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[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1717 Introduced in House (IH)]

113th CONGRESS
  1st Session
                                H. R. 1717

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

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             April 24, 2013

   Mr. Price of Georgia (for himself, Mr. Larson of Connecticut, Mr. 
Thompson of Pennsylvania, Mr. Braley of Iowa, Mr. Roe of Tennessee, Mr. 
 Ryan of Ohio, Mr. Tiberi, Mr. Loebsack, Mr. Joyce, Mr. McKinley, Mrs. 
 Capito, Mr. DesJarlais, Mrs. Blackburn, Mr. Barletta, Mr. Grimm, Mr. 
Austin Scott of Georgia, Mr. Harper, Mr. Marino, Mr. Crenshaw, Mr. King 
  of New York, Mr. Johnson of Ohio, Mr. Fortenberry, Mr. Chabot, Mr. 
 Posey, Mr. Lankford, and Mr. Nunnelee) introduced the following bill; 
  which was referred to the Committee on Energy and Commerce, and in 
addition to the Committees on Ways and Means and Appropriations, for a 
 period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL

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

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare DMEPOS Market Pricing 
Program Act of 2013''.

SEC. 2. TERMINATION OF COMPETITIVE ACQUISITION PROGRAM.

    Section 1847(a)(1) of the Social Security Act (42 U.S.C. 1395w-
3(a)(1)) is amended--
            (1) in subparagraph (B), by striking ``The programs'' and 
        inserting ``Subject to subparagraph (G), the programs'';
            (2) in subparagraph (D), by striking clauses (ii) and 
        (iii); and
            (3) by adding at the end the following new subparagraph:
                    ``(G) Termination of program; transition.--
                            ``(i) No additional competition rounds.--
                        Notwithstanding subparagraph (B), the 
                        competition under this section shall end on 
                        December 31, 2013, with round 1. The Secretary 
                        shall take no further action to implement round 
                        2 of the competitive acquisition program, the 
                        national mail order competitive acquisition 
                        program, or any subsequent round of the 
                        competitive acquisition program under this 
                        section.
                            ``(ii) Contract termination.--The contracts 
                        awarded under this section before the date of 
                        the enactment of this subparagraph shall 
                        terminate on July 1, 2013, and no payment shall 
                        be made under this title after such date based 
                        on such a contract. To the extent that any 
                        damages may be applicable as a result of the 
                        termination of such contracts, such damages 
                        shall be payable from the Federal Supplementary 
                        Medical Insurance Trust Fund under section 
                        1841. Nothing in this clause shall be construed 
                        to provide an independent cause of action or 
                        right to administrative or judicial review with 
                        regard to the termination provided under this 
                        clause.''.

SEC. 3. TRANSITIONAL PAYMENT AFTER TERMINATION OF DMEPOS COMPETITIVE 
              BIDDING PROGRAM.

    (a) Transitional Payment Rules.--
            (1) Payment for durable medical equipment.--
                    (A) In general.--Section 1834(a)(1) of the Social 
                Security Act (42 U.S.C. 1395m(a)(1)) is amended--
                            (i) in subparagraph (F)(i)--
                                    (I) by inserting ``and before July 
                                1, 2013,'' after ``January 1, 2011,'';
                                    (II) by striking ``, subject to 
                                subparagraphs (G) and (H),''; and
                                    (III) by adding ``and'' at the end;
                            (ii) in subparagraph (F)(ii)--
                                    (I) by striking ``(and, in the case 
                                of covered items'' and all that follows 
                                through ``subject to clause (iii) 
                                shall)''; and
                                    (II) by striking ``; and'' at the 
                                end and inserting a period;
                            (iii) by striking clause (iii) of 
                        subparagraph (F);
                            (iv) by striking subparagraphs (G) and (H); 
                        and
                            (v) by adding at the end the following new 
                        subparagraph:
                    ``(G) Payment rates in round 1 areas during 
                transition.--
                            ``(i) In general.--In the case of covered 
                        items and services that are furnished in an 
                        area that had been designated by the Secretary 
                        as a competitive acquisition program under 
                        section 1847(a)(1)(B)(i)(I) on or after the 
                        date on which contracts for the furnishing of 
                        such covered items and services expire, the 
                        payment basis under this subsection for such 
                        items and services furnished in such area shall 
                        be the amount described in clause (ii) or 
                        (iii), as the case may be.
                            ``(ii) Payment rates in round 2 for items 
                        and services that are not diabetic testing 
                        supplies.--
                                    ``(I) In general.--In the case of 
                                covered items that were selected to be 
                                furnished in the competitive 
                                acquisition program (excluding diabetic 
                                supplies) in a competitive acquisition 
                                area selected pursuant to section 
                                1847(a)(1)(B)(i)(II) on or after July 
                                1, 2013, and before the date on which 
                                the Secretary implements the market 
                                pricing program under section 1847C, 
                                subject to subclause (II), the payment 
                                basis under this subsection for such 
                                items and services furnished in such 
                                areas shall be 95 percent of the amount 
                                established under this subsection.
                                    ``(II) Further reductions in 2014 
                                and 2015.--In the case of covered items 
                                described in subclause (I) that are 
                                furnished during 2014, the payment 
                                basis under this subsection for such 
                                items furnished in such areas shall be 
                                reduced by 10 percent from the amount 
                                described in such subclause. In the 
                                case of such items and services that 
                                are furnished in such areas on or after 
                                January 1, 2015, and before the date on 
                                which the Secretary implements the 
                                market pricing program under section 
                                1847C, the payment basis under this 
                                subsection for such items and services 
                                shall be further reduced by 10 percent 
                                after taking into account the reduction 
                                effected under the preceding sentence.
                            ``(iii) Payment rates for diabetic 
                        supplies.--
                                    ``(I) In general.--In the case of 
                                all diabetic testing supplies, mail 
                                order and non-mail order (HCPCS Codes 
                                A4233, A4234, A4235, A4236, A4253, 
                                A4256, A4258, and A4259, including the 
                                KL modifier), effective July 1, 2013, 
                                and before the date on which the 
                                Secretary implements the market pricing 
                                program under section 1847C and subject 
                                to subclause (II), the payment basis 
                                under this subsection for such supplies 
                                shall be 90 percent of the amount 
                                otherwise established under this 
                                subsection.
                                    ``(II) Further reductions in 2014 
                                and 2015.--In the case of supplies 
                                described in subclause (I) that are 
                                furnished during 2014, the payment 
                                basis under this subsection for such 
                                items furnished in such areas shall be 
                                reduced by 15 percent from the amount 
                                described in such subclause. In the 
                                case of such supplies that are 
                                furnished in such areas on or after 
                                January 1, 2015, and before the date on 
                                which the Secretary implements the 
                                market pricing program under section 
                                1847C, the payment basis under this 
                                subsection for such supplies shall be 
                                further reduced by 15 percent after 
                                taking into account the reduction 
                                effected under the preceding 
                                sentence.''.
                    (B) Conforming amendments.--Section 1842(s) of the 
                Social Security Act (42 U.S.C. 1395u(s)) is amended--
                            (i) in paragraph (3), in the matter 
                        preceding subparagraph (A), by inserting ``and 
                        that are furnished in such an area on or before 
                        July 1, 2013'' after ``section 1847(a)''; and
                            (ii) by adding at the end the following new 
                        paragraph:
    ``(4)(A)(i) In the case of items and services described in 
paragraph (2)(D) that are furnished in an area that had been designated 
by the Secretary as a competitive acquisition area under section 
1847(a)(1)(B)(i)(I) on or after the date on which contracts for the 
furnishing of such covered items and services expire, the payment basis 
under this subsection for such items and services furnished in such 
area shall be the amounts described in clause (ii).
    ``(ii)(I) In the case of items and services described in paragraph 
(2)(D) that were selected to be furnished in the competitive 
acquisition program in a competitive acquisition area selected pursuant 
to section 1847(a)(1)(B)(i)(II) on or after July 1, 2013, and before 
the date on which the Secretary implements the market pricing program 
under section 1847C, subject to subclause (II), the payment basis under 
this subsection for such items and services furnished in such areas 
shall be 95 percent of the amount otherwise established under this 
subsection.
    ``(II) In the case of covered items and services described in 
subclause (I) that are furnished during 2014, the payment basis under 
this subsection for such items and services furnished in such areas 
shall be reduced by 10 percent from the amount described in such 
subclause. In the case of such items and services that are furnished in 
such areas on or after January 1, 2015, and before the date on which 
the Secretary implements the market pricing program under section 
1847C, the payment basis under this subsection for such supplies shall 
be further reduced by 10 percent after taking into account the 
reduction effected under the preceding sentence.
    ``(B)(i) In the case of items and services described in paragraph 
(2)(D) that are included in the market pricing program under section 
1847C, the payment basis under this subsection for such items and 
services furnished in such area shall be the payment basis determined 
under such competitive acquisition program.
    ``(ii) The Secretary may use information on the payment determined 
under such market pricing program to adjust the payment amount 
otherwise applicable under clause (i) for an area that is not a market 
pricing area under section 1847C, and in the case of such adjustment, 
paragraphs (8) and (9) of subsection (b) shall not be applied.''.
            (2) Treatment of suppliers in competitive acquisition 
        program areas.--Section 1847(b)(4) of the Social Security Act 
        (42 U.S.C. 1395w-3(b)(4)) is amended--
                    (A) in subparagraph (A)--
                            (i) in the first sentence, by striking 
                        ``The Secretary may limit'' and inserting 
                        ``Until December 31, 2013, the Secretary may 
                        limit''; and
                            (ii) by inserting after the first sentence 
                        the following: ``The preceding sentence shall 
                        not apply to items and services furnished in an 
                        eligible auction area (within the meaning of 
                        subsection (a)(4) of section 1847C) on or after 
                        the date of the implementation of the market 
                        pricing program under such section.''; and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(C) Non-contracted suppliers in market pricing 
                program.--The Secretary also shall award contracts to 
                any supplier that meets eligibility requirements under 
                this title for the furnishing of such items and 
                services so long as the supplier accepts the price 
                established under such program as payment in full for 
                such items and services.''.
            (3) Payment for off-the-shelf orthotics.--Section 
        1834(h)(1) of the Social Security Act (42 U.S.C. 1395m(h)(1)) 
        is amended by adding at the end the following new subparagraph:
                    ``(I) Application of market pricing program; 
                limitation of inherent reasonableness authority.--In 
                the case of orthotics described in subsection (b)(1)(K) 
                of section 1847C furnished on or after January 1, 2014, 
                in an eligible auction area, that are included in a 
                market pricing program under such section--
                            ``(i) the payment basis under this 
                        subsection for such orthotics furnished in such 
                        area shall be the payment basis determined 
                        under such market pricing program; and
                            ``(ii) the Secretary may use information on 
                        the payment determined under such market 
                        pricing program to adjust the payment amount 
                        otherwise recognized under subparagraph (B)(ii) 
                        for an area that is not an eligible auction 
                        area under section 1847C, and in the case of 
                        such adjustment, paragraphs (8) and (9) of 
                        section 1842(b) shall not be applied.''.
    (b) Policy After Implementation of the Market Pricing Program.--
            (1) In general.--Section 1834(a)(1) of the Social Security 
        Act (42 U.S.C. 1395m(a)(1)), as amended by subsection 
        (a)(1)(B), is amended by adding at the end the following new 
        subparagraph:
                    ``(H) Application of market pricing program; 
                limitation of inherent reasonableness authority.--
                            ``(i) In general.--In the case of market 
                        priced items and services described in section 
                        1847C(b)(1) furnished on or after the date of 
                        implementation of a market pricing program for 
                        which a price has been established under the 
                        program conducted in an eligible auction area 
                        under section 1847C, the payment basis under 
                        this subsection--
                                    ``(I) in the eligible auction area 
                                shall be the amount determined under 
                                the auction conducted in such eligible 
                                auction area for such items and 
                                services; or
                                    ``(II) in another eligible auction 
                                area shall be the amount determined 
                                under subclause (I) adjusted by the 
                                appropriate factor described in section 
                                1847C(d)(7)(B)(iv).
                            ``(ii) No adjustment in payment amount 
                        during initial two-year period of pricing 
                        program.--During the term of any contract 
                        awarded pursuant to section 1847C(d)(6) for an 
                        item and service described in clause (i), the 
                        Secretary may not adjust the payment basis 
                        established under such clause to take into 
                        account the effects of a later-conducted 
                        auction during that two-year contract period. 
                        The Secretary may, at the termination of a 
                        contract awarded under section 1847C(d)(6) for 
                        such an item or service, adjust such payment 
                        basis to take into account the effects of a 
                        later-conducted auction.
                            ``(iii) Market pricing in rural and non-
                        competitive areas.--The Secretary, after 
                        consultation with the auction expert under 
                        section 1847C, may (and, in the case of covered 
                        items furnished on or after January 1, 2016, 
                        shall) use information on the payment 
                        determined under such market pricing program to 
                        adjust the payment amount otherwise recognized 
                        under subparagraph (B)(ii) for an area in which 
                        an auction has not been conducted pursuant to 
                        section 1847C(a).
                            ``(iv) Continued use of additional 
                        information.--In the case of covered items 
                        furnished on or after January 1, 2016, the 
                        Secretary shall continue to make such 
                        adjustments described in clause (ii) as, under 
                        such market pricing program, additional covered 
                        items are phased in or information is updated 
                        as contracts are renewed under such program.''.
            (2) Regulatory authority.--Section 1834(a)(1)(G) of the 
        Social Security Act (42 U.S.C. 1395w-3(a)(1)(G)) is amended--
                    (A) in the subparagraph heading, by inserting ``or 
                market pricing'' before ``rates'';
                    (B) by striking ``subparagraph (F)(ii)'' and 
                inserting ``subparagraph (F)(ii), subparagraph 
                (H)(iii),''; and
                    (C) by inserting ``or eligible auction areas in 
                which an auction has been conducted, after June 30, 
                2013,'' after ``competitive acquisition areas''.

SEC. 4. ESTABLISHMENT OF DMEPOS MARKET PRICING PROGRAM.

    (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

    ``Sec. 1847C.  (a) Establishment.--
            ``(1) In general.--The Secretary shall establish and 
        implement a market pricing program (in this section referred to 
        as `market pricing program') under which auctions are conducted 
        in eligible auction areas (as defined in paragraph (4)) 
        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.
            ``(2) Roles of auction expert and market monitor.--The 
        elements of the market pricing program, including eligible 
        auction areas, auction design, establishing of clearing prices, 
        and conduct of auctions, shall be established and operated in 
        consultation with, and after input and review by, the auction 
        expert and the market monitor under subsection (g). In this 
        section, the terms `auction expert' and `market monitor' refer 
        to the respective auction expert and market monitor contracted 
        with under subsection (g)(1).
            ``(3) Implementation.--The market pricing program shall be 
        implemented in all eligible auction areas so that market 
        pricing occurs nationwide in the first year of implementation 
        consistent with the following:
                    ``(A) First year of implementation.--In the first 
                year of implementation--
                            ``(i) auctions under the program shall be 
                        held in at least 20 percent of eligible auction 
                        areas;
                            ``(ii) prices in these areas will be set by 
                        such auctions;
                            ``(iii) in each eligible auction area 2 
                        categories of items shall be selected for 
                        auction;
                            ``(iv) prices for categories not selected 
                        for auction in the area shall be set by 
                        reference to auctions held for those categories 
                        in econometrically similar areas; and
                            ``(v) in those areas in which no auctions 
                        are held, prices for all categories will be set 
                        by reference to auctions held for those 
                        categories in econometrically similar areas.
                    ``(B) Second year of implementation.--In the second 
                year of implementation--
                            ``(i) auctions shall be held in other 
                        eligible auction areas that include 10 percent 
                        of eligible auction areas; and
                            ``(ii) prices in those areas in which no 
                        auctions are held or for categories in which an 
                        auction is not held, shall be set in the same 
                        manner as under subparagraph (A).
                    ``(C) Subsequent years.--In each subsequent year of 
                implementation--
                            ``(i) auctions shall be held in an 
                        additional 10 percent of eligible auction 
                        areas, selected by the Secretary annually on an 
                        ongoing and rotating basis, until all eligible 
                        auction areas have been covered; and
                            ``(ii) prices in those areas in which no 
                        auctions are held or for categories in which an 
                        auction is not held, shall be set in the same 
                        manner as under subparagraph (A).
                    ``(D) Once the market pricing program is applied 
                throughout the United States under subparagraph (C), 
                the Secretary shall conduct auctions for different 
                eligible auction areas throughout the United States on 
                an ongoing and rotating basis covering 10 percent of 
                eligible auction areas no later than March for each 
                subsequent year.
                    ``(E) The requirements of this section shall apply 
                to each subsequent round of market-priced auctions in 
                the same manner that such requirements apply to the 
                initial market-priced auction.
            ``(4) Eligible auction areas.--
                    ``(A) In general.--In this section and section 
                1834, the term `eligible auction areas' means counties, 
                aggregations of counties, or parts of counties, not 
                excluded under subparagraph (D), as established by the 
                Secretary.
                    ``(B) Market areas must reflect economic 
                interdependency.--In determining and selecting eligible 
                auction areas, the Secretary shall choose, from among 
                counties, aggregations of counties, or parts of 
                counties, auction areas that form an economically 
                interdependent area reflecting standard econometric 
                market models. Nothing in this subparagraph shall 
                preclude the Secretary from subdividing a large county 
                to take into account population and geographic size in 
                establishing auction areas in order to comply with this 
                subparagraph.
                    ``(C) Selection of auction areas.--In selecting 
                auction areas in which an auction will be conducted 
                under this section, the Secretary shall ensure that 
                several auction areas of each econometric model are 
                chosen.
                    ``(D) Exclusion of certain auction areas.--The 
                Secretary shall not subject areas described in clause 
                (iii) of section 1847(a)(1)(D) to market program 
                reimbursement rates before the year specified in such 
                clause.
            ``(5) Application of certain policies applicable to 
        competitive acquisition programs.--The following provisions of 
        subsection (a)(1) of section 1847 shall apply to the market 
        pricing program in the same manner as they 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 market 
                pricing program and may continue in subsequent years of 
                the program.
                    ``(C) Subparagraph (F) (relating to feedback on 
                missing financial documentation), except that any 
                reference to a round of a program is deemed a reference 
                to a year of the market pricing program.
    ``(b) Market Priced Items and Services Defined.--
            ``(1) In general.--In this section, subject to paragraph 
        (2), the term `market priced items and services' means the 
        following:
                    ``(A) Oxygen supplies and equipment.
                    ``(B) Standard power wheelchairs, power scooters, 
                and related accessories.
                    ``(C) Manual wheelchairs.
                    ``(D) Enteral nutrients, equipment, and supplies.
                    ``(E) Continuous positive airway pressure devices, 
                respiratory assistive devices, and related supplies.
                    ``(F) Hospital beds and related accessories.
                    ``(G) Walkers and related accessories.
                    ``(H) Support services (Group 2 mattresses and 
                overlays).
                    ``(I) Negative pressure wound therapy pumps and 
                related supplies and accessories.
                    ``(J) Diabetic supplies.
                    ``(K) Off-the-shelf orthotics described in section 
                1847(a)(2)(C) furnished on or after July 1, 2013.
                    ``(L) External infusion pumps and supplies.
                    ``(M) 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).
            ``(2) Excluded items.--Such term does not include the 
        following:
                    ``(A) An adjustable skin protection cushion used in 
                connection with a wheelchair.
                    ``(B) A complex rehabilitative power wheelchair and 
                related accessories.
                    ``(C) A manual wheelchair billed using current 
                HCPCS Codes K0005 or E1161, and related accessories for 
                such a wheelchair.
                    ``(D) A medical device classified in class III 
                under the Federal Food, Drug, and Cosmetic Act.
    ``(c) Market Pricing Program Requirements.--
            ``(1) In general.--The Secretary shall establish an auction 
        design through the process described in paragraph (2), that 
        meets the requirements of paragraph (3), and shall ensure that 
        the first auction will be conducted for all eligible auction 
        areas no later than 14 months after the date of entering into 
        the contract with the auction expert under subsection (g)(1).
            ``(2) Auction process; input of stakeholders; design.--
                    ``(A) Transparent process required.--
                            ``(i) In general.--In establishing such 
                        auction design, the Secretary shall utilize an 
                        open and transparent process that involves all 
                        relevant stakeholders (as defined in clause 
                        (ii)) in the market, including through the 
                        auction plan conference and other outreach 
                        efforts.
                            ``(ii) Relevant stakeholders.--For purposes 
                        of clause (i), the term `relevant stakeholders' 
                        means suppliers and manufacturers of market 
                        priced items and services (and trade 
                        associations representing such suppliers and 
                        manufacturers), physicians, and individuals 
                        entitled to benefits under this title (and 
                        representatives of such individuals).
                    ``(B) Draft auction design.--Not later than 2 
                months after the date the auction expert first begins 
                service under subsection (g)(1), the auction expert 
                shall develop a draft auction design that shall propose 
                auction areas nationwide, lead products for each 
                product category, and the price index associated with 
                each lead product, and proposed rules for the conduct 
                of auctions.
                    ``(C) Design conference.--
                            ``(i) In general.--Not later than 4 months 
                        after the date the auction expert first begins 
                        service under subsection (g)(1), the Secretary 
                        shall convene a design conference (in this 
                        paragraph referred to as the `design 
                        conference') for the auction process under this 
                        section. The auction expert shall chair the 
                        conference.
                            ``(ii) Participants.--The participants at 
                        the design conference shall include at least 
                        the following:
                                    ``(I) Manufacturers and suppliers 
                                of dmepos.--Representatives of market 
                                priced items and services.
                                    ``(II) Beneficiaries.--
                                Representatives of individuals entitled 
                                to benefits under this part.
                                    ``(III) CMS.--The Administrator of 
                                the Centers for Medicare & Medicaid 
                                Services and other appropriate Federal 
                                personnel.
                                    ``(IV) Program advisory and 
                                oversight committee.--The members of 
                                the committee referred to in paragraph 
                                (3).
                            ``(iii) Purpose of conference.--The purpose 
                        of the design conference shall be to review the 
                        auction design developed by the auction expert 
                        under subparagraph (B) for the establishment of 
                        an efficient auction consistent with best 
                        practices and actuarial science.
                            ``(iv) Elements of conference.--With 
                        respect to the design conference--
                                    ``(I) the auction expert shall 
                                provide a demonstration of the 
                                preliminary auction design;
                                    ``(II) the auction expert shall 
                                lead a mock auction based upon such 
                                design in which the attendees will 
                                participate and offer comments and 
                                suggestions for improvement;
                                    ``(III) the auction expert may 
                                establish working committees on major 
                                issues; and
                                    ``(IV) the design conference shall 
                                be recorded and made available over the 
                                Internet through simultaneous Web cast 
                                or otherwise.
                    ``(D) Recommendations.--
                            ``(i) Working committees.--Not later than 2 
                        months after the last day of the design 
                        conference, each working committee established 
                        under subparagraph (C)(iv)(III) shall submit to 
                        the auction expert the committee's 
                        recommendations on the final design for 
                        auctions under this section.
                            ``(ii) Final design recommendation.--Not 
                        later than 3 months after the last day of the 
                        design conference, the auction expert shall 
                        submit to the Secretary final recommendations 
                        on the auction design for approval for 
                        expedited rulemaking. In this clause, the term 
                        `expedited rulemaking process' means a process 
                        of publication of the proposed auction design 
                        and solicitation of public comments on such 
                        design. The provisions of section 1871(b)(1) 
                        shall not apply to such process.
            ``(3) Requirements.--In establishing the auction design, 
        the Secretary shall ensure that rates of payment developed 
        through the auction process--
                    ``(A) are market-based and based on binding bids 
                and clearing prices; and
                    ``(B) do not result in a diminution of access to or 
                quality of items of market priced items and services in 
                the applicable market areas.
    ``(d) Conduct of Auction.--
            ``(1) Initial auction.--No later than 14 months after the 
        date a contract is first entered into with an auction expert 
        under subsection (g), the Secretary shall conduct auctions 
        (each in this section referred to as a `market-priced auction') 
        among entities supplying market priced items and services in 
        eligible auction areas that are selected in the auction design 
        and consistent with subsection (a)(3). Each auction shall 
        conclude no later than 2 months after its commencement. Market-
        based auctions shall be conducted in accordance with an auction 
        design developed under subsection (c).
            ``(2) Items and services subject to auction.--
                    ``(A) In general.--In each eligible auction area in 
                which a market-priced auction is conducted, the 
                Secretary shall select to be subject to auction a 
                combination of 2 categories of items and services from 
                among the market priced items and services.
                    ``(B) All listed items and services to be subject 
                to auction.--The Secretary shall ensure in the market-
                priced auction that each lead product that is 
                identified under paragraph (4) from among each market 
                priced item and service is subject to auction among all 
                eligible auction areas. The Secretary shall ensure that 
                each product category is auctioned in at least a 
                sufficient number of eligible auction areas to produce 
                a sample of bids based on the percentages set forth in 
                subsection (a)(3).
            ``(3) Requirements to submit bid in auction.--
                    ``(A) Submission of bids.--Any supplier that 
                complies with the requirements of subparagraph (B) and 
                that is identified by the Secretary pursuant to 
                paragraph (5)(C) as a supplier of a market priced item 
                or service that is the subject of a market-priced 
                auction in an eligible auction area may submit a bid at 
                such auction.
                    ``(B) Financial assurances.--
                            ``(i) In general.--In order to be eligible 
                        to participate in a market-priced auction, a 
                        supplier must submit a cash deposit in an 
                        amount determined by the Secretary.
                            ``(ii) Letter of credit in lieu of cash 
                        deposit.--The Secretary may, in the Secretary's 
                        sole discretion, accept a letter of credit from 
                        a financial institution acceptable to the 
                        Secretary instead of the cash deposit otherwise 
                        required under clause (i).
                    ``(C) Treatment of deposits submitted by 
                suppliers.--
                            ``(i) Successful bidders.--The Secretary 
                        shall retain as a performance guarantee the 
                        deposit submitted under subparagraph (B)(i) of 
                        a supplier that has submitted a winning bid at 
                        a market-priced auction.
                            ``(ii) Unsuccessful bids.--If a supplier 
                        submits a bid that is not accepted at the 
                        auction, any such deposit shall be returned to 
                        the supplier.
                            ``(iii) Deposit return requirements for 
                        partially successful suppliers.--If a supplier 
                        submits a bid that is accepted at the auction, 
                        but the supplier is not awarded a contract for 
                        the full amount of the bid, the Secretary shall 
                        provide for a proportionate return of any such 
                        deposit.
            ``(4) Lead product selection for establishing clearing 
        prices.--
                    ``(A) In general.--For each product category of 
                items and services specified in subsection (b)(1) that 
                is the subject of a market-priced auction, the 
                Secretary shall establish a lead product. Such lead 
                product shall be selected based upon the price and 
                utilization of the product under this part.
                    ``(B) Lead product clearing price establishes 
                clearing price for other products.--
                            ``(i) Lead product as reference point for 
                        other products.--The lead product selected 
                        under subparagraph (A) shall be used as a 
                        reference point for all other products 
                        (categorized by the healthcare common procedure 
                        coding system code) in the same category as the 
                        lead product. Such lead product shall be 
                        assigned a weight of 100 percent.
                            ``(ii) Additional products in each product 
                        category.--Every other product in the same 
                        product category as the lead product identified 
                        under subparagraph (A) shall be assigned based 
                        upon each auction a weight expressed as a 
                        percentage of the lead product, which 
                        percentage of the clearing price, established 
                        by the auction expert in the plan design and 
                        adjusted after input from providers at the 
                        design plan conference, establishes the price 
                        of each item and service in the category.
                            ``(iii) Establishing clearing price for 
                        items and services.--The Secretary shall 
                        establish the clearing price for each market 
                        priced item and service that is subject to the 
                        auction based upon the data submitted under 
                        this subparagraph. Such clearing price shall be 
                        equal to the highest cost bid that will meet 
                        capacity targets in the eligible auction area 
                        for such item and service.
            ``(5) Conduct of auction.--
                    ``(A) In general.--The Secretary shall conduct the 
                market-priced auctions consistent with the provisions 
                of this paragraph.
                    ``(B) 3 months before auction date.--Approximately 
                3 months before the scheduled auction date, the 
                Secretary shall detail auction rules that are 
                consistent with the auction plan developed under this 
                section. These rules shall include the following:
                            ``(i) Financial and other qualification 
                        requirements for bidders.
                            ``(ii) Algorithms for determining winners 
                        and prices as a function of bids.
                            ``(iii) Performance obligations of contract 
                        suppliers, guarantees, and penalties for non-
                        conformance.
                            ``(iv) The product categories to be 
                        selected (and their related healthcare common 
                        procedure coding system codes) from within the 
                        market priced items and services.
                            ``(v) The lead product for each product 
                        category selected under paragraph (4)(A) and 
                        the price grid for such category.
                            ``(vi) The eligible auction areas 
                        nationwide (and areas identified as having the 
                        same econometric model) and those eligible 
                        auction areas in which a market-priced auction 
                        will be conducted each year.
                    ``(C) 30 days before auction date.--Thirty days 
                before a scheduled auction date, the Secretary shall 
                review all applicants and identify the qualified 
                suppliers eligible to submit bids. In carrying out this 
                subparagraph, the Secretary shall specify the 
                following:
                            ``(i) The historic capacity for each 
                        eligible bidder for each category that will be 
                        subject to the auction.
                            ``(ii) Bidder eligibility by eligible 
                        auction area.
                            ``(iii) For each auction area, the lead 
                        product established under paragraph (4)(A).
                            ``(iv) The price index (described in 
                        subsection (c)(2)(B)) in each auction area.
                    ``(D) Bidders conference.--Prior to conducting each 
                such auction, the auction expert shall conduct a 
                conference of prospective bidders in eligible auction 
                areas in which an auction will be conducted.
                    ``(E) During auction.--During the conduct of the 
                auction, the Secretary shall announce the following:
                            ``(i) The time of the end of the round of 
                        auctioning.
                            ``(ii) The history of prior rounds 
                        including the aggregate supply at the end of 
                        the round price for each product category by 
                        round.
                    ``(F) Immediately after each auction round.--Not 
                later than 15 minutes after the end of each auction, 
                the Secretary shall announce the following:
                            ``(i) The aggregate supply for each item 
                        and service that is the subject of the auction 
                        at the price established during the auction.
                            ``(ii) For each supplier that has 
                        participated in the auction, its own supply for 
                        all prices (from the initial starting price to 
                        the end of round price) for each item and 
                        service that is the subject of the auction.
                            ``(iii) Revised schedule of rounds for the 
                        next bidding day.
                    ``(G) At conclusion of final auction round.--Not 
                later than 15 minutes after the end of the final 
                auction round, the Secretary shall announce the 
                following:
                            ``(i) A list of winning suppliers.
                            ``(ii) The market clearing price for each 
                        item and service that is the subject of the 
                        auction.
                    ``(H) Final actions.--Not later than 30 days after 
                the end of the final auction round, the Secretary shall 
                adjust the performance guarantees received from each 
                bidder to reflect the outcome of the auction in 
                accordance with paragraph (3)(B).
            ``(6) Conditions of awarding contract.--
                    ``(A) In general.--The Secretary shall award a 
                contract to any entity in an eligible auction area in 
                which an auction is conducted and whose bid submitted 
                pursuant to paragraph (3)(A) is at or below the 
                clearing price established pursuant to paragraph 
                (4)(G)(ii).
                    ``(B) Terms of contract.--
                            ``(i) Mandatory acceptance of contract.--A 
                        supplier that submits a bid at or below such 
                        clearing price shall be treated as having 
                        agreed to and accept the contract awarded 
                        pursuant to subparagraph (A).
                            ``(ii) Contract terms.--A contract awarded 
                        pursuant to subparagraph (A) shall be valid for 
                        2 years.
                            ``(iii) No requirement to supply up to bid 
                        amount.--Nothing in this subsection shall 
                        require a supplier that is awarded a contract 
                        pursuant to subparagraph (A) to supply a marked 
                        priced item or service that is the subject of 
                        an auction in the eligible auction area beyond 
                        the level of demand for such item or service in 
                        the eligible auction area, even if such level 
                        is below the level that the supplier assumed in 
                        its bid.
                    ``(C) Ensuring adequate selection of contractors.--
                The Secretary may not award a contract to any entity 
                under the auction to furnish such items or services 
                unless the Secretary finds that the conditions 
                described in section 1847(b)(2)(A) apply with respect 
                to an entity receiving a contract under this paragraph.
                    ``(D) Sufficient capacity.--
                            ``(i) In general.--The Secretary shall 
                        identify the capacity of each supplier that 
                        applies to participate in an auction under this 
                        section. A supplier's capacity shall be based 
                        upon the capacity of the supplier in the 
                        preceding year in the auction area.
                            ``(ii) New suppliers.--Each bidding 
                        supplier that has no historic capacity in the 
                        auction area shall be assigned a base capacity 
                        for each produce category made available under 
                        the auction of 1 percent of the total dollar 
                        value of that item or service made available in 
                        the eligible auction area.
            ``(7) Payment amount shall equal auction clearing price.--
                    ``(A) In general.--With respect to market priced 
                items or services that are provided in an eligible 
                auction area in which--
                            ``(i) a market-priced auction is conducted, 
                        the auction price determined at such auction 
                        for such item in such eligible auction area; or
                            ``(ii) such an auction is not conducted, 
                        the auction price determined at an auction for 
                        those items that is conducted in another 
                        eligible auction area, as adjusted by the 
                        factor described in subparagraph (B)(iv), if 
                        appropriate,
                shall constitute the payment amount under section 
                1834(a)(1)(H)(i)(I) or section 1842(s), as the case may 
                be.
                    ``(B) Supplying items or services.--
                            ``(i) In general.--No entity other than a 
                        supplier of a market priced item or service 
                        that is the subject of a market-priced auction 
                        in an eligible auction area and that is a 
                        winning bidder in that eligible auction area 
                        shall be eligible to receive a contract under 
                        paragraph (6)(A) in such auction area.
                            ``(ii) Supplying items in economically 
                        equivalent markets.--A supplier of a market 
                        priced item or service that is not a winning 
                        bidder in the eligible auction area described 
                        in clause (i) shall, subject to clauses (iii) 
                        and (iv), be eligible to supply any other 
                        market priced item or service that was not the 
                        subject of an auction in that eligible auction 
                        area but that was the subject of a market-
                        priced auction in another econometrically 
                        similar eligible auction area (as determined by 
                        the Secretary).
                            ``(iii) Supplier must accept auction 
                        price.--Clause (ii) shall only apply to a 
                        supplier that agrees to accept the price 
                        determined at an auction in another eligible 
                        auction area for a market priced item or 
                        service.
                            ``(iv) Appropriate adjustments.--The 
                        Secretary shall develop an adjustment factor to 
                        reflect economic differences between the 
                        auction area that was the subject of the 
                        market-priced auction for the item or service 
                        and the auction area in which the supplier is 
                        located. The Secretary shall use such 
                        adjustment factor to adjust the payment amount 
                        made to a supplier pursuant to clause (iii). 
                        The Secretary, auction expert, and market 
                        monitor shall consult with relevant 
                        stakeholders in developing such factors.
            ``(8) Monitor access and quality.--
                    ``(A) In general.--The Secretary shall monitor the 
                performance of suppliers that are awarded a contract 
                pursuant to paragraph (6) to ensure compliance with the 
                requirements of this subsection, including the 
                requirements and obligations established by the auction 
                expert under paragraph (5)(B).
                    ``(B) Enforcement.--If the Secretary, after 
                consultation with the market monitor, determines that 
                there has been a material failure of a supplier that 
                has been awarded a contract pursuant to paragraph (6) 
                to comply with such requirements, the Secretary, after 
                consultation with the market monitor, shall implement 
                enforcement measures. Such enforcement measures may 
                include the following:
                            ``(i) A formal warning letter.
                            ``(ii) Forfeiture of amounts submitted as a 
                        performance deposit pursuant to subsection 
                        (d)(3)(B).
                            ``(iii) Termination of a contract awarded 
                        under paragraph (6).
                            ``(iv) Termination of the supplier's 
                        agreement to participate in the program under 
                        this title for up to 2 years.
    ``(e) Application of Competitive Acquisition Program Provisions.--
In implementing the market pricing program under this section, the 
provisions of section 1847(b) shall be applied as follows:
            ``(1) Paragraph (3) shall apply, except that, for purposes 
        of contracts awarded under the market pricing program, 
        subparagraph (B) of such paragraph shall be applied by 
        substituting `2 years' for `3 years'.
            ``(2) Subject to subsection (d)(7)(B), paragraph (4) shall 
        apply.
            ``(3) Paragraph (5) shall apply, except that--
                    ``(A) the reference in subparagraph (A) of such 
                paragraph to subsection (a)(2) is deemed a reference to 
                subsection (b)(1) of this section; and
                    ``(B) the reference in subparagraph (B)(i) of such 
                paragraph to subparagraph (A) is deemed a reference to 
                subsection (d)(4) of this section.
            ``(4) Paragraph (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 market pricing program.
            ``(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 market pricing 
        program.
            ``(8) Paragraph (11) shall not apply, except that--
                    ``(A) the pendency of any claim for review under 
                this section shall not delay any auction round 
                conducted pursuant to subsection (a)(3) or (d)(1); and
                    ``(B) there shall be no administrative or judicial 
                review of any claim to enjoin the operation of a 
                market-priced auction conducted.
    ``(f) Transparency Requirements for Market Pricing Program.--In 
implementing the market pricing program, the Secretary shall provide 
for publication, on an Internet Web site operated by the Secretary, of 
the following information:
            ``(1) The qualifications necessary to submit a bid pursuant 
        to subsection (d)(3).
            ``(2) The financial requirements that are applicable for 
        purposes of subsection (d)(3)(B).
            ``(3) The quality standards and the performance standards 
        developed pursuant to subsection (c)(3)(B).
            ``(4) The calculation of the total market capacity of an 
        eligible auction area for purposes of subsection (d)(5)(C)(i).
            ``(5) The methodology developed for an adjustment factor 
        applied pursuant to subsection (d)(7)(B)(iv).
            ``(6) The process for soliciting and accepting bids for 
        purposes of paragraphs (3) and (5) of subsection (d).
            ``(7) For purposes of subsection (d)(5)--
                    ``(A) the number of bidders at the auction;
                    ``(B) the number of winning and losing bidders at 
                the auction; and
                    ``(C) with respect to rejected bidders, the 
                specific reasons for rejections of any bid, and, with 
                respect to any such rejection, a means of ensuring the 
                availability of the process of review or appeal to a 
                rejected bidder.
            ``(8) The calculation of and compliance with the 
        requirement of section 1847(b)(6)(D), as made applicable to the 
        market pricing program by subsection (e).
    ``(g) Reliance on Auction Expert and Market Monitor in Establishing 
and Operating Market Pricing Program; Advisory Committee Report and 
Monitoring.--
            ``(1) Auction expert and market monitor.--
                    ``(A) In general.--The Secretary shall, not later 
                than 3 months after the date of the enactment of this 
                section, through the Office of the Assistant Secretary 
                for Planning and Evaluation, enter into a contract with 
                an individual to serve as the auction expert and such a 
                contract to serve as a market monitor to assist in the 
                design, development, implementation and functioning of 
                the auction to be conducted pursuant to subsection (b). 
                The auction expert and market monitor shall report and 
                be accountable to the Secretary.
                    ``(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; and
                                    ``(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 market pricing program.
                            ``(iv) Term of contract.--The contract for 
                        the auction expert and for the market monitor 
                        under this paragraph shall be for a period of 4 
                        years.
            ``(2) Functions of auction expert.--The auction expert 
        shall conduct the activities as described in this section, 
        including--
                    ``(A) development of a draft auction design and 
                design conference under subparagraphs (B) and (C) of 
                subsection (c)(2);
                    ``(B) conducting bidders conferences under 
                subsection (d)(5)(D); and
                    ``(C) lead the auction, contracting, and other 
                aspects of implementing the market pricing program with 
                the advice of the market monitor.
            ``(3) Functions of market monitor.--
                    ``(A) Participate in design conference.--The market 
                monitor shall participate in the design conference 
                under subsection (c)(2)(C) and, at the conference, 
                provide a presentation on the responsibilities of the 
                market monitor throughout the year and common on key 
                aspects of the design and their purpose.
                    ``(B) Review of final design.--The market monitor 
                shall review the final auction design recommendations 
                submitted under subsection (c)(2)(D) and, within one 
                month of the release of such recommendations, provide 
                public comment on them.
                    ``(C) Monitoring.--
                            ``(i) In general.--The market monitor shall 
                        provide ongoing monitoring of the performance 
                        of suppliers and the effects of the market 
                        pricing program to guard against the occurrence 
                        of any negative effects specified in subsection 
                        (d)(8).
                            ``(ii) Provide transparency of 
                        information.--The monitoring under clause (i) 
                        shall include public availability of the number 
                        of suppliers providing market priced items and 
                        services in an eligible auction area during 
                        each year of the operation of the market 
                        pricing program.
                    ``(D) Biannual reports to secretary.--The market 
                monitor shall provide biannual reports to the Secretary 
                in the initial two years and annually thereafter on the 
                development and operations of the market pricing 
                program. In each report, the monitor shall--
                            ``(i) identify potential problems with the 
                        program; and
                            ``(ii) recommend solutions to problems so 
                        identified.
                    ``(E) Annual report.--The market monitor shall 
                provide an annual report to Congress on the operation 
                and functioning of the market pricing program. Each 
                such report shall include information on--
                            ``(i) potential problems with the program;
                            ``(ii) recommended solutions to problems 
                        identified pursuant to subclause (I);
                            ``(iii) the appropriateness of HCPCS codes 
                        selected for auctions;
                            ``(iv) an evaluation on the ability of 
                        individuals eligible for benefits under this 
                        part to obtain items and services subject to 
                        the market pricing program;
                            ``(v) any adverse health effects resulting 
                        from implementation of the program;
                            ``(vi) any material deterioration in the 
                        quality of items and services provided under 
                        the program;
                            ``(vii) the costs of any preventable 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 program.''.

SEC. 5. APPLICATION OF EXISTING PROVISIONS.

    (a) Revisions to Program Advisory and Oversight Committee.--Section 
1847(c) of the Social Security Act (42 U.S.C. 1395w-3(c)) is amended--
            (1) in paragraph (1), by adding at the end the following: 
        ``The Secretary shall reconstitute the Committee and extend the 
        terms of its members.'';
            (2) in paragraph (3), by adding at the end the following 
        new subparagraph:
                    ``(C) Additional report to congress.--Not later 
                than 1 year after the date of the appointment of the 
                auction expert under section 1847C(g)(1), the Committee 
                shall submit to the Congress a report on the market 
                pricing program established under section 1847C. The 
                report shall include information on the design of the 
                market pricing program, access to and quality of market 
                priced items and services by beneficiaries under the 
                program.'';
            (3) by striking paragraph (4) (relating to FACA); and
            (4) in paragraph (5), by inserting before the period at the 
        end the following: ``, except that the reconstituted Committee 
        shall terminate 2 years after the date of the appointment of 
        the auction expert and the market monitor under section 
        1847C(g)(1)''.
    (b) Negative Pressure Wound Therapy Standards.--The Secretary of 
Health and Human Services, in consultation with relevant stakeholders 
(as defined in section 1847C(c)(2)(A)(ii) of the Social Security Act, 
as added by section 4), shall develop standards for coverage and 
quality of negative pressure wound therapy items and services (within 
the meaning of section 1847(a)(1)(D)(i)(IV) of such Act, 42 U.S.C. 
1395w-3(a)(1)(D)(i)(IV)).

SEC. 6. ADDITIONAL BUDGETARY OFFSET.

    (a) In General.--In addition to the payment reductions specified in 
the amendments made by section 3(a)(1), unobligated balances of all 
discretionary appropriations for each fiscal year (beginning with 
fiscal year 2013) are hereby rescinded in an amount equal to the amount 
necessary to make this Act budget neutral for such fiscal year.
    (b) Implementation.--The Director of the Office of Management and 
Budget shall determine and identify each account, program, project, and 
activity to which the rescission under subsection (a) shall apply and 
the amount of such rescission that shall apply to each such account, 
program, project and activity. Not later than 60 days after the date of 
the enactment of this Act, the Director of the Office of Management and 
Budget shall submit a report to the Secretary of the Treasury and to 
Congress of the accounts, programs, projects, activities, and amounts 
determined and identified for rescission under the preceding sentence.
    (c) Exception.--This section shall not apply to accounts, programs, 
projects and activities operated by the Department of Defense or the 
Department of Veteran's Affairs.
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