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[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4185 Introduced in House (IH)]

<DOC>

114th CONGRESS
  1st Session
                                H. R. 4185

 To make adjustments, including by amending title XVIII of the Social 
   Security Act, relating to competitive bidding program and durable 
 medical equipment under the Medicare program, to amend such title to 
 establish a DMEPOS market pricing program demonstration project, and 
                          for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            December 8, 2015

  Mr. Tom Price of Georgia (for himself, Mrs. McMorris Rodgers, Mrs. 
 Blackburn, Ms. Duckworth, Mr. Loebsack, Mr. Ryan of Ohio, Mr. Roe of 
Tennessee, Mrs. Noem, Mr. King of New York, Mr. Zinke, Mr. Tipton, Mr. 
Blum, Mr. Cramer, Mr. McClintock, Mr. Keating, Mr. Duncan of Tennessee, 
  Mrs. Ellmers of North Carolina, Mr. Harper, and Mr. Austin Scott of 
   Georgia) 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 make adjustments, including by amending title XVIII of the Social 
   Security Act, relating to competitive bidding program and durable 
 medical equipment under the Medicare program, to amend such title to 
 establish a DMEPOS market pricing program demonstration project, and 
                          for other purposes.

    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 ``Protecting Access through 
Competitive-pricing Transition Act of 2015'' or as the ``PACT Act of 
2015''.

SEC. 2. REVISION OF PAYMENTS FOR DURABLE MEDICAL EQUIPMENT UNDER THE 
              MEDICARE PROGRAM.

    (a) Transition to Implementation of Fee Schedule Payment 
Adjustments Using Information From Competitive Bidding Programs.--
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:
                    ``(J) Transition to implementation of payment 
                adjustments using information from competitive bidding 
                programs.--
                            ``(i) In general.--In implementing 
                        subparagraph (F) and paragraphs (1) and (2) of 
                        section 414.210(g) of title 42, Code of Federal 
                        Regulations, with respect to items and services 
                        furnished on or after January 1, 2016, and 
                        before January 1, 2019, the fee schedule amount 
                        that would otherwise be determined for each 
                        area under this section shall be adjusted to 
                        the lesser of--
                                    ``(I) 130 percent of the regional 
                                price determined under clause (i) of 
                                such paragraph (1) for the State in 
                                which such area is located (or, in the 
                                case of an area located within the 
                                District of Columbia, for such 
                                District); or
                                    ``(II) the fee schedule amount that 
                                would otherwise be determined for such 
                                area under this section (without the 
                                application of subsection (a)(1)(F) of 
                                such section) on January 1, 2015, 
                                updated by the covered item update 
                                described in paragraph (14)(L) for the 
                                year in which the items and services to 
                                which such fee schedule applies are 
                                furnished.
                            ``(ii) Phase-in.--The adjustment described 
                        in clause (i) shall be implemented over a two-
                        year period and in a manner that phases in such 
                        adjustment in equal increments in each year of 
                        such two-year period, with such adjustment 
                        being fully implemented with respect to items 
                        and services furnished in 2017.''.
    (b) Bid Ceiling for Competitive Acquisition for Durable Medical 
Equipment Under the Medicare Program.--Section 1847(b)(5) of the Social 
Security Act (42 U.S.C. 1395w-3(b)(5)) is amended--
            (1) in subparagraph (A)--
                    (A) by inserting ``, subject to subparagraph (E),'' 
                after ``subsection (a)(2)''; and
                    (B) by inserting ``, subject to subparagraph (E),'' 
                after ``Based on such bids''; and
            (2) by adding at the end the following new subparagraph:
                    ``(E) Bid ceiling for durable medical equipment.--
                            ``(i) In general.--Payment under this 
                        section for applicable covered items may not 
                        exceed the amount that would otherwise be paid 
                        for such items under section 1834 (without the 
                        application of subsection (a)(1)(F) of such 
                        section) on January 1, 2015, updated by the 
                        covered item update described in section 
                        1834(a)(14)(L) for the year in which such 
                        covered item is furnished.
                            ``(ii) Application to new covered items.--
                        The Secretary shall establish a process for 
                        purposes of applying clause (i) with respect to 
                        applicable covered items for which no amount 
                        would otherwise be paid under section 1834 
                        (without the application of subsection 
                        (a)(1)(F) of such section) on January 1, 2015.
                            ``(iii) Applicable covered items defined.--
                        For purposes of this subparagraph, the term 
                        `applicable covered items' means covered items 
                        (as defined in section 1834(a)(13)) for which 
                        payment would otherwise be made under section 
                        1834(a) that are furnished with respect to 
                        competitive bid contracts that begin on or 
                        after January 1, 2017.''.
    (c) Requirement in Determining Adjustments Using Information From 
Competitive Bidding Programs.--Section 1834(a)(1)(G) of the Social 
Security Act (42 U.S.C. 1395m(a)(1)(G)) is amended by adding at the end 
the following new sentence: ``In the case of items and services 
furnished on or after January 1, 2019, in making any adjustments under 
clause (ii) or (iii) of subparagraph (F), the Secretary shall take into 
account the average travel distance and cost associated with furnishing 
items and services in a competitive acquisition area, the average 
volume of items and services furnished by providers in such an area, 
the clearing price of items and services, and the number of providers 
in competitive acquisition areas compared to the number of providers in 
noncompetitive acquisition areas. In implementing the preceding 
sentence, the Secretary shall solicit and take into account stakeholder 
input.''.

SEC. 3. ESTABLISHMENT OF DMEPOS MARKET PRICING PROGRAM DEMONSTRATION 
              PROJECT.

    (a) In General.--Part B of title XVIII of the Social Security Act 
is amended by inserting after section 1847B (42 U.S.C. 1395w-3b) the 
following new section:

         ``dmepos market pricing program demonstration project

    ``Sec. 1847C. 
    ``(a) Establishment.--
            ``(1) In general.--The Secretary shall establish and 
        implement a six-year market pricing program demonstration 
        project (in this section referred to as the `demonstration 
        project') under which three auctions are conducted in eligible 
        auction areas (as defined in paragraph (3)) throughout the 
        United States for the furnishing of market-priced items and 
        services (as defined in subsection (b)) for which payment is 
        made under this part. Each such auction shall, in accordance 
        with subsection (c)(3)(D)(ii)(IV), be with respect to a 
        contract period of two years for each lead product.
            ``(2) Implementation timeline.--The demonstration project 
        shall be carried out in accordance with the following timeline:
                    ``(A) Contracting with auction expert and market 
                monitor.--Not later than 3 months after the date of the 
                enactment of this section, the Secretary shall contract 
                with the auction expert contracted with under 
                subsection (f)(1) (hereinafter referred to as the 
                `auction expert') and market monitor contracted with 
                under such subsection (hereinafter referred to as the 
                `market monitor').
                    ``(B) Initial design of auction.--Not later than 5 
                months after such date of enactment, the development of 
                the initial auction design under subsection 
                (c)(2)(B)(i) shall be completed.
                    ``(C) Auction design conference.--Not later than 6 
                months after such date of enactment, the Secretary 
                shall hold the auction design conference under 
                subsection (c)(2)(C).
                    ``(D) Finalizing auction details.--Not later than 
                7\1/2\ months after such date of enactment, the 
                Secretary shall promulgate, through the expedited 
                rulemaking process under subsection (c)(2)(D), the 
                procedures to be used for auctions under the 
                demonstration project.
                    ``(E) Conduct of first auction.--Not later than 11 
                months after such date of enactment, the first auction 
                under the demonstration project shall occur under 
                subsection (c)(3).
                    ``(F) Awarding contracts under first auction.--Not 
                later than 1 year after such date of enactment, 
                contracts under such first auction shall be awarded.
            ``(3) Eligible auction areas.--
                    ``(A) Definition.--
                            ``(i) In general.--In this section, subject 
                        to clause (ii), the term `eligible auction 
                        area' means, with respect to an auction under 
                        this section, a county, aggregation of 
                        counties, or part of one or more counties 
                        specified by the Secretary for purposes of such 
                        auction, in accordance with this paragraph.
                            ``(ii) Special rule for diabetic 
                        supplies.--In applying this section with 
                        respect to the product category described in 
                        subsection (b)(11), the term `eligible auction 
                        area' means, with respect to an auction under 
                        this section, a State specified by the 
                        Secretary for purposes of such auction, in 
                        accordance with subparagraph (B)(iii).
                    ``(B) Specification of eligible auction areas.--For 
                purposes of this section, the Secretary shall specify 
                eligible auction areas in accordance with the 
                following:
                            ``(i) Market areas must reflect economic 
                        interdependency.--The Secretary shall choose 
                        counties, aggregations of counties, or parts of 
                        counties in such a manner as to provide for 
                        auction areas that form economically 
                        interdependent areas (as reflected in standard 
                        econometric market models). For purposes of 
                        specifying eligible auction areas in accordance 
                        with the preceding sentence, the Secretary may 
                        subdivide a large county to take into account 
                        population and geographic size.
                            ``(ii) Round 2 recompete competitive 
                        bidding areas.--The Secretary shall specify at 
                        least 10 eligible auction areas that 
                        constituted Round 2 Recompete competitive 
                        bidding areas under section 1847. To the extent 
                        possible, areas selected for the demonstration 
                        project should represent a variety of economic 
                        markets (as reflected in standard econometric 
                        market models).
                            ``(iii) Mail order diabetic supplies.--For 
                        purposes of subparagraph (A)(ii), with respect 
                        to the product category described in subsection 
                        (b)(11), the Secretary shall specify two States 
                        as eligible auction areas for mail order 
                        diabetic supplies. Such two States, combined, 
                        shall represent at least 7 percent of the total 
                        population of individuals who are either 
                        entitled to benefits under part A or enrolled 
                        under part B (as determined based upon the most 
                        recent available data).
            ``(4) Application of certain policies applicable to 
        competitive acquisition programs.--The following provisions of 
        subsection (a)(1) of section 1847 shall apply to the 
        demonstration project in the same manner as such provisions 
        apply to competitive acquisition programs 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 auction areas and 
                shall be conducted in the first two years of the 
                demonstration project and may continue in subsequent 
                years of the project.
                    ``(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 demonstration project.
    ``(b) Market-Priced Items and Services Defined.--In this section, 
the term `market-priced items and services' means items and services in 
each of the following categories (each of which in this section 
referred to as a `product category'):
            ``(1) Oxygen supplies and equipment.
            ``(2) Standard power wheelchairs, power scooters, and 
        related accessories.
            ``(3) Manual wheelchairs.
            ``(4) Enteral nutrients, equipment, and supplies.
            ``(5) Continuous positive airway pressure devices, 
        respiratory assistive devices, and related supplies.
            ``(6) Hospital beds and related accessories.
            ``(7) Walkers and related accessories.
            ``(8) Support services (Group 2 mattresses and overlays).
            ``(9) Negative pressure wound therapy pumps and related 
        supplies and accessories.
            ``(10) Off-the-shelf orthotics described in subparagraph 
        (C) of section 1847(a)(2) to the extent they are included 
        pursuant to such subparagraph in items and services described 
        under such section and included in a competitive bidding 
        program in a competitive acquisition area under section 
        1847(a).
            ``(11) Mail order diabetic supplies.
            ``(12) Other items and services (other than those items and 
        services specified in paragraph (2)) that could have been 
        subject to participation in competitive acquisition programs 
        under section 1847(a)(1).
    ``(c) Demonstration Pricing Project Requirements.--
            ``(1) In general.--The Secretary shall establish, through 
        the process described in paragraph (2), an auction design for 
        each auction that meets the requirements of paragraph (3), and 
        shall ensure that the first auction under the demonstration 
        project will be conducted for all eligible auction areas 
        specified under subsection (a)(3) not later than the date 
        specified in subsection (a)(2)(E).
            ``(2) Auction design process; stakeholder input.--
                    ``(A) Transparent process required.--In 
                establishing the auction design described in paragraph 
                (1), the Secretary shall utilize an open and 
                transparent process that involves all eligible 
                participants described in subparagraph (C)(ii), 
                including through the auction design conference and 
                other outreach efforts.
                    ``(B) Initial auction design.--The auction expert 
                shall, with respect to an auction and consistent with 
                subsection (a)(2)(B), develop an auction design 
                (referred to in this section as the `initial auction 
                design') that shall propose for such auction eligible 
                auction areas, lead products for each product category, 
                weights to be assigned to products under paragraph 
                (3)(B)(iv), and proposed rules for the conduct of the 
                auction.
                    ``(C) Auction design conference.--
                            ``(i) In general.--The Secretary shall, 
                        consistent with subsection (a)(2)(C), convene a 
                        design conference (in this paragraph referred 
                        to as the `design conference') for the auction 
                        process for each auction under this section. 
                        The auction expert shall chair the conference 
                        and the market monitor shall participate in the 
                        conference (including as described in clause 
                        (v)).
                            ``(ii) Participants.--The participants at 
                        the design conference shall include at least 
                        the following:
                                    ``(I) Manufacturers, suppliers and 
                                trade associations of dmepos.--
                                Representatives of manufacturers, 
                                suppliers, and trade associations of 
                                market-priced items and services.
                                    ``(II) Beneficiaries.--
                                Representatives of individuals enrolled 
                                under this part.
                                    ``(III) CMS.--The Administrator of 
                                the Centers for Medicare & Medicaid 
                                Services and other appropriate Federal 
                                personnel.
                            ``(iii) Purpose of conference.--The purpose 
                        of the design conference shall be to review the 
                        initial auction design for the establishment of 
                        an efficient auction consistent with best 
                        practices and actuarial science and to provide 
                        stakeholders the opportunity to provide 
                        feedback on the initial auction design.
                            ``(iv) Auction expert responsibilities at 
                        conference.--With respect to the design 
                        conference, the auction expert shall--
                                    ``(I) provide a demonstration of 
                                the initial auction design;
                                    ``(II) lead a mock auction based 
                                upon such initial auction design in 
                                which the attendees will participate 
                                and offer comments and suggestions for 
                                improvement;
                                    ``(III) invite input from suppliers 
                                as to the relationship between, with 
                                respect to a product category, the lead 
                                product in such product category and 
                                the value of other products in the same 
                                product category as such lead product 
                                (and may establish working committees 
                                on major issues related to such 
                                relationship); and
                                    ``(IV) invite input from small 
                                suppliers as to the ways in which such 
                                initial auction design can be improved 
                                to ensure that small suppliers have the 
                                opportunity to participate in the 
                                auction.
                            ``(v) Market monitor responsibilities at 
                        conference.--With respect to the design 
                        conference, the market monitor shall provide a 
                        presentation on the responsibilities of the 
                        market monitor throughout the year and comment 
                        on key aspects of the initial auction design 
                        and their purpose.
                            ``(vi) Internet accessibility of 
                        conference.--The design conference shall be 
                        recorded and made available on an Internet Web 
                        site (through simultaneous Web cast or 
                        otherwise).
                    ``(D) Auction design proposed through expedited 
                rulemaking.--
                            ``(i) Submission to secretary.--The auction 
                        expert shall, with respect to an auction and in 
                        accordance with the timeline described in 
                        subsection (a)(2), submit to the Secretary an 
                        auction design for the auction (referred to in 
                        this section as the `revised auction design') 
                        that takes into account the feedback on the 
                        initial auction design provided at the auction 
                        conference for such auction.
                            ``(ii) Publication and proposal.--Upon 
                        receiving the submission of the revised auction 
                        design for an auction by the auction expert 
                        pursuant to clause (i), the Secretary shall--
                                    ``(I) make such modifications to 
                                such revised auction design as are 
                                necessary to ensure that the such 
                                auction design meets the requirements 
                                described in clause (viii);
                                    ``(II) make such other 
                                modifications to such revised auction 
                                design as the Secretary determines 
                                appropriate; and
                                    ``(III) publish and propose a rule 
                                for implementing such auction design 
                                for such auction, as modified pursuant 
                                to subclauses (I) and (II), through an 
                                expedited rulemaking process.
                            ``(iii) Submission of comments to auction 
                        expert and market monitor.--The Secretary shall 
                        submit comments received on an auction design 
                        published under clause (ii)(III) to the auction 
                        expert and the market monitor to consider for 
                        modification of such auction design.
                            ``(iv) Review of comments by auction expert 
                        and market monitor.--The market monitor and 
                        auction expert shall review such comments and, 
                        within one month of the receipt of such 
                        comments pursuant to clause (iii), shall each 
                        provide public comment on such comments.
                            ``(v) Determination of changes to auction 
                        design.--Taking into consideration the comments 
                        submitted to the auction expert and market 
                        monitor pursuant to clause (iii), such auction 
                        expert shall determine if any changes should be 
                        made in the auction design published under 
                        clause (ii)(III) for an auction in response to 
                        such comments. If the auction expert determines 
                        that changes should be made in such design in 
                        response to such comments, the auction expert 
                        shall submit to the Secretary an auction design 
                        (referred to in this section as the `further 
                        revised auction design') for such auction.
                            ``(vi) Adoption and publication of auction 
                        design.--The Secretary shall adopt as the 
                        auction design to be used for purposes of an 
                        auction conducted under the demonstration 
                        project either--
                                    ``(I) the further revised auction 
                                design for such auction, modified as 
                                necessary by the Secretary to ensure 
                                that such auction design meets the 
                                requirements described in clause (viii) 
                                (and, if such design is so established, 
                                shall publish by rule such design); or
                                    ``(II) the auction design published 
                                under clause (ii)(III) for such auction 
                                (and, if such design is so selected 
                                despite a further revised auction 
                                design having been submitted to the 
                                Secretary under clause (v), shall 
                                notify the auction expert and market 
                                monitor of, and publish in the Federal 
                                Register, the reasons for electing to 
                                establish the revised auction design 
                                instead of the further revised auction 
                                design).
                            ``(vii) Expedited rulemaking process 
                        defined.--In this subparagraph, the term 
                        `expedited rulemaking process' means a process 
                        of publication of the revised auction design 
                        (and, as applicable, the further revised 
                        auction design) and solicitation of public 
                        comments on such design. The provisions of 
                        section 1871(b)(1) shall not apply to such 
                        process.
                            ``(viii) Requirements described.--For 
                        purposes of this paragraph, the requirements 
                        described in this clause are requirements that, 
                        with respect to an auction design--
                                    ``(I) the rates of payment under 
                                such auction design do not result in a 
                                diminution of access to market-priced 
                                items and services for individuals 
                                entitled to benefits under part A or 
                                enrolled under part B in the eligible 
                                auction areas in which the 
                                demonstration project is conducted or 
                                of the quality of such items and 
                                services that are furnished to such 
                                individuals in such areas;
                                    ``(II) the lead product proposed in 
                                such auction design for each product 
                                category has been selected to be so 
                                proposed based upon the historical 
                                price and utilization of the product 
                                under this part; and
                                    ``(III) the weights assigned under 
                                paragraph (3)(B)(iv) to products that 
                                are not lead products take into 
                                consideration input provided on such 
                                weights by providers at the design 
                                conference for the applicable auction.
            ``(3) Conduct of auction.--
                    ``(A) In general.--The market monitor shall, 
                consistent with subsection (a)(2)(E) and in accordance 
                with the auction design adopted under paragraph (2)(D), 
                conduct auctions (each in this section referred to as a 
                `market-priced auction') among potential bidders that 
                are identified as eligible bidders under subparagraph 
                (B)(ii) by carrying out the activities described in 
                subparagraph (B) and subparagraph (C)(i) and such other 
                activities as specified by the Secretary.
                    ``(B) Market monitor actions before auction date.--
                In conducting a market-priced auction, the market 
                monitor shall (subject, as appropriate, to review by 
                the Secretary), on a date that is prior to the date of 
                such auction, carry out the following:
                            ``(i) Detail auction rules.--Detail auction 
                        rules and processes that are consistent with 
                        the auction design adopted under paragraph 
                        (2)(D). The rules and processes described in 
                        the preceding sentence shall, with respect to 
                        an auction, include the following:
                                    ``(I) The requirements that an 
                                entity must meet in order to be 
                                considered an eligible bidder under 
                                subparagraph (E)(ii) for purposes of 
                                such auction.
                                    ``(II) Processes through which it 
                                will be determined for such auction, as 
                                a function of bids submitted by 
                                eligible bidders at such auction, the 
                                eligible bidders for lead products that 
                                are to be awarded contracts under this 
                                section and the prices for all products 
                                that are in the same product category 
                                as such lead product.
                                    ``(III) Performance obligations of 
                                such eligible bidders that are awarded 
                                such contracts, guarantee requirements 
                                applied under the demonstration 
                                program, and penalties that will apply 
                                in the case of such an eligible bidder 
                                that is awarded such a contract and 
                                that fails satisfy the terms of such 
                                contract or such requirements.
                            ``(ii) Identify eligible bidders.--Review 
                        all applications for potential bidders seeking 
                        to be eligible bidders in the auction and 
                        identify, for purposes of such auction, the 
                        eligible bidders (as defined in subparagraph 
                        (E)(ii)) by eligible auction area.
                            ``(iii) Specify target capacity for 
                        eligible bidders.--Specify, with respect to 
                        each eligible bidder for such auction, a target 
                        percentage for a product category that 
                        represents the percentage of the projected 
                        market for such product in an eligible auction 
                        area and contract period that it is estimated 
                        that the eligible bidder would have the 
                        capacity to serve. Each such target percentage 
                        shall be determined as follows:
                                    ``(I) In the case of an eligible 
                                bidder with historic capacity in an 
                                auction area with respect to the lead 
                                product in such product category, the 
                                target percentage shall be determined 
                                based on the historic capacity for such 
                                bidder for such product.
                                    ``(II) In the case of an eligible 
                                bidder that has no historic capacity in 
                                an auction area with respect to such 
                                lead product, the target percentage 
                                shall be 1 percent of the projected 
                                market for such product.
                            ``(iv) Set product weights.--
                                    ``(I) In general.--Assign to each 
                                product (categorized by the health care 
                                common procedure coding system code) 
                                that is in the same product category as 
                                a lead product a weight that is 
                                expressed as a number.
                                    ``(II) Weight amount for lead 
                                product.--With respect to a product 
                                category described in clause (i), the 
                                lead product in such product category 
                                shall, for purposes of such clause, be 
                                assigned a weight of 1.0.
                    ``(C) Auction.--In conducting a market-priced 
                auction, the market monitor or Secretary (as 
                applicable) shall, during such auction, carry out the 
                following:
                            ``(i) Establishment of clearing price.--The 
                        market monitor (subject, as appropriate, to 
                        review by the Secretary) shall establish a 
                        clearing price for each lead product selected 
                        under subparagraph (A) for each eligible area. 
                        Such clearing price shall, subject to clause 
                        (iii) and with respect to a lead product, be 
                        equal to the price (referred to in this clause 
                        as the `target price') specified in the bid 
                        submitted by an eligible bidder with respect to 
                        such product and such area that, in conjunction 
                        with all bids submitted by eligible bidders for 
                        such product and such area that specify prices 
                        that are less than such target price, will 
                        provide for the total projected volume 
                        determined by the Secretary to be needed to 
                        fulfill demand for such product under this 
                        title in such area (as determined through the 
                        use of target percentages specified under 
                        subparagraph (B)(iii)).
                            ``(ii) Awarding of contracts.--
                                    ``(I) In general.--The Secretary 
                                shall award, pursuant to an auction for 
                                a contract period and eligible auction 
                                area, a contract for products in a 
                                product category to each eligible 
                                bidder whose bid submitted for the lead 
                                product in such product category for 
                                such area is at or below the clearing 
                                price established for such lead product 
                                and area pursuant to clause (i).
                                    ``(II) Mandatory acceptance of 
                                contract.--An eligible bidder that has 
                                been awarded a contract under subclause 
                                (I) based on a bid described in such 
                                subclause by such bidder shall be 
                                treated, upon the conclusion of the 
                                auction with respect to which such 
                                contract is awarded, as having agreed 
                                to and accepted the contract, including 
                                the requirements described in 
                                subclauses (III) and (IV), based on the 
                                price of items included in such bid.
                                    ``(III) Volume of products under 
                                contract.--A contract awarded to an 
                                eligible bidder under subclause (I) 
                                with respect to market-priced items and 
                                services in a product category for an 
                                eligible auction area and contract 
                                period shall include a requirement that 
                                such bidder will furnish such items and 
                                services in sufficient quantities to 
                                meet the needs of individuals for such 
                                items and services in the eligible 
                                auction area during such period. An 
                                eligible bidder shall not satisfy the 
                                sufficient quantities requirement 
                                described in the preceding sentence 
                                unless the bidder furnishes the 
                                percentage of the market for such item 
                                or service in such area that is equal 
                                to the target percentage specified for 
                                such bidder for the lead product for 
                                such category under subparagraph 
                                (B)(iii) or, if lesser, the percentage 
                                of such market in such area and period 
                                that seeks such item or service from 
                                such bidder.
                                    ``(IV) Duration of contract.--A 
                                contract awarded under subclause (I) 
                                shall be valid for 2 years.
                            ``(iii) Rule if total bids inadequate to 
                        fulfill demand.--In the case that the capacity 
                        represented by all bids submitted by eligible 
                        bidders for a lead product for an eligible area 
                        does not provide for the total projected volume 
                        determined by the Secretary to be needed to 
                        fulfill demand for such product under this 
                        title in such area, the Secretary shall--
                                    ``(I) establish a clearing price 
                                for such lead product and area that is 
                                equal to the initial bid price 
                                established at such auction by the 
                                market monitor for such product and 
                                area and, pursuant to clause (ii)(I), 
                                award contracts to all eligible bidders 
                                for such lead product and area whose 
                                bid submitted for such product and area 
                                is at or below such price;
                                    ``(II) announce the remaining 
                                aggregate supply needed for such 
                                product and area in order to fulfill 
                                demand for such product under this 
                                title in such area; and
                                    ``(III) conduct among eligible 
                                bidders an additional auction round, in 
                                such manner as is specified by the 
                                Secretary, to fulfill such remaining 
                                supply.
                    ``(D) Announcement of information after auction.--
                Immediately after a market-priced auction is completed, 
                the Secretary shall publish on the Internet Web site of 
                the Centers for Medicare & Medicaid Services and in the 
                Federal Register the following:
                            ``(i) A list of eligible bidders awarded 
                        contracts under such auction.
                            ``(ii) The price determined at such auction 
                        for each product in a product category that is 
                        subject to the auction.
                    ``(E) Bid-related terms defined.--For purposes of 
                this section:
                            ``(i) The term `bid' means, with respect to 
                        a lead product in a product category that is 
                        subject to a market-priced auction under the 
                        demonstration project, an offer made at the 
                        auction by an eligible bidder to furnish a lead 
                        product in a volume specified in such bid for a 
                        particular price and time period for one or 
                        more eligible auction areas.
                            ``(ii) The term `eligible bidder' means, 
                        with respect to an auction and an eligible 
                        auction area and lead product, a supplier 
                        that--
                                    ``(I) applies to the Secretary to 
                                participate in such auction with 
                                respect to such area and lead product;
                                    ``(II) is identified by the 
                                Secretary as a supplier of a market-
                                priced item or service that is the 
                                subject of a market-priced auction in 
                                an eligible auction area;
                                    ``(III) would meet the licensure 
                                and performance guarantee requirements 
                                under section 1847(a)(1)(G) if such 
                                requirements applied for purposes of 
                                auctions conducted under the 
                                demonstration project in the same 
                                manner that they apply with respect to 
                                such section; and
                                    ``(IV) meets such other licensure, 
                                bid-bond, and other requirements as the 
                                Secretary may specify.
            ``(4) Monitoring access and quality.--
                    ``(A) In general.--The Secretary, in consultation 
                with the market monitor, shall monitor the performance 
                of eligible bidders that are awarded contracts under 
                paragraph (3)(C)(ii) and the effects of the 
                demonstration project to ensure compliance with the 
                requirements of this section, including the 
                requirements and obligations established in the auction 
                design adopted under paragraph (2)(D)(v).
                    ``(B) Provide transparency of information.--The 
                market monitor shall make publicly available the number 
                of suppliers providing market-priced items and services 
                in an eligible auction area during each year of the 
                operation of the demonstration project.
                    ``(C) Enforcement.--If the Secretary, after 
                consultation with the market monitor, determines that 
                there has been a material failure of an eligible bidder 
                that has been awarded a contract under paragraph 
                (3)(C)(ii) to comply with such requirements, the 
                Secretary, after consultation with the market monitor, 
                shall implement, consistent with subparagraph (D), 
                enforcement measures, which may include the termination 
                of a contract awarded under paragraph (3)(C)(ii).
                    ``(D) Enforcement measures.--
                            ``(i) Warning letters and opportunity for 
                        corrective action.--The Secretary shall provide 
                        for the following before terminating, pursuant 
                        to subparagraph (B), a contract awarded under 
                        paragraph (3)(C)(ii):
                                    ``(I) Warning letter.--The 
                                Secretary shall issue a formal warning 
                                letter at least 90 days before the date 
                                on which the Secretary terminates such 
                                contract. The warning letter shall 
                                describe the reason (or reasons) for 
                                the termination.
                                    ``(II) Opportunity for corrective 
                                action.--The Secretary shall provide an 
                                opportunity for the supplier to take 
                                corrective action to come into 
                                compliance with the contract and avoid 
                                termination of the contract.
                            ``(ii) Additional consequences of 
                        termination.--In the case of a termination of 
                        such a contract with an eligible bidder, the 
                        Secretary may require forfeiture of amounts 
                        submitted as a bid and performance bond 
                        pursuant to section 1847(a)(1)(G)(ii).
    ``(d) Application of Competitive Acquisition Program Provisions.--
In implementing the demonstration project 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 demonstration project, 
        subparagraph (B) of such paragraph shall be applied by 
        substituting `2 years' for `3 years'.
            ``(2) 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) of this section; and
                    ``(B) the reference in subparagraph (B)(i) of such 
                paragraph to subparagraph (A) is deemed a reference to 
                subsection (a) of this section.
            ``(4) Paragraph (7) shall not apply.
            ``(5) Paragraph (8) shall apply.
            ``(6) Paragraph (9) shall apply, except that such paragraph 
        shall be applied as if a reference to a bidding program 
        includes a reference to the demonstration project.
            ``(7) 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 demonstration 
        project.
            ``(8) Paragraph (11) shall not apply, except that--
                    ``(A) the pendency of any claim for review under 
                this section shall not delay any auction conducted 
                pursuant to this section; and
                    ``(B) there shall be no administrative or judicial 
                review of any claim to enjoin the operation of a 
                market-priced auction conducted during the first round 
                of the demonstration project.
    ``(e) Transparency Requirements for Demonstration Project.--In 
implementing the demonstration project, the Secretary shall provide for 
the publication, on an Internet Web site operated by the Secretary, of 
the following information with respect to an auction:
            ``(1) The qualifications necessary to be an eligible 
        bidder.
            ``(2) The standards developed for purposes of subsection 
        (c)(2)(B)(ii)(II).
            ``(3) The calculation of the total market capacity of an 
        eligible auction area for purposes of specifying the target 
        percentage under subsection (c)(3)(B)(iii) for eligible bidders 
        in the auction for such area.
            ``(4) The process for soliciting and accepting bids for 
        purposes of subsection (c)(3)(D)(ii).
            ``(5) For purposes of such subsection--
                    ``(A) the number of eligible bidders at the 
                auction;
                    ``(B) the number of eligible bidders at the auction 
                that were awarded a contract under such subsection at 
                the auction; and
                    ``(C) with respect to prospective bidders at the 
                auction that were determined by the Secretary not to be 
                eligible bidders--
                            ``(i) the specific reasons for such 
                        determination; and
                            ``(ii) a means and process by which such 
                        prospective bidders may appeal, or otherwise 
                        obtain a review of, such determination.
            ``(6) The calculation of and compliance with the 
        requirement of section 1847(b)(6)(D), as made applicable to the 
        demonstration project by subsection (d).
    ``(f) Reliance on Auction Expert and Market Monitor in Establishing 
and Operating Market-Pricing Demonstration Project; Advisory Committee 
Report and Monitoring.--
            ``(1) Auction expert and market monitor.--
                    ``(A) In general.--The Secretary shall, consistent 
                with subsection (a)(2)(A) and through the Office of the 
                Assistant Secretary for Planning and Evaluation, enter 
                into a contract with an individual to serve as the 
                auction expert and a contract with an individual to 
                serve as a market monitor to assist in the design, 
                development, implementation and functioning of the 
                auctions to be conducted pursuant to subsection (c). 
                Under each such contract, the auction expert and market 
                monitor shall report and be accountable to the 
                Secretary in the manner described in this section.
                    ``(B) Selection of auction expert and market 
                monitor; term; access to information.--
                            ``(i) Competitive process.--The selection 
                        of the individual to serve as the auction 
                        expert and as a market monitor under 
                        subparagraph (A) shall be undertaken through a 
                        competitive process.
                            ``(ii) Disqualifications.--An individual 
                        may not be selected as the auction expert if 
                        such individual--
                                    ``(I) is a current or former 
                                employee of the Centers for Medicare & 
                                Medicaid Services;
                                    ``(II) 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);
                                    ``(III) does not have significant 
                                experience in implementing auctions of 
                                similar complexity in Government 
                                programs; or
                                    ``(IV) does not have appropriate 
                                educational credentials.
                            ``(iii) Access to information.--The 
                        Secretary shall make available to the auction 
                        expert and the market monitor all applicable 
                        information (including confidential 
                        information) on the relevant markets throughout 
                        the duration of the demonstration project.
                            ``(iv) Term of contract.--The contract for 
                        the auction expert and for the market monitor 
                        under this paragraph shall be for a period of 6 
                        years.
            ``(2) Reports.--
                    ``(A) Semiannual reports to secretary.--The market 
                monitor shall provide to the Secretary semiannual 
                reports in the initial two years of the demonstration 
                project and annual reports in each subsequent year of 
                the demonstration project on the development and 
                operations of the demonstration project. In each 
                report, the market monitor shall--
                            ``(i) identify potential problems with the 
                        demonstration project; and
                            ``(ii) recommend solutions to potential 
                        problems so identified.
                    ``(B) Annual report.--The market monitor shall 
                submit to the Committees on Ways and Means and Energy 
                and Commerce of the House of Representatives and the 
                Committee on Finance of the Senate an annual report on 
                the operation and functioning of the demonstration 
                project. Each such report shall include information 
                on--
                            ``(i) potential problems with the project;
                            ``(ii) recommended solutions to problems 
                        identified pursuant to clause (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 demonstration project;
                            ``(v) any adverse health effects resulting 
                        from implementation of the project;
                            ``(vi) any material deterioration in the 
                        quality of items and services provided under 
                        the project;
                            ``(vii) the costs of any preventable or 
                        prolonged hospitalizations due to lack of 
                        timely access to market-priced items and 
                        services; and
                            ``(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 project.''.
    (b) Licensure Requirements and Financial Assurances Under 
Competitive Bidding.--Section 1847(a)(1) of the Social Security Act (42 
U.S.C. 1395w-3(a)(1)) is amended by adding at the end the following new 
subparagraphs:
                    ``(G) Requiring state licensure and performance 
                guarantees for bidding entities.--With respect to 
                rounds of competitions beginning under this subsection 
                on or after the date of enactment of this subparagraph, 
                the Secretary may not accept a bid from an entity for 
                an area unless, as of the deadline for bid submission--
                            ``(i) the entity meets applicable State 
                        licensure requirements for such area for all 
                        items in such bid for a product category; and
                            ``(ii) the entity has submitted a cash 
                        deposit as a bid and performance bond in an 
                        amount determined by the Secretary after 
                        consultation with the auction expert, except 
                        that the Secretary may, in the Secretary's sole 
                        discretion, accept a letter of credit from a 
                        financial institution acceptable to the 
                        Secretary in lieu of the cash deposit required 
                        to be submitted under this clause.
                    ``(H) Treatment of bid and performance bonds 
                submitted.--
                            ``(i) For successful bidders.--The 
                        Secretary shall retain as a performance 
                        guarantee the deposit submitted by a supplier 
                        that is selected at an auction conducted 
                        pursuant to subparagraph (G)(ii) and such 
                        deposit--
                                    ``(I) shall be returned to the 
                                entity within 90 days of the date of 
                                completion of the contract; or
                                    ``(II) shall be retained by the 
                                Secretary if the contract is terminated 
                                before the expiration of the contract.
                            ``(ii) Unsuccessful bidders.--If a bidding 
                        entity submits a bid that is not accepted for 
                        an area, the bid and performance deposit 
                        submitted for the entity for such area shall be 
                        returned within 90 days of the date of notice 
                        of nonacceptance.''.
    (c) Clarification About Individual Self-Adjustment for Off-the-
Shelf Orthotics.--
            (1) In general.--Section 1847(a)(2)(C) of the Social 
        Security Act (42 U.S.C. 1395w-3(a)(2)(C)) is amended--
                    (A) by inserting ``furnished to an individual'' 
                after ``section 1861(s)(9)'';
                    (B) by inserting after ``minimal self-adjustment'' 
                the following: ``by that individual (and not by another 
                person)''; and
                    (C) by striking ``to fit to the individual'' and 
                inserting ``to fit to that individual''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply to off-the-shelf orthotics (as defined in section 
        1847(a)(2)(C) of the Social Security Act (42 U.S.C. 1395w-
        3(a)(2)(C)), as amended by paragraph (1)) furnished in rounds 
        of competitive bidding under section 1847 of such Act (42 
        U.S.C. 1395w-3) initiated on or after such date, as soon as 
        practicable after the date of the enactment of this Act, as the 
        Secretary of Health and Human Services determines appropriate. 
        Such amendments only apply to the demonstration project under 
        section 1847C of such Act, as added by subsection (a), if the 
        Secretary implements competitive bidding for such off-the-shelf 
        orthotics under the competitive bidding program under such 
        section 1847.
                                 <all>
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