The COVID-19 public health emergency exposed significant vulnerabilities in U.S. reliance on foreign-manufactured personal protective equipment (PPE) and essential medicines. Disruptions in global supply chains led to shortages of critical items for health care providers and patients, undermining both clinical care and national preparedness. In response, CMS recently published an Advanced Notice of Proposed Rule Making (ANPRM) exploring solutions – not formally proposing anything yet. The Agency is seeking input on various policy options to incentivize the use and procurement of American-made medical supplies and essential medicines among Medicare providers.   

A New “Secure American Medical Supplies” Designation 

CMS is considering creating a voluntary, publicly-reported hospital designation based on “demonstrated commitment to procuring domestic PPE and domestic essential medicines.” The policy would establish a minimum share of their PPE and essential medicines to be purchased from domestic manufacturers. This idea mirrors other CMS designation programs, but the ANPRM lacks specifics on what percentage of domestic procurement would qualify, how it’s measured and what counts as “American-made.” CMS is soliciting feedback on how to decide these specifics. 

Potential Payment Incentives 

CMS is exploring how to help hospitals manage the higher costs often associated with domestically-produced supplies and medicines. Domestic manufacturing frequently carries a price premium: for example, government analyses have previously shown U.S.-made nitrile gloves can cost 1.5-3 times as much as foreign alternatives. To address this, the ANPRM seeks comment on potential Medicare payment changes, like: 

• Separate cost-based payment adjustments for hospitals meeting the domestic procurement designation. 

• New reimbursement mechanisms linked to hospitals’ procurement data. 

• Ensuring any payment support minimizes burden on health providers. 

CMS is also asking for ideas on other potential payment paths that could promote resilient domestic supply chains. 

Quality Reporting Measures 

Another idea under consideration is integrating domestic procurement commitments into existing Medicare quality programs like the Hospital Inpatient Quality Reporting (IQR) Program. Under this option, hospitals would attest whether they are meeting defined domestic procurement thresholds.  

Meeting a specific threshold would not immediately be tied to Medicare payment adjustments but it could create a public reporting mechanism that highlights hospitals’ supply chain practices and sets the stage for future policy incentives. 

What CMS Is Asking Stakeholders 

Because this ANPRM is pre-proposal, CMS is currently focused on soliciting input rather than dictating policy. Among the specific questions for comment are: 

• Definition of “American-made”: Should products be entirely manufactured in the U.S., or is a certain percentage of U.S. content sufficient? 

• Procurement minimums: What thresholds should hospitals meet to earn the Secure American Medical Supplies designation? 

• Verification and reporting: How should hospitals document and report domestic procurement? 

• Payment approaches: What mechanisms are most workable and equitable for helping hospitals manage cost differences? 

• Other policy options: Are there alternative approaches CMS should consider to promote domestic supply resilience?