NU Online News Service, March 25, 11:47 a.m. EDT

WASHINGTON-Surety bond insurers' representatives said they successfully lobbied to prevent the new health care bill from containing a provision that would have impacted their business.

At issue they said was an effort by retail pharmacy interests to ease their surety bond requirement for selling medical equipment to Medicare and Medicaid.

The pharmacy effort to soften rules was made as the newly adopted health care reform bill was being drafted, according to officials of the Surety & Fidelity Association of America (SFAA) and congressional staff.

Surety bond requirements are in place to protect taxpayers from fraud and waste in the Medicare and Medicaid programs.

According to SFAA officials with knowledge of the health care bill drafting process, pharmacies in exchange for supporting the legislation, asked to be made exempt from the $50,000 surety bond required of providers of durable medical equipment to Medicare and Medicaid patients.

Such a provision was included in the House version of such legislation after lawmakers were persuaded by representatives of the pharmacy industry that the requirement of a $50,000 bond could hurt small pharmacies.

But visits to members of the Senate by industry officials represented by the SFAA resulted in language more to insurers liking in the Senate bill passed Christmas Eve.

Under the new law, the Department of Health Services was given the authority to set a bond amount that is commensurate with the volume of business of the supplier.

"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.

"With the passage of the health care reform legislation, 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, " said Thomas Kunkel, SFAA board chairman.

"The bond will help protect taxpayers from fraud and overpayment in the Medicare and Medicaid systems," he said.

The SFAA officials noted that 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 Centers for Medicare and Medicaid Services there are about 113,000 providers of durable medical 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, SFAA said.

"Abandoning financial protection on such a large scale," Kunkel added, "would have been a serious mistake."