Competitive Bidding for Manufacturers?

WASHINGTON — House Democrats moved another step closer to
revamping health care with the Oct. 29 release of H.R. 3962, dubbed
the “Affordable Health Care for America Act.” While
most Americans focused on the hotly debated public insurance
option, home care advocates were caught off guard by a provision
that instructs the Government Accountability Office to evaluate the
establishment of a competitive bidding program for
DME manufacturers.

The proposal — buried within Section 1149 of the
1,990-page bill — “is a new addition to the House bill and is
not in the current version of the Senate health reform
legislation,” said Seth Johnson, vice president of government
affairs for Pride Mobility Products, Exeter, Pa. “It would require
the GAO comptroller to conduct a study to evaluate the potential
establishment of a program to acquire DME and supplies through a
competitive bidding process among manufacturers of such equipment
and supplies. The GAO report is due to Congress within 12 months of
enactment of the bill.”

According to the National Association of Independent Medical
Equipment Suppliers, the concept is similar to a program being used
in California for incontinence products. “The basic concept is that
manufacturers would bid to supply a selected product. Suppliers
would be paid this fee and would buy the product from the
manufacturers at a price that is below the bid fee,” NAIMES
reported, noting that House Ways and Means Committee staff had
brought up the issue in discussions with the group earlier this
year.

Michael Reinemer, vice president, communications and policy, for
the American Association for Homecare, pointed out that the
legislation is not actually proposing manufacturer bidding at this
point. Instead, Reinemer reiterated that the bill merely proposes
that the idea be considered. AAHomecare has scheduled a meeting
with House committee staff to learn more about the proposal.

In a Thursday afternoon update, AAHomecare reported that the GAO
study mandated by the bill would encompass the following
topics:

• Identification of types of DME and supplies that would be
  appropriate for bidding under such a program.

• Recommendations on how to structure such an acquisition program
  to promote fiscal responsibility while also ensuring beneficiary
  access to high quality equipment and supplies.

• Recommendations on how such a program could be phased in and on
  what geographic level would bidding be most appropriate.

• In addition to price, recommendations on criteria that could be
  factored into the bidding process.

• Recommendations on how suppliers could be compensated for
  furnishing and servicing equipment and supplies acquired under such
  a program.

• Comparison of such a program to the current competitive bidding
  program under Medicare for durable medical equipment, as well as
  any other similar Federal acquisition programs, such as the General
  Services Administration’s vehicle purchasing program.

• Any other consideration relevant to the acquisition, supply, and
  service of durable medical equipment and supplies that is deemed
  appropriate by the Comptroller General.

AAHomecare also reported that Section 222 of the bill states
that DME, prosthetics, orthotics and related supplies are now
included in the minimum essential benefits package that qualified
health insurance plans must cover. The association had lobbied for
inclusion of HME in the minimum benefits package.

Additional analyses from AAHomecare, NAIMES and VGM Group also
noted the bill:

• Implements annual productivity adjustments (reductions) for
  “certain DME” beginning in 2013, but “certain DME” was not defined.
  AAHomecare said additional HME CPI
  reductions that had earlier been proposed by Rep. Gene Green,
  D-Texas, do not appear to be contained anywhere in the bill.

• Adds an option for Medicare beneficiaries to take ownership of
  Group 3 support surfaces after the 13-month capped rental period
  ends. The option must be offered in the 10th month. If rental is
  chosen, suppliers are required to provide and support the item for
  the remainder of the useful life (five years) at no charge to
  Medicare. Unspecified service and maintenance would be paid.

• Requires that a supplier who provides oxygen to a patient during
  the 27th month is required to provide the equipment through the
  60th month regardless of circumstances or location. According to
  NAIMES, this change “effectively moves the commitment to the
  patient from the 36th month to the 27th month while leaving the cap
  at 36 months. It specifically states this, regardless of
  circumstances, unless another supplier has accepted responsibility
  through the 60th month.”

• Establishes rules that would restart the 36-month rental period
  for oxygen if the supplier goes bankrupt after 24 months of
  payments have been made for the patient.

• Except for competitive bidding, exempts pharmacies only from
  accreditation if they only provide diabetic suppliers, canes and
  crutches. Some restrictions apply.

• Adds a 2.5 percent excise tax on the sale of medical devices
  (products sold at retail stores would be exempt). The proposal,
  which would raise approximately $20 billion, is similar to one in
  the Senate Finance Committee’s health reform bill, but the Senate
  version levies a fee on the medical device manufacturers
  themselves. (See Manufacturers
  Marshal Forces to Battle $40 Billion Tax, Sept. 21.)

Pride’s Johnson also confirmed that elimination of the
first-month purchase option for standard power wheelchairs is
included in the House bill, a move that experts expected and one
industry advocates continue to fight.

“The provision does provide for an exemption of the Round 1.2
competitive bidding areas where contracts are entered into by Oct.
1, 2010,” said Johnson, adding: “The industry remains focused on
securing a budget-neutral
alternative that would preserve the purchase option prior to
final passage of the bill.”

H.R. 3962’s estimated cost of $894 billion over 10 years squeaks
in just under President Obama’s stated goal of staying under $900
billion. The House will likely consider the bill in earnest as
early as the middle of next week, and vote on final passage prior
to Veterans Day (Nov. 11).

Congressional Quarterly reports that the legislation
would be “paid for largely by a surtax on the adjusted gross income
of individuals making more than $500,000, and married couples
making more than $1 million. The bill contains new revenue-raisers
that would impose tax-compliance requirements on businesses and
create a 2.5 percent excise tax on certain medical devices.”

View a PDF of the Affordable Health Care for America Act.

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