Survival of Medicare Bond Provision in Health Care Reform Legislation a Win For Taxpayers
March 24, 2010, Washington, DC – As the public begins to dissect the massive $938 billion health care reform bill that the President signed into law, what many may overlook is a little-known provision that will have big implications for taxpayers. The provision maintains a surety bond requirement that protects taxpayers from fraud and waste in the Medicare and Medicaid programs.
Pharmacies had sought and exemption from the $50,000 surety bond required of providers of durable medical equipment (DME) to Medicare and Medical patients. “This important insurance issue in the health care debate never made any headlines, even though it has significant implications for taxpayers,” said Lynn M. Schubert, President of The Surety & Fidelity Association of America (SFAA).
"With the passage of the care reform legislation,” said Thomas Kunkel, Chair of the SFAA Board of Directors, “Congress recognized the value of the surety bond in ensuring that these providers are legitimate and have the financial and other capacity to perform as expected before they can start billing the federal government for their products. The bond will help protect taxpayers from fraud and overpayment in the Medicare and Medicaid systems.”
Through the surety bond, the surety company gives the Centers for Medicare and Medicaid Services (CMS) the benefit of an independent third-party evaluation of the qualifications of the provider. In the event that the pharmacy fails to pay and overpayment, fine or penalty assessed by CMS, the surety bond provides the necessary financial protection up the bond amount.
“With bonding, there is a greater assurance that all providers that submit claims to Medicare and Medicaid are legitimate and that overpayments, fines and penalties assessed by CMS are paid” Kunkel added.
Both sureties and pharmacies were concerned that the requirements of a $50,000 bond for each billing number for pharmacies could hurt small pharmacies. The new law addresses that concern by permitting the Secretary of Health and Human Services to set a bond amount that is commensurate with the volume of business of the supplier.
“SFAA presented Congress with better options than a broad exemption for pharmacies from the surety bonding requirement,” Schubert said. “We understand the needs of small businesses and the burdens placed on them in compliance with federal regulations. Allowing HHS to set an appropriate bond amount based on the supplier’s volume of business is a much better approach than exempting all pharmacies, many of which are giant operations such as chains or megastores.”
Waiving the bond for pharmacies would have exempted the largest class of providers that would have been required to obtain this bond. According to the CMS regulations that implement the bond requirement, there are about 113,000 providers of durable equipment, and about 55,000 of them are pharmacies. If pharmacies had been exempted, about half of the providers of durable medical equipment would not have been required to provide CMS with this critical anti-fraud and financial protection device. “Abandoning financial protection on such large scale,” Schubert added, “would have been a serious mistake.” -Presented by permission of The Surety & Fidelity Association of America