NATIONAL COMPETITIVE BIDDING (NCB) Legislation Status and Comparison ITEM H. R. 4954S. 3018S # Pages255 pages296 pages28 SponsorRep. Nancy Johnson (R-CT)Senator Max Baucus (D-MT) Senator Charles Grassley (R-IA) Senator Bob Graham (D-FL) Senator Phil Gramm (R-TX) TitleMedicare Modernization and Prescription Drug Act of 2002 Beneficiary Access to Care and Medicare Equity Act of 2002 Medicare Competitive Acquisition Act of 2002 Current Status June 28, 02 (Passed) 221 – 208 July 15, 02 placed on Senate Legislative Calendar Oct 3, 02 Introduced to Senate by use of Rule XIV (failed – Sen. Don Nickles (R-OK) in opposition Oct 10, 02 Read twice and referred to the Committee on Finance Summary$350 Billion Bill - 10 year package. Provides Rx Drug coverage & $30 Billion > for Hospitals / Doc / Nursing Fac. $43 Billion Bill – 10 year package. Provides $30 Billion “give back” to Hospitals / Doc / Nursing Fac. $12.8 Billion Rural Health “Stand alone” Bill to impose Competitive Bidding. Does not include MSA’s of 500k “Carve – out” found in S Sec # for NCB Section 511 – Titled “V: Provisions relating to Part B” Section 311 – Titled “Competitive Acquisition of Certain Items & Serv.” Section 2 – Titled “Competitive Acquisition of Items and Services” Phase –In time frame Not longer than 3 years, 1/3 areas in 04 & 2/3 areas in 05 Not longer than 4 years, ¼ area 03 2/4 area in 04 w/ no less ¾ by 05 Not longer than 4 years, ¼ in 03 at least 2/4 in 04 w/ ¾ by 05 Impact loss to HME CBO projected $7.7 Bil savings 6,000 Small Business Close 60,000 employees laid off CBO projection $5.8 Bil Savings 4,500 Small Business Close 45,000 employees laid off CBO projected $7.7 Bil savings 6,000 Small Business Close 60,000 employees laid off

Aftermath of CMS takeover In the demonstration sites, fewer than 25% of providers won Medicare contracts Of non-participants, only 20% can survive long- term without Medicare patients National chains will dominate Negative impact on beneficiaries, including rural areas Industry – post NCB

Aftermath of CMS Takeover 60% of the nation’s independent dealers out of business Severe change in seniors’ access to their preferred provider Providers forced to reduce the quality of product service to become lower cost providers Halting of innovation in home care products

CBO Estimates for NCB CBO estimated gross 10 year savings of competitive bidding at $7.7 billion $5.8 million of this “savings” reverts to the US Treasury

Cost of Bureaucracy? CMS administrative costs for the demonstration were 56% of the gross savings Demonstration sites

Questions on the rate of growth The future growth rate of homecare spending is subject to estimates. CBO’s growth estimate results in 33% greater homecare expenditures as compared to CMS’s estimated growth rate Growth in Homecare ($B)

Behind the numbers Administrative costs at demonstration sites were 56% of gross savings CBO analysis assumed higher growth rate than CMS. Splitting the difference reduces gross savings by $1 billion This does not even include the reduction in income tax collections Little “savings” left for federal government

Conclusions 1.The costs and likely “savings” from competitive bidding are still unknown –No objective analysis performed to date –Significant uncertainties in the assumptions –Huge negative impact on access, service, quality and innovation –Canada tried it and it failed –Fails the smell test – eliminates many businesses, increases the size and control of federal government