I think it would be a positive thing, and I know we have talked about it, and I know Senator Conrad is passionate about this, I know you are, and I am. I think the three of us could sit down and see what we could do in this area. I would love to work on it with you.

Senator GRASSLEY. And then maybe just a yes or no, because I think you discussed this as thoroughly as it needs to be discussed with Senator Snowe, but just the President's prescription drug program versus something more comprehensive, and I am not talking about just what I might lead a group of us putting in here shortly, but if we can develop a very comprehensive prescription drug program coupled with the improvement of Medicare, that would be the President's first choice?

Secretary THOMPSON. Absolutely. Yes.

Senator GRASSLEY. In other words, the $190 billion plan is not necessarily the President's ideal program; it is a starting point for the President.

Secretary THOMPSON. That is correct. We want to work with you, Senator.

Senator GRASSLEY. Thank you.

Thank you, Mr. Chairman.

Chairman CONRAD. Thank you, Senator Grassley.

Senator Stabenow.

Senator STABENOW. Well, thank you very much, Mr. Chairman, and welcome. I appreciate your leadership and advocacy on important issues like organ transplant and your advocacy for our public health system and the other wide variety of issues that are on your plate that are very important and touch people's lives.

as

In the interest of time I want to talk just specifically about one issue, and that is the issue of prescription drugs. It has been talked about this morning, but let me just start by saying that this is, you know, not just an issue for our seniors, although right now we have somebody sitting at home at their kitchen table deciding do I eat today or get my medicine, pay my utility bills, tough choices that our seniors are having to make, and as tough as our choices are, I think that the choices they are having to make are even tougher.

But I am also hearing this as an issue across with everyone I talk to, small business people who see their insurance premiums going up 25, 27 percent, who call me and tell me they are canceling their insurance, they and their five employees no longer will be insured because of the cost, and it is the cost of prescription drugs. I see it from the biggest businesses in the State of Michigan coming to me who are concerned about this, university presidents who come to me, hospital CEOs who are coming to me. This is by far and away the largest underlying reason for the increase in costs of health care.

And so, on the one hand, while I believe strongly in the Medicare prescription drug plan, we need to update Medicare. It was written in 1965 and is structures like we provided health care in 1965. And I would say as an aside that when we talk about priorities for this country and in this budget, I would say that the President's first choice is not comprehensive prescription drug coverage. The first choice was the tax cut, which has taken the majority of the re

sources off the table, geared very much to a few at the top of the income stream, and the majority of people, seniors, small businesses, all those affected by the issue of prescription drugs, have not been the top priority. And I would like them to be, because I think this is such a pervasive issue, and the amount of money in the budget does not address in a comprehensive manner-although you have given it your best efforts, I appreciate the way you have attempted to approach this. It does not address in a comprehensive long-term manner the costs for our seniors through Medicare.

But having said that, you have within your grasp, you yourself as Secretary, the ability to cut costs immediately, substantially, and without great cost to the taxpayers of this country. And as you know, that is the issue of opening our borders to American-made, safe, FDA-approved drugs that are sold to other countries, every other country in this world, for less than they are sold here. And I know we have talked about this before, but from my perspective as we look at this budget, the tough choices, the concerns about how to design Medicare prescription drug coverage, and the time that that is going to take, and the money that that is going to take, we can at least in the short run open our borders.

As you know, the House and the Senate overwhelmingly 2 years ago passed a provision, and in fairness to you, your predecessor did not implement that. And I received a letter from you this summer, a letter from Secretary Shalala as well as yourself, concerning why you do not want to proceed with that. But I feel very strongly that if we can allow our American companies to, in fact, create manufacturing plants in other countries, if we can send FDA inspectors there to inspect them and then allow them to come back to this country, we can create a way to satisfy the concerns of the FDA and open our borders for prescription drugs. And we could at minimum cut costs by 30 percent. In efforts that I have done with Canada, it is easily 50 percent. And that would not only address seniors, it would address businesses, hospitals, universities, everyone who is concerned.

So I would appreciate your thoughts on that right now. And also when we look at your budget, you have indicated that in the budget there will be a substantial increase in the number of safety inspections for FDA-regulated products that are imported into this country. I wonder if that might not be an opportunity for us to address the issue of safety inspections in prescription drugs.

Secretary THOMPSON. First, let me thank you for your kindness, Senator. You have been very generous with your kindness to me, and I appreciate it and thank you very much.

Now second, in regards to Medicare, I really, sincerely hope that we can sit down on a bipartisan basis and develop a strengthened Medicare proposal this year. I am optimistic that we can do that and get one that is satisfactory to the Democrats and the Republicans and this Administration, and get it passed with a very comprehensive drug component. I think that we can do that, and I hope that we can do it.

Number 3, the reason that I have not, and the reason that Donna Shalala did not, is that the law requires us to certify as Secretary that we know that these drugs are safe. It is impossible for us to certify that these drugs are safe.

I came to this Committee, and I asked Senator Conrad many times to help me with food inspections. I consider this a huge problem in America, and I have said that in this Committee, in Congress, and that is why we requested some additional inspectors. We only had 700 inspectors in FDA to inspect 56,000 places. We only had 125 inspectors to inspect food that was coming into America in 151 ports of entry and we were only inspecting less than 1 percent of the food that was coming into the United States.

This Congress was very generous and on a bipartisan basis, I know you supported that as well, Senator, to give us some additional dollars. We are in the process of hiring those individuals. We are going to get an additional 400 inspectors, coupled with our 700, a little over a 50 percent increase which I think is tremendous and it is going to be very helpful.

Now if you want to pass a law requiring these inspectors to get involved in inspecting plants outside of America that are in the pharmaceutical industry, I think that is something that we should explore and see if we could not work together. But the current law in which I would have to certify that drugs coming into America are safe, I am not in a position to do that. But I think we can change the law so that we could satisfy you and satisfy your constituents and come up with something that is workable.

Senator STABENOW. I am very anxious to work with you on this because of the immediacy of the concern, both by individuals, health care providers, as well as the business Community, and the reality is that this is one of the ways to most directly and most quickly lower costs.

But let me ask, have you examined the regulatory system of Canada? Have you looked at it? Because we have taken a look at it, and feel that the system of oversight is very similar to the United States, and if we were to focus, say, just on Canada in terms of opening our northern border, I am wondering if you have looked at the regulatory and safety system.

Secretary THOMPSON. You know, the only way I can ever operate is to be candid. I personally have not, but my lawyers and people at FDA have, and they have come back with that recommendation to me that I would not be able to do that.

Senator STABENOW. Well, we are happy to change the law. I mean, in my mind that language was put in specifically to make it difficult to be implemented, unfortunately, as it went through the Congress 2 years ago, and we are going to offer something that will be much easier for you to implement and would want to work with you on that. I think it is a challenging situation. On the one hand, you have seniors that, in fact, certainly are in great pain, may lose their life as a result of inability to receive prescription drug coverage, maybe a small business whose employees find themselves in life-threatening situations because they have to stop their coverage, and we will have to weigh that as it relates to any perceived or potential risk of opening the borders.

I would argue there are risks in not opening the borders and keeping the costs as high as they are, and I look forward to working with you.

Secretary THOMPSON. The only rejoinder I would have is I compliment you on it, and I want to work with you on it. I only hope

you bring the same passion to want to work with me in strengthening Medicare, and it is a two-way street.

Senator STABENOW. I absolutely want to strengthen Medicare. What I would just urge you, and I am sure that you know this, when you look at your numbers of $190 billion in terms of prescription drug coverage, it does not provide what our seniors are asking for in terms of the amount of coverage, the premium that will be unfortunately much higher than they would like. We will not be able to have 100 percent coverage. It is difficult. You cannot fit that into the box.

Secretary THOMPSON. Well, let us start.

Senator STABENOW. I am happy to start. I am happy to start and have been involved and will continue to be involved with you, because it is critically important, and probably it is the most critical issue on a daily basis for families, as well as, I think, in terms of the economy and where the uncontrollable costs are right now. Secretary THOMPSON. Thank you very much.

Chairman CONRAD. Thank you, Senator Stabenow.

I can tell you there is nobody who has been a stronger voice for strengthening Medicare than Senator Stabenow, and we appreciate her contributions to this Committee.

I want to thank you again for your appearance here. As you know, I have high regard for you. I have high regard for you professionally and personally.

Secretary THOMPSON. I know that.

Chairman CONRAD. And I would be less than honest if I did not say I have got low regard for this budget. I do not think it adds up. I think it clearly breaks the promise that has been made to protect Social Security and Medicare. I believe that is compounded by this budget for HHS, and I know you do not have a free hand here, but I know how it works, I know the role of the OMB and the White House.

I believe this understates the cost of Medicare by $300 billion. I believe it understates the cost of a meaningful prescription drug benefit. I believe it understates the need to address payments for providers, and that is hundreds of billions of dollars of cost. So I fundamentally think it misleads Congress and misleads the American people.

My frustration is with this overall budget-not yours specifically. I have said what I see as the shortfalls there, but the overall budget circumstance is growing, as I examine more closely the overall budget, and I would send a message, if I could, through you to the Administration that I think they have put us on a fiscal course that is truly reckless. I believe that. I can see what is happening here.

You know, it used to be that budget deficits were a line in the sand, and then we were able to stop running budget deficits, and then we were able to draw a new line that fenced off Social Security funds, and that had tremendous benefits, not just to Social Security, but imposing fiscal discipline when we are on the brink of an entirely different set of facts with the demographic changes coming to this country. I believe it is absolutely essential for the fiscal future of the country to have those lines, and now the President, in not just his budget submission for this year-I could un

derstand that at a time of economic slowdown, but he has got deficits here, budget deficits on a unified basis for years to come. He has got deficits on a non-trust fund basis for the entire next decade, and I tell you, once those lines are gone, the floodgates are open, and I can see it in the conversations I am having with my colleagues, I can see that in terms of the consideration of the other body, and it is going to take some dramatic reconfiguration.

It is very clear the tax cut imposed last year, based on an assumption of these big surpluses, that that fundamental consideration has been just dramatically changed. If we use the President's own formula, he said last year he was taking one of every four surplus dollars for tax cuts. That is how we got to $1.6 trillion out of a $5.6 trillion projected surplus. He proposed a $1.6 trillion tax cut, and he said he was taking one of every four dollars. That math did not quite work out, but that is what he was talking about.

Well, now we are talking about realistically maybe $200 or $300 billion left, really. If we take the President's proposals, we take CBO's scoring of those proposals, we have got maybe $200, $300 billion dollars left. Two or three hundred billion. And every dime of it is Social Security, every dime of it.

One quarter of that would be a $50 billion tax cut instead of a $1.6 trillion tax cut.

But the larger amount has been put into law. And the result is under the President's plan we are going to be taking $1.6 trillion of Social Security money over the next decade, $500 billion of Medicare money, and using it to pay for tax cuts and using it to pay for other spending. I think it is a profound mistake with the baby boomers about to start retiring in 6 years.

And I mean, it is not just a little mistake. I think it is a huge mistake, and the consequences for the Nation are enormous because we all know those baby boomers are going to retire, and they are going to be eligible for these benefits. And it is true the money has been credited to the accounts, but there is no money there. There are bonds there that have to be redeemed out of the future earnings, future revenue stream of the Federal Government. And that is going to compel a future Congress and a future President to propose really draconian steps, massive cuts in benefits, huge tax increases, gigantic increase in debt.

Now, I see that Senator Murray has arrived. I would certainly recognize her for a statement or questions, and be happy to have you answer as well.

Secretary THOMPSON. I just would like to thank you for your consideration and your friendship. I would like to work with you on the budget and see if we could make improvements to your satisfaction. I just want to pledge to you that cooperation, sir.

Chairman CONRAD. We look forward, as we always do, to working with you. I think you are a very creative person and a creative political leader. You certainly were in your home State and you have been here, and under very difficult circumstances.

Senator Murray, I will leave. I have an appointment here, and I will leave

Senator MURRAY. Oh, good.

Chairman CONRAD [continuing]. You in charge.

Senator MURRAY. [presiding]. Thank you, Mr. Chairman.