[Congressional Record (Bound Edition), Volume 154 (2008), Part 9]
[Senate]
[Pages 12581-12584]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. BAUCUS (for himself, Mr. Grassley, Ms. Stabenow, Mr. 
        Voinovich, Mr. Salazar, Mr. Roberts, Mr. Brown, Mr. Smith, Mr. 
        Casey, Ms. Collins, Mr. Levin, Mrs. Dole, Mr. Lieberman, Mr. 
        Isakson, Mr. Wyden, Mr. Burr, Mr. Dodd, Ms. Snowe, Mr. Sanders, 
        Mr, Hatch, Ms. Cantwell, Mr. Cardin, Mr. Schumer, Mrs. Clinton, 
        Ms. Mikulski, and Mrs. Lincoln):
  S. 3144. A bill to amend part B of title XVIII of the Social Security 
Act to delay and reform the Medicare competitive acquisition program 
for purchase of durable medical equipment, prosthetics, orthotics, and 
supplies; to the Committee on Finance.
  Mr. BAUCUS. Mr. President, today I introduce, with my friend Senator 
Grassley and twenty-four other Democratic and Republican Senators, the 
Medicare DMEPOS Competitive Acquisition Reform Act of 2008. In doing 
so, I would also like to recognize the efforts of Congressman Pete 
Stark, Congressman Dave Camp, and so many others in the House of 
Representatives who worked very hard on this bipartisan legislation.
  This legislation will delay the durable medical equipment, 
prosthetics, orthotics, and supplies competitive acquisition program. 
Many Members of Congress and I have received reports about potential 
inaccuracies in the implementation of the CAP program. These reports 
range from suppliers who believe they were wrongly disqualified to 
questions about the clarity and consistency of information that 
suppliers received during the bidding process. Some providers were 
awarded contracts to serve areas in which they did not previously have 
a presence. Other suppliers were awarded contracts for service lines 
with which they have little or no experience.
  While I support the concept of competitive bidding as a way to 
decrease costs, it is the obligation of Congress to make sure that 
these savings are not at the expense of beneficiary access to the care 
that they need in their own communities. I believe that Congress should 
take a closer look to make sure this program lives up to its potential.
  In order to ensure that we are getting the best possible price and 
quality for beneficiaries, it is critical that the competitive bidding 
process be accurate and inclusive. I am most concerned about the impact 
that a poorly designed program will have on Medicare beneficiaries, 
many of whom are confused about what this new program means for them 
and are concerned that they won't be able to get care from someone in 
their own community.
  This means we must have as many bidders as possible who offer not 
only the best price but clearly meet high quality standards. Based upon 
the numbers we have seen as a result of bidding in phase one, I think 
we need to look more closely to make sure that we are not missing an 
opportunity to consider additional suppliers who have experience 
furnishing these services in the communities at play. Furthermore, we 
need to examine the bidding process outcomes to make sure that the 
suppliers being offered contracts to serve patients in a selected area 
have the team on the ground to help patients in those areas.
  I have also heard concerns that some of the products included in the 
first phase of the competitive acquisition program may not be the best 
fit for this type of program because they require specialized handling 
or expertise. At the end of the day, the most important goal of the 
Medicare program is to make sure patients get the care that is 
appropriate for them, so we must tread carefully when we move ahead 
with a program covering these products.
  The Centers for Medicare and Medicaid Services put forth an admirable 
effort to implement a complex competitive bidding program in a short 
time frame. I think that many of the concerns that people have raised 
about the program can be resolved, but we cannot afford to ignore them. 
The beneficiary services at stake are just too important to move 
hastily; no matter how much money we believe we can save.
  I think that it is worth it for us to delay for just a bit and take a 
closer look to make sure this program lives up to its potential. With a 
few minor tweaks here and there, I am convinced that the competitive 
acquisition program will live up to its promise to provide cost 
effective, high-quality services and products to patients.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text was ordered to be printed in the 
Record, as follows:

                                S. 3144

       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 Competitive 
     Acquisition Reform Act of 2008''.

     SEC. 2. DELAY IN AND REFORM OF MEDICARE DMEPOS COMPETITIVE 
                   ACQUISITION PROGRAM.

       (a) Temporary Delay and Reform.--
       (1) In general.--Section 1847(a)(1) of the Social Security 
     Act (42 U.S.C. 1395w-3(a)(1)) is amended--
       (A) in paragraph (1)--
       (i) in subparagraph (B)(i), in the matter before subclause 
     (I), by inserting ``consistent with subparagraph (D)'' after 
     ``in a manner'';
       (ii) in subparagraph (B)(i)(II), by striking ``80'' and 
     ``in 2009'' and inserting ``an additional 70'' and ``in 
     2011'', respectively;
       (iii) in subparagraph (B)(i)(III), by striking ``after 
     2009'' and inserting ``after 2011 (or, in the case of 
     national mail order for items and services, after 2010)''; 
     and
       (iv) by adding at the end the following new subparagraphs:
       ``(D) Changes in competitive acquisition programs.--
       ``(i) Round 1 of competitive acquisition program.--
     Notwithstanding subparagraph (B)(i)(I) and in implementing 
     the first round of the competitive acquisition programs under 
     this section--

       ``(I) the contracts awarded under this section before the 
     date of the enactment of this subparagraph are terminated, no 
     payment shall be made under this title on or after the date 
     of the enactment of this subparagraph based on such a 
     contract, and, to the extent that any damages may be 
     applicable as a result of the termination of such contracts, 
     such damages shall be payable from the Federal Supplementary 
     Medical Insurance Trust Fund under section 1841;
       ``(II) the Secretary shall conduct the competition for such 
     round in a manner so that it occurs in 2009 with respect to 
     the same items and services and the same areas, except as 
     provided in subclauses (III) and (IV);
       ``(III) the Secretary shall exclude Puerto Rico so that 
     such round of competition covers 9, instead of 10, of the 
     largest metropolitan statistical areas; and
       ``(IV) there shall be excluded negative pressure wound 
     therapy items and services.

     Nothing in subclause (I) shall be construed to provide an 
     independent cause of action or right to administrative or 
     judicial review with regard to the termination provided under 
     such subclause.
       ``(ii) Round 2 of competitive acquisition program.--In 
     implementing the second round of the competitive acquisition 
     programs under this section described in subparagraph 
     (B)(i)(II)--

       ``(I) the metropolitan statistical areas to be included 
     shall be those metropolitan statistical areas selected by the 
     Secretary for such round as of June 1, 2008; and
       ``(II) the Secretary may subdivide metropolitan statistical 
     areas with populations (based upon the most recent data from 
     the Census Bureau) of at least 8,000,000 into separate areas 
     for competitive acquisition purposes.

       ``(iii) Exclusion of certain areas in subsequent rounds of 
     competitive acquisition programs.--In implementing subsequent 
     rounds of the competitive acquisition programs under this 
     section, including under subparagraph (B)(i)(III), for 
     competitions occurring before 2015, the Secretary shall 
     exempt from the competitive acquisition program (other than 
     national mail order) the following:

       ``(I) Rural areas.
       ``(II) Metropolitan statistical areas not selected under 
     round 1 or round 2 with a population of less than 250,000.
       ``(III) Areas with a low population density within a 
     metropolitan statistical area that is otherwise selected, as 
     determined for purposes of paragraph (3)(A).

       ``(E) Verification by oig.--The Inspector General of the 
     Department of Health and Human Services shall, through post-
     award

[[Page 12582]]

     audit, survey, or otherwise, assess the process used by the 
     Centers for Medicare & Medicaid Services to conduct 
     competitive bidding and subsequent pricing determinations 
     under this section that are the basis for pivotal bid amounts 
     and single payment amounts for items and services in 
     competitive bidding areas under rounds 1 and 2 of the 
     competitive acquisition programs under this section and may 
     continue to verify such calculations for subsequent rounds of 
     such programs.
       ``(F) Supplier feedback on missing financial 
     documentation.--
       ``(i) In general.--In the case of a bid where one or more 
     covered documents in connection with such bid have been 
     submitted not later than the covered document review date 
     specified in clause (ii), the Secretary--

       ``(I) shall provide, by not later than 45 days (in the case 
     of the first round of the competitive acquisition programs as 
     described in subparagraph (B)(i)(I)) or 90 days (in the case 
     of a subsequent round of such programs) after the covered 
     document review date, for notice to the bidder of all such 
     documents that are missing as of the covered document review 
     date; and
       ``(II) may not reject the bid on the basis that any covered 
     document is missing or has not been submitted on a timely 
     basis, if all such missing documents identified in the notice 
     provided to the bidder under subclause (I) are submitted to 
     the Secretary not later than 10 business days after the date 
     of such notice.

       ``(ii) Covered document review date.--The covered document 
     review date specified in this clause with respect to a 
     competitive acquisition program is the later of--

       ``(I) the date that is 30 days before the final date 
     specified by the Secretary for submission of bids under such 
     program; or
       ``(II) the date that is 30 days after the first date 
     specified by the Secretary for submission of bids under such 
     program.

       ``(iii) Limitations of process.--The process provided under 
     this subparagraph--

       ``(I) applies only to the timely submission of covered 
     documents;
       ``(II) does not apply to any determination as to the 
     accuracy or completeness of covered documents submitted or 
     whether such documents meet applicable requirements;
       ``(III) shall not prevent the Secretary from rejecting a 
     bid based on any basis not described in clause (i)(II); and
       ``(IV) shall not be construed as permitting a bidder to 
     change bidding amounts or to make other changes in a bid 
     submission.

       ``(iv) Covered document defined.--In this subparagraph, the 
     term `covered document' means a financial, tax, or other 
     document required to be submitted by a bidder as part of an 
     original bid submission under a competitive acquisition 
     program in order to meet required financial standards. Such 
     term does not include other documents, such as the bid itself 
     or accreditation documentation.''; and
       (B) in paragraph (2)(A), by inserting before the period at 
     the end the following: ``and excluding certain complex 
     rehabilitative power wheelchairs recognized by the Secretary 
     as classified within group 3 or higher (and related 
     accessories when furnished in connection with such 
     wheelchairs)''.
       (2) Budget neutral offset.--
       (A) In general.--Section 1834(a)(14) of such Act (42 U.S.C. 
     1395m(a)(14)) is amended--
       (i) by striking ``and'' at the end of subparagraphs (H) and 
     (I);
       (ii) by redesignating subparagraph (J) as subparagraph (M); 
     and
       (iii) by inserting after subparagraph (I) the following new 
     subparagraphs:
       ``(J) for 2009--
       ``(i) in the case of items and services furnished in any 
     geographic area, if such items or services were selected for 
     competitive acquisition in any area under the competitive 
     acquisition program under section 1847(a)(1)(B)(i)(I) before 
     July 1, 2008, including diabetic supplies but only if 
     furnished through mail order, -9.5 percent; or
       ``(ii) in the case of other items and services, the 
     percentage increase in the consumer price index for all urban 
     consumers (U.S. urban average) for the 12-month period ending 
     with June 2008;
       ``(K) for 2010, 2011, 2012, and 2013, the percentage 
     increase in the consumer price index for all urban consumers 
     (U.S. urban average) for the 12-month period ending with June 
     of the previous year;
       ``(L) for 2014--
       ``(i) in the case of items and services described in 
     subparagraph (J)(i) for which a payment adjustment has not 
     been made under subsection (a)(1)(F)(ii) in any previous 
     year, the percentage increase in the consumer price index for 
     all urban consumers (U.S. urban average) for the 12-month 
     period ending with June 2013, plus 2.0 percentage points; or
       ``(ii) in the case of other items and services, the 
     percentage increase in the consumer price index for all urban 
     consumers (U.S. urban average) for the 12-month period ending 
     with June 2013; and''.
       (B) Conforming treatment for certain items and services.--
     The second sentence of section 1842(s)(1) of such Act (42 
     U.S.C. 1395u(s)(1)) is amended by striking ``except that'' 
     and all that follows and inserting the following: ``except 
     that for items and services described in paragraph (2)(D)--
       ``(A) for 2009 section 1834(a)(14)(J)(i) shall apply under 
     this paragraph instead of the percentage increase otherwise 
     applicable; and
       ``(B) for 2014, if subparagraph (A) applied to the items 
     and services and there has not been a payment adjustment 
     under subsection (h)(1)(H) for the items and services for any 
     previous year, the percentage increase computed under section 
     1834(a)(14)(L)(i) shall apply instead of the percentage 
     increase otherwise applicable.''.
       (3) Conforming delay.--Subsections (a)(1)(F) and (h)(1)(H) 
     of section 1834 of the Social Security Act (42 U.S.C. 1395m) 
     are each amended by striking ``January 1, 2009'' and 
     inserting ``January 1, 2011''.
       (4) Considerations in application.--Section 1834 of such 
     Act (42 U.S.C. 1395m) is amended--
       (A) in subsection (a)(1)--
       (i) in subparagraph (F), by inserting ``subject to 
     subparagraph (G),'' before ``that are included''; and
       (ii) by adding at the end the following new subparagraph:
       ``(G) Use of information on competitive bid rates.--The 
     Secretary shall specify by regulation the methodology to be 
     used in applying the provisions of subparagraph (F)(ii) and 
     subsection (h)(1)(H)(ii). In promulgating such regulation, 
     the Secretary shall consider the costs of items and services 
     in areas in which such provisions would be applied compared 
     to the payment rates for such items and services in 
     competitive acquisition areas.''; and
       (B) in subsection (h)(1)(H), by inserting ``subject to 
     subsection (a)(1)(G),'' before ``that are included''.
       (b) Quality Standards.--
       (1) Application of accreditation requirement.--
       (A) In general.--Section 1834(a)(20) of the Social Security 
     Act (42 U.S.C. 1395m(a)(20)) is amended--
       (i) in subparagraph (E), by inserting ``including 
     subparagraph (F),'' after ``under this paragraph,''; and
       (ii) by adding at the end the following new subparagraph:
       ``(F) Application of accreditation requirement.--In 
     implementing quality standards under this paragraph--
       ``(i) subject to clause (ii), the Secretary shall require 
     suppliers furnishing items and services described in 
     subparagraph (D) on or after October 1, 2009, directly or as 
     a subcontractor for another entity, to have submitted to the 
     Secretary evidence of accreditation by an accreditation 
     organization designated under subparagraph (B) as meeting 
     applicable quality standards; and
       ``(ii) in applying such standards and the accreditation 
     requirement of clause (i) with respect to eligible 
     professionals (as defined in section 1848(k)(3)(B)), and 
     including such other persons, such as orthotists and 
     prosthetists, as specified by the Secretary, furnishing such 
     items and services--

       ``(I) such standards and accreditation requirement shall 
     not apply to such professionals and persons unless the 
     Secretary determines that the standards being applied are 
     designed specifically to be applied to such professionals and 
     persons; and
       ``(II) the Secretary may exempt such professionals and 
     persons from such standards and requirement if the Secretary 
     determines that licensing, accreditation, or other mandatory 
     quality requirements apply to such professionals and persons 
     with respect to the furnishing of such items and services.''.

       (B) Construction.--Section 1834(a)(20)(F) (ii) of the 
     Social Security Act, as added by subparagraph (A), shall not 
     be construed as preventing the Secretary of Health and Human 
     Services from implementing the first round of competition 
     under section 1847 of such Act on a timely basis.
       (2) Disclosure of subcontractors under competitive 
     acquisition program.--Section 1847(b)(3) of such Act (42 
     U.S.C. 1395w-3(b)(3)) is amended by adding at the end the 
     following new subparagraph:
       ``(C) Disclosure of subcontractors.--
       ``(i) Initial disclosure.--Not later than 10 days after the 
     date a supplier enters into a contract with the Secretary 
     under this section, such supplier shall disclose to the 
     Secretary, in a form and manner specified by the Secretary, 
     the information on--

       ``(I) each subcontracting relationship that such supplier 
     has in furnishing items and services under the contract; and
       ``(II) whether each such subcontractor meets the 
     requirement of section 1834(a)(20)(F)(i), if applicable to 
     such subcontractor.

       ``(ii) Subsequent disclosure.--Not later than 10 days after 
     such a supplier subsequently enters into a subcontracting 
     relationship described in clause (i)(II), such supplier shall 
     disclose to the Secretary, in such form and manner, the 
     information described in subclauses (I) and (II) of clause 
     (i).''.
       (3) Competitive acquisition ombudsman.--Such section is 
     further amended by adding at the end the following new 
     subsection:
       ``(f) Competitive Acquisition Ombudsman.--The Secretary 
     shall provide for a competitive acquisition ombudsman within 
     the Centers for Medicare & Medicaid Services in order to 
     respond to complaints and inquiries made by suppliers and 
     individuals relating to the application of the competitive 
     acquisition program under this section. The ombudsman may be 
     within the office of the

[[Page 12583]]

     Medicare Beneficiary Ombudsman appointed under section 
     1808(c). The ombudsman shall submit to Congress an annual 
     report on the activities under this subsection, which report 
     shall be coordinated with the report provided under section 
     1808(c)(2)(C).''.
       (c) Change in Reports and Deadlines.--
       (1) GAO report.--Section 302(b)(3) of the Medicare 
     Prescription Drug, Improvement, and Modernization Act of 2003 
     (Public Law 108-173) is amended--
       (A) in subparagraph (A)--
       (i) by inserting ``and as amended by section 2 of the 
     Medicare DMEPOS Competitive Acquisition Reform Act of 2008'' 
     after ``as amended by paragraph (1)''; and
       (ii) by inserting before the period at the end the 
     following: ``and the topics specified in subparagraph (C)'';
       (B) in subparagraph (B), by striking ``Not later than 
     January 1, 2009,'' and inserting ``Not later than 1 year 
     after the first date that payments are made under section 
     1847 of the Social Security Act,''; and
       (C) by adding at the end the following new subparagraph:
       ``(C) Topics.--The topics specified in this subparagraph, 
     for the study under subparagraph (A) concerning the 
     competitive acquisition program, are the following:
       ``(i) Beneficiary access to items and services under the 
     program, including the impact on such access of awarding 
     contracts to bidders that--

       ``(I) did not have a physical presence in an area where 
     they received a contract; or
       ``(II) had no previous experience providing the product 
     category they were contracted to provide.

       ``(ii) Beneficiary satisfaction with the program and cost 
     savings to beneficiaries under the program.
       ``(iii) Costs to suppliers of participating in the program 
     and recommendations about ways to reduce those costs without 
     compromising quality standards or savings to the Medicare 
     program.
       ``(iv) Impact of the program on small business suppliers.
       ``(v) Analysis of the impact on utilization of different 
     items and services paid within the same Healthcare Common 
     Procedure Coding System (HCPCS) code.
       ``(vi) Costs to the Centers for Medicare & Medicaid 
     Services, including payments made to contractors, for 
     administering the program compared with administration of a 
     fee schedule, in comparison with the relative savings of the 
     program.
       ``(vii) Impact on access, Medicare spending, and 
     beneficiary spending of any difference in treatment for 
     diabetic testing supplies depending on how such supplies are 
     furnished.
       ``(viii) Such other topics as the Comptroller General 
     determines to be appropriate.''.
       (2) Delay in other deadlines.--
       (A) Program advisory and oversight committee.--Section 
     1847(c)(5) of the Social Security Act (42 U.S.C. 1395w-
     3(c)(5)) is amended by striking ``December 31, 2009'' and 
     inserting ``December 31, 2011''.
       (B) Secretarial report.--Section 1847(d) of such Act (42 
     U.S.C. 1395w-3(d)) is amended by striking ``July 1, 2009'' 
     and inserting ``July 1, 2011''.
       (C) IG report.--Section 302(e) of the Medicare Prescription 
     Drug, Improvement, and Modernization Act of 2003 (Public Law 
     108-173) is amended by striking ``July 1, 2009'' and 
     inserting ``July 1, 2011''.
       (3) Evaluation of certain code.--The Secretary of Health 
     and Human Services shall evaluate the existing Healthcare 
     Common Procedure Coding System (HCPCS) code for negative 
     pressure wound therapy to ensure accurate reporting and 
     billing for items and services under such code. In carrying 
     out such evaluation, the Secretary shall use the existing 
     process for the consideration of coding changes and consider 
     all relevant studies and information furnished pursuant to 
     such process.
       (d) Other Provisions.--
       (1) Exemption from competitive acquisition for certain off-
     the-shelf orthotics.--Section 1847(a) of the Social Security 
     Act (42 U.S.C. 1395w-3(a)) is amended by adding at the end 
     the following new paragraph:
       ``(7) Exemption from competitive acquisition.--The programs 
     under this section shall not apply to the following:
       ``(A) Certain off-the-shelf orthotics.--Items and services 
     described in paragraph (2)(C) if furnished--
       ``(i) by a physician or other practitioner (as defined by 
     the Secretary) to the physician's or practitioner's own 
     patients as part of the physician's or practitioner's 
     professional service; or
       ``(ii) by a hospital to the hospital's own patients during 
     an admission or on the date of discharge.
       ``(B) Certain durable medical equipment.--Those items and 
     services described in paragraph (2)(A)--
       ``(i) that are furnished by a hospital to the hospital's 
     own patients during an admission or on the date of discharge; 
     and
       ``(ii) to which such programs would not apply, as specified 
     by the Secretary, if furnished by a physician to the 
     physician's own patients as part of the physician's 
     professional service.''.
       (2) Correction in face-to-face examination requirement.--
     Section 1834(a)(1)(E)(ii) of such Act (42 U.S.C. 
     1395m(a)(1)(E)(ii)) is amended by striking ``1861(r)(1)'' and 
     inserting ``1861(r)''.
       (3) Special rule in case of national mail-order competition 
     for diabetic testing strips.--Section 1847(b) of such Act (42 
     U.S.C. 1395w-3(b)) is amended--
       (A) by redesignating paragraph (10) as paragraph (11); and
       (B) by inserting after paragraph (9) the following new 
     paragraph:
       ``(10) Special rule in case of competition for diabetic 
     testing strips.--
       ``(A) In general.--With respect to the competitive 
     acquisition program for diabetic testing strips conducted 
     after the first round of the competitive acquisition 
     programs, if an entity does not demonstrate to the Secretary 
     that its bid covers types of diabetic testing strip products 
     that, in the aggregate and taking into account volume for the 
     different products, cover 50 percent (or such higher 
     percentage as the Secretary may specify) of all such types of 
     products, the Secretary shall reject such bid. The volume for 
     such types of products may be determined in accordance with 
     such data (which may be market based data) as the Secretary 
     recognizes.
       ``(B) Study of types of testing strip products.--Before 
     2011, the Inspector General of the Department of Health and 
     Human Services shall conduct a study to determine the types 
     of diabetic testing strip products by volume that could be 
     used to make determinations pursuant to subparagraph (A) for 
     the first competition under the competitive acquisition 
     program described in such subparagraph and submit to the 
     Secretary a report on the results of the study. The Inspector 
     General shall also conduct such a study and submit such a 
     report before the Secretary conducts a subsequent competitive 
     acquisition program described in subparagraph (A).''.
       (4) Other conforming amendments.--Section 1847(b)(11) of 
     such Act, as redesignated by paragraph (3), is amended--
       (A) in subparagraph (C), by inserting ``and the 
     identification of areas under subsection (a)(1)(D)(iii)'' 
     after ``(a)(1)(A)'';
       (B) in subparagraph (D), by inserting ``and implementation 
     of subsection (a)(1)(D)'' after ``(a)(1)(B)'';
       (C) in subparagraph (E), by striking ``or'' at the end;
       (D) in subparagraph (F), by striking the period at the end 
     and inserting ``; or''; and
       (E) by adding at the end the following new subparagraph:
       ``(G) the implementation of the special rule described in 
     paragraph (10).''.
       (5) Funding for implementation.--In addition to funds 
     otherwise available, for purposes of implementing the 
     provisions of, and amendments made by, this section, other 
     than the amendment made by subsection (c)(1) and other than 
     section 1847(a)(1)(E) of the Social Security Act, the 
     Secretary of Health and Human Services shall provide for the 
     transfer from the Federal Supplementary Medical Insurance 
     Trust Fund established under section 1841 of the Social 
     Security Act (42 U.S.C. 1395t) to the Centers for Medicare & 
     Medicaid Services Program Management Account of $20,000,000 
     for fiscal year 2008, and $25,000,000 for each of fiscal 
     years 2009 through 2012. Amounts transferred under this 
     paragraph for a fiscal year shall be available until 
     expended.
       (e) Effective Date.--The amendments made by this section 
     shall take effect as of June 30, 2008.

  Mr. GRASSLEY. Mr. President, I am pleased to introduce the Medicare 
DMEPOS Competitive Acquisition Reform Act of 2008 with my colleague, 
Senator Baucus, to delay and reform the competitive bidding program for 
Medicare durable medical equipment, prosthetics, orthotics, and 
supplies. We are introducing this legislation to address serious 
concerns that have arisen over implementation of the competitive 
bidding program which is set to take effect in certain areas of the 
country on July 1, 2008. The bill will delay the start of the 
competitive bidding program for 18 months and require the Centers for 
Medicare and Medicaid Services to review the program and address 
significant issues that have been raised regarding implementation of 
the program.
  We must act now before the competitive bidding program takes effect. 
We must ensure that the frail elderly who depend on diabetic supplies, 
oxygen, and other medical equipment for life-threatening conditions 
will continue to have access to essential medical products and supplies 
which are vital to their daily lives. The continued viability of much 
of the home medical supply industry is in serious jeopardy as a result 
of flaws that surfaced in the program during the first round of 
competitive bidding. Many small home medical equipment suppliers are in 
danger of going out of business through no fault of their own if the 
competitive bidding

[[Page 12584]]

program is implemented as planned. Losing a significant number of small 
suppliers from the home medical equipment industry would have severe, 
unintended adverse consequences on thousands of beneficiaries who need 
home medical equipment and supplies. If that were to occur, it would 
severely hamper access to essential medical equipment for an untold 
number of beneficiaries. It was due to these very concerns that I 
opposed competitive bidding for DME when it was under consideration in 
2003. Now, my original concerns, unfortunately, have become a reality, 
and urgent action by Congress is required.
  These concerns are especially problematic right now in states such as 
Iowa in the Midwest which are already reeling from the disastrous 
floods and tornadoes we have experienced this past month. The loss of 
many more small businesses would be disastrous to beneficiaries whose 
access to needed medical supplies has already been severely limited, 
let alone the ripple effect this would inflict on local economies which 
have already been severely impacted by record floods which have harmed 
scores of businesses and cost hundreds of millions of dollars in 
damages.
  We heard from many medical equipment suppliers that the rules of the 
competitive bidding program were unclear or were changed at the last 
minute, and that their bids were not considered. CMS has told us that 
roughly two-thirds of the bids submitted by suppliers were ultimately 
rejected for lack of proper documentation or other issues apart from 
price. This was done even though CMS had assured suppliers when the 
program began that they would be notified if their bids lacked the 
required documentation. Two weeks before the bidding closed, CMS 
abruptly decided they would not provide such notification. 
Appropriately, this bill terminates the contracts that were awarded 
under Round One and pays any applicable damages incurred as a result of 
the terminations, if any. In the future, the bill requires a more 
transparent process on the part of CMS. When Round One is re-bid, the 
bill requires CMS to provide feedback to suppliers with documentation 
issues or other problems and give them an opportunity to remedy the 
situation before their bids are thrown out and excluded from 
consideration.
  As Ranking Member of the Senate Finance Committee, I am committed to 
ensuring that Medicare dollars are spent wisely and provide high 
quality products to seniors at the lowest possible cost. The program 
improvements required by this legislation will ensure more protections 
for beneficiaries and lead to lower prices and higher quality medical 
products while ensuring that beneficiaries will still have access to 
the medical equipment and supplies that they need. These improvements 
will also help prevent many small home medical equipment suppliers from 
going out of business due to a flawed bidding process which unfairly 
eliminated them from the Medicare program for three years.
  In our bill, the cost of delaying the competitive bidding program and 
adding additional safeguards to the program would be fully paid for by 
the durable medical equipment industry. According to the Congressional 
Budget Office, the delay in implementing competitive bidding and the 
reforms to the program included in this bill will increase Medicare 
spending by $3.1 billion over 5 years. To offset the cost of the 
legislation, in 2009 those DME items subject to Round One of the 
program will not receive a CPI update, and payments for those items 
will be reduced by 9.5 percent. Items not subject to Round One will 
receive a CPI update in 2009, and all DME items will receive CPI 
updates in years 2010 through 2013. In 2014, those DME items which were 
subject to the 9.5 percent payment reduction in 2009 will receive an 
additional payment increase of two percent over the CPI unless they are 
covered by competitive bidding contracts then.
  As is true in many sectors, the DME industry is given a bad name by a 
few bad apples that spoil the barrel. Unfortunately, we hear on a 
regular basis from the Office of Inspector General and the Justice 
Department that the DME industry continues to have far too many 
incidents of waste, fraud and abuse. The multi-agency Medicare Fraud 
Task Force formed last year has uncovered numerous examples of criminal 
behavior and successfully prosecuted dozens of fraudulent or non-
existent DME suppliers in South Florida and elsewhere. In just over a 
year, the task force has brought more than 120 cases against nearly 200 
defendants in South Florida alone who have been charged with a total of 
$638 million in fraud. We must have stronger safeguards to ensure that 
companies who participate in competitive bidding are actual, legitimate 
companies that can provide the equipment and services they bid to 
provide. In addition, the Inspector General of the Department of Health 
and Human Services is required to assess the process used by CMS to 
conduct competitive bidding and verify the calculations of the pricing 
determinations used to determine the payment amounts for competitively 
bid items in Rounds One and Two.
  This bill also includes standards which will lead to an improved 
competitive bidding program. Under the bill, all DME suppliers must be 
accredited and meet quality standards by October 2009. We also close a 
loophole that currently allows subcontractors to remain unaccredited. 
We heard many complaints about companies awarded contracts who had no 
presence in the competitively bid area and who then began to solicit 
subcontractors to assist in carrying out the terms of the contract they 
had been awarded. Under the current program, subcontractors do not need 
to meet accreditation standards. Our bill requires that every company 
that supplies DME in the Medicare program must meet accreditation 
standards, whether they are primary suppliers or subcontractors.
  I urge my colleagues to support this legislation to delay the 
competitive bidding program in order to ensure seniors continued access 
to needed home medical equipment and supplies and to remedy flaws in 
the bidding process and make other necessary improvements in the 
competitive bidding program.

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