done it for all seniors. the reason i object actually to closing the doughnut hole is this is more of it will transfer. this is from the younger generation -- this is more of a wealth transfer. they will pay higher drug prices, or, 3, they will not have the drugs available because that money has got to come from someplace. they will have to pay more in the future.

we have to be fair. when you talk about giving an extra benefit by charging the drug companies, we have to be fair on what that extra charges going to do. >> mr. chairman? >> senator méndez. >> thank you, mr. chairman. i appreciate what senator nelson is trying to accomplish, and i do not think anyone of us once a hole -- wants a hole in the coverage. while he says this is not his purpose, there is a lot of talk that it would seem it is its purpose. i knowledge that he says it is not his purpose, but dual eligible beneficiaries and other low-income beneficiaries have no coverage gap, no coverage gap, and low copayments. so in essence, what we're doing is talking about taking that

universe, and particularly as it relates to as we move them into part d and gave them the full benefits that they are, in fact, have no gap, that we move them out of medicaid, moved them into medicare part d, gave them the full benefit so that they would not have a gap, and going back and say we should now charging drug companies for what was previously that medicaid rebate and add that to the equation, and certainly, medicaid is certainly a much more stricter formulary than medicare part d, so this amendment, while is well intentioned, would do nothing to improve the drug coverage for certainly those dual eligible medicare beneficiaries. they have no doughnut hole. it would do nothing for other low-income beneficiaries, as

those with incomes below 150% of the level, and they have no donut hole, and yet, they would pay rebates at the company's fourth sales at the beneficiaries -- at the companies for sales for the beneficiaries. the companies are already paying rebates on sales to all, all, medicare beneficiaries. they are paid directly to the medicare prescription drug plan, and under the law that created the medicare drug benefit, these rebates can be greater than the rebate that companies pay under medicaid. and the result of that, according to the cbo and cms. these rebates had exceeded what was expected when the drug benefit was created, and that is a big reason that the drug benefit has cost billions of dollars less than projected, and

beneficiary premiums have also been lower-than-expected. so i looked at the chairman's mark, and i see good progress being made on closing the doughnut hole. it requires, requires, does not ask, it requires the pharmaceutical companies to pay a percentage of the drug costs in the doughnut hole. that is not insignificant. in fact, it is more than double the level of the medicaid rebates this amendment seeks to impose. if the amendment passes, the better, it would add another 23% or more rebate to the 50% sign that the chairman's mark already mandates, so we're talking about almost a 75% increase. so, like others, i would like to see the doughnut hole closed completely, however, to compile one mandatory rebate on another mandatory discount is, well, to say the least, piling on.

finally, let me just say under this amendment, manufacturers pay once by lowering the prices they charge to be part b -- d insurers and twice a mandated medicaid price control. on top of that, this amendment does not strip away the significant increases to the medicaid rebate that were included as part of the chairman's mark. that means manufacturers would pay billions more for medicare beneficiaries who are not also in the medicare program, premiums could increase for all

medicare part d eligibles excess for the duals. this may very well undermine the essence of this agreement and put us in a position that makes it very difficult to move forward. i would love to work with the gentleman on the floor to try to achieve what he wants, but i think this is -- the way in which he seeks to achieve this goal is not one to begin certainly support. but it is one that is dangerous to the overall goal. >> mr. chairman? >> mr. chairman, we have talked both about the senator's amendment and asa about the prescription drug -- and also about the prescription drug program overall, and i am not going to get in the construction drug plan. we are all people of goodwill working on that. i have a different perspective on the outcome of that, but i do want to talk about the senator's

amendment and also from my perspective, to say that this is not about an agreement or deal made with the white house, because i believe this is separate from that. it is simply time to fix a problem and address the excessive costs, which is what we're trying to do through the whole bill. this is about looking for ways to create more efficiencies and to be able to cut excess costs out so that we can put it towards increased services for people. there was no gap in service. they got the drugs that they were needed. the prescription drug bill passes.

, and some may have increases, but, in general, is about the same. but one thing is different. there is $100 billion, if the senator from florida is correct, $100 billion more in costs. so it is not that seniors got a better deal. low-income seniors in nursing homes when from medicaid to medicare. it is not that their coverage changed. is that the cost to the taxpayer in the system changed, and that is my concern. they will see a gap in their coverage, and for many, a tremendous concern. one week ago, the kaiser foundation found that 15% of people with chronic conditions stopped taking their drugs completely when they are in that

gap of coverage, and there are all different kinds of analyses that have been done, but because the decision was made to pay more for folks who were getting the same coverage, the same help, all of the other seniors have to pay more, because they cannot have their medicines covered, and there is a gap in coverage that we now call the doughnut hole. that is my concern. that is fundamentally what this is about. it is not about the broader question surrounding medicare prescription drugs. it is about whether or not a group of people in my judgment who should have been kept in their former system should go back to that because we now know it is costing more at a time when the medicare trust fund has great strains on it. we have heard people talking about it at a time when we cannot provide complete coverage for people who are under the

traditional prescription drug program. why in the world would we not save the dollars went for those seniors, it is the same. it is, in fact, the same. now, it just costs over $100 billion more, so i think the senator's amendment is a right one, and i strongly support it. >> mr. chairman? >> senator schumer. >> thank you, mr. chairman, and i think all of my colleagues for the argument here, -- i thank all of my colleagues, which i think is a good argument. this was touched on by those on the other side. first is that the present system works because the competitive model works. i would certainly concede it works better than most people thought, and the fact that you say, senator grassley, it is 200 $30 billion, or whatever it was, some large number, it shows it is working better than some

people thought. there is no question about it. but there is also no question about it that it still brings in a higher price to the taxpayers for the u.s. government and the proposal made by senator nelson, because the cbo says even with the billions in savings, if you did it his way, it would be $106 billion, i think it is, $106 billion lower? and the fact of the matter is, in some drugs, the competitive model produces competition. in many models, it does not. first, there are many drugs that are patented, so you have no competition by definition. seconds, for some that are not patented, there are unique usages. it is a drug that affects all a small number of people, and there are not many drugs out there, perhaps one, perhaps two, and there is not much competition, and you do not have much price competition, and third, people have unique needs.

i take lipitor. they put me on the generic, and my cholesterol went back up, and they put me back on lipitor, and it went back down. i am sorry. they are a new york company. so the bottom line is in lots of places, the pure competitive model does not work in the pharmaceutical industry. .

>> maybe it will mostly go to advertising. i do not know. there is no direct link. there is no certain link. i really do not buy that argument if competition produced lower prices, pharma would be for changing it. their job is to get as good a price they can. that is how they represent their sharp -- their stockholders. we represent our stockholders, the taxpayer. if you are a fiscal conservative, would you should do is vote for this. then say, we will take the $106 billion and put it toward deficit reduction if you believe in a more robust bill, we could take the money and use it for affordability or the doughnut hole. secondly, my good friend from new jersey has said this does not affect the dual eligibles.

it does not benefit them it is not supposed to. they did find under the medicaid reimbursement. we're not saying that medicaid recipients below 65, the system is broken. that is the system that they would all go back to permit it is not broken. it is working. the pharmaceutical industry gets paid a $106 billion less to do it, but it is not depriving people of their drugs. nor is this amendment intended to deal with them. they are doing fine. i have always believed that our politics and particularly on the democratic side should not divide the poor from the middle class. it is the middle class who have trouble right now. they have the doughnut hole. they do not get paid all the way the way that the dual eligibles

do. why not take this money can't do that? if you do not believe in doing that, and you something else. so, there are two arguments. one, this saves the government a whole lot of money. that is the taxpayers, by doing it this way if you do not do it, the benefits -- they are not as direct. we do not know how much would go into pharmaceutical research. second, this amendment is aimed not at benefiting the poor who have a good program in medicaid. it is aimed at helping middle- class seniors. with what ever is leftover, which seems to be growing every day, cbo estimates, we could use for other things as well i am in strong support of the amendment. i hope it will pass either here or on the floor.

>> thank you, mr. chairman. i think we had a robust debate here. like most people on this panel, i want to close a door on a vote sooner rather than later. i do not know how many of us voted for the part de program. i voted for it. i think it has exceeded its expectations. 95% of the people who participated in it like the program. we use private providers. the competition works. i want to ask a question, if i could. the question is, i want to come to the issue of whether or not people are eligible for medicare -- duke the dual eligibles see an increase when they moved to the party plan?

>> not generally. the medicaid coverage that they had -- some states had minimal cost sharing of a dollar prescription. when they moved to the medicare part b program, it is pretty much on average -- the cost estimate is about the same. to them, it was similar. >> thank you. i do not know if the point has been made thus far. as i understand it, in some states, there are medicaid problems where they provide a prescription benefit where they limit the number of prescriptions, maybe three, four, or five prescriptions that they could get. my mother lived in florida until shortly before her death. does that sound about right? >> that is true.

before the drug benefit, there was a trend that had started in the program to limit the number of prescriptions that those people received. >> it is not uncommon for people to reach those ages and they are using more than four different prescriptions. unfortunately, some of them worked against each other that is something we will hopefully address in this legislation. the first point is that it works well for people to happen to be of lower income. the second question is an inequity question. what is a fair contribution for the pharmaceutical industry to make this health care legislation? i just want to mention again, as i understand it, hospitals costs

make up roughly 40% of medical costs. is that about right? my understanding is that pharmaceutical costs take up roughly 10% of medical costs. is that about right? i realize that some of the hospitals are nonprofit. some of the hospitals are for profit. if you think about hospitals comprising 40% of the cost, that is a difference of about three to one. let's say that even half the hospitals were nonprofit. i think that is roughly right. it would be like, if we are looking at for-profit hospitals, it would be 1.5 to one.

the deal that the administration negotiated, the $80 billion for pharma, frankly, as an equity matter, i do not think they are far off the mark. i was not part of the negotiation. if you do the math and run out the numbers, in terms of equity to farma and hospitals, it is not far off. let me talk about unintended consequences. some have said that this is like a balloon. in terms of their ability to invest, that is what we will hear from them. i think there is another unintended consequence. if this amendment is adopted, i

think it might undermine our ability to pass comprehensive health care reform in this committee. at a time when we have an historic opportunity to do three things that we desperately need to do -- one, reduced the deficit, too, reduce the growth in health-care costs, and three, extend coverage to more people who do not have it, i think we undermine our ability to do that. thank you. >> are we about ready to vote? senator menendez? >> i listened to my colleagues. just a couple of points. my understanding is, there was no mandatory drug coverage under

medicaid. is that correct? >> that is correct. >> in essence, those who were moved into medicare part the got a very significant benefit. >> said determine mendez, a prescription drug coverage is optional under medicaid. it has been since before party. every state provided drug coverages to the eligibles. >> was there not a very restrictive formula? >> when i go to senator schuler's comments, if we look back on the medicaid process and the limitations in those states of what number of prescriptions you could have, it is like

talking between na porsche and a ford. at the end of the day, i think they are very different. we had no mandatory coverage under medicaid. we had a very prescriptive formula. that makes a fundamental difference in what we are looking at here and what the chairman is pursuing by making a very significant coverage of the gap. >> are we about ready to vote here? and >> i agree, but you are going to let me close on my amendment, argued? >> could i say something before he closes? >> senator grassley. >> i am not a pharmacist or a doctor, but 10 years ago, they wanted me to take one of those drugs you had. i was not going to do it.

you'll find out that omega pills will do the same good. my cholesterol came way down. so, if you want me to get it, i will bring you the pills tomorrow. >> grapefruit might do the same thing for you. >> how about a pastrami sandwich? how would that do? >> several other people have made the same point. that is the $106 billion. it is cost shifting to middle- class people, senator schumer. middle-class people are going to end up paying for this. if you want to save the middle class, do not shift the cost on to them. now that we have dual eligible

settled, i would hope that senator rockefeller will say that they are not getting a sucker punch any more. >> i think we are ready to vote. i want to close the doughnut hole just as much as everybody here. we have to find some other way to close the doughnut hole. frankly, i wish the centered not push this amendment because it would not pass. i am a little concerned about some of the additional costs that are passed on. senator carper has pointed out a portion.

the industry will pay 50% of the doughnut hole. that is underestimating it. i am going to have to not vote for this because i think while the goal is good, the way of closing it is inappropriate. are we ready for a vote? >> me i close on my amendment? >> absolutely. >> i could read but each one of these arguments. i will not go into it with great detail. it when you were comparing the profit margins of hospitals to those of pharmaceutical companies, there is no comparison. so, i would say that the comparison that the good senator from delaware had offered is not a legitimate one. when you start getting into the details of the dual eligibles, i could have offered an amendment that would have the 23% rebate

on all medicare part d beneficiaries, and 17.5 million. guess what the revenue would have been from that? that would have been well over $250 billion. i wanted to go with the theory that we would go back to the lock that it was previously so that we're just dealing with the universe of 7.5 million dual eligibles. do not let that get confused about the rebates. 23% rebate would be symmetrical with existing law and the chairman's mark on the rebates for medicaid. that is not the only place where the government gets discounts or rebates.

look at the drugs in the veterans administration. look at the drugs in the department of defense. don't you think that bulk purchasing power has something to do with this? we precluded ourselves from that with regard to medicare beneficiaries when it came to the passage of the prescription drug -- prescription drug bills six years ago. i simply do not think that is right. i think this is an opportunity to bring some of that revenue back to the taxpayer in the form of medicare. thank you, mr. chairman. >> ok. the clerk will call the role of the nelson amendment. >> the nelson amendment failed in a 13-10 vote. the finance committee is expected back here on amendments

to the health care bill at about 40 minutes. one of the toughest democrats to corral in the senate confirmed today that he is not committed to helping his party block a republican filibuster against health care legislation. senator ben nelson has long been a skeptic of democratic led health-care reform. in the wake of paul kirk's appointment, democratic groups have renewed the hope that the nebraskan would vote for cloture. as of now, senator nelson is still insisting that such a promise will be premature. while we wait for the committee to return, we continue our live coverage on more debate from earlier today on an amendment

offered by senator bunning that would provide a tax exemption for those who do not purchase health insurance. >> thank you, mr. chairman. just in case anyone is interested. >> is it legislative language? >> is. no, it is not. thank you for bringing that up. i just wanted you to know that the house of representatives under the leadership of speaker

pelosi just passed what my amendment here -- >> how about that. >> i does wanted you to know that. let me get back to the amendment. this amendment amend the chairman's marked to require that any taxpayer who requests an exemption on their tax return from the personal responsibility excise tax be granted an exemption. i have made no bones about believing the individual mandate is un-american. as senator hatch has pointed out, it may even be unconstitutional. for those listening or watching, the individual mandate, in case they do not understand what it

is, is the part of the bill that requires you to pay a tax if you do not have health care. it requires you to have health care or else pay a tax. some people do not like to call it an individual mandate or a tax. instead, they say that it is your shared responsibility. i do not know if it will make you feel any better when you are spending more money to washington, but that seems to be the attempt. anyway, the bill will require most people to pay a tax between $750.1900 dollars a year if they do not have health insurance. the tax will be assessed through the tax code. this means that when you do your taxes, you will have to say whether you have health

insurance for the past year. if not, most people will have to at the penalty tax between $750 and $1,900 a year to the tax bill they are already sending the irs on april 15. as if doing your taxes was not complicated and expensive enough -- for the last 25 years, i have sat on the one committee of jurisdiction in the house and here in the senate. it is the tax-writing committee. i would not dare do my own taxes. there's only one person i know on these committees that does their own taxes. that was chairman archer. we all thought he was a little -- [laughter] brave to do it. there will be more lines on your

tax forms and likely an extremely complicated schedules that every american will have to fill out. there are some people who would get exemption to this new tax, including people without insurance for less than three months. native americans, the individuals below certain income levels, exceptions will be made for religious reasons and hard ships. and illegal immigrants. some might think the irs will not collect much through this mandate. they are wrong. the government will confiscate 20 billion -- i know we are getting used to "t's," but this

is a "b." so, my amendment says justice. any american who requests an exemption on their tax form will be granted an exemption for any reason. that means if you are filling out your tax returns and did not want to send $750 billion -- $750 to arbuckle sam, you could check a box to research -- to request an exemption and get one. some will likely argue that if this amendment passes, it will undermine the shared responsibility section. some of the other insurance reforms in this bill. i do not think the federal

government should be in the business of taxing americans just because they are uninsured. some will say that the individual mandate is like the requirement that drivers have car insurance. if you do not want to pay car insurance, you do not have to drive or own your own car. in fact, many americans do not own their own cars and do not pay car insurance. you do not have a choice under this bill. the only way to avoid being forced to buy insurance is to stop breathing. instead of the goal of health reform, i think it should be to make more insurance more affordable so that people have it. like seriously looking at ways to help people buy insurance across state lines. reforming our medical

malpractice, which we have talked about numerous times. taking more aggressive steps to help people in role in public programs like medicare if they are eligible this bill certainly gets people covered. at what cost? it is an invasion by the federal government into another element of our private life. we already have seen so much of that this past year. my amendment makes sense in it is the right thing to do. the of said would reduce the threshold for premiums, but i doubt this will be necessary. in fact, i am told that cbo told another member of this committee that the individual mandate at well over $200

billion in cost to this bill, largely because of the increase premium subsidies that results from forcing americans to buy insurance. therefore, i expect this amendment will actually save the government billions of dollars. i urge my colleagues to defend their personal liberties. it is one of the main things that this nation was founded upon and support my amendment. >> mr. chairman? >> the exemptions that center bunning referred to does not include veterans or active-duty military. it does include native americans. i presume that the reason the exemption does not include

groups like veterans or active duty military is that they have separate insurance coverage and health care that qualifies under the minimum terms of the legislation. is that correct? >> that is correct. >> native americans are specifically named as being excluded. yet they have indian health service. why are they explicitly exempted? >> there are two reasons for that because indian tribes are sovereign -- >> the laws of the united states of america applied to native american communities. i understand the aspects of native american sovereignty. i cannot imagine a reason why it would preclude an american citizen from being exempted

simply because it happens to be in the tribe. >> the indian health service is not health coverage. given the lack of funding and difficulty that people are eligible to receive services on a yearly basis, the cbo's conclusion is that having access is actually not creditable coverage. >> thank you. i think that is accurate. i think the legislation exclusive native americans from having to comply with the mandela. i make the point now -- i see a couple of my colleagues are not in that this illustrates something else, the government's

care for native americans is inadequate. it is something that the american people at a big trust and responsibility to correct. we got some funding that was supposed to go in a special trust account as last year to try to help improve health care. we have not even been able to get funding to accomplish this. i think the market is correct. the reason is that we are not in our government-funded health care, doing what we're supposed to do. i suggest that we would have problems similar to that. >> can i ask you a question? i am going to vote for the

amendment, but i have already expressed some concerns about heavy handedness. i recognize the need for more people to purchase coverage. i have an amendment pending on that. the levels of penalties and the new irs enforcement tools represent a disconcerting intrusion into the lives of private citizens. the mark allows for some exemptions. people would be able to apply for a hardship exemption. i will not going to those. i have this question for staff. it could still be subject to an almost $2,000 penalty.

>> he said that is -- for those, it would be a $1,500 penalty if they do not receive 10% of their income. or if they could not get a hardship waiver. >> so, the answer is yes it is a pretty heavy burden for low- income families. i yield. mr. chairman? >> mr. chairman, thank you. the first thing i want -- if you could please clarify what the

penalties are if someone decides -- is it the irs that will enforce the penalties? >> these are penalties under the internal revenue code. >> let's say they object to it and they do not pay it. what are the penalties? >> it would be the usual penalties for failure to meet your tax obligations. >> up to what? >>say this is willful evasion. >> it could be willful. it could be that you are just like filing it. >> i am talking about the maximum penalty.

is it possible somebody could go to jail over this? if it was considered an attempt to defraud, yes. >> what if it is just willful evasion? >> generally, the irs would take you to court. they would undertake normal collection procedures. >> they could have their wages garnished. the reason i am going down this line of questioning is, we have heard from a lot of people -- most of our offices have heard about this. senator hatch mentioned this. a lot of people do not believe that this is constitutional. that this is not in the enumerated powers of the u.s. government to mandate purchase

of health insurance or penalize somebody. we have allowed exceptions for religious and other reasons. some people hold the constitution pretty high in their lives. if they believe that this thing is unconstitutional and they say, i choose not to have health insurance, i am not going to buy it, we could be subjecting those very people who conscientiously because they believe in the u.s. constitution -- we could subjecting them to fines or the interpretation of a judge potentially all the way up to imprisonment. that seems to me to be a problem. i understand the idea of shared responsibility. the insurance companies want everybody to have this mandate. there are a lot of americans who

hold that constitution of the united states very dearly. if you look at the enumerated powers, i have trouble understanding how we are mandating the purchase of health insurance other than the broad interpretation of the general welfare clause. madison was a huge critic of the general expansion of the general welfare clause. i think we should take this thing very seriously and consider what we are doing to the american people who are going to be protesting. some people might even do this out of conscious, drop their health insurance and take this thing on. there is an outrage among the american people over this. >> i think we can vote.

go ahead. >> i just think that as we hear that we should talk a little bit more about the other piece of this. when we look at affordability, i am torn. if we cannot get this to be affordable, if we cannot address the right level of tax credits for middle-class people and the hardship waiver, it becomes harder to do a requirement. but i also think it is important to say a word about the other side, which is the fact that the challenge for us around health care in this country is that we're all paying for people that do not have health insurance and are using emergency rooms

inappropriately every single day. if you have insurance like a lot of people in my state and somebody goes in and uses the emergency room, all of those costs to get rolled on to my employers, the workers, people who have insurance. they see their rates go up. it is another reason why you see $800 aspirin. we're all paying for this. that is the real challenge of all of this with health care. we're all paying for this one way or the other. the question is, do we pay for it through the backdoor and pretend it does not happen and pay twice as much as any other country, or do we try to rationally figure out how to do this so that we are paying for it through the front door and bringing down the cost over

time? we are all together trying to figure out how we make sure that we are able to have everybody have health insurance and at the same time, not be paying for all of these extra costs that every single american, one way or the other is paying for. i am sympathetic. i understand the concerns. i appreciate the political volatility around the question of requiring coverage. we have a real challenge on our hands. and was we want to do what we did with medicare and it is a single payer government-run health care system, which medicare is, that makes sure everybody is in and choose their own doctor, unless we want to do that, the big question is, how

do you make sure that everybody is in? i thing that is a tough one. for me, it comes down to whether or not ultimately in this bill, we can say that this is affordable for people. affordable for businesses and affordable for people. i know that we're working very hard to do that. this is a basic discussion that goes to the heart of what we are trying to do here. i think it is important to talk about the fact that we are paying one way or the other for this. again, the offset to going to middle-class people raises great concern for me, taking away tax credits for middle income people to pay for this. i would ask the staff whether or not the offset even pays for this. i know the chairman has asked for the things we paid for.

i question whether or not removing the middle class tax cuts actually would pay for what is being done in this amendment. i do not know of staff might respond to that. >> the penalty itself raises $20 billion. >> mr. chairman, it is actually more complicated than that. >> i am sure it is. >> the decision to carry insurance or not to carry insurance will affect who participates in those changes and who might be eligible for subsidies and overall premium costs. we cannot just look at the one.

there are secondary effects that go into the overall cost. if you were to exempt a large number of people who under the amendment, it would not be as simple as simply looking at the $20 billion figure. since he is not here, i cannot speak for him. it has been complex interaction of those different factors. >> is there enough in tax credits to pay for the penalty? >> without going through the complex calculation -- there is certainly a good amount of dollars under the mark. >> very quickly.

i have not yet spoken on the amendment. be my guest. >> i would just like to respond to the senator. how many of your constituents think that you do not pay for your healthcare? do you have any idea? >> if i might just respond to my colleague, i think there is a difference between understanding you pay a premium and at this point, the general costs that come from the emergency room care and other kinds of care. i have very intelligent constituents. i am not suggesting -- i hope you are not suggesting this. >> i live in michigan for 14 years. >> there certainly is a

difference between the awareness of paying out of pocket for a premium and what happens in directly all the time. >> let me just make this point. we will still be paying for the emergency room visits of uninsured native americans, people with religious objections, and illegal immigrants. why is it ok for some and not others? >> i would just say, you raise very important pieces of this. this is a tough issue. if you cannot solve all of it, do you not try to solve any of it? that is what we are here all about. it is the status quo ok? i do not think it is. >> that is what i was trying to amend. >> i does have a couple comments. i would say that it is a

mortally wounding amendment. it basically says, no more personal requirements, no more shared responsibility for individuals. that is going to undermine this whole system. the system will not work if this amendment passes it makes insurance even less affordable. we want this to work, not to make things more difficult. please signify by voting. >> mr. kerry?

>> no. >> ms. stabenow? >> no. >> no by proxy. >> mr. hatch? >> aye by proxy. >> mr. crapo? >> aye by proxy. >> mr. chairman? >> no.

>> mr. chairman, the amendment is 9 ayes and 14 nays. >> about 15 minutes before the senate finance committee is expected back to have more work on amendments to the health care bill. that is time enough to see more of debate during the crapo amendment. it would prevent a competitive bidding to be implemented if it results in insurers not participating in the medicare advantage program. here is that debate. >> thank you very much, mr. chairman. we sent around the modification about an hour ago.

this is a continuation of a discussion on the same issue that senator hatch has raised. it would eliminate the cuts and section 3 to prohibit the implementation of the changes to the medicare advantage program. in other words, the cuts that we see proposed here, i am convinced and i think many are convinced will result in providers leaving the marketplace. if providers do leave the marketplace with less choice of options, we should not implement these proposals.

the director clearly gave the answer to the issue that we have been back and forth yesterday and this morning. he made it very clear that the proposed changes to medicare advantage and are going to reduce the benefits provided to those who have medicare advantage plans by a little bit less than half of what they are today. it may be true that some will get an increase and some will get a decrease. the net result is that the benefits to be available will be reduced by about half. that is what the cbo analysis has provided. senator conrad has indicated that medicare is very expensive. in his words, we have a false sense that we can continue paying for medicare advantage

and at some point, we have to look people in the eye and tell people the truth about it. this mark does seek to take $113 billion out of the medicare and advantage program and that is going to result in less benefit to the citizens who now have enrollment in the medicare advantage program. in my home state, there are 60,000 medicare advantage beneficiaries. 27% of the medicare beneficiaries in my state. that is just a couple percentage points higher than the national average. since the creation of the medicare advantage program in 2003, the overall enrollment in private plans has been steadily increasing and beneficiaries now have more private plans to choose from than they did 10 years ago. as i indicated yesterday, about

90% of the people on medicare advantage are satisfied with the coverage that they are getting, which is in stark contrast to those have with relationship to the coverage that they are receiving. as of january, 2009, all medicare beneficiaries had access to a plan along with traditional medicare plans. medicare advantage is working. it is working much more rapidly into the marketplace because of its acceptance among those who are able to make these choices. as a matter of fact, this choice is particularly crucial lead role areas. between. and 2007, more than 600,000 beneficiaries joined the medicare benefits program.

the point being that the reason that people are moving to this program is because particularly in rural areas, they have very little choice. these plants are providing them with a better set of benefits that they would otherwise have. my amendment simply seeks to preserve that choice for america's seniors. it simply says that if the changes we are proposing in this bill today actually result in fewer providers and less competition in medicare advantage, we should not implement them. we have not yet tested or seen how the proposals that we -- that are in the market today will work. there is a very big question as to what kind of an impact they will ultimately have. mr. chairman, a lot of attack has been made on medicare advantage. certainly, we need to address the excess costs in medicare.

republicans have proposed many alternatives and continue to propose alternatives to deal with both the unfunded mandate in medicare, the crisis that we expect to face in medicaid as well in terms of funding, and in terms of overall reform of our health-care system. it is to simply misstate the truth. the bottom line here is, we know that you cannot take $113 billion out of a program after cbo has indicated that that change will result in a 50% reduction in the benefits available and not see a dramatic change in the availability of benefits to those who currently have these plans. if ever the issue of whether a person who likes their health- care coverage today gets to keep

that health care coverage, was on a point, this is it. for those americans who are on medicare advantage today, they will not be able to have access to that health care option in the future under this plan. i simply propose that we provide that if the competitive are rina changes, if the number of providers decrees and we have decreased choice and competition for seniors in the medicare system, we should not implement the provisions of this plan. >> some further debate? >> with the senator yield for a question? >> thank you, mr. chairman. we have had a lot of discussion on medicare is advantage. in broad terms, medicare advantage was an effort to

allow for-profit insurance companies to come in. the argument was that it would bring costs down. he did not. it brought costs up. i find it interesting that there is an objection to have competitive bidding. in the broader sense, we always argue that competitive bidding will actually bring costs down. we were told medicare advantage would provide lower costs to be able to strengthen the integrity of medicare. the majority of seniors, 80% of which are not on medicare advantage go to see their doctor. they are paying more. it is to subsidize the private for-profit insurance industry to be able to participate with our seniors to medicare advantage. i believe that we have been working towards a very important

way to resolve this for seniors who are currently on medicare in the vantage, to be able to allow them to increase what they have, but going forward, our responsibility, it seems to me, is to all the seniors. they now pay more than they otherwise would if we did not have a program that subsidized for-profit insurance companies. one way to address that and begin to move this in a direction to protect medicare for seniors and to be able to offer the other great things in this bill on prevention, quality initiatives, be able to do the other things to make medicine more available, affordable, closing the doughnut hole, is to have competitive bidding. from my perspective, even though we certainly have substantial amounts of medicare advantage in

michigan, going forward, i think it is very hard to argue that something that was supposed to lower-cost by bringing in more competition with the private sector has raised costs, but now we are against competitive bidding to be able to rein in costs and be able to protect all seniors. i would oppose the amendment. >> mr. chairman, can i respond? >> i want to make it very clear. i am not against competitive bidding. i like the fact that we should have more competitors. my amendment says, if the language in the bill does not result -- if the proposal results in fewer competitors -- if we have a less competitive environment, we should not implement it. that is all it says. >> with the senator yield?

>> i would suggest that you are supporting the wrong amendment. what you should consider is not taking the inefficiencies out of medicare advantage by competitive bidding, which will take the inefficiencies out. it gets 14% more than medicare fee-for-service. what you are trying to do is to protect the existing seniors on medicare and advantage. you i've been opportunity to do that as i bring forth an amendment that will basically grandfather out most of the seniors on medicare advantage. senator hatch keeps referring to the nelson amendment. that is what you are referring to, senator, what is already in the mark. this center has another one that is coming that is going to grandfather and most of the

seniors on medicare advantage. >> i will carefully review your amendment when you bring it. i am not opposed to competition in the marketplace. my amendment says that if we restrict competition in the marketplace, we should not implement the provisions that are restricting it. when we hear the discussion about the fact that medicare is advantage is paying 14% more on average than fee-for-service, let's remember, fee-for-service does not fully compensate the fees for the true services that are provided. we have all discussed the fact that it is below the true cost of the value of the medicine being provided. that 14% is not just going to providers. 75% of that is returned in additional benefits to medicare

benefits. that is why they like the program so much. it provides them the extra buffer, that 75% of the differential, and additional benefits. it is additional benefits that is making medicare advantage such a popular program in our country and we should try to salvage rather than try to eliminate. >> i would like to first ask the senator, is there a cost to this bill? >> yes, it is interesting. the bill has been scored. it has been scored as something like $130 billion price tag, which tells you that cdos thinks that virtually, the entire medicare invented segment of the mark is going to be knocked out by this amendment, which means they think that