WASHINGTON (March 11, 2015)—HR 284 would impose new requirements on private firms that supply products through Medicare’s competitive bidding program for durable medical equipment (DME). CBO estimates that enacting HR 284 would increase revenues by about $1 million over the 2015-2025 period.
The legislation could affect direct spending, but CBO estimates those effects would not be significant. Under current law, Medicare pays for some DME (including items like wheelchairs, hospital beds, and oxygen tanks and related supplies) using prices that are set through a two-stage process. In the first stage, firms submit bids to furnish a category of DME items to Medicare beneficiaries in a geographic area. The Medicare program uses those bids to exclude from the second stage the firms that submitted the highest bids. The remaining firms are invited to contract, for a period of three years, to supply that category of DME in that geographic area. The contractual price, or single payment amount (SPA), is the median bid of all the firms that are invited to participate in the second stage. Firms are free to decline to accept the contract.
HR 284 would require that firms wishing to bid in a geographic area meet applicable licensure requirements of the state in which they are bidding and obtain a surety bond of between $50,000 and $100,000 from a bonding agency. If the company submitted a bid below the SPA in a geographic area but declined to accept a contract, it would forfeit the bond to the federal government. The estimate assumes those requirements would apply for contracts that go into effect beginning on January 1, 2019; in CBO’s judgment, it would take several years to establish the requirements of the bond process through regulations and other program guidance.
CBO is unsure whether under HR 284 the bonding agency or the Centers for Medicare and Medicaid Services (CMS), which administers the competitive bidding program, would hold the bond throughout the bidding process. CBO anticipates that these details would be clarified through regulations.
CBO expects that implementing the legislation would not have a significant effect on the prices that CMS establishes for DME items, but that it would result in the forfeiture of a small number of surety bonds. CBO estimates that the revenues from such forfeitures will amount to less than $500,000 in each year, and will total about $1 million over the 2019-2025 period. This estimate assumes enactment in the spring of 2015.
The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. As noted above, CBO estimates that revenues would rise by less than $500,000 per year. HR 284 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.
