Statements on Introduced Bills and Joint Resolutions

Floor Speech

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS -- (Senate - June 17, 2008)

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Mr. GRASSLEY. Mr. President, I am pleased to introduce the Medicare DMEPOS Competitive Acquisition Reform Act of 2008 with my colleague, Senator Baucus, to delay and reform the competitive bidding program for Medicare durable medical equipment, prosthetics, orthotics, and supplies. We are introducing this legislation to address serious concerns that have arisen over implementation of the competitive bidding program which is set to take effect in certain areas of the country on July 1, 2008. The bill will delay the start of the competitive bidding program for 18 months and require the Centers for Medicare and Medicaid Services to review the program and address significant issues that have been raised regarding implementation of the program.

We must act now before the competitive bidding program takes effect. We must ensure that the frail elderly who depend on diabetic supplies, oxygen, and other medical equipment for life-threatening conditions will continue to have access to essential medical products and supplies which are vital to their daily lives. The continued viability of much of the home medical supply industry is in serious jeopardy as a result of flaws that surfaced in the program during the first round of competitive bidding. Many small home medical equipment suppliers are in danger of going out of business through no fault of their own if the competitive bidding program is implemented as planned. Losing a significant number of small suppliers from the home medical equipment industry would have severe, unintended adverse consequences on thousands of beneficiaries who need home medical equipment and supplies. If that were to occur, it would severely hamper access to essential medical equipment for an untold number of beneficiaries. It was due to these very concerns that I opposed competitive bidding for DME when it was under consideration in 2003. Now, my original concerns, unfortunately, have become a reality, and urgent action by Congress is required.

These concerns are especially problematic right now in states such as Iowa in the Midwest which are already reeling from the disastrous floods and tornadoes we have experienced this past month. The loss of many more small businesses would be disastrous to beneficiaries whose access to needed medical supplies has already been severely limited, let alone the ripple effect this would inflict on local economies which have already been severely impacted by record floods which have harmed scores of businesses and cost hundreds of millions of dollars in damages.

We heard from many medical equipment suppliers that the rules of the competitive bidding program were unclear or were changed at the last minute, and that their bids were not considered. CMS has told us that roughly two-thirds of the bids submitted by suppliers were ultimately rejected for lack of proper documentation or other issues apart from price. This was done even though CMS had assured suppliers when the program began that they would be notified if their bids lacked the required documentation. Two weeks before the bidding closed, CMS abruptly decided they would not provide such notification. Appropriately, this bill terminates the contracts that were awarded under Round One and pays any applicable damages incurred as a result of the terminations, if any. In the future, the bill requires a more transparent process on the part of CMS. When Round One is re-bid, the bill requires CMS to provide feedback to suppliers with documentation issues or other problems and give them an opportunity to remedy the situation before their bids are thrown out and excluded from consideration.

As Ranking Member of the Senate Finance Committee, I am committed to ensuring that Medicare dollars are spent wisely and provide high quality products to seniors at the lowest possible cost. The program improvements required by this legislation will ensure more protections for beneficiaries and lead to lower prices and higher quality medical products while ensuring that beneficiaries will still have access to the medical equipment and supplies that they need. These improvements will also help prevent many small home medical equipment suppliers from going out of business due to a flawed bidding process which unfairly eliminated them from the Medicare program for three years.

In our bill, the cost of delaying the competitive bidding program and adding additional safeguards to the program would be fully paid for by the durable medical equipment industry. According to the Congressional Budget Office, the delay in implementing competitive bidding and the reforms to the program included in this bill will increase Medicare spending by $3.1 billion over 5 years. To offset the cost of the legislation, in 2009 those DME items subject to Round One of the program will not receive a CPI update, and payments for those items will be reduced by 9.5 percent. Items not subject to Round One will receive a CPI update in 2009, and all DME items will receive CPI updates in years 2010 through 2013. In 2014, those DME items which were subject to the 9.5 percent payment reduction in 2009 will receive an additional payment increase of two percent over the CPI unless they are covered by competitive bidding contracts then.

As is true in many sectors, the DME industry is given a bad name by a few bad apples that spoil the barrel. Unfortunately, we hear on a regular basis from the Office of Inspector General and the Justice Department that the DME industry continues to have far too many incidents of waste, fraud and abuse. The multi-agency Medicare Fraud Task Force formed last year has uncovered numerous examples of criminal behavior and successfully prosecuted dozens of fraudulent or non-existent DME suppliers in South Florida and elsewhere. In just over a year, the task force has brought more than 120 cases against nearly 200 defendants in South Florida alone who have been charged with a total of $638 million in fraud. We must have stronger safeguards to ensure that companies who participate in competitive bidding are actual, legitimate companies that can provide the equipment and services they bid to provide. In addition, the Inspector General of the Department of Health and Human Services is required to assess the process used by CMS to conduct competitive bidding and verify the calculations of the pricing determinations used to determine the payment amounts for competitively bid items in Rounds One and Two.

This bill also includes standards which will lead to an improved competitive bidding program. Under the bill, all DME suppliers must be accredited and meet quality standards by October 2009. We also close a loophole that currently allows subcontractors to remain unaccredited. We heard many complaints about companies awarded contracts who had no presence in the competitively bid area and who then began to solicit subcontractors to assist in carrying out the terms of the contract they had been awarded. Under the current program, subcontractors do not need to meet accreditation standards. Our bill requires that every company that supplies DME in the Medicare program must meet accreditation standards, whether they are primary suppliers or subcontractors.

I urge my colleagues to support this legislation to delay the competitive bidding program in order to ensure seniors continued access to needed home medical equipment and supplies and to remedy flaws in the bidding process and make other necessary improvements in the competitive bidding program.

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