Republican Ways and Means RSS Articles

Davis Opening Statement: Hearing on State TANF Spending and Its Impact on Work Requirements

Sun, 17 May 2020 04:00:00 GMT

Our hearing today reviews a key provision of welfare reform: State spending requirements and their impact on work requirements.

As part of welfare reform in 1996, States were given a Federal block grant for the Temporary Assistance for Needy Families (or TANF) program which maintained record Federal spending on welfare. At the same time, States were allowed to reduce State spending to as little as 75 percent of prior levels under “Maintenance of Effort” or “MOE” requirements. This requirement was meant to ensure a continued Federal/State partnership in helping families move from welfare to work.

But now there is cause for concern that in some States this financial partnership is becoming a more one-sided proposition, with States no longer matching Federal spending as reliably as they once did.

Ironically, recent official data from the Department of Health and Human Services – including Fiscal Year 2011 data published yesterday – appears to suggest States have been increasing their own TANF spending rapidly. As this graph shows, since FY 2005, States have reported spending almost one-third more on TANF, including during and after the Great Recession:

However, what appears to be behind this growth is not actual increases in State TANF spending, but rather increased State reporting of TANF spending, including spending by third parties that States are now claiming as their own.

Why would States choose to start reporting more TANF spending?

There are several reasons.

First, under a 1999 regulation, States can reduce the share of adults they must engage in work if they “spend” more than required. These “excess MOE credits” have attracted greater State interest since work requirements were strengthened in the Deficit Reduction Act signed into law in early 2006. The most recent data suggests sixteen States used excess MOE credits to satisfy work requirements, effectively reducing the share of adults on TANF that are expected to work or train in order to maintain TANF benefits.

Second, other sources of Federal TANF funding – the ongoing “contingency fund” and the onetime “welfare emergency fund” created in the 2009 stimulus law – require increased levels of State spending. So to get more Federal funds, States had to spend more State dollars, or at least report that they were doing so.

This slide, taken from a presentation given to State TANF directors at a December 2006 conference, illustrates how the “hunt for MOE” has been on, and appears to be behind some reported increases in State TANF spending:

Many States have scoured their budgets to find other current program spending – such as for Pre-K, child care, and after school programs – they could report as TANF spending. Others began counting third-party spending – such as assistance offered by food banks and Boys and Girls clubs – as TANF spending. One State even apparently found a way to count the value of volunteer hours by Girl Scout troop leaders as State TANF “spending.”

Now, I want to be clear that this is not illegal. But that does not make it right. States’ ability to claim such a broad range of items as TANF spending, as well as the availability of excess MOE credits when they do so, have eroded key features of the Federal/State partnership in place since 1996.

Today’s hearing will review these issues and consider whether the law should be adjusted to ensure TANF continues to meet its goal of helping low-income parents find and keep jobs.

We have an excellent panel of witnesses joining us today to review these issues, which our colleagues on both sides of the aisle recognize merit attention. I look forward to working with all of our colleagues and invited guests on this as we consider TANF reauthorization later this year.

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Boustany Questions Obama Administration’s Use of Taxpayer Dollars on PR Campaigns

Tue, 22 May 2012 04:00:00 GMT

Washington, DC – Today, Subcommittee on Oversight Chairman Charles Boustany Jr., M.D. (R-LA) requested information on how much has been spent by the Department of Health and Human Services (HHS) for public relations, advertisements, polling and message testing since January 1, 2008. The letter follows various news reports detailing millions in taxpayer dollars going to public relations campaigns to promote the Democrats’ health care law.

Boustany stated: “Raising public awareness is one thing, but using taxpayer dollars to raise your reelection chances is crossing the line. The majority of Americans oppose the Democrats’ health care law. HHS needs to explain why the Obama Administration is spending millions of dollars trying to convince them otherwise, and they need to do so before millions more in campaign-style spending goes out the door. The American people deserve to know how their money is being spent by this Administration.”

It was recently revealed that the Administration spent $20 million on a contract awarded by HHS to a public relations firm to “educate” consumers about the preventive services in the Democrats’ heath care law. Last year, the Administration spent over $1 million sending out 4 million postcards to small business owners touting their “eligibility” for the Small Business Tax Credit. A recent Government Accountability Office report found that about 170,000 small businesses claimed the credit in 2010 – a take-up rate of less than five percent.

“We’ve only seen the tip of the iceberg,” Boustany stated. “We don’t yet know the full amount of taxpayer dollars spent on polling, message development and focus groups on the way to ‘market’ government-run health care exchanges.”

The full text of the letter can be read here.

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Chairman Dave Camp (R-MI) Remarks: Federal Policy Group’s 2012 Tax, Budget, and Legislative Policy Seminar

Thu, 17 May 2012 04:00:00 GMT

(Remarks as prepared)

As I prepared for today’s remarks, I looked back on the comments I made last year when I spoke to you. Whether it was looming tax hikes that still hang over this weak economy, stalled trade deals that have since been signed into law, or the debt limit crisis, which the Budget Control Act pushed off until at least the end of this year or early 2013, last year dealt us a lot of challenges.

Some we dealt with better than others. For example, the payroll tax conference committee, despite the December theatrics, was resolved ahead of schedule – the deal was announced two weeks prior to the February 29 deadline. Others, like the Supercommittee, well…let’s not go back there.

The bottom line is this: America is still in crisis. Unemployment remains high, while participation in the workforce is at a 30-year low. While the Budget Control Act took the first step towards reducing out-of-control spending in Washington, we are but a few short months from yet again hitting our nation’s debt limit. Worse yet, the small businesses we’re counting on to move our economy forward and virtually every worker in America is facing the prospect of higher taxes starting January 1.

Of the challenges that still remain, there is one simple unifying thread that is woven through each of them – jobs.

If we are to unlock new opportunities for job creation and strengthen the economy, then we must take even larger steps toward comprehensive tax reform. At the Ways and Means Committee, we have established a framework for comprehensive reform that brings the corporate and the individual rate in line at a top rate of 25 percent on both sides.

As you know, every Republican Member of the Ways and Means Committee signed a letter to the Budget Committee detailing these policies and the House has adopted this approach as part of this year’s budget resolution. Not only will we cut rates, we:

•   Collapse the six rates on the individual side to two rates of 10 and 25 percent;
•   Eliminate the AMT, which should have been named the “alternative maximum tax;” and
•   Move from an outdated worldwide system of taxation to a more competitive territorial system.

Moving to a territorial system, along with a lower corporate rate, is critical to ensuring that we are an attractive destination for other countries looking for new places to do business. It is equally important that we – once-and-for-all – have a tax system that encourages our companies doing business abroad to bring profits back home instead of leaving them stranded around the globe.

American companies should be free to invest their global earnings in their American operations – not once, not once every few years, but each and every year. It is time America’s tax code put the American economy first.

That is the cornerstone of the territorial draft the Committee released last fall. I know many of you have been actively engaged in helping us refine that proposal, and I thank you for your advice and practical knowledge of how the rules Washington sets can impact business and workers in the real world.

So, what do we have to show for all of this? Where do we really stand on tax reform? Well, two-years ago, when I was the Ranking Member of the Committee, no one was seriously talking about tax reform. Today, House Republicans have made it a centerpiece of our platform. Mitt Romney has released a bold, aggressive plan. The President, well, he finally released a “framework” for partial reform.

Clearly, progress has been made. This isn’t just some Dusty Springfield song, and we aren’t just sitting around “wishing and hoping and thinking and praying,” that tax reform will get done.

Over the last month, I and Pat Tiberi, Chairman of the Select Revenue Measures Subcommittee, in coordination with Kevin McCarthy and Peter Roskam – our Whip Team – hosted tax planning sessions with House Republicans. As a result of those meetings, I can firmly say our goal is: One, block massive, job-killing tax increases; and, two, enact – not just pass – comprehensive tax reform.

And, there is strong support to use the expiration of the 2010 compromise as leverage to force action in 2013 on comprehensive tax reform. How? Simple: in addition to extending current low-tax policies originally enacted in 2001 and 2003, we should enact fast track procedures to compel comprehensive tax reform next year. There are 34 examples of fast track already in law. The one most of us recognize is TPA – Trade Promotion Authority.

This is an idea House Republicans support, the Speaker endorsed it earlier this week, and I urge the Senate and the President to get behind it as well. Doing so would send a clear, strong message to the markets, to employers and families that Washington is serious about reforming our tax code and putting us on a path to sustained economic growth.

Now, as Chairman, it should come as no secret to any of you that I have tended to run things differently than my predecessors – both Republican and Democrat. I am not fond of putting out a bill and expecting that the support will come. Nor do I prefer the “take it or leave it” approach to legislating that has become too common over the years. It simply does not yield the results and the growth that this country so deeply needs.

Instead, I intend, as I have said since the first hearing of this Congress, to run the Committee in a way that not only allows stakeholders at all levels the opportunity to share their thoughts – but makes clear that they are expected to do so as well.

Simply put, I intend to continue taking an open approach to tax reform, because I believe Congress wants and needs to hear from a variety of voices. We need to hear from families who have struggled too long under a maze of complexity that leaves them unable to understand how to make sense of a tax code that is ten times the size of the Bible – with none of the Good News.

We want to hear from small businesses who for too long have been living in fear because they are worried they will be used as the next “pay for” on something like a student loan bill.

And, we need to understand how our larger corporate businesses will be hurt when their long-term investment and planning decisions are waylaid because they are hit by a new tax or left in a lurch because they aren’t the politically-favored flavor of the week over at the White House.

In other words, we need you – all of you.

It has been said that when it comes to the legislative process in Washington that, “If you are not at the table, then you are on the menu.” Well, let me be clear – you are all at the table. We want you there, and we need you there. And if you, your industry, your association, or your advocacy group thinks otherwise, then I encourage you to look again. There is a place card with your name on it, so pull up a chair. I strongly urge you not to turn away from this opportunity.

I’ve already heard from a number of different industries regarding items they believe must be preserved as we embark on tax reform. My response has been and will continue to be the same to each and every one: tax reform cannot be achieved if everyone retreats to their four corners. That has happened too many times, and it’s why we are now struggling under the weight of a tax code that bears significant responsibility for the sluggish economic recovery.

So, come to the table – with your ideas, your thoughts, and a desire to work with your job-creating colleagues, and the men and women you employ, so that we can create a path for comprehensive tax reform that is worthy of the people we live and work with every day.

Given that I am currently serving as a conferee on the Highway bill, I hope that you will pardon the pun when I say that the pathway to comprehensive tax reform is not an express lane.

Instead, there are a few stops we need to make on the way.

So, before I close, please allow me to talk about one of those stops – tax extenders. In 2010, and mostly as a result of negotiations behind closed doors, 73 provisions expired. I was there, and I didn’t enjoy it.

Washington should not operate in the dark. Congress is a public body and must conduct itself in public. That is why I have tasked Chairman Tiberi with an open review of the tax extenders, something that neither Ways and Means nor Senate Finance has done since 2005.

If extenders are beneficial and are helping the economy, then they should be seriously considered. On the other hand, if an extender has outlived its value, and if it is not producing the economic benefits it once was, then we need to determine whether there is merit in continuing that provision.

Those are not easy choices to make, and matters are only further complicated by the fact that we are trying to bridge to tax reform and we are still dealing with the combination of a weakened economy and historic levels of debt and deficits. That said, Washington must make these choices – it is what the American people sent us here to do.

I know this may make some people nervous. Don’t be; no decisions have been made. And, I know there are rumors that Chairman Tiberi and the Select Revenue Subcommittee will be doing more work in this area. Let me put that rumor to rest – they will be. Before any decisions are reached there will be another hearing, and I expect that will happen early in June.

Yes, these are big tasks and big goals, but I’ve learned in life to set the bar high. Frankly, setting the bar low only guarantees you will trip over it.

So, while overhauling our outdated tax code is an ambitious goal, it is also necessary. If the United States is to be a beacon for attracting new investment, then we must take steps that provide an opportunity for all job creators – small, medium, and large – to be a part of that economic renaissance. And that begins with all of us working together.

I thank you for providing me this opportunity to speak with you today, and I look forward to our continued work together.

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Brady Opening Statement: Hearing on Customs Trade Modernization, Facilitation and Enforcement

Thu, 17 May 2012 04:00:00 GMT

Our hearing today will focus on three critical aspects of the Customs mission: modernization, streamlining and facilitation, and enforcement – as well as the accurate, timely measurement of improvement in all three. I want to welcome everyone and extend a special welcome to our guests.

Just 100 years ago, the main function of Customs was revenue collection revenue. For over 125 years, customs duties were our main source of funds. At that time, America’s imports were a mere $153 billion a year, and duties collected totaled about $310 million.

Today, the value of imported goods is approximately $2.3 trillion a year, and duties, taxes, and fees collected on these goods bring in almost $37 billion. The value of imports in 2011 has grown to over four times what it was just twenty years ago.

Trade is vital to our economic engine, creating jobs and lifting wages here at home. Today, more than 50 million U.S. workers are employed by companies that engage in international trade, and U.S. trade represents over 30 percent of U.S. GDP.

In the 21st century, lowering tariff barriers and increasing quotas is not enough. Time is a trade barrier and streamlining legal trade is an essential component to our competitiveness in the global marketplace.

This hearing will explore how to allocate resources, develop models and measure progress so that we can move the ever-increasing volume of legitimate trade more efficiently - and halt trade that doesn’t comply with our laws. Customs is the “air filter” to our economic engine, allowing good or clean inputs flow through, while the harmful elements are screened out before they cause damage.

To develop better tools and measurements, I intend to move forward on a bipartisan basis to pass Customs reauthorization legislation this year. The last time this Committee last passed a Customs bill was in 2004, and it is long overdue.

CBP and ICE play pivotal roles to ensure that our trade agreements, preference programs, and U.S. trade laws are enforced.

The Treasury Department also plays an important role in furthering CBP’s trade mission, and we depend on it to oversee CBP’s important customs revenue functions.

I strongly believe that for the United States to remain competitive, we must have the most modern and automated Customs structure we can realistically develop – the first component of a sound customs policy. I support the modernization of CBP’s Automated Commercial Environment, which is vital to supporting increasing imports and pre-screening of cargo. I hope that CBP has turned over a new leaf in making ACE a reality and will quickly operationalize the cargo release module that we’ve been awaiting for some time. I understand that ACE will soon be expanded to accommodate export processing, which today is partially an archaic paper process.

Complementing ACE is the International Trade Data System. In working with Treasury, CBP has been leading 48 agencies in developing ITDS so that our companies deal with an electronic and seamless “one stop government” at the border and instead of a morass of multiple clearance processes. These programs will allow CBP and other agencies to more quickly and cost-effectively process imported goods and to more efficiently collect and use trade data.

Second, in addition to automation, the sophisticated nature of trade demands better streamlining of Customs processes, particularly for low-risk importers. CBP’s advance cargo data initiatives and industry partnership programs must work together to better facilitate legitimate trade. Companies that partner with CBP to improve trade compliance should realize the benefits of a more efficient system that create incentives for cooperation above the norm.

CBP has the potential to develop new models to facilitate legitimate trade in a risk-based manner, such as through pooling expertise in Centers of Excellence and Expertise as well as the Importer Self Assessment program, instead of shipment-by-shipment approaches. These models would enable CBP to focus on high-risk imports and expedite low-risk shipments while leveraging limited government resources. I would like to maximize the role of the Office of Trade in carrying out these functions.

The third component of sound customs policy is collecting revenue and enforcing our laws without jeopardizing legitimate trade. While the great majority of incoming trade is materially compliant, CBP and ICE face increasing challenges as the sophistication of those who wish to evade our laws increases.

CBP and ICE have designated eight critical sectors as Priority Trade Issues to focus their enforcement resources, such as intellectual property rights enforcement, textiles, and antidumping/countervailing duties.

I also want to congratulate fellow Ways & Means Committee member Dr. Charles Boustany on his bipartisan legislation to address evasion and underpayment of antidumping and countervailing duties, and I look forward to considering it.

We also can’t forget that our trade agreements beneficially create new obligations on our trading partners that increase compliance. The TPP negotiations are taking this several steps further.

In conclusion, I want to emphasize that CBP and ICE consultations with this Committee, other agencies, and the private sector on its rulemakings and other major actions must be systematic and meaningful. This hasn’t always been the case. There have been some bumps in the road in the past, and I think that consultation helps achieve a better product.

Today, we’ll have a comprehensive discussion on efforts to enhance economic growth and job creation by facilitating legitimate trade, modernizing customs procedures, and enforcing U.S. Customs and trade laws, in preparation for moving Customs reauthorization legislation.

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Dave Camp Urges Comprehensive Tax Overhaul

Thu, 17 May 2012 04:00:00 GMT

House Ways and Means Chairman Dave Camp nudged the Obama administration to embrace a comprehensive overhaul of the tax system next year, in a speech on Thursday morning.

The comments underscored a growing GOP effort to seize the initiative on taxes and fiscal policy, after a period when Democrats appeared to dominate the political messaging wars with their focus on tax-dodging millionaires.

Republicans hope to reassure jittery voters that they’re the more responsible party on taxes and the economy, as a fiscal day of reckoning approaches at the end of the year.

Setting up a process this year for a 2013 tax rewrite “is an idea House Republicans support, the Speaker endorsed it earlier this week, and I urge the Senate and the President to get behind it as well,” Mr. Camp said at an annual tax-policy seminar. “Doing so would send a clear, strong message to the markets, to employers and families that Washington is serious about reforming our tax code and putting us on a path to sustained economic growth.”

Mr. Camp (R., Mich.), along with House Speaker John Boehner, has been seeking to build support for the idea of a 2013 tax-code revamp in recent days, in hopes of setting up an orderly timetable for addressing the nation’s mounting fiscal issues. Those issues include the expiration of Bush-era tax levels at the end of 2012; the increasing obsolescence of the basic U.S. tax code in the eyes of many experts; automatic spending cuts that will occur next year if Congress doesn’t act; and another needed increase in the federal debt limit.

The tax issues are likely the key to a comprehensive deal, but also are the most difficult to resolve, because of their sheer complexity as well as the number of affected parties – especially among businesses. That makes broad tax changes unlikely in the lame-duck congressional session, and probably necessitates at least another year of debate.

The White House didn’t immediately respond. President Obama has showed interest in overhauling the business tax system, but has been somewhat less enthusiastic about a comprehensive rewrite of the tax rules for individuals, at least on the terms Republicans are offering. The basic disagreement is over top rates. House Republicans have embraced a 25% top rate, down from the current 35%, while reducing deductions and credits.

Mr. Obama favors returning to the 39.6% top rate of the Clinton era, while adding a new minimum tax for households with incomes over $1 million and other increases for high earners.

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Boustany Opening Statement: Hearing on Tax-Exempt Organizations

Wed, 16 May 2012 04:00:00 GMT

This hearing will be the first in a series of hearings exploring tax-exempt issues and related IRS compliance efforts.

Tax-exempt organizations, especially charitable organizations, serve an important role in our society. From the local little league to non-profit hospitals to major universities, tax-exempt organizations are intertwined with our communities and economy.

Tax-exempt organizations also control vast resources. It is estimated that in 2008, charitable organizations had $2.5 trillion dollars in assets. In addition, tax-exempt organizations employ 10% of the workforce.

With so many Americans relying on, working for, and engaged in economic relationships with tax-exempt organizations, taxpayers should have confidence that tax-exempt organizations, especially charitable organizations, are operating efficiently and hopefully using good governance practices to maximize benefits provided to the community. To support these goals, it is important that this Committee review the substantive rules that apply to tax-exempt organizations, IRS compliance efforts, and the operations and governance of tax-exempt organizations.

In addition, Congress must ensure that the IRS has the information it needs to effectively interact with tax-exempt organizations. The IRS is charged with ensuring tax-exempt organizations are operating in furtherance of their tax-exempt purpose, and it is important that tax-exempt organizations and the IRS effectively communicate with each other to meet this goal.

With this in mind, in October of last year, I sent a letter to Commissioner Shulman to discuss a variety of current issues involving tax-exempt organizations and IRS compliance efforts.

Today, we have invited witnesses who can provide information from the tax-exempt sector’s perspective on the issues that were raised in my letter, such as good governance and compliance, the IRS College and Universities Compliance Project, and new reporting requirements for non-profit hospitals. In addition, we have a witness who can provide historical background about recent changes in tax-exempt rules and the general structure of the tax-exempt sector.

This is an opportunity to hear from the tax-exempt community on these important issues and learn what the current landscape looks like for tax-exempt organizations.

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Camp, Brady Statements on U.S.-Colombia Trade Promotion Agreement Entry Into Force

Tue, 15 May 2012 04:00:00 GMT

Washington, DC - Ways and Means Chairman Dave Camp (R-MI) and Trade Subcommittee Chairman Kevin Brady (R-TX) issued the following statements in reaction to the U.S.-Colombia Trade Promotion Agreement entering into force today.

Chairman Camp stated: “Today’s entry into force is cause for celebration. I appreciate and applaud the significant effort by the administrations of both Presidents Obama and Santos to ensure prompt implementation of the agreement after Congress approved it in October.

“Now we can begin reaping the substantial benefits that the Colombia trade agreement unlocks. The U.S. International Trade Commission has estimated that the agreement will increase U.S. exports by $1.1 billion and increase U.S. GDP by $2.5 billion. That means substantial U.S. job creation, which we so greatly need in this difficult economy.”

Chairman Brady added: “Entry into force of this agreement is very good news for U.S. workers, farmers, manufacturers, and service exporters. We can now begin to recapture export market share that we lost in Colombia during the years that the trade agreement was not in force. Now that we are ‘back on the field’ in Colombia and Korea, I look forward to rapid implementation of the Panama trade agreement, as well.”

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Boustany Requests Information on Harmful IRS Bank Regulation

Fri, 11 May 2012 04:00:00 GMT

Washington, DC – The Treasury Department’s failure to provide sufficient answers about an Internal Revenue Service (IRS) regulation requiring banks to disclose interest paid to nonresident aliens has prompted Ways and Means Oversight Subcommittee Chairman Charles Boustany, Jr., MD (R-LA) to request additional information from Treasury Secretary Timothy Geithner.

“This regulation could drive foreign investment out of our economy and burden banks with unnecessary reporting requirements, in turn hurting individuals and small businesses,” Boustany stated.

The May 11 letter calls on the Treasury Department to provide correspondence and other documents relating to the formation of the opinion that the proposed regulation is not a “significant regulatory action,” as well as other information requested in Boustany's earlier letter.

The full letter can be read here.

ObamaCare's Impact on the Economy: Layoffs, U.S. Jobs Shipped Overseas, Plans to Create New U.S. Jobs Canceled

Thu, 10 May 2012 04:00:00 GMT

In today’s Washington Post, George Will highlights the ways in which the Democrats’ health care law is already contributing to job loss and inhibiting economic growth here at home - leaving job creators and employees alike worried about whether the trend will continue as more and more provisions of the law take effect.

Mr. Will’s piece focuses on the new medical device tax in the law, which taxes everything from tongue depressors to pacemakers. Beginning next year, device manufacturers will be slapped with a 2.3 percent excise tax on all U.S. sales of those products. The $30 billion tax increase has left health care innovators struggling with how to manage yet another new “cost of doing business” that was foisted on them courtesy of ObamaCare. What are the companies being forced to do as they prepare for this tax increase?

Stryker eliminated 1,000 U.S. jobs.
Zimmer laid off 450 U.S. workers.
Covidien released 200 employees.
Cook Medical cancelled plans to open a new factory in the United States, canceling plans for thousands of jobs.
Boston Scientific decided to build a new research facility and a new manufacturing facility overseas.

Worst of all, this massive $30 billion tax increase has nothing to do with making health care more affordable or improving quality. Instead, this money grab is meant to pay for ObamaCare’s staggering $1.8 trillion price tag.

Maybe former House Speaker Nancy Pelosi was right, and Congress did have to pass the law to find out what is in it. And what have we learned so far? Not only has ObamaCare made health care more expensive and caused people to lose the health plan they have and like, it also has resulted in job loss at home today – and hurt job creation for the future, too.

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Herger Opening Statement: Hearing on Medicare Durable Medical Equipment Competitive Bidding Program

Wed, 09 May 2012 04:00:00 GMT

We are here today to assess the impact of the Medicare Durable Medical Equipment competitive bidding program. Our intent is to understand the program’s impact on beneficiaries, suppliers, and Medicare expenditures, and the implications for program expansion.

Congress mandated the use of competitive bidding to establish payment rates for high cost and high volume DME in the Medicare Modernization Act of 2003. Congress took this action in response to evidence that Medicare fee schedule payment rates often far exceed retail prices. In fact, in some cases, Medicare beneficiary copays exceeded the cost of the device on the open market. These generous payment rates also made the DME benefit especially vulnerable to waste, fraud, and abuse. A successful small-scale test required through the Balanced Budget Act of 1997 showed that competitive bidding for DME was feasible.

Consistent with the statute, the Centers for Medicare and Medicaid Services implemented a competitive bidding process for nine DME product categories in nine geographic areas on January 1, 2011. This first phase of implementation is known as Round 1. Medicare is in the process of expanding the competitive bidding program to an additional 91 areas, with competition-based payment amounts to take effect in mid-2013. This expansion is referred to as Round 2.

The DME supplier industry has long had concerns about the use of competitive bidding. It is important to understand these concerns not only because numerous beneficiaries rely on medical equipment to keep them in their homes and out of the hospital, but also because many suppliers are the kinds of small businesses that form the backbone of our economy.

Congress, with input from members of this Committee, responded to supplier concerns that the initial CMS effort to implement competitive bidding was flawed. As a result, we passed the Medicare Improvements for Patients and Providers Act in 2008, which terminated the initial Round 1 and required that it be re-bid once improvements were made.

That said, it is important that Medicare pay a reasonable and responsible price for DME so that beneficiary and taxpayer dollars are used wisely. CMS has reported that the competitive bidding program resulted in $200 million in savings in 2011. These first-year program savings are derived largely from competition-based payment amounts that are, on average, 32 percent lower than DME fee schedule prices. And these lower prices mean that beneficiaries are paying less in the form of their 20 percent co-insurance.

A comparison of the Medicare payment for an oxygen concentrator, a common DME item, shows how the Medicare program and its beneficiaries benefit from lower prices derived from competitive bidding. In the nine Round 1 MSAs, Medicare would have paid $2,080 under the DME fee schedule, with a beneficiary paying 20 percent, or $416, on average. By contrast, with competitive bidding, Medicare paid $1,395, and the beneficiary paid $279, on average.

While I strongly believe in the competitive forces of the private market, the process by which the competition is conducted must be fair. To help the Subcommittee understand the successes and challenges associated with Round 1 before the program’s scheduled expansion next year, we will hear from witnesses who collectively provide a balanced range of perspectives on the competitive bidding program.

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Committee Rules and Committee Budget for FY 1997-1998

Wed, 05 Feb 1997 05:00:00 GMT

H.R. 668, the "Airport and Airway Trust Fund Tax Reinstatement Act of 1997"

Wed, 12 Feb 1997 05:00:00 GMT

Oversight Plan

Wed, 12 Feb 1997 05:00:00 GMT

Hearing on Medicare Provisions in the President's Budget

Tue, 16 Aug 2011 20:36:05 GMT

Hearing on Annual Report of the Internal Revenue Service Taxpayer Advocate

Tue, 16 Aug 2011 19:41:56 GMT

Hearing on WTO Singapore Ministerial Meeting

Wed, 17 Aug 2011 14:10:09 GMT

Hearing on "High-Risk" Programs within the Jurisdiction of the Committee on Ways and Means

Tue, 16 Aug 2011 19:22:51 GMT

Hearing on The Future of Social Security for this Generation and the Next

Tue, 16 Aug 2011 19:32:17 GMT

Hearing on The Future of Social Security for this Generation and the Next

Tue, 16 Aug 2011 19:38:30 GMT

H.R. 968, a bill to amend titles XVIII and XIX of the Social Security Act to permit a waiver of the prohibition of offering nurse aid training and competency evaluation programs in certain nursing facilities

Wed, 12 Mar 1997 04:00:00 GMT