WASHINGTON BUREAU — Surety bond insurers are up in arms over a section of H.R. 3962, the House health bill, that would affect Medicare durable equipment providers.

The provision would waive a bond requirement for most pharmacies that provide durable equipment for 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 [the Centers for Medicare and Medicaid Services] are paid?” asks Lynn Schubert, president of the Surety & Fidelity Association of America, Washington.

Today, the pharmacies are part of the biggest class of providers that has to obtain the surety bond, Schubert says.

The surety bond waiver provision is not in S. 1679, health bill approved by the Senate Health, Education, Labor and Pensions Committee in July, an SFAA representative says.

S. 1796, the bill approved by the Senate Finance Committee in October, would create a tiered pricing structure for the bonds, with the price based on a supplier’s volume, the SFAA representative says. The S. 1796 provision would cap the bond cost for large suppliers at $50,000.

Senate Majority Leader Harry Reid, D-Nev., has sent a Senate health bill draft based on a combination of S. 1679 and S. 1796 to the Congressional Budget Office for budget impact scoring.

“We are still waiting to hear back from the Congressional Budget Office and hope to hear from them soon,” a CBO representative said today.

“They are working as quickly as they can to get back to us,” the staffer said. “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 estimates in regulations implementing the existing bond requirement that there are about 113,000 providers of durable equipment, and about 55,000 durable equipment providers that are pharmacies.

The current durable equipment provider bonding requirement protects CMS against losses resulting from fraud and provider financial weakness, Schubert says.

The SFAA believes H.R. 3962 would exempt about half of the providers who have been subject to the requirement from the requirement.

“Abandoning financial protection on such a large scale could be disastrous,” Schubert says.

The bond is affordable and widely available, and some surety bonds charge qualified pharmacies less than $500 per year,” Schubert says.

“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,” Schubert says.

Up till now, there have been few exemptions granted from the bond requirement, and any existing exemptions are narrowly limited to licensed medical professionals, Schubert says.

“The broad exemption for the major providers of durable medical equipment was sought by pharmacies and rejected in the regulatory process,” Schubert says.

“Pharmacies now seek to accomplish in the health care reform bill what they could not do in the regulations,” Schubert says.