[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 3098 Introduced in Senate (IS)]







107th CONGRESS
  2d Session
                                S. 3098

To amend title XVIII of the Social Security Act to establish a program 
    for the competitive acquisition of items and services under the 
                           medicare program.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 10, 2002

 Mr. Graham (for himself and Mr. Gramm) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend title XVIII of the Social Security Act to establish a program 
    for the competitive acquisition of items and services under the 
                           medicare program.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Competitive Acquisition Act 
of 2002''.

SEC. 2. COMPETITIVE ACQUISITION OF ITEMS AND SERVICES UNDER MEDICARE.

    (a) Program Authorized.--Title XVIII of the Social Security Act (42 
U.S.C. 1395 et seq.) is amended by redesignating section 1866B as 
section 1866C and by inserting after section 1866A the following new 
section:

           ``competitive item and service acquisition program

    ``Sec. 1866B. (a) Program Authority.--
            ``(1) In general.--The Secretary shall implement programs 
        and demonstration projects to purchase, on behalf of 
        individuals enrolled under part B, certain competitively priced 
        items and services in competitive acquisition areas (in 
        accordance with the succeeding provisions of this section) for 
        which payment is made under such part. Such areas may differ in 
        the items and services provided.
            ``(2) Rules applicable to programs and demonstration 
        projects.--With respect to each program and demonstration 
        project implemented under this section, the following rules 
        shall apply:
                    ``(A) The Secretary may reject unreasonably low 
                bids.
                    ``(B) If the Secretary determines that the product 
                quality or service quality of an entity with a contract 
                has deteriorated since the contract was entered into, 
                the Secretary may cancel the contract prior to the date 
                on which the contract is scheduled to end and award a 
                contract to a different entity for the remainder of the 
                term of the contract.
                    ``(C) No device that is in a class of devices 
                described in section 513(a)(1)(C) of the Federal Food 
                Drug and Cosmetic Act (21 U.S.C. 360c(a)(1)(C)) may be 
                furnished under such a program or demonstration 
                project.
            ``(3) Phased-in implementation.--The programs implemented 
        under paragraph (1) shall be phased-in among competitive 
        acquisition areas over a period of not longer than 5 years in a 
        manner so that the competition under the programs occurs in--
                    ``(A) at least \1/5\ of such areas in 2003;
                    ``(B) at least \2/5\ of such areas in 2004;
                    ``(C) at least \3/5\ of such areas in 2005; and
                    ``(D) at least \4/5\ of such areas in 2006.
    ``(b) Implementation of Programs in Competitive Acquisition 
Areas.--
            ``(1) Types of programs.--The Secretary shall implement 
        programs under which competitive acquisition areas are 
        established for contract award purposes for the furnishing 
        under part B of--
                    ``(A) covered items (as defined in section 
                1834(a)(13)) and inhalation drugs used in conjunction 
                with durable medical equipment;
                    ``(B) surgical dressings, splints, casts, and other 
                devices described in section 1861(s)(5); and
                    ``(C) leg, arm, back, and neck braces described in 
                section 1861(s)(9), other than custom fabricated 
                orthotics (as defined by the Secretary).
            ``(2) Program requirements.--Each program implemented under 
        paragraph (1) shall--
                    ``(A) include such categories of items and services 
                as the Secretary may prescribe; and
                    ``(B) be conducted in such competitive acquisition 
                areas as the Secretary determines are appropriate.
            ``(3) Criteria for establishment of competitive acquisition 
        areas.--Each competitive acquisition area established under a 
        program implemented under paragraph (1) shall--
                    ``(A) be, or shall be within, a metropolitan 
                statistical area (as defined by the Director of the 
                Office of Management and Budget and the Secretary of 
                Commerce);
                    ``(B) be chosen based on the availability and 
                accessibility of entities able to furnish items and 
                services, and the probable savings to be realized by 
the use of competitive bidding in the furnishing of items and services 
in such area; and
                    ``(C) have multiple suppliers for each product 
                category.
    ``(c) Awarding of Contracts in Competitive Acquisition Areas.--
            ``(1) In general.--The Secretary shall conduct a 
        competition among entities supplying the items and services to 
        be furnished under the program implemented under subsection 
        (b)(1) for each competitive acquisition area established under 
        subsection (b)(3) for that program.
            ``(2) Administration by contract.--
                    ``(A) In general.--The Secretary shall administer 
                the programs under this section by entering into 
                contracts with entities.
                    ``(B) Conditions for awarding contract.--The 
                Secretary may not award a contract to any entity under 
                the competition conducted under paragraph (1) to 
                furnish an item or service unless the Secretary finds 
                that--
                            ``(i) the entity meets quality and 
                        financial standards specified by the Secretary 
                        or developed by accreditation entities or 
                        organizations recognized by the Secretary;
                            ``(ii) beneficiary liability is limited to 
                        the applicable percentage of the contract award 
                        price;
                            ``(iii) the entity has an agreement in 
                        effect under section 1866 and has an active 
                        National Supplier Clearinghouse identification 
                        number;
                            ``(iv) the entity complies with all Federal 
                        and State licensure and regulatory 
                        requirements;
                            ``(v) the entity is in compliance with all 
                        the provisions of title XI, this title, and 
                        title XIX, and any regulations relating 
                        thereto;
                            ``(vi) the entity is in compliance with all 
                        billing guidelines relating to the program 
                        under this title;
                            ``(vii) the entity has not been suspended 
                        within the 12 months preceding the date on 
                        which a bid is submitted by any DMERC antifraud 
                        unit for billing for items or services not 
                        furnished; and
                            ``(viii) the total amounts to be paid under 
                        the contract (including costs associated with 
                        the administration of the contract) are 
                        expected to be less than the total amounts that 
                        would otherwise be paid.
            ``(3) Contents of contract.--A contract entered into with 
        an entity under the competition conducted under paragraph (1) 
        shall be subject to such terms and conditions as the Secretary 
        may specify.
            ``(4) Limit on number of contractors.--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.
            ``(5) Small business protections.--Notwithstanding any 
        other provision of this section, the Secretary shall allow--
                    ``(A) an entity to bid to become a supplier in a 
                portion of the competitive acquisition area if the 
                entity does not have the capacity to service an entire 
                competitive acquisition area;
                    ``(B) small suppliers to bid for only 1 or a few 
                product categories instead of all the products in a 
                competitive acquisition area; and
                    ``(C) small suppliers to join together to form 
                networks for bidding purposes, as long as the combined 
                market share of such suppliers does not exceed 25 
                percent.
    ``(d) Evaluations and Annual Reports.--
            ``(1) Evaluations.--The Secretary shall evaluate the impact 
        of the implementation of the programs implemented under 
        subsection (b)(1) on--
                    ``(A) payments made and savings realized under this 
                title;
                    ``(B) the access of beneficiaries to items and 
                services furnished under such programs and 
                demonstration projects;
                    ``(C) the diversity of product selection under such 
                programs and demonstration projects; and
                    ``(D) the quality of items and services furnished 
                under such programs and demonstration projects.
            ``(2) Annual reports.--Not less frequently than annually, 
        the Secretary shall submit to the Committees on Ways and Means 
        and Energy and Commerce of the House of Representatives and the 
        Committee on Finance of the Senate a report on the results of 
        the evaluation conducted under paragraph (1).
    ``(e) Diagnostic Tests.--
            ``(1) In general.--The Secretary shall implement 
        demonstration projects under which competitive acquisition 
        areas are established for contract award purposes for the 
        furnishing under part B of diagnostic x-ray tests, diagnostic 
        laboratory tests, and other diagnostic tests described in 
        section 1861(s)(3).
            ``(2) Project requirements.--Each demonstration project 
        under paragraph (1) shall--
                    ``(A) be conducted in not more than 3 competitive 
                acquisition areas;
                    ``(B) be operated over a 3-year period; and
                    ``(C) otherwise be subject to the conditions under 
                subsections (b)(3) and (c) in the same manner as such 
                conditions apply to the programs established under 
                subsection (a).
            ``(3) Reports.--
                    ``(A) Initial report.--Not later than December 31, 
                2004, the Secretary shall submit to the Committees on 
                Ways and Means and Energy and Commerce of the House of 
                Representatives and the Committee on Finance of 
the Senate an initial report on the demonstration projects conducted 
under this subsection.
                    ``(B) Progress and final reports.--The Secretary 
                shall submit such progress and final reports to the 
                committees described in subparagraph (A) after the date 
                described in such subparagraph as the Secretary 
                determines appropriate.
    ``(f) Other Part B Items and Services.--
            ``(1) In general.--The Secretary may implement not more 
        than 5 demonstration projects under which competitive 
        acquisition areas are established for contract award purposes 
        for the furnishing under part B of any item or service covered 
        under such part that the Secretary may specify other than--
                    ``(A) any item or service described in subsection 
                (e)(1); or
                    ``(B) physicians' services (as defined in section 
                1861(r)(1)).
            ``(2) Project requirements.--Each demonstration project 
        under paragraph (1) shall--
                    ``(A) be conducted in not more than 3 competitive 
                acquisition areas;
                    ``(B) be operated over a 3-year period; and
                    ``(C) otherwise be subject to the conditions under 
                subsections (b)(3) and (c) in the same manner as such 
                conditions apply to the programs established under 
                subsection (a).
            ``(3) Reports.--
                    ``(A) Initial report.--Not later than December 31, 
                2004, the Secretary shall submit to the Committees on 
                Ways and Means and Energy and Commerce of the House of 
                Representatives and the Committee on Finance of the 
                Senate an initial report on the demonstration projects 
                conducted under this subsection.
                    ``(B) Progress and final reports.--The Secretary 
                shall submit such progress and final reports to the 
                committees described in subparagraph (A) after the date 
                described in such subparagraph as the Secretary 
                determines appropriate.
    ``(g) Expansion of Programs and Demonstration Projects.--The 
Secretary may expand a program or demonstration project implemented 
under subsection (b)(1) to additional competitive acquisition areas if 
the Secretary determines, based on the evaluations conducted under 
subsection (d)(1), that there is clear evidence that any program or 
demonstration project--
            ``(1) results in a decrease in Federal expenditures under 
        this title; and
            ``(2) does not reduce program access, diversity of product 
        selection, and quality under this title.
    ``(h) Duration of Programs and Demonstration Projects.--
            ``(1) Durable medical equipment, surgical dressings, and 
        orthotics.--The programs implemented under subsection (b)(1) 
        shall terminate on such date as the Secretary may specify or 
        may continue indefinitely (as determined by the Secretary).
            ``(2) Diagnostic tests.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), any demonstration project implemented 
                under subsection (e)(1) shall terminate not later than 
                December 31, 2007.
                    ``(B) Exception.--If the Secretary determines that 
                a demonstration project implemented under subsection 
                (e)(1) meets the requirements of paragraphs (1) and (2) 
                of subsection (g), such project shall terminate on such 
                date as the Secretary may specify or may continue 
                indefinitely (as determined by the Secretary).
            ``(3) Other part b items and services.--Any demonstration 
        project implemented under subsection (f)(1) shall terminate not 
        later than December 31, 2007.''.
    (b) Continuation of Original Demonstration Projects.--Section 
1847(e) of the Social Security Act (42 U.S.C. 1395w-3(e)) is amended by 
striking ``all projects under this section shall terminate not later 
than December 31, 2002'' and inserting ``all projects implemented under 
this section prior to December 31, 2002, shall continue under the same 
terms and conditions applicable under this section until such time as 
the competitive acquisition area under a demonstration project 
implemented under subsection (a) is designated as a competitive 
acquisition area for purposes of section 1866B''.
    (c) Items and Services To Be Furnished Only Through Competitive 
Acquisition.--Section 1862(a) of the Social Security Act (42 U.S.C. 
1395y(a)), as amended by section 3(a) of the Administrative 
Simplification Compliance Act (Public Law 107-105; 115 Stat. 1006), is 
amended--
            (1) by striking ``or'' at the end of paragraph (21);
            (2) by striking the period at the end of paragraph (22) and 
        inserting ``; or''; and
            (3) by inserting after paragraph (22) the following new 
        paragraph:
            ``(23) except in such cases of emergency or urgent need as 
        the Secretary shall prescribe, where the expenses are for an 
        item or service described in section 1866B(d) that is furnished 
        in a competitive acquisition area (as established by the 
        Secretary under section 1866B(b)) by an entity other than an 
        entity with which the Secretary has entered into an agreement 
        under section 1866B(c) for the furnishing of such an item or 
        service in that area.''.
    (d) Conforming Amendments Relating to General Provisions for 
Administration.--
            (1) General administrative authority.--Section 1866C(a) of 
        the Social Security Act (as redesignated by subsection (a)) is 
        amended--
                    (A) in paragraph (1)--
                            (i) in the matter preceding subparagraph 
                        (A), by striking ``the program under section 
                        1866A (in this section referred to as the 
                        `demonstration program')'' and inserting ``a 
                        program or demonstration project under section 
                        1866A or 1866B'';
                            (ii) in subparagraph (A), by striking ``and 
                        entitled to benefits under part A; and'' and 
                        inserting a semicolon;
                            (iii) in subparagraph (B), by striking the 
                        period at the end and inserting ``; and''; and
                            (iv) by adding at the end the following new 
                        subparagraph:
                    ``(C) in the case of the demonstration program 
                under section 1866A, is entitled to benefits under part 
                A.'';
                    (B) in paragraph (3), by striking ``Items and 
                services shall'' and inserting ``Except as provided in 
                the authority for the programs and demonstration 
                projects under section 1866B, items and services 
                shall'';
                    (C) in paragraph (4), by striking ``individuals or 
                entities'' and inserting ``entities (or, in the case of 
                the demonstration program under section 1866A, 
                individuals or entities)'';
                    (D) in paragraph (5)--
                            (i) in the first sentence, by striking 
                        ``the demonstration program'' and inserting 
                        ``the programs and demonstration projects under 
                        sections 1866A and 1866B''; and
                            (ii) in the second sentence, by striking 
                        ``individuals or entities'' and inserting 
                        ``entities (or, in the case of the 
                        demonstration program under section 1866A, 
                        individuals or entities)'';
                    (E) in paragraph (6)--
                            (i) by striking ``individual or entity'' 
                        and inserting ``entity (or, in the case of the 
                        demonstration program under section 1866A, an 
                        individual or entity)''; and
                            (ii) by striking ``the demonstration 
                        program'' and inserting ``the programs and 
                        demonstration projects under sections 1866A and 
                        1866B'';
                    (F) in paragraph (7), by striking ``individual or 
                entity'' each place it appears and inserting ``entity 
                (or, in the case of the demonstration program under 
                section 1866A, an individual or entity)''; and
                    (G) in paragraph (8)--
                            (i) in subparagraph (A), by striking ``the 
                        demonstration program'' and inserting ``the 
                        programs and demonstration projects under 
                        sections 1866A and 1866B''; and
                            (ii) in subparagraph (B), by striking 
                        ``individual or entity'' and inserting ``entity 
                        (or, in the case of the demonstration program 
                        under section 1866A, an individual or 
                        entity)''.
            (2) Contracts for program administration.--Section 1866C(b) 
        of the Social Security Act (as so redesignated) is amended--
                    (A) in paragraph (1), by striking ``the 
                demonstration program'' and inserting ``the programs 
                and demonstration projects under sections 1866A and 
                1866B'';
                    (B) in paragraph (2), by striking ``contracts.--The 
                Secretary'' and inserting the following: ``contracts.--
                A contract under this subsection may, at the 
                Secretary's discretion, relate to the administration of 
                either the program under section 1866A or a program or 
                demonstration project under section 1866B, or both. The 
                Secretary''; and
                    (C) in paragraph (7)--
                            (i) in subparagraph (D), by inserting 
                        ``under section 1866A'' before the period at 
                        the end;
                            (ii) by redesignating subparagraphs (E) 
                        through (H) as subparagraphs (G) through (J), 
                        respectively; and
                            (iii) by inserting after subparagraph (D) 
                        the following new subparagraphs:
                    ``(E) List of program participants.--Maintain and 
                regularly update a list of entities with agreements to 
                provide health care items and services under the 
                program under section 1866B, and ensure that such list, 
                in electronic and hard copy formats, is readily 
                available, as applicable, to--
                            ``(i) individuals residing in the service 
                        area who are entitled to benefits under part A 
                        or enrolled in the program under part B;
                            ``(ii) the entities responsible under 
                        sections 1816 and 1842 for administering 
                        payments for health care items and services 
                        furnished; and
                            ``(iii) entities providing health care 
                        items and services in the service area.
                    ``(F) Beneficiary enrollment.--Determine 
                eligibility of individuals to enroll under a program or 
                demonstration project under section 1866B and provide 
                enrollment-related services (but only if the Secretary 
                finds that the program administrator has no conflict of 
                interest caused by a financial relationship with any 
                entity furnishing items or services for which payment 
                may be made under any such program, or any other 
                conflict of interest with respect to such function).''.
            (3) Rules applicable to both program agreements and program 
        administration contracts.--Section 1866C(c) of the Social 
        Security Act (as so redesignated) is amended--
                    (A) in paragraph (1), by striking ``the 
                demonstration program'' and inserting ``the programs 
                and demonstration projects under sections 1866A and 
                1866B'';
                    (B) in paragraph (2)--
                            (i) in the matter preceding subparagraph 
                        (A), by inserting ``under section 1866A'' after 
                        ``the demonstration program'';
                            (ii) in subparagraph (A), by striking ``the 
                        program'' and inserting ``such a program''; and
                            (iii) in subparagraph (B)(i), by inserting 
                        ``under section 1866A'' after ``the 
                        demonstration program''; and
                    (C) in paragraph (3)--
                            (i) by striking ``the demonstration 
                        program'' and inserting ``the programs and 
                        demonstration projects under sections 1866A and 
                        1866B''; and
                            (ii) by striking ``administer the program'' 
                        and inserting ``administer such a program or 
                        project''.
            (4) Limitations on judicial review.--Section 1866C(d) of 
        the Social Security Act (as so redesignated) is amended--
                    (A) in the matter preceding paragraph (1), by 
                striking ``the demonstration program'' and inserting 
                ``the programs and demonstration projects under 
                sections 1866A and 1866B'' in the matter preceding 
                subparagraph (A);
                    (B) in paragraph (1), by striking ``the program'' 
                and inserting ``a program or demonstration project 
                under section 1866A or 1866B'';
                    (C) in paragraph (2), by striking ``program'' each 
                place it appears and inserting ``program or 
                demonstration project''; and
                    (D) in paragraph (5)--
                            (i) in the matter preceding subparagraph 
                        (A), by striking ``to the program'' and 
                        inserting ``to a program or demonstration 
                        project'';
                            (ii) in subparagraph (A), by striking 
                        ``or'' after the semicolon at the end; and
                            (iii) in subparagraph (B), by inserting 
                        ``with respect to the demonstration program 
                        under section 1866A,'' before ``as to 
                        whether''.
            (5) Application limited to parts a and b.--Section 1866C(e) 
        of the Social Security Act (as so redesignated) is amended by 
        striking ``or of the demonstration program'' and inserting ``, 
        section 1866A, or section 1866B''.
            (6) Other conforming amendments.--
                    (A) Section 1866A(a)(2) of the Social Security Act 
                (42 U.S.C. 1395cc-1) is amended by striking ``section 
                1866B'' and inserting ``section 1866C''.
                    (B) The heading of section 1866C of the Social 
                Security Act (as so redesignated) is amended to read as 
                follows:

 ``general provisions for the administration of certain private sector 
             purchasing and quality improvement programs''.

    (e) GAO Study and Report.--
            (1) Study.--The Comptroller General of the United States 
        shall conduct a study on the coverage under the medicare 
        program under title XVIII of the Social Security Act of new and 
        innovative durable medical equipment, prosthetics, orthotics, 
        supplies, and equipment and the coding of such items for 
        purposes of payment under such program. Such study shall 
        include an analysis of the review and approval process for the 
        new and innovative items described in the preceding sentence, 
        the coding process for such items, and beneficiary access to 
        such items if such items are not covered under the medicare 
        program.
            (2) Report.--Not later than the date that is 2 years after 
        the date of enactment of this Act, the Comptroller General 
        shall submit a report on the study conducted under paragraph 
        (1) to the Committee on Ways and Means and the Committee on 
        Energy and Commerce of the House of Representatives and the 
        Committee on Finance of the Senate together with such 
        recommendations for legislative and administrative action as 
        the Comptroller General determines appropriate.
                                 <all>