Fast Grassroots Action Stalls Surety Bond Legislation

WASHINGTON–In yet another close call for the industry, HME
providers can breathe a sigh of relief as, at least for the moment,
a recently proposed $500,000 surety bond requirement for Medicare
has been taken off the table.

Initially proposed to deter fraud and abuse, Senate Bill 2603,
the “Medicare Fraud Prevention Act of 2008,” was introduced Feb. 7.
Among its provisions, the bill included increases in civil and
criminal fines for fraud and also upped a surety bond requirement
for providers to $500,000.

The bill was introduced by Sen. Mel Martinez, R-Fla., and
cosponsored by Sens. John Cornyn, R-Texas; Norm Coleman, R-Minn.;
Lamar Alexander, R-Tenn.; David Vitter, R-La.; and Jim DeMint,
R-S.C.

But after receiving an influx of calls and emails from industry
groups saying the measure would cause undue hardships on small
providers, several of the senators quickly said they would
reconsider.

According to the American Association for Homecare, insurance
experts said a $500,000 surety bond would cost providers between
$10,000 and $20,000, in addition to putting up collateral to back
the half-million-dollar bond.

“The original surety bond [$50,000 in 1997] put forth by
Congress has never been implemented. Now they’re trying to
implement it without ever having seen the effects of the $50,000
bond, and Congress is trying to increase it 10-fold,” said Walt
Gorski, the association’s vice president of government affairs.

A section of the Balanced Budget Act of 1997 requires a $50,000
surety bond for DME providers as a deterrent to fraud and abuse.
However, the government never implemented the requirement, and in
July of last year, CMS proposed a $65,000 bond be required. The
agency said that amount was an inflation-adjusted figure from the
$50,000 amount included in the 1997 Act. (See
HomeCare Monday, July 30, 2007.)

“The surety bond is supposed to eliminate 15,000 suppliers
simply because those suppliers are so small they will make a
decision not to continue with Medicare enrollment,” Gorski
continued. “More importantly, though, is that CMS has been clever
to craft this surety bond proposal as a claims payment tool. The
surety bond can be tapped before the supplier has exhausted all of
his or her appeals for a denied claim.

“In addition … one of the most onerous things is that while
the bond in and of itself is not likely to put a supplier primarily
engaged in HME out of business, it is the cumulative effect of
these regulatory proposals on suppliers–reimbursement cuts, new
standards and qualifications, competitive bidding–[that will put
providers out of business]. In short, it’s death by a thousand
cuts.”

Following the senators’ decision to rethink the bill, AAHomecare
issued a statement thanking Rose Schafhauser, executive director of
the Midwest Association of Medical Equipment Services, and Heather
Allan, executive director of the Florida Association for Medical
Equipment Services, for rallying support against the measure. After
hearing the senators would not push the surety bond, Schafhauser
commended MAMES members for their numerous calls and emails to
Congress: “This is the perfect example of the impact of grassroots
efforts. You are making a difference!” she said.

According to Gorski, “This shows that we can be listened to on
Capitol Hill. We should view this as a victory that our efforts on
Capitol Hill and with CMS do pay off.”

But he also said the industry cannot take its achievement for
granted.

“I believe this issue will come up again,” Gorski said. “The
desire to take action on fraud is very great on Capitol Hill. It is
our job to work with lawmakers and try to point them in the
direction of what we think is effective.”