12/04/2014

Senators Introduce Companion Bill to Require Binding Bids in Medicare Bidding Program

On Dec. 4, Senators Rob Portman (R-OH) and Ben Cardin (D-MD) introduced in the Senate, S 2975, a companion bill to HR 4920,“The Medicare DMEPOS Competitive Bidding Improvement Act of 2014.” The bill would provide strong financial incentives for bidders to honor their bids, injecting accountability into the Medicare durable medical equipment (DME) competitive bidding program.  The bill would also elevate to federal law compliance with state licensure under the Medicare DME bidding program.  Following is a summary of the bill.

Binding Bids:  The requirement for binding bids would be accomplished through a new bid bond requirement.  For future rounds of bidding, the bidder would have to submit to the Secretary of Health and Human Services proof of having obtained a bid and performance bond in the amount of between $50,000 and $100,000 for each bid area.   If the bidder is offered a contract and its composite bid is at or below the product category’s median composite bid rate for the area, and the bidder does not accept the contract offered for the product and the area, the bid bond would be forfeited by the bidder and the Secretary would collect on that bond. If the bidder’s composite bid is above the median composite bid rate and the bidder does not accept the contract then there is no financial repercussion for the bid firm. Unsuccessful bidders would have their bond returned within 90 days of notice of non-acceptance.

The bid bond requirement would provide a significant financial incentive for bidders to submit more responsible bids than under the current Medicare DME bidding program which does not require binding bids.  The bid bond process would also ensure that the bidding firm’s financial information is vetted by an outside private entity.  CMS has repeatedly told Members of Congress it does not believe it has the authority to require binding bids and that Congress must specifically grant them the authority.  Economists who are experts in the bid/auction field have also told Congress that binding bids are standard for any auction.  Other government bid programs, such as the Department of Veterans Affairs, also typically require binding bids.

State Licensure:  The bill restates the existing requirement that bidders be appropriately licensed for the products and the bid areas where they submit bids.  In the current program, many bidders that were awarded contracts did not meet the applicable state requirements as of the date of bid submission, contrary to current Centers for Medicare and Medicaid Services (CMS) regulations. This has caused longstanding concern by many Members of Congress, and the Office of Inspector General is currently looking into this issue.

Please urge your Senators to support S 2975 by signing on as a co-sponsor!  OAMES would like to thank Sen. Rob Portman for his leadership on this vital legislation and dedication to preserving access to quality home medical services.