[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6490 Introduced in House (IH)]

112th CONGRESS
  2d Session
                                H. R. 6490

 To amend title XVIII of the Social Security Act to establish a market 
pricing program for durable medical equipment, prosthetics, orthotics, 
      and supplies (DMEPOS) under part B of the Medicare program.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 21, 2012

  Mr. Price of Georgia (for himself, Mr. Altmire, Mrs. Blackburn, Mr. 
   Deutch, Mr. Wilson of South Carolina, Ms. Castor of Florida, Mr. 
 Tiberi, Mr. Braley of Iowa, Mr. Latham, Mr. Barrow, Mr. King of Iowa, 
 Mr. Kelly, Mr. LaTourette, and Mrs. Ellmers) introduced the following 
 bill; which was referred to the Committee on Energy and Commerce, and 
  in addition to the Committee on Ways and Means, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL


 
 To amend title XVIII of the Social Security Act to establish a market 
pricing program for durable medical equipment, prosthetics, orthotics, 
      and supplies (DMEPOS) under part B of 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 DMEPOS Market Pricing 
Program Act of 2012''.

SEC. 2. ESTABLISHMENT OF DMEPOS MARKET PRICING PROGRAM AS REPLACEMENT 
              FOR COMPETITIVE BIDDING PROGRAM.

    (a) In General.--Part B of title XVIII of the Social Security Act 
is amended by inserting after section 1847B the following new section:

                    ``dmepos market pricing program

    ``Sec. 1847C.  (a) Establishment.--
            ``(1) In general.--The Secretary shall establish and 
        implement a market pricing program (in this section referred to 
        as `market pricing program') under which auctions are conducted 
        in eligible market areas (as defined in paragraph (3)) 
        throughout the United States for the furnishing under this part 
        of market priced items and services (as defined in subsection 
        (b)) for which payment is made under this part.
            ``(2) Roles of auction expert and market monitor.--The 
        elements of the market pricing program, including eligible 
        market areas and auction design, shall be established and 
        operated in consultation with, and after input and review by, 
        the auction expert and the market monitor under subsection (g). 
        In this section, the terms `auction expert' and `market 
        monitor' refer to the respective auction expert and market 
        monitor contracted with under paragraph (1) or (2), 
        respectively, of subsection (g).
            ``(3) Implementation.--The market pricing program shall be 
        implemented in eligible market areas consistent with the 
        following:
                    ``(A) Market pricing is applied to payments under 
                this part in 20 percent of eligible market areas for 
                market priced items and services furnished in 2014.
                    ``(B) Market pricing is applied to payments under 
                this part in an additional 10 percent of eligible 
                market areas for market priced items and services 
                furnished in 2015.
                    ``(C) Market pricing is applied to payments under 
                this part in an additional 10 percent of eligible 
                market areas in each subsequent year until the market 
                pricing program is applying to items and services 
                furnished in 100 percent of eligible market areas 
                throughout the United States.
                    ``(D) Once the market pricing program is applied 
                throughout the United States under subparagraph (C), 
                the Secretary shall conduct auctions for different 
                eligible market areas throughout the United States on 
                an ongoing and rotating basis covering 10 percent of 
                eligible market areas no later than March for each 
                subsequent year.
                    ``(E) The requirements of this section shall apply 
                to each subsequent round of market-priced auctions in 
                the same manner that such requirements apply to the 
                initial market-priced auction.
            ``(4) Eligible market areas.--
                    ``(A) In general.--In this section and section 
                1834, the term `eligible market areas' means areas of 
                the United States established by the Secretary.
                    ``(B) Market areas must reflect economic 
                interdependency.--In determining and selecting eligible 
                market areas, the Secretary shall choose, from among 
                counties, aggregations of counties, or parts of 
                counties, market areas that form an economically 
                interdependent area reflecting standard econometric 
                market models. Nothing in this subparagraph shall 
                preclude the Secretary from subdividing a large county 
                (as determined by the Secretary, taking into account 
                population and geographic size) in establishing market 
                areas in order to comply with this subparagraph.
                    ``(C) Selection of market areas.--In selecting 
                eligible market areas in which an auction will be 
                conducted under this section, the Secretary shall 
                ensure that several market areas of each econometric 
                model for a market area specified in subparagraph (B) 
                are chosen.
                    ``(D) Exclusion of certain areas.--The Secretary 
                shall not include as an eligible market area any area 
                described in clause (iii) of section 1847(a)(1)(D) 
                before the year specified in such clause.
            ``(5) Application of certain policies applicable to 
        competitive acquisition program.--The following provisions of 
        section 1847(a)(1) shall apply to the market pricing program in 
        the same manner as they apply to the competitive acquisition 
        program under such section except as otherwise provided:
                    ``(A) Subparagraph (C) (relating to waiver of 
                certain provisions).
                    ``(B) Subparagraph (E) (relating to verification by 
                OIG), except that the assessment shall be of market 
                pricing and subsequent pricing determinations that are 
                the basis for auction prices and single payment amounts 
                for items and services in eligible market areas and 
                shall be conducted in the first two years of the market 
                pricing program and may continue in subsequent years of 
                the program.
                    ``(C) Subparagraph (F) (relating to feedback on 
                missing financial documentation), except that any 
                reference to a round of a program is deemed a reference 
                to a year of the market pricing program.
    ``(b) Market Priced Items and Services Defined.--
            ``(1) In general.--In this section, subject to paragraph 
        (2), the term `market priced items and services' means the 
        following:
                    ``(A) Oxygen supplies and equipment.
                    ``(B) Standard power wheelchairs, power scooters 
                and related accessories.
                    ``(C) Manual wheelchairs.
                    ``(D) Enteral nutrients, equipment, and supplies.
                    ``(E) Continuous positive airway pressure devices, 
                respiratory assistive devices, and related supplies.
                    ``(F) Hospital beds and related accessories.
                    ``(G) Walkers and related accessories.
                    ``(H) Support services (Group 2 mattresses and 
                overlays).
                    ``(I) Negative pressure wound therapy pumps and 
                related supplies and accessories.
                    ``(J) Diabetic supplies.
                    ``(K) Off-the-shelf orthotics described in section 
                1847(a)(2)(C).
                    ``(L) Other items and services (other than those 
                items and services specified in paragraph (2)) that 
                could have been subject to participation in the 
                competitive acquisition programs under section 
                1847(a)(1).
            ``(2) Excluded items.--Such term does not include the 
        following:
                    ``(A) Adjustable skin protection cushions used in 
                connection with a wheelchair.
                    ``(B) Complex rehabilitative power wheelchairs and 
                related accessories.
                    ``(C) Manual wheelchairs billed using current HCPCS 
                Codes K0005 or E1161, and related accessories for such 
                wheelchairs.
    ``(c) Market Pricing Program Requirements.--
            ``(1) In general.--The Secretary shall establish an auction 
        design through the process described in paragraph (2), that 
        meets the requirements of paragraph (3), and shall ensure that 
        the first auction will be conducted for all eligible market 
        areas no later than March 1, 2013.
            ``(2) Auction process; input of stakeholders; design.--
                    ``(A) Transparent process required.--
                            ``(i) In general.--In establishing such 
                        auction design, the Secretary shall utilize an 
                        open and transparent process that involves all 
                        relevant stakeholders (as defined in clause 
                        (ii)) in the market.
                            ``(ii) Relevant stakeholders.--For purposes 
                        of clause (i), the term `relevant stakeholders' 
                        means suppliers of market priced items and 
                        services (and trade associations representing 
                        such suppliers), physicians, and individuals 
                        entitled to benefits under this title (or 
                        representatives of such individuals).
                    ``(B) Draft auction design.--
                            ``(i) In general.--Not later than 2 months 
                        after the date the auction expert first begins 
                        service under subsection (g)(1), the auction 
                        expert shall develop a draft auction design for 
                        all eligible areas and all market priced items 
                        and services.
                            ``(ii) Standards.--In developing such 
                        auction design, the auction expert shall 
                        develop standards for eligible bidders, 
                        including--
                                    ``(I) the financial qualifications 
                                for an entity to participate in the 
                                market pricing program; and
                                    ``(II) the quality of products and 
                                related services.
                            ``(iii) Design used in expedited rulemaking 
                        process.--Such design shall serve as the basis 
                        for an expedited rulemaking process for the 
                        publication of the proposed auction design and 
                        solicitation of public comments on such design. 
                        Section 1871(b)(1) shall not apply to such 
                        process.
                    ``(C) Design conference.--
                            ``(i) In general.--Not later than 4 months 
                        after the date the auction expert first begins 
                        service under subsection (g)(1), the auction 
                        expert shall convene a design conference (in 
                        this paragraph referred to as the `design 
                        conference') for the auction process under this 
                        section. The auction expert shall chair the 
                        conference.
                            ``(ii) Participants.--The participants at 
                        the design conference shall include at least 
                        the following:
                                    ``(I) Suppliers of dmepos.--
                                Representatives of market priced items 
                                and services.
                                    ``(II) Beneficiaries.--
                                Representatives of individuals entitled 
                                to benefits under this part.
                                    ``(III) CMS.--The Administrator of 
                                the Centers for Medicare & Medicaid 
                                Services and other appropriate Federal 
                                personnel.
                                    ``(IV) Program advisory and 
                                oversight committee.--The members of 
                                the committee referred to in paragraph 
                                (3).
                            ``(iii) Purpose of conference.--The purpose 
                        of the design conference shall be to establish 
                        an efficient auction consistent with best 
                        practices and actuarial science.
                            ``(iv) Elements of conference.--
                                    ``(I) At the design conference the 
                                auction expert shall provide a 
                                demonstration of the preliminary 
                                auction design.
                                    ``(II) Attendees at the conference 
                                will participate in a mock auction 
                                based upon the preliminary design.
                                    ``(III) The auction expert shall 
                                establish working committees on major 
                                issues.
                                    ``(IV) The design conference shall 
                                be recorded and made available over the 
                                Internet either through simultaneous 
                                Web cast or otherwise.
                                    ``(V) The Federal Advisory 
                                Committee Act shall not apply with 
                                respect to the working committee 
                                established under subclause (III).
                    ``(D) Recommendations.--
                            ``(i) Working committees.--Not later than 2 
                        months after the last day of the design 
                        conference, each working committee established 
                        under subparagraph (C)(iv)(III) shall submit to 
                        the auction expert the committee's 
                        recommendations on the final design for 
                        auctions under this section.
                            ``(ii) Final design recommendation.--Not 
                        later than 3 months after the last day of the 
                        design conference, the auction expert shall 
                        submit to the Secretary final recommendations 
                        on the auction design.
            ``(3) Requirements.--In establishing the auction design, 
        the Secretary shall ensure that rates of payment developed 
        through the auction process--
                    ``(A) are market-based and based on binding bids 
                and clearing prices; and
                    ``(B) do not result in a diminution of access to or 
                quality of items of market priced items and services in 
                the applicable market areas.
    ``(d) Conduct of Auction.--
            ``(1) Initial auction.--No later than March 1 of each year 
        (beginning with 2013), the Secretary shall conduct an auction 
        (in this section referred to as a `market-priced auction') from 
        among entities supplying market priced items and services in an 
        eligible market area that is selected in the auction design. 
        The first such auction shall conclude no later than March 30, 
        2013. Market-based auctions shall be conducted in accordance 
        with an auction design developed under subsection (c).
            ``(2) Items and services subject to auction.--
                    ``(A) In general.--In each eligible market area in 
                which a market-priced auction is conducted, the 
                Secretary shall select 2 items and services from among 
                the market priced items and services.
                    ``(B) All listed items and services to be subject 
                to auction.--The Secretary shall ensure in the market-
                priced auction that each lead product that is 
                identified under paragraph (4) from among each market 
                priced item and service is subject to auction among all 
                eligible market areas. The Secretary shall ensure that 
                each product category is auctioned in at least a 
                sufficient number of eligible market areas to produce a 
                sample of bids based on the percentages set forth in 
                subsection (a)(3).
            ``(3) Requirements to submit bid in auction.--
                    ``(A) Submission of bids.--Any supplier that 
                complies with the requirements of subparagraph (B) and 
                that is identified by the Secretary pursuant to 
                paragraph (5)(C) as a supplier of a market priced item 
                or service that is the subject of a market-priced 
                auction in an eligible market area may submit a bid at 
                such auction.
                    ``(B) Financial assurances.--
                            ``(i) In general.--In order to be eligible 
                        to participate in a market-priced auction, a 
                        supplier must submit a cash deposit in an 
                        amount determined by the Secretary.
                            ``(ii) Letter of credit in lieu of cash 
                        deposit.--The Secretary may, in the Secretary's 
                        sole discretion, accept a letter of credit from 
                        a financial institution acceptable to the 
                        Secretary instead of the cash deposit otherwise 
                        required under clause (i).
                    ``(C) Treatment of deposits submitted by 
                suppliers.--
                            ``(i) Successful bidders.--The Secretary 
                        shall retain as a performance guarantee the 
                        deposit submitted under subparagraph (B)(i) of 
                        a supplier that has submitted a bid that is 
                        selected at a market-priced auction.
                            ``(ii) Unsuccessful bids.--If a supplier 
                        submits a bid that is not accepted at the 
                        auction, any such deposit shall be returned to 
                        the supplier.
                            ``(iii) Deposit return requirements for 
                        partially successful suppliers.--If a supplier 
                        submits a bid that is accepted at the auction, 
                        but the supplier is not awarded a contract for 
                        the full amount of the bid, the Secretary shall 
                        provide for a proportionate return of any such 
                        deposit.
            ``(4) Lead product selection.--
                    ``(A) In general.--For each item and service that 
                is the subject of a market-priced auction, the 
                Secretary shall establish a lead product for each 
                product category specified in subsection (b)(1). Such 
                lead product shall be selected based upon cost and 
                utilization of the product under this part.
                    ``(B) Lead product clearing price establishes 
                clearing price for other products.--
                            ``(i) Lead product as reference point for 
                        other products.--The lead product selected 
                        under subparagraph (A) shall be used as a 
                        reference point for all other products 
                        (categorized by healthcare common procedure 
                        coding system code) in the same category as the 
                        lead product. Such lead product shall be 
                        assigned a weight of 100 percent.
                            ``(ii) Additional products in each product 
                        category.--Every other product in the same 
                        product category as the lead product identified 
                        under subparagraph (A) shall be assigned based 
                        upon each auction a weight expressed as a 
                        percentage of the lead product. The Secretary 
                        shall establish a single capacity-weighted 
                        average for each such other product in the same 
                        product category based upon the relative price 
                        value submitted from eligible bidders in 
                        advance of the auction for such other product 
                        relative to the price of the lead product. The 
                        Secretary shall establish a price index that is 
                        the single capacity-weighted average for each 
                        product in a product category in a market area.
                            ``(iii) Establishing clearing price.--The 
                        Secretary shall establish the clearing price 
                        for each market priced item and service that is 
                        subject to the auction based upon the data 
                        submitted under this subparagraph. Such 
                        clearing price shall be equal to the highest 
                        cost bid (or, in the case of a product 
                        described in clause (ii), such price bid 
                        weighted by the single capacity-weighted 
                        average established under clause (ii)) that 
                        will meet capacity targets in the eligible 
                        market area for such item and service.
            ``(5) Conduct of auction.--
                    ``(A) In general.--The Secretary shall establish 
                timelines for the conduct of the market-priced auction 
                that are consistent with the provisions of this 
                paragraph.
                    ``(B) Three months before auction date.--
                Approximately three months before the scheduled auction 
                date, the Secretary shall detail auction rules that are 
                consistent with the auction plan developed under this 
                section. These rules shall include--
                            ``(i) financial and other qualification 
                        requirements for bidders;
                            ``(ii) algorithms for determining winners 
                        and prices as a function of bids;
                            ``(iii) performance obligations of contract 
                        suppliers, guarantees, and penalties for non-
                        conformance;
                            ``(iv) the product categories to be 
                        selected (and their related healthcare common 
                        procedure coding system codes) from within the 
                        market priced items and services;
                            ``(v) the lead product for each product 
                        category selected under paragraph (4)(A); and
                            ``(vi) the eligible market areas in which a 
                        market-priced auction will be conducted.
                    ``(C) Two weeks before auction date.--Approximately 
                2 weeks before the scheduled auction date, the 
                Secretary shall identify the qualified suppliers 
                eligible to submit bids. In carrying out this 
                subparagraph, the Secretary shall specify--
                            ``(i) bidder capacity;
                            ``(ii) bidder eligibility by eligible 
                        market area;
                            ``(iii) for each market area, the lead 
                        price for the lead product established under 
                        paragraph (4)(A);
                            ``(iv) the price index (described in 
                        paragraph (4)(B)(ii)) in each market area; and
                            ``(v) for each eligible bidder, its 
                        historic capacity for each item and service 
                        that will be subject to auction pursuant to 
                        paragraph (1) in the eligible market area.
                    ``(D) Pre-auction bidders outreach.--Before each 
                auction, the Secretary shall provide an open meeting or 
                other form of outreach at which prospective bidders in 
                eligible market areas in which the auction will be 
                conducted are provided information concerning the 
                auction and have the opportunity to have the auction 
                expert respond to questions concerning the conduct of 
                the auction.
                    ``(E) During auction.--During the conduct of the 
                auction, the Secretary shall announce--
                            ``(i) the time of the end of the round of 
                        auctioning; and
                            ``(ii) the history of prior rounds 
                        including the aggregate supply at the end of 
                        the round price for each product area by round.
                    ``(F) Immediately after each auction round.--Not 
                later than 15 minutes after the end of each auction, 
                the Secretary shall announce--
                            ``(i) the aggregate supply for each item 
                        and service that is the subject of the auction 
                        at the price established during the auction;
                            ``(ii) for each supplier who has 
                        participated in the auction, its own supply for 
                        all prices (from the initial starting price to 
                        the end of round price) for each item and 
                        service that is the subject of the auction; and
                            ``(iii) revised schedule of rounds for the 
                        next bidding day.
                    ``(G) At conclusion of final auction round.--Not 
                later than 15 minutes after the end of the final 
                auction round, the Secretary shall announce--
                            ``(i) a list of winning suppliers;
                            ``(ii) the market clearing price for each 
                        item and service that is the subject of the 
                        auction; and
                            ``(iii) for each bidder and in each 
                        eligible market area, the bidder's supply for 
                        all prices (from the initial starting price to 
                        the end of round price).
                    ``(H) Final actions.--Not later than one week after 
                the end of the final auction round, the Secretary shall 
                enforce the performance guarantees received from each 
                winning bidder (including a list of bidders who failed 
                to provide performance guarantees in accordance with 
                paragraph (3)(B) within one week after the end of the 
                auction).
            ``(6) Conditions of awarding contract.--
                    ``(A) In general.--The Secretary shall award a 
                contract to any entity in an eligible market area in 
                which an auction is conducted and whose bid submitted 
                pursuant to paragraph (3)(A) is below the clearing 
                price established pursuant to paragraph (4)(B)(iii).
                    ``(B) Terms of contract.--
                            ``(i) Mandatory acceptance of contract.--A 
                        supplier that submits a bid below such clearing 
                        price shall be treated as having agreed to and 
                        accept the contract awarded pursuant to 
                        subparagraph (A).
                            ``(ii) Contract terms.--A contract awarded 
                        pursuant to subparagraph (A) shall be valid for 
                        2 years, with the first such contract for the 
                        period beginning on July 1, 2013.
                            ``(iii) No requirement to supply up to bid 
                        amount.--Nothing in this subsection shall 
                        require a supplier that is awarded a contract 
                        pursuant to subparagraph (A) to supply a marked 
                        priced item or service that is the subject of 
                        an auction in the eligible market area beyond 
                        the level of demand for such item or service in 
                        the eligible market area, even if such level is 
                        below the level that the supplier assumed in 
                        its bid.
                    ``(C) Ensuring adequate selection of contractors.--
                The Secretary may not award a contract to any entity 
                under the auction to furnish such items or services 
                unless the Secretary finds that the conditions 
                described in section 1847(b)(2)(A) apply with respect 
                to an entity receiving a contract under this paragraph.
                    ``(D) Sufficient capacity.--The Secretary shall 
                establish a process to ensure that a supplier has 
                sufficient capacity to supply and fulfill the patient 
                demand for the item or service involved in the market 
                area involved. Such process shall be based upon the 
                historic capacity of the supplier. For purposes of the 
                preceding sentence, the term `historic capacity' means 
                the capacity of the supplier in the market area in the 
                preceding year.
                    ``(E) Limits on suppliers.--Each bidding supplier 
                who has no historic capacity in the market area subject 
                to an auction shall be assigned a base capacity for 
                each item and service made available under the auction 
                of 1 percent of the total dollar value of that item or 
                service made available in the eligible market area.
            ``(7) Payment amount shall equal auction clearing price.--
                    ``(A) In general.--With respect to market priced 
                items or services that are provided in an eligible 
                market area in which--
                            ``(i) a market-priced auction is conducted, 
                        the auction price determined at such auction 
                        for such item in such eligible market area; or
                            ``(ii) such an auction is not conducted, 
                        the auction price determined at an auction for 
                        those items that is conducted in another 
                        eligible market area, as adjusted by the factor 
                        described in subparagraph (B)(iv),
                shall constitute the payment amount under section 
                1834(a)(1)(H)(i)(I) or section 1842(s), as the case may 
                be.
                    ``(B) Supplying items or services.--
                            ``(i) In general.--No entity other than a 
                        supplier of a market priced item or service 
                        that is the subject of a market-priced auction 
                        in an eligible market area and that has been 
                        selected as the winning bidder in that eligible 
                        market area shall be eligible to receive a 
                        contract under paragraph (6)(A) in such market 
                        area.
                            ``(ii) Supplying items in economically 
                        equivalent markets.--A supplier of a market 
                        priced item or service that has not been 
                        selected as the winning bidder in the eligible 
                        market area described in clause (i) shall, 
                        subject to clauses (iii) and (iv), be eligible 
                        to supply any other market priced item or 
                        service that was not the subject of an auction 
                        in that eligible market area but that was the 
                        subject of a market-priced auction in another 
                        economically similar eligible market area (as 
                        determined by the Secretary).
                            ``(iii) Supplier must accept auction 
                        price.--Clause (ii) shall only apply to a 
                        supplier that agrees to accept the price 
                        determined at an auction in another eligible 
                        market area for a market priced item or 
                        service.
                            ``(iv) Appropriate adjustments.--The 
                        Secretary shall develop an adjustment factor to 
                        reflect economic differences between the market 
                        area that was the subject of the market-priced 
                        auction for the item or service and the market 
                        area in which the supplier is located. The 
                        Secretary shall use such adjustment factor to 
                        adjust the payment amount made to a supplier 
                        pursuant to clause (iii). The Secretary, 
                        auction expert, and market monitor shall 
                        consult with relevant stakeholders in 
                        developing such factor.
            ``(8) Monitoring of access and quality.--
                    ``(A) In general.--The Secretary shall work with 
                stakeholders to develop performance measures for 
                suppliers that are awarded a contract pursuant to 
                paragraph (6)(A) to ensure compliance with the 
                requirements of this subsection and the measures 
                developed by the auction expert under subsection 
                (c)(2)(B)(ii) and to monitor the performance of 
                suppliers.
                    ``(B) Enforcement.--If the Secretary determines 
                that there has been a material failure of a supplier 
                that has been awarded a contract under paragraph (6)(A) 
                to comply with such requirements and measures, the 
                Secretary shall implement enforcement measures. Such 
                enforcement measures may include--
                            ``(i) a formal warning letter;
                            ``(ii) forfeiture of amounts submitted as a 
                        performance deposit pursuant to paragraph 
                        (3)(B)(i) or paragraph (8);
                            ``(iii) termination of a contract awarded 
                        pursuant to paragraph (6)(A); or
                            ``(iv) termination of the supplier's 
                        agreement to participate in the program 
                        established under this title for a period not 
                        to exceed 2 years.
                    ``(C) Appeals mechanism.--The Secretary shall 
                ensure that, prior to the imposition of an enforcement 
                measure under subparagraph (B), a supplier subject to 
                such measure has an opportunity to appeal imposition of 
                the measure.
    ``(e) Application of Competitive Acquisition Program Provisions.--
In implementing the market pricing program under this section, the 
provisions of section 1847(b) shall be applied as follows:
            ``(1) Paragraph (3) shall apply, except that, for purposes 
        of contracts awarded under the market pricing program, 
        subparagraph (B) of such paragraph shall be applied by 
        substituting `2 years' for `3 years'.
            ``(2) Subject to subsection (d)(7)(B), paragraph (4) shall 
        apply.
            ``(3) Paragraph (5) shall apply, except that--
                    ``(A) the reference in subparagraph (A) of such 
                paragraph to subsection (a)(2) is deemed a reference to 
                subsection (b)(1) of this section; and
                    ``(B) the reference in subparagraph (B)(i) of such 
                paragraph to subparagraph (A) is deemed a reference to 
                subsection (d)(4) of this section.
            ``(4) Paragraph (6) shall apply, except that in applying 
        subparagraph (D)--
                    ``(A) the term `small suppliers' shall mean an 
                entity with a gross revenue that does not exceed 
                $3,500,000; and
                    ``(B) the Secretary shall ensure that at least 30 
                percent of the number of contractors that are awarded 
                contracts pursuant to subsection (d)(6) of this section 
                for each product category in an eligible market area 
                are small suppliers (as defined in subparagraph (A)).
            ``(5) Paragraph (7) shall not apply.
            ``(6) Paragraph (8) shall apply.
            ``(7) Paragraph (9) shall apply, except that such paragraph 
        shall be applied as if a reference to a bidding program 
        includes a reference to the market pricing program.
            ``(8) Paragraph (10) shall apply, except that such 
        paragraph shall be applied as if a reference to a competitive 
        acquisition program includes a reference to the market pricing 
        program.
            ``(9) Paragraph (11) shall not apply, except that--
                    ``(A) the pendency of any claim for review under 
                this section shall not delay any auction round 
                conducted pursuant to subsection (a)(3) or (d)(1); and
                    ``(B) there shall be no administrative or judicial 
                review of any claim to enjoin the operation of a 
                market-priced auction conducted.
    ``(f) Transparency Requirements for Market Pricing Program.--
            ``(1) In general.--In implementing the market pricing 
        program, the Secretary shall provide for publication, on an 
        Internet Web site operated by the Secretary, of the following 
        information:
                    ``(A) The qualifications necessary to submit a bid 
                pursuant to subsection (d)(3).
                    ``(B) The financial requirements and ratios of such 
                requirements necessary for an entity described in 
                subparagraph (A) that are applicable for purposes of 
                subsection (d)(3)(B)(i).
                    ``(C) The quality standards and the performance 
                standards developed by the auction expert pursuant to 
                subsection (c)(2)(B)(ii).
                    ``(D) The calculation of the total market capacity 
                of an eligible market area for purposes of subsection 
                (d)(5)(C)(i).
                    ``(E) The methodology developed for an adjustment 
                factor applied pursuant to subsection (d)(7)(B)(iv).
                    ``(F) The process for soliciting and accepting bids 
                for purposes of paragraphs (3) and (5) of subsection 
                (d).
                    ``(G) For purposes of subsection (d)(5)--
                            ``(i) the number of bidders at the auction;
                            ``(ii) the number of bids accepted and 
                        rejected at the auction; and
                            ``(iii) with respect to rejected bidders, 
                        the specific reasons for rejections of any bid, 
                        and, with respect to any such rejection, a 
                        means of ensuring the availability of the 
                        process described in paragraph (2) to a 
                        rejected bidder.
                    ``(H) The calculation of and compliance with the 
                requirement of section 1847(b)(6)(D), as made 
                applicable to the market pricing program by subsection 
                (e)(4).
            ``(2) Transparent appeals process.--
                    ``(A) In general.--For purposes of complying with 
                paragraph (1)(G)(iii), the Secretary shall develop an 
                appeals process under which an entity that submits a 
                bid under subsection (d)(3)(A) that is rejected for 
                participation in an auction may challenge such 
                rejection.
                    ``(B) Timely response to appeal.--The process 
                established pursuant to subparagraph (A) shall include 
                a requirement that the Secretary respond to the 
                rejected entity within 45 days of submission of an 
                appeal by the entity.
    ``(g) Reliance on Auction Expert and Market Monitor in Establishing 
and Operating Market Pricing Program; Advisory Committee Report and 
Monitoring.--
            ``(1) Auction expert.--
                    ``(A) In general.--The Secretary shall, not later 
                than 3 months after the date of the enactment of this 
                section, through the Office of the Assistant Secretary 
                for Planning and Evaluation, enter into a contract with 
                an individual to serve as the auction expert to assist 
                in the design, development, implementation and 
                functioning of the auction to be conducted pursuant to 
                subsection (b). The auction expert shall report and be 
                accountable to the Secretary.
                    ``(B) Selection of auction expert; term; access to 
                information.--
                            ``(i) Competitive process.--The selection 
                        of the individual to serve as the auction 
                        expert under subparagraph (A) shall be 
                        undertaken through a competitive process.
                            ``(ii) Qualifications.--An individual may 
                        not be selected as the auction expert unless 
                        the individual--
                                    ``(I) has appropriate educational 
                                credentials; and
                                    ``(II) has experience in 
                                implementing auctions of similar 
                                complexity in government programs.
                            ``(iii) Disqualifications.--An individual 
                        may not be selected as the auction expert if 
                        such individual--
                                    ``(I) is a current government 
                                employee;
                                    ``(II) is a former employee of the 
                                Centers for Medicare & Medicaid 
                                Services who had any responsibilities 
                                with respect to the program under 
                                section 1847; or
                                    ``(III) is a current or former 
                                contractor for the Centers for Medicare 
                                & Medicaid Services that participated 
                                in the implementation of the 
                                competitive acquisition program under 
                                section 1847(a).
                            ``(iv) Term of contract.--The contract for 
                        the initial auction expert under this paragraph 
                        shall be for a period of 4 years and thereafter 
                        such contract may be renewed for additional 
                        periods of 4 years or another auction expert 
                        selected.
                            ``(v) Access to information.--The Secretary 
                        shall make available to the auction expert all 
                        applicable information (including confidential 
                        information) on the relevant markets.
            ``(2) Market monitor.--
                    ``(A) In general.--The Secretary shall, not later 
                than 3 months after the date of the enactment of this 
                section, through the Office of the Assistant Secretary 
                for Planning and Evaluation, enter into a contract with 
                an individual to serve as the market monitor to monitor 
                the design, development, and functioning of the auction 
                to be conducted under subsection (b). The market 
                monitor shall report and be accountable to the 
                Secretary.
                    ``(B) Selection of market monitor; term of 
                contract; access to information.--The provisions of 
                subparagraph (B) of paragraph (1) shall apply with 
                respect to the market monitor in the same manner as 
                they apply with respect to the auction expert.
                    ``(C) Functions of market monitor.--
                            ``(i) Public comments on auction design.--
                        The market monitor shall provide public 
                        comments on the auction design developed under 
                        subsection (c) within one month of the date of 
                        its publication.
                            ``(ii) Participate in design conference.--
                        The market monitor shall participate in the 
                        design conference and, at the conference, 
                        provide a presentation on the auction design.
                            ``(iii) Review of final design.--The market 
                        monitor shall review the final auction design 
                        recommendations submitted under subsection 
                        (c)(2)(D) and, within one month of the release 
                        of such recommendations, provide public comment 
                        on them.
                            ``(iv) Annual report.--The market monitor 
                        shall provide an annual report to Congress on 
                        the operation and functioning of the market 
                        pricing program. Each such report shall include 
                        information on--
                                    ``(I) potential problems with the 
                                program;
                                    ``(II) recommended solutions to 
                                problems identified pursuant to 
                                subclause (I);
                                    ``(III) the appropriateness of 
                                HCPCS codes selected for auctions;
                                    ``(IV) an evaluation on the ability 
                                of individuals eligible for benefits 
                                under this part to obtain items and 
                                services subject to the market pricing 
                                program;
                                    ``(V) any adverse health effects 
                                resulting from implementation of the 
                                program;
                                    ``(VI) any material deterioration 
                                in the quality of items and services 
                                provided under the program;
                                    ``(VII) the costs of any 
                                preventable hospitalizations for market 
                                priced items and services;
                                    ``(VIII) any negative business 
                                consequences to the supplier of any 
                                market priced items and services 
                                occurring as a result of errors made in 
                                the conduct of the program; and
                                    ``(IX) any other effects identified 
                                by the market monitor.
            ``(3) Reconstitution of and report by program advisory 
        committee.--
                    ``(A) In general.--With respect to the Program 
                Advisory and Oversight Committee established under 
                section 1847(c), notwithstanding paragraphs (4) and (5) 
                of such section and for the purposes of preparing the 
                report under subparagraph (B) of this paragraph, the 
                Secretary shall reconstitute the Committee and extend 
                the terms of its members (and its termination date) 
                through December 31, 2014, and the provisions of the 
                Federal Advisory Committee Act (5 U.S.C. App.) shall 
                apply to the reconstituted Committee.
                    ``(B) Report.--Not later than December 31, 2014, 
                such Committee shall submit to the Congress a report on 
                the market pricing program. The report shall include 
                information on the design of the market pricing program 
                and access to and quality of market priced items and 
                services.
            ``(4) Ongoing monitoring by secretary.--The Secretary shall 
        monitor the effects of the market pricing program to guard 
        against the occurrence of any negative effects specified in 
        paragraph (2)(C)(iv). Such monitoring shall include public 
        availability of the number of suppliers providing market priced 
        items and services in an eligible market area during each year 
        of the operation of the market pricing program.''.

SEC. 3. TERMINATION AND TRANSITION FROM DMEPOS COMPETITIVE BIDDING 
              PROGRAM.

    (a) Termination of Competitive Acquisition Program.--Section 
1847(a)(1) of the Social Security Act (42 U.S.C. 1395w-3(a)(1)) is 
amended--
            (1) in subparagraph (B), by striking ``The programs'' and 
        inserting ``Subject to subparagraph (G), the programs''; and
            (2) by adding at the end the following new subparagraph:
                    ``(G) Termination of program; transition.--
                            ``(i) No additional competition rounds.--
                        Notwithstanding subparagraph (B), the 
                        competition under this section shall end with 
                        round 1. The Secretary shall take no further 
                        action to implement round 2 of the competitive 
                        acquisition program, the national mail order 
                        competitive acquisition program, or any 
                        subsequent round of the competitive acquisition 
                        program under this section.
                            ``(ii) Contract termination.--The contracts 
                        awarded under this section before the date of 
                        the enactment of this subparagraph shall 
                        terminate on June 30, 2013, and no payment 
                        shall be made under this title after such date 
                        based on such a contract. 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. Nothing in this clause shall be construed 
                        to provide an independent cause of action or 
                        right to administrative or judicial review with 
                        regard to the termination provided under this 
                        clause.''.
    (b) Transitional Payment Rules.--
            (1) Payment for durable medical equipment.--Section 
        1834(a)(1)(F) of the Social Security Act (42 U.S.C. 
        1395m(a)(1)(F)) is amended--
                    (A) in clause (i)--
                            (i) by inserting ``and before July 1, 
                        2013,'' after ``January 1, 2011,''; and
                            (ii) by adding ``and'' at the end;
                    (B) in clause (ii)--
                            (i) by striking ``(and, in the case of 
                        covered items'' and all that follows through 
                        ``subject to clause (iii) shall)''; and
                            (ii) by striking ``; and'' at the end and 
                        inserting a period; and
                    (C) by striking clause (iii).
            (2) Awards to qualified suppliers not selected in 
        competitive acquisition program.--Section 1847(b)(4) of such 
        Act (42 U.S.C. 1395w-3(b)(4)) is amended--
                    (A) by striking ``The Secretary may limit'' and 
                inserting ``Subject to subparagraph (C), the Secretary 
                may limit''; and
                    (B) by adding at the end thereof the following new 
                subparagraph:
                    ``(C) Non-contracted suppliers in competitive 
                acquisition program.--Beginning on the date of the 
                enactment of this subparagraph and until the date of 
                implementation of the market pricing program under 
                section 1847C, the limit under subparagraph (A) shall 
                not apply and the Secretary shall award a contract to 
                any entity that--
                            ``(i) submitted a bid in the competitive 
                        acquisition program;
                            ``(ii) meets financial and quality 
                        standards and is otherwise qualified but was 
                        not awarded a contract under such program 
                        because the entity's bid was above the pricing 
                        threshold to provide such items and services in 
                        a competitive acquisition area; and
                            ``(iii) accepts the price established under 
                        such program as payment in full.''.
            (3) Payment for off-the-shelf orthotics.--Section 
        1834(h)(1) (42 U.S.C. 1395m(h)(1)) is amended by adding at the 
        end the following new subparagraph:
                    ``(I) Application of market pricing program; 
                limitation of inherent reasonableness authority.--In 
                the case of orthotics described in subsection (b)(1)(K) 
                of section 1847C furnished on or after July 1, 2013, in 
                an eligible market area, that are included in a market 
                pricing program under such section--
                            ``(i) the payment basis under this 
                        subsection for such orthotics furnished in such 
                        area shall be the payment basis determined 
                        under such market pricing program; and
                            ``(ii) paragraphs (8) and (9) of section 
                        1842(b) shall not be applied.''.
    (c) Conforming Amendments to Market Pricing Policy.--
            (1) In general.--Section 1834(a)(1) of the Social Security 
        Act (42 U.S.C. 1395m(a)(1)) is amended by adding at the end the 
        following new subparagraph:
                    ``(H) Application of market pricing program; 
                limitation of inherent reasonableness authority.--
                            ``(i) In general.--In the case of covered 
                        items or off-the-shelf orthotics furnished on 
                        or after January 1, 2014, subject to 
                        subparagraph (G), that are included in a market 
                        pricing program in an eligible market area 
                        under section 1847C--
                                    ``(I) the payment basis under this 
                                subsection in an eligible market area 
                                for the 2 items and services described 
                                in section 1847C(b)(1) that are 
                                selected for auction in such area 
                                pursuant to section 1847C(d)(2) shall 
                                be the amount determined under the 
                                auction conducted in such eligible 
                                market area;
                                    ``(II) the payment basis under this 
                                subsection in an eligible market area 
                                for the items and services described in 
                                section 1847C(b)(1) that are not 
                                selected for auction in such area 
                                pursuant to section 1847C(d)(2) shall 
                                be the amount determined pursuant to an 
                                auction for those items that is 
                                conducted in another eligible market 
                                area, and adjusted by the factor 
                                described in section 
                                1847C(d)(7)(B)(iv);
                                    ``(III) during the term of any 
                                contract awarded pursuant to section 
                                1847C(d)(6) for an item and service 
                                described in subclause (I), the 
                                Secretary may not adjust the payment 
                                rate determined in section 
                                1847(b)(13)(G) to take into account the 
                                effects of a later-conducted auction 
                                during that two-year contract period;
                                    ``(IV) at the termination of a 
                                contract awarded under section 
                                1847C(d)(6) for an item or service 
                                described in subclause (I), the 
                                Secretary shall adjust the payment rate 
                                applicable under such contract to take 
                                into account the effects of a later-
                                conducted auction; and
                                    ``(V) with respect to payment 
                                amounts applicable pursuant to 
                                subclause (II), the Secretary shall 
                                adjust the payment rate annually.
                            ``(ii) Use of additional information.--The 
                        Secretary, after consultation with the auction 
                        expert under section 1847C, may (and, in the 
                        case of covered items furnished on or after 
                        January 1, 2016, shall) use information on the 
                        payment determined under such market pricing 
                        program to adjust the payment amount otherwise 
                        recognized under subparagraph (B)(ii) for an 
                        area in which an auction has not been conducted 
                        pursuant to section 1847C(a) and in the case of 
                        such adjustment, paragraph (10)(B) shall not be 
                        applied.
                            ``(iii) Continued use of additional 
                        information.--In the case of covered items 
                        furnished on or after January 1, 2016, the 
                        Secretary shall continue to make such 
                        adjustments described in clause (ii) as, under 
                        such market pricing program, additional covered 
                        items are phased in or information is updated 
                        as contracts are renewed under such program.''.
            (2) Regulatory authority.--Section 1834(a)(1)(G) of such 
        Act (42 U.S.C. 1395w-3(a)(1)(G)) is amended--
                    (A) by inserting ``or market pricing'' before 
                ``rates'' in the subparagraph heading;
                    (B) by striking ``subparagraph (F)(ii)'' and 
                inserting ``subparagraph (F)(ii), subparagraph 
                (H)(iii),''; and
                    (C) by inserting ``or eligible market areas in 
                which an auction has been conducted, on or after the 
                first day of the year specified in section 
                1847C(a)(3)(A)'' after ``competitive acquisition 
                areas''.
    (d) Negative Pressure Wound Therapy Standards.--The Secretary of 
Health and Human Services, in consultation with relevant stakeholders 
(as defined in section 1847C(c)(2)(A)(ii) of the Social Security Act, 
as added by section 1) shall develop standards for coverage and quality 
of negative pressure wound therapy items and services (within the 
meaning of section 1847(a)(1)(D)(i)(IV) of such Act).

SEC. 4. OFFSET THROUGH REDUCTIONS IN PROGRAM SPENDING.

    Section 1834(a)(14) of the Social Security Act (42 U.S.C. 
1395m(a)(14)) is amended--
            (1) in subparagraph (K), by striking ``and'' at the end;
            (2) in subparagraph (L)--
                    (A) by striking ``and each subsequent year''; and
                    (B) by striking the period at the end of clause 
                (ii) and inserting ``; and'';
            (3) by inserting after subparagraph (L) the following new 
        subparagraphs:
                    ``(M) for 2012--
                            ``(i) the percentage increase in the 
                        consumer price index for all urban consumers 
                        (United States city average) for the 12-month 
                        period ending with June of 2011, reduced by--
                            ``(ii) the productivity adjustment 
                        described in section 1886(b)(3)(B)(xi)(II);
                    ``(N) in 2013--
                            ``(i) in the case of items and services 
                        described in section 1847C(b) furnished in any 
                        geographic area (including related accessories, 
                        but only if such accessories are furnished with 
                        such items and services), -4.8 percent; and
                            ``(ii) in the case of items and services 
                        not described clause (i), the amount specified 
                        in subparagraph (M); and
                    ``(O) in 2014 and each subsequent year--
                            ``(i) the percentage increase in the 
                        consumer price index for all urban consumers 
                        (United States city average) for the 12-month 
                        period ending with June of the previous year, 
                        reduced by
                            ``(ii) the productivity adjustment 
                        described in section 1886(b)(3)(B)(xi)(II).''; 
                        and
            (4) in the matter following subparagraph (O) (as added by 
        paragraph (3)), by striking ``subparagraph (L)(ii)'' and 
        inserting in lieu thereof ``clause (ii) of subparagraphs (L), 
        (M), and (O)''.
                                 <all>