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[From the U.S. Government Publishing Office]


114th Congress    }                                {   Rept. 114-38
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                {   Part 1
======================================================================
 
         MEDICARE DMEPOS COMPETITIVE BIDDING IMPROVEMENT ACT OF 2015

                                _______
                                

                 March 13, 2015.--Ordered to be printed

                                _______
                                

Mr. Ryan of Wisconsin, from the Committee on Ways and Means, submitted 
                             the following

                              R E P O R T

                        [To accompany H.R. 284]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 284) to amend title XVIII of the Social Security Act 
to require State licensure and bid surety bonds for entities 
submitting bids under the Medicare durable medical equipment, 
prosthetics, orthotics, and supplies (DMEPOS) competitive 
acquisition program, and for other purposes, having considered 
the same, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
 I. SUMMARY AND BACKGROUND............................................2
        A. Purpose and Summary...................................     2
        B. Background and Need for Legislation...................     3
        C. Legislative History...................................     5
II. EXPLANATION OF THE BILL...........................................5
III.VOTES OF THE COMMITTEE............................................7

IV. BUDGET EFFECTS OF THE BILL........................................7
        A. Committee Estimate of Budgetary Effects...............     7
        B. Statement Regarding New Budget Authority and Tax 
            Expenditures Budget Authority........................     7
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................     7
 V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE........9
        A. Committee Oversight Findings and Recommendations......     9
        B. Statement of General Performance Goals and Objectives.     9
        C. Duplication of Federal Programs.......................     9
        D. Disclosure of Directed Rule Makings...................     9
        E. Information Relating To Unfunded Mandates.............    10
        F. Congressional Earmarks, Limited Tax Benefits, and 
            Limited Tariff Benefits..............................    10
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............10

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Medicare DMEPOS Competitive Bidding 
Improvement Act of 2015''.

SEC. 2. REQUIRING BID SURETY BONDS AND STATE LICENSURE FOR ENTITIES 
                    SUBMITTING BIDS UNDER THE MEDICARE DMEPOS 
                    COMPETITIVE ACQUISITION PROGRAM.

  (a) Bid Surety Bonds.--Section 1847(a)(1) of the Social Security Act 
(42 U.S.C. 1395w-3(a)(1)) is amended by adding at the end the following 
new subparagraphs:
          ``(G) Requiring bid bonds for bidding entities.--With respect 
        to rounds of competitions beginning under this subsection for 
        contracts beginning not earlier than January 1, 2017, and not 
        later than January 1, 2019, an entity may not submit a bid for 
        a competitive acquisition area unless, as of the deadline for 
        bid submission, the entity has obtained (and provided the 
        Secretary with proof of having obtained) a bid surety bond (in 
        this paragraph referred to as a `bid bond') in a form specified 
        by the Secretary consistent with subparagraph (H) and in an 
        amount that is not less than $50,000 and not more than $100,000 
        for each competitive acquisition area in which the entity 
        submits the bid.
          ``(H) Treatment of bid bonds submitted.--
                  ``(i) For bidders that submit bids at or below the 
                median and are offered but do not accept the 
                contract.--In the case of a bidding entity that is 
                offered a contract for any product category for a 
                competitive acquisition area, if--
                          ``(I) the entity's composite bid for such 
                        product category and area was at or below the 
                        median composite bid rate for all bidding 
                        entities included in the calculation of the 
                        single payment amounts for such product 
                        category and area; and
                          ``(II) the entity does not accept the 
                        contract offered for such product category and 
                        area,
                the bid bond submitted by such entity for such area 
                shall be forfeited by the entity and the Secretary 
                shall collect on it.
                  ``(ii) Treatment of other bidders.--In the case of a 
                bidding entity for any product category for a 
                competitive acquisition area, if the entity does not 
                meet the bid forfeiture conditions in subclauses (I) 
                and (II) of clause (i) for any product category for 
                such area, the bid bond submitted by such entity for 
                such area shall be returned within 90 days of the 
                public announcement of the contract suppliers for such 
                area.''.
  (b) State Licensure.--
          (1) In general.--Section 1847(b)(2)(A) of the Social Security 
        Act (42 U.S.C. 1395w-3(b)(2)(A)) is amended by adding at the 
        end the following new clause:
                          ``(v) The entity meets applicable State 
                        licensure requirements.''.
          (2) Construction.--Nothing in the amendment made by paragraph 
        (1) shall be construed as affecting the authority of the 
        Secretary of Health and Human Services to require State 
        licensure of an entity under the Medicare competitive 
        acquisition program under section 1847 of the Social Security 
        Act (42 U.S.C. 1395w-3) before the date of the enactment of 
        this Act.
  (c) GAO Report on Bid Bond Impact on Small Suppliers.--
          (1) Study.--The Comptroller General of the United States 
        shall conduct a study that evaluates the effect of the bid 
        surety bond requirement under the amendment made by subsection 
        (a) on the participation of small suppliers in the Medicare 
        DMEPOS competitive acquisition program under section 1847 of 
        the Social Security Act (42 U.S.C. 1395w-3).
          (2) Report.--Not later than 6 months after the date contracts 
        are first awarded subject to such bid surety bond requirement, 
        the Comptroller General shall submit to Congress a report on 
        the study conducted under paragraph (1). Such report shall 
        include recommendations for changes in such requirement in 
        order to ensure robust participation by legitimate small 
        suppliers in the Medicare DMEPOS competition acquisition 
        program.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 284, the Medicare DMEPOS Competitive Bidding 
Improvement Act of 2015, as reported, would require DMEPOS 
suppliers that participate in the competitive bidding program 
to secure a surety bond of no less than $50,000 and no more 
than $100,000 for each geographic area in which they bid. The 
bill would also codify in statute a competitive bidding program 
regulatory requirement that DMEPOS suppliers must meet 
applicable State licensure requirements. It would promote the 
participation of suppliers committed to providing beneficiaries 
with access to DMEPOS products at prices that are conscious of 
the Medicare program's resources.

                 B. Background and Need for Legislation

    On January 12, 2015, Representative Tiberi and 
Representative Larson introduced H.R. 284, the Medicare DMEPOS 
Competitive Bidding Improvement Act of 2015. H.R. 284 would 
require DMEPOS suppliers that participate in the competitive 
bidding program to secure a surety bond for each geographic 
area in which they bid and codify in statute a regulatory 
requirement that participating DMEPOS suppliers must meet 
applicable State licensure requirements.
    Medicare Part B covers health care products and items that 
can withstand repeated use and are prescribed by physicians and 
other professionals for beneficiaries to use in their home. 
These products, which include wheelchairs and hospital beds, 
are referred to as DMEPOS. Traditionally, Medicare paid 
suppliers of DMEPOS products according to a fee schedule based 
on historical charges. Studies conducted by the Government 
Accountability Office (GAO), the Inspector General of the 
Department of Health and Human Services (HHS), and others 
documented that Medicare was consistently overpaying for many 
DMEPOS products. As a result, Congress turned to a system where 
suppliers submit a bid for the amount at which they can supply 
certain DMEPOS products as a way to establish more rational 
payment amounts.
    In the Balanced Budget Act of 1997 (BBA), Congress required 
the Secretary of Health and Human Services (the Secretary) to 
establish a competitive bidding demonstration project in 
geographic areas likely to reduce expenditures while 
maintaining access to products.
    Based on the results of the BBA demonstration project, 
Congress enacted the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) that required the Secretary 
to establish a DMEPOS competitive bidding program to be phased-
in in successive rounds. The first round included 10 geographic 
areas, followed by an expansion to 70 additional areas and a 
national mail order program.
    The Medicare Improvements for Patients and Providers Act of 
2008 (MIPPA) froze the first round of the DMEPOS competitive 
bidding program after only a few weeks of operation. Concerned 
that the Secretary's implementation of the program may have 
been unfair to suppliers, MIPPA required that the Secretary to, 
among other things ``rebid'' the first round and put into place 
a process to notify suppliers if certain financial information 
is missing from a bid. MIPPA also established a one-time 9.5 
percent reduction to the fee-schedule payment amount for the 
products that were included in the first round. This fee 
schedule payment reduction offset the increased spending that 
resulted from the competitive bidding program's start.
    In Public Law 111-148 and Public Law 111-152 (collectively 
referred to as the Affordable Care Act), Congress required the 
Secretary the Round 2 competition from 70 additional areas to 
91 areas. It also required the Secretary to extend the program, 
or modify the fee schedule based on competitively bid rates in 
the non-competitive bidding areas by 2016.
    As each round of competitive bidding has awarded suppliers 
contracts for multiple years, the Secretary has implemented two 
contract cycles for round 1 and has started the process for the 
second round 2 cycle. The Secretary has used a consistent 
process since the initial phase of the program through the 
round 1 rebid. The Secretary has included DMEPOS products that 
have a high fee schedule payment amount, are provided 
frequently, and/or have a high potential to reduce 
expenditures.
    The Secretary established and uses a bidding process that 
involves a number of steps that include:
           Suppliers submit a bid to supply a product 
        at a price representative of the percentage of the 
        geographic area market they can serve;
           Suppliers must comply with Secretary's 
        regulatory requirement that participants meet 
        applicable State licensure requirements;
           The Secretary arrays eligible bids for a 
        product category and sets a payment amount at the 
        median supplier bid;
           The Secretary offers the median bid payment 
        amount to as many suppliers as needed to meet 
        beneficiary demand, or capacity, in the market. The 
        median bid amount generally results in half of the 
        suppliers receiving a contract amount that is below 
        their bid; and
           If a supplier declines to sign a contract, 
        the Secretary makes an offer to the supplier with the 
        next lowest bid--the payment offered continues to be 
        based on the median bid amount of the suppliers 
        initially offered a contract.
    The competitive bidding program has significantly reduced 
Medicare spending on DMEPOS products, with average payment 
amount reduction of 45 percent below the fee schedule for the 
first cycle of Round 2. The reduced per-item payment amount 
also means that beneficiaries pay less, as the standard 20 
percent coinsurance is applied to a smaller amount.
    The Committee believes, however, the competitive bidding 
program can be improved. Some suppliers have rejected a 
contract offer from the Secretary for a payment amount that 
exceeds their bid price. The Secretary states that 
approximately 8 percent of suppliers have rejected a contract 
offer, with half of those rejecting a payment amount higher 
than their bid price. A 2014 Government Accountability Office 
(GAO) report indicates that suppliers have declined over 1,200 
individual contracts for products. Under the Secretary's 
implementation of the program, supplier rejection of contracts 
above their bid price has the effect of lowering the payment 
amount made to suppliers who sign an offered contract. 
Discouraging suppliers from bidding at prices they do not 
intend to honor improves the program. Further, the Committee 
believes that the regulatory requirement that suppliers meet 
applicable State licensure requirements is important to the 
functioning of the program and should be codified in statute.

                         C. Legislative History


Background

    H.R. 284 was introduced on January 12, 2015, and was 
referred to the Committee on Energy and Commerce, in addition 
to the Committee on Ways and Means.
    The Chairman's Amendment in the Nature of a Substitute 
(AINS) to H.R. 284, the Medicare DMEPOS Competitive Bidding 
Improvement Act of 2015, was made publicly available through 
the Committee's website on February 25, 2015.

Committee Action

    The Committee marked up H.R. 284 on February 26, 2015 and 
ordered the bill favorably reported to the House of 
Representatives as amended by a voice vote (with a quorum being 
present).

Committee Hearings

    On May 9, 2012, the Subcommittee on Health had a hearing to 
examine the impact of the DMEPOS competitive bidding program on 
Medicare beneficiaries, suppliers, and program expenditures. 
The Subcommittee heard testimony from the individuals below.
    Panel 1:
           Laurence Wilson, Director of the Chronic 
        Care Policy Group, Centers for Medicare and Medicaid 
        Services; and
           Kathleen King, Director, Health Care, 
        Government Accountability Office.
    Panel 2:
           Joel D. Marx, Chair, Board of Directors, 
        American Association for Homecare;
           H. Wayne Sale, Chair, Board of Directors, 
        National Association of Independent Medical Equipment 
        Suppliers;
           Dino Martis, President, Ablecare Medical, 
        Inc.; and
           Alfred J. Chiplin, Jr., Senior Policy 
        Attorney, Center for Medicare Advocacy, Inc.

                      II. EXPLANATION OF THE BILL


                              PRESENT LAW

    Congress requires the Secretary to use a competitive 
bidding program to sets the Medicare payment amount for certain 
DMEPOS according to supplier bids as opposed to the traditional 
fee schedule that is based on historical charges. The Secretary 
uses a bidding process that involves the following steps:
           Suppliers submit a bid to supply a product 
        at a price representative of the percentage of the 
        geographic area market they can serve;
           Suppliers must comply with Secretary's 
        regulatory requirement that participants meet 
        applicable State licensure requirements;
           The Secretary arrays eligible bids for a 
        product category and sets a payment amount at the 
        median supplier bid;
           The Secretary offers the median bid payment 
        amount to as many suppliers as needed to meet 
        beneficiary demand, or capacity, in the market. The 
        median bid amount generally results in half of the 
        suppliers receiving a contract amount that is below 
        their bid; and
           If a supplier declines to sign a contract, 
        the Secretary makes an offer to the supplier with the 
        next lowest bid--the payment offered continues to be 
        based on the median bid amount of the suppliers 
        initially offered a contract.
    Congress requires that the Secretary take actions to ensure 
that small suppliers have an opportunity to participate in the 
competitive bidding program. Through regulation, the Secretary 
defined small supplier as a supplier that generates gross 
revenues of $3.5 million or less in annual receipts. The 
Secretary also established a regulatory target of awarding 30 
percent of contracts for each product in each area to small 
suppliers. The Secretary has generally exceed the target, with 
small suppliers typically receiving more than 50 percent of 
contract awards in the rounds that have been implemented.
    There is no statutory provision that requires suppliers to 
meet applicable State licensure requirements to participate in 
the competitive bidding program, though the Secretary does 
maintain it as a regulatory requirement.

                           REASONS FOR CHANGE

    The Committee is concerned that some suppliers have 
rejected contracts offered for payment amounts above their bid 
price as it lowers the payment amount for suppliers who 
actually sign contracts. The financial implications of 
requiring bid bonds would discourage suppliers from submitting 
bids for prices that they do not intend to honor. The Committee 
believes that the regulatory requirement that suppliers meet 
State licensure requirements to participate in the competitive 
bidding program is important enough to codify it in statute. 
H.R. 284 would improve the competitive bidding program by 
promoting participation of suppliers committed to providing 
access to DMEPOS products at prices that are conscious of the 
Medicare program's resources.

                        EXPLANATION OF PROVISION

    The bill would require DMEPOS suppliers that participate in 
the competitive bidding program to secure a surety bond of no 
less than $50,000 and no more than $100,000 for each geographic 
area in which they bid. The bill would also codify in statute a 
competitive bidding program regulatory requirement that DMEPOS 
suppliers must meet applicable State licensure requirements by 
establishing it as a criterion to be awarded a contract.

                             EFFECTIVE DATE

    The bill would establish the supplier bid bond requirement 
for rounds of competitive bidding for which contracts take 
effect not sooner than 2017 but not later than 2019. The bill 
establishes the regulatory requirement that suppliers must meet 
applicable State licensure requirements in statute in a way 
that would allow the Secretary to continue to use the licensure 
requirement without disruption.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statements are made 
concerning the votes of the Committee on its consideration of 
H.R. 284. H.R. 284 was ordered favorably reported to the House 
of Representatives as amended by voice vote (with a quorum 
being present).

                          VOTES ON AMENDMENTS

    The amendment in the nature of a substitute was agreed to 
by voice vote.
    An amendment by Mr. Tiberi to the AINS to H.R. 284, in 
which on page 3, lines 8 and 9, strike `that is offered a 
contract,' was agreed to by voice vote (with a quorum being 
present).

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the revenue provisions 
of the bill, H.R. 284 as reported: The Committee agrees with 
the estimates prepared by the Congressional Budget Office 
(CBO), which are included below.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    The bill as reported is in compliance with clause 3(c)(2) 
of rule XIII of the Rules of the House of Representatives. 
Further, the bill involves no new or increased tax expenditures 
and no new budget authority.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.
                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 11, 2015.
Hon. Paul Ryan,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 284, the Medicare 
DMEPOS Competitive Bidding Improvement Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Lara 
Robillard.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 284--Medicare DMEPOS Competitive Bidding Improvement Act of 2015

    H.R. 284 would impose new requirements on private firms 
that supply products through Medicare's competitive bidding 
program for durable medical equipment (DME). CBO estimates that 
enacting H.R. 284 would increase revenues by about $1 million 
over the 2015-2025 period. The legislation could affect direct 
spending, but CBO estimates those effects would not be 
significant.
    Under current law, Medicare pays for some DME (including 
items like wheelchairs, hospital beds, and oxygen tanks and 
related supplies) using prices that are set through a two-stage 
process. In the first stage, firms submit bids to furnish a 
category of DME items to Medicare beneficiaries in a geographic 
area. The Medicare program uses those bids to exclude from the 
second stage the firms that submitted the highest bids. The 
remaining firms are invited to contract, for a period of three 
years, to supply that category of DME in that geographic area. 
The contractual price, or single payment amount (SPA), is the 
median bid of all the firms that are invited to participate in 
the second stage. Firms are free to decline to accept the 
contract.
    H.R. 284 would require that firms wishing to bid in a 
geographic area meet applicable licensure requirements of the 
state in which they are bidding and obtain a surety bond of 
between $50,000 and $100,000 from a bonding agency. If the 
company submitted a bid below the SPA in a geographic area but 
declined to accept a contract, it would forfeit the bond to the 
federal government. The estimate assumes those requirements 
would apply for contracts that go into effect beginning on 
January 1, 2019; in CBO's judgment, it would take several years 
to establish the requirements of the bond process through 
regulations and other program guidance.
    CBO is unsure whether under H.R. 284 the bonding agency or 
the Centers for Medicare and Medicaid Services (CMS), which 
administers the competitive bidding program, would hold the 
bond throughout the bidding process. CBO anticipates that these 
details would be clarified through regulations.
    CBO expects that implementing the legislation would not 
have a significant effect on the prices that CMS establishes 
for DME items, but that it would result in the forfeiture of a 
small number of surety bonds. CBO estimates that the revenues 
from such forfeitures will amount to less than $500,000 in each 
year, and will total about $1 million over the 2019-2025 
period. This estimate assumes enactment in the spring of 2015.
    The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting 
direct spending or revenues. The net changes in revenues that 
are subject to those pay-as-you-go procedures are shown in the 
following table. As noted above, CBO estimates that revenues 
would rise by less than $500,000 per year.

          CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 284, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON FEBRUARY 26, 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2015   2016   2017   2018   2019   2020   2021   2022   2023   2024   2025  2015-2020  2015-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             NET DECREASE (-) IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact.......................      0      0      0      0      0      0      0      0      0      0      0         0         -1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    H.R. 284 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Lara Robillard. 
The estimate was approved by Holly Harvey, Deputy Assistant 
Director for Budget Analysis.

   V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE OF 
                            REPRESENTATIVES


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee concluded that it was appropriate and timely to 
enact the sections included in the bill, as reported.
    On May 9, 2012, the Subcommittee on Health had a hearing to 
examine the impact of the DMEPOS competitive bidding program on 
Medicare beneficiaries, suppliers, and program expenditures. 
During this hearing, the Subcommittee heard testimony that the 
ability of suppliers to reject contract offers for an amount 
above their bid is harmful to the competitive bidding program. 
The Committee believes this bill would promote participation by 
suppliers committed to providing access to DMEPOS products at 
reasonable prices.

        B. Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the performance goals and 
objectives of the Committee are reflected in the descriptive 
portions of this report.

                   C. Duplication of Federal Programs

    In compliance with Sec. 3(g)(2) of H. Res. 5 (114th 
Congress), the Committee states that no provision of the bill 
establishes or reauthorizes: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169).

                 D. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that there may be one directed 
rule making within the meaning of such section.

              E. Information Related to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Act of 1995 (Pub. L. No. 104-4). The 
bill does not impose a Federal mandate on the private sector. 
The bill does not impose a Federal intergovernmental mandate on 
State, local, or tribal governments.

  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee states that the 
provisions of the bill do not contain any congressional 
earmarks, limited tax benefits, or limited tariff benefits 
within the meaning of the rule.

          VI. CHANGES IN EXISTING LAW BY THE BILL, AS REPORTED

    With respect to clause 3(e) of rule XIII of the Rules of 
the House of Representatives, H.R. 876 makes the following 
changes to current law.

       Changes in Existing Law Proposed by the Bill, as Reported

  In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
proposed by the bill, as reported, are shown as follows (new 
matter is printed in italic and existing law in which no change 
is proposed is shown in roman):

SOCIAL SECURITY ACT

           *       *       *       *       *       *       *


TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *


   Part B--Supplementary Medical Insurance Benefits for the Aged and 
Disabled

           *       *       *       *       *       *       *


         competitive acquisition of certain items and services

  Sec. 1847. (a) Establishment of Competitive Acquisition 
Programs.--
          (1) Implementation of programs.--
                  (A) In general.--The Secretary shall 
                establish and implement programs under which 
                competitive acquisition areas are established 
                throughout the United States for contract award 
                purposes for the furnishing under this part of 
                competitively priced items and services 
                (described in paragraph (2)) for which payment 
                is made under this part. Such areas may differ 
                for different items and services.
                  (B) Phased-in implementation.--The programs--
                          (i) shall be phased in among 
                        competitive acquisition areas in a 
                        manner consistent with subparagraph (D) 
                        so that the competition under the 
                        programs occurs in--
                                  (I) 10 of the largest 
                                metropolitan statistical areas 
                                in 2007;
                                  (II) an additional 91 of the 
                                largest metropolitan 
                                statistical areas in 2011; and
                                  (III) additional areas after 
                                2011 (or, in the case of 
                                national mail order for items 
                                and services, after 2010); and
                          (ii) may be phased in first among the 
                        highest cost and highest volume items 
                        and services or those items and 
                        services that the Secretary determines 
                        have the largest savings potential.
                  (C) Waiver of certain provisions.--In 
                carrying out the programs, the Secretary may 
                waive such provisions of the Federal 
                Acquisition Regulation as are necessary for the 
                efficient implementation of this section, other 
                than provisions relating to confidentiality of 
                information and such other provisions as the 
                Secretary determines appropriate.
          (D) Changes in competitive acquisition programs.--
                  (i) Round 1 of competitive acquisition 
                program.--Notwithstanding subparagraph 
                (B)(i)(I) and in implementing the first round 
                of the competitive acquisition programs under 
                this section--
                          (I) the contracts awarded under this 
                        section before the date of the 
                        enactment of this subparagraph are 
                        terminated, no payment shall be made 
                        under this title on or after the date 
                        of the enactment of this subparagraph 
                        based on such a contract, and, to the 
                        extent that any damages may be 
                        applicable as a result of the 
                        termination of such contracts, such 
                        damages shall be payable from the 
                        Federal Supplementary Medical Insurance 
                        Trust Fund under section 1841;
                          (II) the Secretary shall conduct the 
                        competition for such round in a manner 
                        so that it occurs in 2009 with respect 
                        to the same items and services and the 
                        same areas, except as provided in 
                        subclauses (III) and (IV);
                          (III) the Secretary shall exclude 
                        Puerto Rico so that such round of 
                        competition covers 9, instead of 10, of 
                        the largest metropolitan statistical 
                        areas; and
                          (IV) there shall be excluded negative 
                        pressure wound therapy items and 
                        services.
                Nothing in subclause (I) shall be construed to 
                provide an independent cause of action or right 
                to administrative or judicial review with 
                regard to the termination provided under such 
                subclause.
                  (ii) Round 2 of competitive acquisition 
                program.--In implementing the second round of 
                the competitive acquisition programs under this 
                section described in subparagraph (B)(i)(II)--
                          (I) the metropolitan statistical 
                        areas to be included shall be those 
                        metropolitan statistical areas selected 
                        by the Secretary for such round as of 
                        June 1, 2008;
                          (II) the Secretary shall include the 
                        next 21 largest metropolitan 
                        statistical areas by total population 
                        (after those selected under subclause 
                        (I)) for such round; and
                          (III) the Secretary may subdivide 
                        metropolitan statistical areas with 
                        populations (based upon the most recent 
                        data from the Census Bureau) of at 
                        least 8,000,000 into separate areas for 
                        competitive acquisition purposes.
                  (iii) Exclusion of certain areas in 
                subsequent rounds of competitive acquisition 
                programs.--In implementing subsequent rounds of 
                the competitive acquisition programs under this 
                section, including under subparagraph 
                (B)(i)(III), for competitions occurring before 
                2015, the Secretary shall exempt from the 
                competitive acquisition program (other than 
                national mail order) the following:
                          (I) Rural areas.
                          (II) Metropolitan statistical areas 
                        not selected under round 1 or round 2 
                        with a population of less than 250,000.
                          (III) Areas with a low population 
                        density within a metropolitan 
                        statistical area that is otherwise 
                        selected, as determined for purposes of 
                        paragraph (3)(A).
  (E) Verification by oig.--The Inspector General of the 
Department of Health and Human Services shall, through post-
award audit, survey, or otherwise, assess the process used by 
the Centers for Medicare & Medicaid Services to conduct 
competitive bidding and subsequent pricing determinations under 
this section that are the basis for pivotal bid amounts and 
single payment amounts for items and services in competitive 
bidding areas under rounds 1 and 2 of the competitive 
acquisition programs under this section and may continue to 
verify such calculations for subsequent rounds of such 
programs.
  (F) Supplier feedback on missing financial documentation.--
          (i) In general.--In the case of a bid where one or 
        more covered documents in connection with such bid have 
        been submitted not later than the covered document 
        review date specified in clause (ii), the Secretary--
                  (I) shall provide, by not later than 45 days 
                (in the case of the first round of the 
                competitive acquisition programs as described 
                in subparagraph (B)(i)(I)) or 90 days (in the 
                case of a subsequent round of such programs) 
                after the covered document review date, for 
                notice to the bidder of all such documents that 
                are missing as of the covered document review 
                date; and
                  (II) may not reject the bid on the basis that 
                any covered document is missing or has not been 
                submitted on a timely basis, if all such 
                missing documents identified in the notice 
                provided to the bidder under subclause (I) are 
                submitted to the Secretary not later than 10 
                business days after the date of such notice.
          (ii) Covered document review date.--The covered 
        document review date specified in this clause with 
        respect to a competitive acquisition program is the 
        later of--
                  (I) the date that is 30 days before the final 
                date specified by the Secretary for submission 
                of bids under such program; or
                  (II) the date that is 30 days after the first 
                date specified by the Secretary for submission 
                of bids under such program.
          (iii) Limitations of process.--The process provided 
        under this subparagraph--
                  (I) applies only to the timely submission of 
                covered documents;
                  (II) does not apply to any determination as 
                to the accuracy or completeness of covered 
                documents submitted or whether such documents 
                meet applicable requirements;
                  (III) shall not prevent the Secretary from 
                rejecting a bid based on any basis not 
                described in clause (i)(II); and
                  (IV) shall not be construed as permitting a 
                bidder to change bidding amounts or to make 
                other changes in a bid submission.
          (iv) Covered document defined.--In this subparagraph, 
        the term ``covered document'' means a financial, tax, 
        or other document required to be submitted by a bidder 
        as part of an original bid submission under a 
        competitive acquisition program in order to meet 
        required financial standards. Such term does not 
        include other documents, such as the bid itself or 
        accreditation documentation.
                  (G) Requiring bid bonds for bidding 
                entities.--With respect to rounds of 
                competitions beginning under this subsection 
                for contracts beginning not earlier than 
                January 1, 2017, and not later than January 1, 
                2019, an entity may not submit a bid for a 
                competitive acquisition area unless, as of the 
                deadline for bid submission, the entity has 
                obtained (and provided the Secretary with proof 
                of having obtained) a bid surety bond (in this 
                paragraph referred to as a ``bid bond'') in a 
                form specified by the Secretary consistent with 
                subparagraph (H) and in an amount that is not 
                less than $50,000 and not more than $100,000 
                for each competitive acquisition area in which 
                the entity submits the bid.
                  (H) Treatment of bid bonds submitted.--
                          (i) For bidders that submit bids at 
                        or below the median and are offered but 
                        do not accept the contract.--In the 
                        case of a bidding entity that is 
                        offered a contract for any product 
                        category for a competitive acquisition 
                        area, if--
                                  (I) the entity's composite 
                                bid for such product category 
                                and area was at or below the 
                                median composite bid rate for 
                                all bidding entities included 
                                in the calculation of the 
                                single payment amounts for such 
                                product category and area; and
                                  (II) the entity does not 
                                accept the contract offered for 
                                such product category and area,
                        the bid bond submitted by such entity 
                        for such area shall be forfeited by the 
                        entity and the Secretary shall collect 
                        on it.
                  (ii) Treatment of other bidders.--In the case 
                of a bidding entity for any product category 
                for a competitive acquisition area, if the 
                entity does not meet the bid forfeiture 
                conditions in subclauses (I) and (II) of clause 
                (i) for any product category for such area, the 
                bid bond submitted by such entity for such area 
                shall be returned within 90 days of the public 
                announcement of the contract suppliers for such 
                area.
          (2) Items and services described.--The items and 
        services referred to in paragraph (1) are the 
        following:
                  (A) Durable medical equipment and medical 
                supplies.--Covered items (as defined in section 
                1834(a)(13)) for which payment would otherwise 
                be made under section 1834(a), including items 
                used in infusion and drugs (other than 
                inhalation drugs) and supplies used in 
                conjunction with durable medical equipment, but 
                excluding class III devices under the Federal 
                Food, Drug, and Cosmetic Act and excluding 
                certain complex rehabilitative power 
                wheelchairs recognized by the Secretary as 
                classified within group 3 or higher (and 
                related accessories when furnished in 
                connection with such wheelchairs).
                  (B) Other equipment and supplies.--Items and 
                services described in section 1842(s)(2)(D), 
                other than parenteral nutrients, equipment, and 
                supplies.
                  (C) Off-the-shelf orthotics.--Orthotics 
                described in section 1861(s)(9) for which 
                payment would otherwise be made under section 
                1834(h) which require minimal self-adjustment 
                for appropriate use and do not require 
                expertise in trimming, bending, molding, 
                assembling, or customizing to fit to the 
                individual.
          (3) Exception authority.--In carrying out the 
        programs under this section, the Secretary may exempt--
                  (A) rural areas and areas with low population 
                density within urban areas that are not 
                competitive, unless there is a significant 
                national market through mail order for a 
                particular item or service; and
                  (B) items and services for which the 
                application of competitive acquisition is not 
                likely to result in significant savings.
          (4) Special rule for certain rented items of durable 
        medical equipment and oxygen.--In the case of a covered 
        item for which payment is made on a rental basis under 
        section 1834(a) and in the case of payment for oxygen 
        under section 1834(a)(5), the Secretary shall establish 
        a process by which rental agreements for the covered 
        items and supply arrangements with oxygen suppliers 
        entered into before the application of the competitive 
        acquisition program under this section for the item may 
        be continued notwithstanding this section. In the case 
        of any such continuation, the supplier involved shall 
        provide for appropriate servicing and replacement, as 
        required under section 1834(a).
          (5) Physician authorization.--
                  (A) In general.--With respect to items or 
                services included within a particular HCPCS 
                code, the Secretary may establish a process for 
                certain items and services under which a 
                physician may prescribe a particular brand or 
                mode of delivery of an item or service within 
                such code if the physician determines that use 
                of the particular item or service would avoid 
                an adverse medical outcome on the individual, 
                as determined by the Secretary.
                  (B) No effect on payment amount.--A 
                prescription under subparagraph (A) shall not 
                affect the amount of payment otherwise 
                applicable for the item or service under the 
                code involved.
          (6) Application.--For each competitive acquisition 
        area in which the program is implemented under this 
        subsection with respect to items and services, the 
        payment basis determined under the competition 
        conducted under subsection (b) shall be substituted for 
        the payment basis otherwise applied under section 
        1834(a), section 1834(h), or section 1842(s), as 
        appropriate.
          (7) Exemption from competitive acquisition.--The 
        programs under this section shall not apply to the 
        following:
                  (A) Certain off-the-shelf orthotics.--Items 
                and services described in paragraph (2)(C) if 
                furnished--
                          (i) by a physician or other 
                        practitioner (as defined by the 
                        Secretary) to the physician's or 
                        practitioner's own patients as part of 
                        the physician's or practitioner's 
                        professional service; or
                          (ii) by a hospital to the hospital's 
                        own patients during an admission or on 
                        the date of discharge.
                  (B) Certain durable medical equipment.--Those 
                items and services described in paragraph 
                (2)(A)--
                          (i) that are furnished by a hospital 
                        to the hospital's own patients during 
                        an admission or on the date of 
                        discharge; and
                          (ii) to which such programs would not 
                        apply, as specified by the Secretary, 
                        if furnished by a physician to the 
                        physician's own patients as part of the 
                        physician's professional service.
  (b) Program Requirements.--
          (1) In general.--The Secretary shall conduct a 
        competition among entities supplying items and services 
        described in subsection (a)(2) for each competitive 
        acquisition area in which the program is implemented 
        under subsection (a) with respect to such items and 
        services.
          (2) Conditions for awarding contract.--
                  (A) In general.--The Secretary may not award 
                a contract to any entity under the competition 
                conducted in an competitive acquisition area 
                pursuant to paragraph (1) to furnish such items 
                or services unless the Secretary finds all of 
                the following:
                          (i) The entity meets applicable 
                        quality standards specified by the 
                        Secretary under section 1834(a)(20).
                          (ii) The entity meets applicable 
                        financial standards specified by the 
                        Secretary, taking into account the 
                        needs of small providers.
                          (iii) The total amounts to be paid to 
                        contractors in a competitive 
                        acquisition area are expected to be 
                        less than the total amounts that would 
                        otherwise be paid.
                          (iv) Access of individuals to a 
                        choice of multiple suppliers in the 
                        area is maintained.
                          (v) The entity meets applicable State 
                        licensure requirements.
                  (B) Timely implementation of program.--Any 
                delay in the implementation of quality 
                standards under section 1834(a)(20) or delay in 
                the receipt of advice from the program 
                oversight committee established under 
                subsection (c) shall not delay the 
                implementation of the competitive acquisition 
                program under this section.
          (3) Contents of contract.--
                  (A) In general.--A contract entered into with 
                an entity under the competition conducted 
                pursuant to paragraph (1) is subject to terms 
                and conditions that the Secretary may specify.
                  (B) Term of contracts.--The Secretary shall 
                recompete contracts under this section not less 
                often than once every 3 years.
                  (C) Disclosure of subcontractors.--
                          (i) Initial disclosure.--Not later 
                        than 10 days after the date a supplier 
                        enters into a contract with the 
                        Secretary under this section, such 
                        supplier shall disclose to the 
                        Secretary, in a form and manner 
                        specified by the Secretary, the 
                        information on--
                                  (I) each subcontracting 
                                relationship that such supplier 
                                has in furnishing items and 
                                services under the contract; 
                                and
                                  (II) whether each such 
                                subcontractor meets the 
                                requirement of section 
                                1834(a)(20)(F)(i), if 
                                applicable to such 
                                subcontractor.
                          (ii) Subsequent disclosure.--Not 
                        later than 10 days after such a 
                        supplier subsequently enters into a 
                        subcontracting relationship described 
                        in clause (i)(II), such supplier shall 
                        disclose to the Secretary, in such form 
                        and manner, the information described 
                        in subclauses (I) and (II) of clause 
                        (i).
          (4) Limit on number of contractors.--
                  (A) In general.--The Secretary may limit the 
                number of contractors in a competitive 
                acquisition area to the number needed to meet 
                projected demand for items and services covered 
                under the contracts. In awarding contracts, the 
                Secretary shall take into account the ability 
                of bidding entities to furnish items or 
                services in sufficient quantities to meet the 
                anticipated needs of individuals for such items 
                or services in the geographic area covered 
                under the contract on a timely basis.
                  (B) Multiple winners.--The Secretary shall 
                award contracts to multiple entities submitting 
                bids in each area for an item or service.
          (5) Payment.--
                  (A) In general.--Payment under this part for 
                competitively priced items and services 
                described in subsection (a)(2) shall be based 
                on bids submitted and accepted under this 
                section for such items and services. Based on 
                such bids the Secretary shall determine a 
                single payment amount for each item or service 
                in each competitive acquisition area.
                  (B) Reduced beneficiary cost-sharing.--
                          (i) Application of coinsurance.--
                        Payment under this section for items 
                        and services shall be in an amount 
                        equal to 80 percent of the payment 
                        basis described in subparagraph (A).
                          (ii) Application of deductible.--
                        Before applying clause (i), the 
                        individual shall be required to meet 
                        the deductible described in section 
                        1833(b).
                  (C) Payment on assignment-related basis.--
                Payment for any item or service furnished by 
                the entity may only be made under this section 
                on an assignment-related basis.
                  (D) Construction.--Nothing in this section 
                shall be construed as precluding the use of an 
                advanced beneficiary notice with respect to a 
                competitively priced item and service.
          (6) Participating contractors.--
                  (A) In general.--Except as provided in 
                subsection (a)(4), payment shall not be made 
                for items and services described in subsection 
                (a)(2) furnished by a contractor and for which 
                competition is conducted under this section 
                unless--
                          (i) the contractor has submitted a 
                        bid for such items and services under 
                        this section; and
                          (ii) the Secretary has awarded a 
                        contract to the contractor for such 
                        items and services under this section.
                  (B) Bid defined.--In this section, the term 
                ``bid'' means an offer to furnish an item or 
                service for a particular price and time period 
                that includes, where appropriate, any services 
                that are attendant to the furnishing of the 
                item or service.
                  (C) Rules for mergers and acquisitions.--In 
                applying subparagraph (A) to a contractor, the 
                contractor shall include a successor entity in 
                the case of a merger or acquisition, if the 
                successor entity assumes such contract along 
                with any liabilities that may have occurred 
                thereunder.
                  (D) Protection of small suppliers.--In 
                developing procedures relating to bids and the 
                awarding of contracts under this section, the 
                Secretary shall take appropriate steps to 
                ensure that small suppliers of items and 
                services have an opportunity to be considered 
                for participation in the program under this 
                section.
          (7) Consideration in determining categories for 
        bids.--The Secretary may consider the clinical 
        efficiency and value of specific items within codes, 
        including whether some items have a greater therapeutic 
        advantage to individuals.
          (8) Authority to contract for education, monitoring, 
        outreach, and complaint services.--The Secretary may 
        enter into contracts with appropriate entities to 
        address complaints from individuals who receive items 
        and services from an entity with a contract under this 
        section and to conduct appropriate education of and 
        outreach to such individuals and monitoring quality of 
        services with respect to the program.
          (9) Authority to contract for implementation.--The 
        Secretary may contract with appropriate entities to 
        implement the competitive bidding program under this 
        section.
          (10) Special rule in case of competition for diabetic 
        testing strips.--
                  (A) In general.--With respect to the 
                competitive acquisition program for diabetic 
                testing strips conducted after the first round 
                of the competitive acquisition programs, if an 
                entity does not demonstrate to the Secretary 
                that its bid covers types of diabetic testing 
                strip products that, in the aggregate and 
                taking into account volume for the different 
                products, cover 50 percent (or such higher 
                percentage as the Secretary may specify) of all 
                such types of products, the Secretary shall 
                reject such bid. The volume for such types of 
                products may be determined in accordance with 
                such data (which may be market based data) as 
                the Secretary recognizes.
                  (B) Study of types of testing strip 
                products.--Before 2011, the Inspector General 
                of the Department of Health and Human Services 
                shall conduct a study to determine the types of 
                diabetic testing strip products by volume that 
                could be used to make determinations pursuant 
                to subparagraph (A) for the first competition 
                under the competitive acquisition program 
                described in such subparagraph and submit to 
                the Secretary a report on the results of the 
                study. The Inspector General shall also conduct 
                such a study and submit such a report before 
                the Secretary conducts a subsequent competitive 
                acquistion program described in subparagraph 
                (A).
          (11) No administrative or judicial review.--There 
        shall be no administrative or judicial review under 
        section 1869, section 1878, or otherwise, of--
                  (A) the establishment of payment amounts 
                under paragraph (5);
                  (B) the awarding of contracts under this 
                section;
                  (C) the designation of competitive 
                acquisition areas under subsection (a)(1)(A) 
                and the identification of areas under 
                subsection (a)(1)(D)(iii);
                  (D) the phased-in implementation under 
                subsection (a)(1)(B) and implementation of 
                subsection (a)(1)(D);
                  (E) the selection of items and services for 
                competitive acquisition under subsection 
                (a)(2);
                  (F) the bidding structure and number of 
                contractors selected under this section; or
                  (G) the implementation of the special rule 
                described in paragraph (10).
  (c) Program Advisory and Oversight Committee.--
          (1) Establishment.--The Secretary shall establish a 
        Program Advisory and Oversight Committee (hereinafter 
        in this section referred to as the ``Committee'').
          (2) Membership; terms.--The Committee shall consist 
        of such members as the Secretary may appoint who shall 
        serve for such term as the Secretary may specify.
          (3) Duties.--
                  (A) Advice.--The Committee shall provide 
                advice to the Secretary with respect to the 
                following functions:
                          (i) The implementation of the program 
                        under this section.
                          (ii) The establishment of financial 
                        standards for purposes of subsection 
                        (b)(2)(A)(ii).
                          (iii) The establishment of 
                        requirements for collection of data for 
                        the efficient management of the 
                        program.
                          (iv) The development of proposals for 
                        efficient interaction among 
                        manufacturers, providers of services, 
                        suppliers (as defined in section 
                        1861(d)), and individuals.
                          (v) The establishment of quality 
                        standards under section 1834(a)(20).
                  (B) Additional duties.--The Committee shall 
                perform such additional functions to assist the 
                Secretary in carrying out this section as the 
                Secretary may specify.
          (4) Inapplicability of faca.--The provisions of the 
        Federal Advisory Committee Act (5 U.S.C. App.) shall 
        not apply.
          (5) Termination.--The Committee shall terminate on 
        December 31, 2011.
  (d) Report.--Not later than July 1, 2011, the Secretary shall 
submit to Congress a report on the programs under this section. 
The report shall include information on savings, reductions in 
cost-sharing, access to and quality of items and services, and 
satisfaction of individuals.
  (f) Competitive Acquisition Ombudsman.--The Secretary shall 
provide for a competitive acquisition ombudsman within the 
Centers for Medicare & Medicaid Services in order to respond to 
complaints and inquiries made by suppliers and individuals 
relating to the application of the competitive acquisition 
program under this section. The ombudsman may be within the 
office of the Medicare Beneficiary Ombudsman appointed under 
section 1808(c). The ombudsman shall submit to Congress an 
annual report on the activities under this subsection, which 
report shall be coordinated with the report provided under 
section 1808(c)(2)(C).

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   Text of Existing Law Amended or Repealed by the Bill, as Reported

  In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

SOCIAL SECURITY ACT

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TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *


   Part B--Supplementary Medical Insurance Benefits for the Aged and 
Disabled

           *       *       *       *       *       *       *


         competitive acquisition of certain items and services

  Sec. 1847. (a) Establishment of Competitive Acquisition 
Programs.--
          (1) Implementation of programs.--
                  (A) In general.--The Secretary shall 
                establish and implement programs under which 
                competitive acquisition areas are established 
                throughout the United States for contract award 
                purposes for the furnishing under this part of 
                competitively priced items and services 
                (described in paragraph (2)) for which payment 
                is made under this part. Such areas may differ 
                for different items and services.
                  (B) Phased-in implementation.--The programs--
                          (i) shall be phased in among 
                        competitive acquisition areas in a 
                        manner consistent with subparagraph (D) 
                        so that the competition under the 
                        programs occurs in--
                                  (I) 10 of the largest 
                                metropolitan statistical areas 
                                in 2007;
                                  (II) an additional 91 of the 
                                largest metropolitan 
                                statistical areas in 2011; and
                                  (III) additional areas after 
                                2011 (or, in the case of 
                                national mail order for items 
                                and services, after 2010); and
                          (ii) may be phased in first among the 
                        highest cost and highest volume items 
                        and services or those items and 
                        services that the Secretary determines 
                        have the largest savings potential.
                  (C) Waiver of certain provisions.--In 
                carrying out the programs, the Secretary may 
                waive such provisions of the Federal 
                Acquisition Regulation as are necessary for the 
                efficient implementation of this section, other 
                than provisions relating to confidentiality of 
                information and such other provisions as the 
                Secretary determines appropriate.
                  (D) Changes in competitive acquisition 
                programs.--
                  (i) Round 1 of competitive acquisition 
                program.--Notwithstanding subparagraph 
                (B)(i)(I) and in implementing the first round 
                of the competitive acquisition programs under 
                this section--
                          (I) the contracts awarded under this 
                        section before the date of the 
                        enactment of this subparagraph are 
                        terminated, no payment shall be made 
                        under this title on or after the date 
                        of the enactment of this subparagraph 
                        based on such a contract, and, to the 
                        extent that any damages may be 
                        applicable as a result of the 
                        termination of such contracts, such 
                        damages shall be payable from the 
                        Federal Supplementary Medical Insurance 
                        Trust Fund under section 1841;
                          (II) the Secretary shall conduct the 
                        competition for such round in a manner 
                        so that it occurs in 2009 with respect 
                        to the same items and services and the 
                        same areas, except as provided in 
                        subclauses (III) and (IV);
                          (III) the Secretary shall exclude 
                        Puerto Rico so that such round of 
                        competition covers 9, instead of 10, of 
                        the largest metropolitan statistical 
                        areas; and
                          (IV) there shall be excluded negative 
                        pressure wound therapy items and 
                        services.
                Nothing in subclause (I) shall be construed to 
                provide an independent cause of action or right 
                to administrative or judicial review with 
                regard to the termination provided under such 
                subclause.
                  (ii) Round 2 of competitive acquisition 
                program.--In implementing the second round of 
                the competitive acquisition programs under this 
                section described in subparagraph (B)(i)(II)--
                          (I) the metropolitan statistical 
                        areas to be included shall be those 
                        metropolitan statistical areas selected 
                        by the Secretary for such round as of 
                        June 1, 2008;
                          (II) the Secretary shall include the 
                        next 21 largest metropolitan 
                        statistical areas by total population 
                        (after those selected under subclause 
                        (I)) for such round; and
                          (III) the Secretary may subdivide 
                        metropolitan statistical areas with 
                        populations (based upon the most recent 
                        data from the Census Bureau) of at 
                        least 8,000,000 into separate areas for 
                        competitive acquisition purposes.
                  (iii) Exclusion of certain areas in 
                subsequent rounds of competitive acquisition 
                programs.--In implementing subsequent rounds of 
                the competitive acquisition programs under this 
                section, including under subparagraph 
                (B)(i)(III), for competitions occurring before 
                2015, the Secretary shall exempt from the 
                competitive acquisition program (other than 
                national mail order) the following:
                          (I) Rural areas.
                          (II) Metropolitan statistical areas 
                        not selected under round 1 or round 2 
                        with a population of less than 250,000.
                          (III) Areas with a low population 
                        density within a metropolitan 
                        statistical area that is otherwise 
                        selected, as determined for purposes of 
                        paragraph (3)(A).
  (E) Verification by oig.--The Inspector General of the 
Department of Health and Human Services shall, through post-
award audit, survey, or otherwise, assess the process used by 
the Centers for Medicare & Medicaid Services to conduct 
competitive bidding and subsequent pricing determinations under 
this section that are the basis for pivotal bid amounts and 
single payment amounts for items and services in competitive 
bidding areas under rounds 1 and 2 of the competitive 
acquisition programs under this section and may continue to 
verify such calculations for subsequent rounds of such 
programs.
  (F) Supplier feedback on missing financial documentation.--
          (i) In general.--In the case of a bid where one or 
        more covered documents in connection with such bid have 
        been submitted not later than the covered document 
        review date specified in clause (ii), the Secretary--
                  (I) shall provide, by not later than 45 days 
                (in the case of the first round of the 
                competitive acquisition programs as described 
                in subparagraph (B)(i)(I)) or 90 days (in the 
                case of a subsequent round of such programs) 
                after the covered document review date, for 
                notice to the bidder of all such documents that 
                are missing as of the covered document review 
                date; and
                  (II) may not reject the bid on the basis that 
                any covered document is missing or has not been 
                submitted on a timely basis, if all such 
                missing documents identified in the notice 
                provided to the bidder under subclause (I) are 
                submitted to the Secretary not later than 10 
                business days after the date of such notice.
          (ii) Covered document review date.--The covered 
        document review date specified in this clause with 
        respect to a competitive acquisition program is the 
        later of--
                  (I) the date that is 30 days before the final 
                date specified by the Secretary for submission 
                of bids under such program; or
                  (II) the date that is 30 days after the first 
                date specified by the Secretary for submission 
                of bids under such program.
          (iii) Limitations of process.--The process provided 
        under this subparagraph--
                  (I) applies only to the timely submission of 
                covered documents;
                  (II) does not apply to any determination as 
                to the accuracy or completeness of covered 
                documents submitted or whether such documents 
                meet applicable requirements;
                  (III) shall not prevent the Secretary from 
                rejecting a bid based on any basis not 
                described in clause (i)(II); and
                  (IV) shall not be construed as permitting a 
                bidder to change bidding amounts or to make 
                other changes in a bid submission.
          (iv) Covered document defined.--In this subparagraph, 
        the term ``covered document'' means a financial, tax, 
        or other document required to be submitted by a bidder 
        as part of an original bid submission under a 
        competitive acquisition program in order to meet 
        required financial standards. Such term does not 
        include other documents, such as the bid itself or 
        accreditation documentation.
          (2) Items and services described.--The items and 
        services referred to in paragraph (1) are the 
        following:
                  (A) Durable medical equipment and medical 
                supplies.--Covered items (as defined in section 
                1834(a)(13)) for which payment would otherwise 
                be made under section 1834(a), including items 
                used in infusion and drugs (other than 
                inhalation drugs) and supplies used in 
                conjunction with durable medical equipment, but 
                excluding class III devices under the Federal 
                Food, Drug, and Cosmetic Act and excluding 
                certain complex rehabilitative power 
                wheelchairs recognized by the Secretary as 
                classified within group 3 or higher (and 
                related accessories when furnished in 
                connection with such wheelchairs).
                  (B) Other equipment and supplies.--Items and 
                services described in section 1842(s)(2)(D), 
                other than parenteral nutrients, equipment, and 
                supplies.
                  (C) Off-the-shelf orthotics.--Orthotics 
                described in section 1861(s)(9) for which 
                payment would otherwise be made under section 
                1834(h) which require minimal self-adjustment 
                for appropriate use and do not require 
                expertise in trimming, bending, molding, 
                assembling, or customizing to fit to the 
                individual.
          (3) Exception authority.--In carrying out the 
        programs under this section, the Secretary may exempt--
                  (A) rural areas and areas with low population 
                density within urban areas that are not 
                competitive, unless there is a significant 
                national market through mail order for a 
                particular item or service; and
                  (B) items and services for which the 
                application of competitive acquisition is not 
                likely to result in significant savings.
          (4) Special rule for certain rented items of durable 
        medical equipment and oxygen.--In the case of a covered 
        item for which payment is made on a rental basis under 
        section 1834(a) and in the case of payment for oxygen 
        under section 1834(a)(5), the Secretary shall establish 
        a process by which rental agreements for the covered 
        items and supply arrangements with oxygen suppliers 
        entered into before the application of the competitive 
        acquisition program under this section for the item may 
        be continued notwithstanding this section. In the case 
        of any such continuation, the supplier involved shall 
        provide for appropriate servicing and replacement, as 
        required under section 1834(a).
          (5) Physician authorization.--
                  (A) In general.--With respect to items or 
                services included within a particular HCPCS 
                code, the Secretary may establish a process for 
                certain items and services under which a 
                physician may prescribe a particular brand or 
                mode of delivery of an item or service within 
                such code if the physician determines that use 
                of the particular item or service would avoid 
                an adverse medical outcome on the individual, 
                as determined by the Secretary.
                  (B) No effect on payment amount.--A 
                prescription under subparagraph (A) shall not 
                affect the amount of payment otherwise 
                applicable for the item or service under the 
                code involved.
          (6) Application.--For each competitive acquisition 
        area in which the program is implemented under this 
        subsection with respect to items and services, the 
        payment basis determined under the competition 
        conducted under subsection (b) shall be substituted for 
        the payment basis otherwise applied under section 
        1834(a), section 1834(h), or section 1842(s), as 
        appropriate.
          (7) Exemption from competitive acquisition.--The 
        programs under this section shall not apply to the 
        following:
                  (A) Certain off-the-shelf orthotics.--Items 
                and services described in paragraph (2)(C) if 
                furnished--
                          (i) by a physician or other 
                        practitioner (as defined by the 
                        Secretary) to the physician's or 
                        practitioner's own patients as part of 
                        the physician's or practitioner's 
                        professional service; or
                          (ii) by a hospital to the hospital's 
                        own patients during an admission or on 
                        the date of discharge.
                  (B) Certain durable medical equipment.--Those 
                items and services described in paragraph 
                (2)(A)--
                          (i) that are furnished by a hospital 
                        to the hospital's own patients during 
                        an admission or on the date of 
                        discharge; and
                          (ii) to which such programs would not 
                        apply, as specified by the Secretary, 
                        if furnished by a physician to the 
                        physician's own patients as part of the 
                        physician's professional service.
  (b) Program Requirements.--
          (1) In general.--The Secretary shall conduct a 
        competition among entities supplying items and services 
        described in subsection (a)(2) for each competitive 
        acquisition area in which the program is implemented 
        under subsection (a) with respect to such items and 
        services.
          (2) Conditions for awarding contract.--
                  (A) In general.--The Secretary may not award 
                a contract to any entity under the competition 
                conducted in an competitive acquisition area 
                pursuant to paragraph (1) to furnish such items 
                or services unless the Secretary finds all of 
                the following:
                          (i) The entity meets applicable 
                        quality standards specified by the 
                        Secretary under section 1834(a)(20).
                          (ii) The entity meets applicable 
                        financial standards specified by the 
                        Secretary, taking into account the 
                        needs of small providers.
                          (iii) The total amounts to be paid to 
                        contractors in a competitive 
                        acquisition area are expected to be 
                        less than the total amounts that would 
                        otherwise be paid.
                          (iv) Access of individuals to a 
                        choice of multiple suppliers in the 
                        area is maintained.
                  (B) Timely implementation of program.--Any 
                delay in the implementation of quality 
                standards under section 1834(a)(20) or delay in 
                the receipt of advice from the program 
                oversight committee established under 
                subsection (c) shall not delay the 
                implementation of the competitive acquisition 
                program under this section.
          (3) Contents of contract.--
                  (A) In general.--A contract entered into with 
                an entity under the competition conducted 
                pursuant to paragraph (1) is subject to terms 
                and conditions that the Secretary may specify.
                  (B) Term of contracts.--The Secretary shall 
                recompete contracts under this section not less 
                often than once every 3 years.
                  (C) Disclosure of subcontractors.--
                          (i) Initial disclosure.--Not later 
                        than 10 days after the date a supplier 
                        enters into a contract with the 
                        Secretary under this section, such 
                        supplier shall disclose to the 
                        Secretary, in a form and manner 
                        specified by the Secretary, the 
                        information on--
                                  (I) each subcontracting 
                                relationship that such supplier 
                                has in furnishing items and 
                                services under the contract; 
                                and
                                  (II) whether each such 
                                subcontractor meets the 
                                requirement of section 
                                1834(a)(20)(F)(i), if 
                                applicable to such 
                                subcontractor.
                          (ii) Subsequent disclosure.--Not 
                        later than 10 days after such a 
                        supplier subsequently enters into a 
                        subcontracting relationship described 
                        in clause (i)(II), such supplier shall 
                        disclose to the Secretary, in such form 
                        and manner, the information described 
                        in subclauses (I) and (II) of clause 
                        (i).
          (4) Limit on number of contractors.--
                  (A) In general.--The Secretary may limit the 
                number of contractors in a competitive 
                acquisition area to the number needed to meet 
                projected demand for items and services covered 
                under the contracts. In awarding contracts, the 
                Secretary shall take into account the ability 
                of bidding entities to furnish items or 
                services in sufficient quantities to meet the 
                anticipated needs of individuals for such items 
                or services in the geographic area covered 
                under the contract on a timely basis.
                  (B) Multiple winners.--The Secretary shall 
                award contracts to multiple entities submitting 
                bids in each area for an item or service.
          (5) Payment.--
                  (A) In general.--Payment under this part for 
                competitively priced items and services 
                described in subsection (a)(2) shall be based 
                on bids submitted and accepted under this 
                section for such items and services. Based on 
                such bids the Secretary shall determine a 
                single payment amount for each item or service 
                in each competitive acquisition area.
                  (B) Reduced beneficiary cost-sharing.--
                          (i) Application of coinsurance.--
                        Payment under this section for items 
                        and services shall be in an amount 
                        equal to 80 percent of the payment 
                        basis described in subparagraph (A).
                          (ii) Application of deductible.--
                        Before applying clause (i), the 
                        individual shall be required to meet 
                        the deductible described in section 
                        1833(b).
                  (C) Payment on assignment-related basis.--
                Payment for any item or service furnished by 
                the entity may only be made under this section 
                on an assignment-related basis.
                  (D) Construction.--Nothing in this section 
                shall be construed as precluding the use of an 
                advanced beneficiary notice with respect to a 
                competitively priced item and service.
          (6) Participating contractors.--
                  (A) In general.--Except as provided in 
                subsection (a)(4), payment shall not be made 
                for items and services described in subsection 
                (a)(2) furnished by a contractor and for which 
                competition is conducted under this section 
                unless--
                          (i) the contractor has submitted a 
                        bid for such items and services under 
                        this section; and
                          (ii) the Secretary has awarded a 
                        contract to the contractor for such 
                        items and services under this section.
                  (B) Bid defined.--In this section, the term 
                ``bid'' means an offer to furnish an item or 
                service for a particular price and time period 
                that includes, where appropriate, any services 
                that are attendant to the furnishing of the 
                item or service.
                  (C) Rules for mergers and acquisitions.--In 
                applying subparagraph (A) to a contractor, the 
                contractor shall include a successor entity in 
                the case of a merger or acquisition, if the 
                successor entity assumes such contract along 
                with any liabilities that may have occurred 
                thereunder.
                  (D) Protection of small suppliers.--In 
                developing procedures relating to bids and the 
                awarding of contracts under this section, the 
                Secretary shall take appropriate steps to 
                ensure that small suppliers of items and 
                services have an opportunity to be considered 
                for participation in the program under this 
                section.
          (7) Consideration in determining categories for 
        bids.--The Secretary may consider the clinical 
        efficiency and value of specific items within codes, 
        including whether some items have a greater therapeutic 
        advantage to individuals.
          (8) Authority to contract for education, monitoring, 
        outreach, and complaint services.--The Secretary may 
        enter into contracts with appropriate entities to 
        address complaints from individuals who receive items 
        and services from an entity with a contract under this 
        section and to conduct appropriate education of and 
        outreach to such individuals and monitoring quality of 
        services with respect to the program.
          (9) Authority to contract for implementation.--The 
        Secretary may contract with appropriate entities to 
        implement the competitive bidding program under this 
        section.
          (10) Special rule in case of competition for diabetic 
        testing strips.--
                  (A) In general.--With respect to the 
                competitive acquisition program for diabetic 
                testing strips conducted after the first round 
                of the competitive acquisition programs, if an 
                entity does not demonstrate to the Secretary 
                that its bid covers types of diabetic testing 
                strip products that, in the aggregate and 
                taking into account volume for the different 
                products, cover 50 percent (or such higher 
                percentage as the Secretary may specify) of all 
                such types of products, the Secretary shall 
                reject such bid. The volume for such types of 
                products may be determined in accordance with 
                such data (which may be market based data) as 
                the Secretary recognizes.
                  (B) Study of types of testing strip 
                products.--Before 2011, the Inspector General 
                of the Department of Health and Human Services 
                shall conduct a study to determine the types of 
                diabetic testing strip products by volume that 
                could be used to make determinations pursuant 
                to subparagraph (A) for the first competition 
                under the competitive acquisition program 
                described in such subparagraph and submit to 
                the Secretary a report on the results of the 
                study. The Inspector General shall also conduct 
                such a study and submit such a report before 
                the Secretary conducts a subsequent competitive 
                acquistion program described in subparagraph 
                (A).
          (11) No administrative or judicial review.--There 
        shall be no administrative or judicial review under 
        section 1869, section 1878, or otherwise, of--
                  (A) the establishment of payment amounts 
                under paragraph (5);
                  (B) the awarding of contracts under this 
                section;
                  (C) the designation of competitive 
                acquisition areas under subsection (a)(1)(A) 
                and the identification of areas under 
                subsection (a)(1)(D)(iii);
                  (D) the phased-in implementation under 
                subsection (a)(1)(B) and implementation of 
                subsection (a)(1)(D);
                  (E) the selection of items and services for 
                competitive acquisition under subsection 
                (a)(2);
                  (F) the bidding structure and number of 
                contractors selected under this section; or
                  (G) the implementation of the special rule 
                described in paragraph (10).
  (c) Program Advisory and Oversight Committee.--
          (1) Establishment.--The Secretary shall establish a 
        Program Advisory and Oversight Committee (hereinafter 
        in this section referred to as the ``Committee'').
          (2) Membership; terms.--The Committee shall consist 
        of such members as the Secretary may appoint who shall 
        serve for such term as the Secretary may specify.
          (3) Duties.--
                  (A) Advice.--The Committee shall provide 
                advice to the Secretary with respect to the 
                following functions:
                          (i) The implementation of the program 
                        under this section.
                          (ii) The establishment of financial 
                        standards for purposes of subsection 
                        (b)(2)(A)(ii).
                          (iii) The establishment of 
                        requirements for collection of data for 
                        the efficient management of the 
                        program.
                          (iv) The development of proposals for 
                        efficient interaction among 
                        manufacturers, providers of services, 
                        suppliers (as defined in section 
                        1861(d)), and individuals.
                          (v) The establishment of quality 
                        standards under section 1834(a)(20).
                  (B) Additional duties.--The Committee shall 
                perform such additional functions to assist the 
                Secretary in carrying out this section as the 
                Secretary may specify.
          (4) Inapplicability of faca.--The provisions of the 
        Federal Advisory Committee Act (5 U.S.C. App.) shall 
        not apply.
          (5) Termination.--The Committee shall terminate on 
        December 31, 2011.
  (d) Report.--Not later than July 1, 2011, the Secretary shall 
submit to Congress a report on the programs under this section. 
The report shall include information on savings, reductions in 
cost-sharing, access to and quality of items and services, and 
satisfaction of individuals.
  (f) Competitive Acquisition Ombudsman.--The Secretary shall 
provide for a competitive acquisition ombudsman within the 
Centers for Medicare & Medicaid Services in order to respond to 
complaints and inquiries made by suppliers and individuals 
relating to the application of the competitive acquisition 
program under this section. The ombudsman may be within the 
office of the Medicare Beneficiary Ombudsman appointed under 
section 1808(c). The ombudsman shall submit to Congress an 
annual report on the activities under this subsection, which 
report shall be coordinated with the report provided under 
section 1808(c)(2)(C).

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