I 114th CONGRESS 1st Session H. R. 4185 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.

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 . 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. . 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: 1847C. DMEPOS market pricing program demonstration project (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 ½ 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.