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Statement of Need: The statute requires that we establish and implement a new competitive bidding program for certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) items in the Medicare program. This program changes the way that Medicare pays for these items under Part B of the Medicare program by utilizing bids submitted by DMEPOS suppliers to establish payment amounts. The final rule must be published timely to ensure that competition under the Medicare DMEPOS competitive bidding program begins in 10 of the largest metropolitan statistical areas (MSAs) in 2007.

Summary of the Legal Basis: Section 1847 of the Social Security Act (the Act) requires the Secretary to establish and implement competitive acquisition programs for certain items of DMEPOS. Section 1847(a)(1)(B) of the Act requires phased-in implementation so that competition under the programs occurs in 10 of the MSAs in 2007, 80 of the largest MSAs in 2009, and additional areas after 2009.

Alternatives: None. This is a statutory requirement.

Anticipated Costs and Benefits: The projected annual Medicare program savings from DMEPOS competitive bidding over the first 4 years of the program are estimated to be approximately $110 million the first year and increasing to over $1.2 billion by the fourth year.

Risks: If this regulation is not published timely, we will be unable to meet the statutory implementation schedule and receive the anticipated savings.