Surety Bond Insurers Riled By Health Care Measure Provision

NU Online News Service, Nov. 12, 12:42 p.m. EST

WASHINGTON–Surety bond insurers are up in arms over a provision in the House health care reform legislation that waives a bond requirement for most pharmacies that provide durable equipment to Medicare beneficiaries.

"In the absence of bonding, who will be looking to assure that all providers that submit claims to Medicare are legitimate and that overpayments, fines and penalties assessed by CMS [Centers for Medicare and Medicaid Services] are paid?" asks Lynn M. Schubert, president of the Surety & Fidelity Association of America.

According to Ms. Schubert, waiving the bond for pharmacies would exempt the largest class of providers that have to obtain this bond.

The provision is not contained in the version of health care reform legislation reported out by the Senate Health, Education, Labor and Pension Committee in July, according to a staff member at SFAA.

While the House measure has no bond requirement, the bill reported out by the Senate Finance Committee creates a tiered pricing structure for the bonds geared to the volume of the supplier, according to SFAA. It also sets a maximum bond cost of $50,000 to large suppliers.

The two bills are being melded together by the office of Sen. Harry Reid, D-Nev., Senate majority leader.

An official in the majority leader's office said this morning that, "We are still waiting to hear back from the Congressional Budget Office and hope to hear from them soon.

"They are working as quickly as they can to get back to us," she added. "Depending on when we hear from them, we hope to be able to move to the legislation [on the Senate floor] as early as next week."

CMS, which has regulations implementing the bond requirement, estimates that there are about 113,000 providers of durable equipment, and about 55,000 of them are pharmacies.

If pharmacies were exempted, about half of the providers of durable medical equipment would not have to provide CMS with what is essentially an anti-fraud and financial protection device, said the SFAA's Ms. Schubert.

"Abandoning financial protection on such a large scale could be disastrous," she added.

Ms. Schubert said the bond is not costly, and widely available, with some surety bond companies charging less than $500 annually for qualified pharmacies.

As of now, the qualified pharmacies should have obtained the bond to meet the Oct. 2, 2009, filing deadline.

"Members of Congress now are in a position to ask for the actual costs of the bond and to judge whether the costs of such bonds would put pharmacies out of the Medicare business as some groups claim," she said.

Ms. Schubert noted that there have been few exemptions granted from the bond requirement and any existing exemptions are narrowly limited to licensed medical professionals, rather than drug stores and other types of suppliers.

"The broad exemption for the major providers of durable medical equipment was sought by pharmacies and rejected in the regulatory process," Ms. Schubert said.

"Pharmacies now seek to accomplish in the health care reform bill what they could not do in the regulations," she said.