Costly Supplier Surety Bond Requirement Set Aside, Says AAHomecare

The surety bond provision of Senate bill 2603 -- aka the Medicare Fraud Prevention Act of 2008 -- has been "set aside" pending further investigation, according to the American Association for Homecare (AAHomecare). That provision has been under industry fire for requiring DME suppliers to secure $500,000 surety bonds if they want to continue to do business with Medicare.

The bill was introduced on Feb. 6 and is sponsored by Sen. Mel Martinez (R-Fla.), Sen. John Cornyn (R-Texas), Sen. Norm Coleman (R-Minn.), Sen. Lamar Alexander (R-Tenn.), Sen. David Vitter (R-La.) and Sen. Jim DeMint (R-S.C.).

S. 2603 proposes "to amend titles XI and XVIII of the Social Security Act to provide increased civil and criminal penalties for acts involving fraud and abuse under the Medicare program and to increase the amount of the surety bond required for suppliers of durable medical equipment."

On Feb. 14, AAHomecare announced Sen. Martinez had "assured" the association that he "would work with the home medical equipment industry and reconsider the surety bond provision of...S.2603." An AAHomecare announcement said the surety bond provision "was filed as an amendment to the Indian healthcare bill" under consideration on the Senate floor on Feb. 14. But then "Due to feedback from the homecare community, the surety bond provision was set aside until its impact on HME providers can be more closely examined," AAHomecare said.

Currently, a 1997 law requires a $50,000 surety bond for suppliers, but that requirement has never been put into play. The Centers for Medicare & Medicaid Services (CMS) proposed raising that amount to $65,000 last year.

In an earlier news statement, AAHomecare quoted insurance experts as saying a $500,000 surety bond would cost a supplier $10,000 to $20,000, plus additional collateral. AAHomecare President Tyler J. Wilson predicted such a cost "would be devastating on law-abiding small providers. This provision would put a lot of home medical equipment providers out of business without fixing the fraud and abuse problem. No one is more concerned about getting criminals out of Medicare, but this is clearly a case of throwing the baby out with the bath water. Why would the government increase the surety bond by 1,000 percent before it has even implemented the original amount?"

The National Association of Independent Medical Equipment Suppliers (NAIMES) said it is "adamantly opposed to any surety bond mandate for DME suppliers" and called S. 2603 "beyond any sense of reasonability." NAIMES pointed out that for "many small, rural suppliers, a median of $15,000 for such a bond would be more than their net profit margin."

NAIMES President/CEO Wayne Stanfield said that amount "will cost many small suppliers more than they collect from Medicare in a year...CMS must revoke supplier numbers when fraud has been found, rather than accepting a multi-million-dollar settlement and allowing these same companies to continue to bill Medicare. It is time to stop punishing good people and good business for the sins of others."

AAHomecare cited intense communications between state DME supplier associations and Senate offices as among the factors that led to Sen. Martinez to reconsider the surety bond portion of S.2603.

Contact the S. 2603 Sponsors

Call the senators sponsoring the Medicare Fraud Prevention Act of 2008 using their office phone numbers below, or click to link to the senators' e-mail forms to send e-mail messages.

Sen. Mel Martinez
(202)  224-3041
To send e-mail, click HERE or go to

Sen. John Cornyn
(202) 224-2934
To send e-mail, click HERE or go to

Sen. Norm Coleman
(202) 224-5641
To send e-mail, click HERE or go to

Sen. Lamar Alexander
(202) 224-4944
To send e-mail, click HERE or go to

Sen. David Vitter
(202) 224-4623
To send e-mail, click HERE or go to

Sen. Jim DeMint
(202) 224-6121
To send e-mail, click HERE or go to

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