[Congressional Record Volume 144, Number 15 (Wednesday, February 25, 1998)]
[Senate]
[Pages S1012-S1014]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DORGAN (for himself, Mr. Johnson, Mr. Conrad, and Mr. 
        Daschle):
  S. 1680. A bill to amend title XVIII of the Social Security Act to 
clarify that licensed pharmacists are not subject to the surety bond 
requirements under the medicare program; to the Committee on Finance.


         Providing Parity for Licensed Pharmacists Legislation

  Mr. DORGAN. Mr. President, I am introducing today legislation that 
will exempt licensed pharmacists from the Medicare surety bond 
requirement imposed by the Balanced Budget Act of 1997 for suppliers of 
durable medical equipment (DME). I am pleased to be joined in offering 
this legislation by Senators Johnson, Conrad, and Daschle.
  Let me say right off that I understand and generally support the 
rationale behind the surety bond requirement. This will be an important 
new tool for the Health Care Financing Administration to prevent 
Medicare fraud and abuse by raising the threshold for participating in 
Medicare and thereby helping to ensure that only legitimate medical 
suppliers participate. I am sure we have all heard the horror stories 
about some of the scams uncovered by the HHS Office of Inspector 
General, in which businesses with no employees and no actual physical 
location were billing Medicare for unneeded services and supplies. It 
was these kinds of ``fly-by-night'' operations that the surety bond is 
intended to weed out, and I certainly support this goal.
  I do not, however, think it makes sense to apply this requirement to 
pharmacists, who are already licensed and heavily regulated by the 
states, and I do not believe that was Congress' intention. Pharmacists 
are highly skilled health care providers who are licensed by the 
states, and the pharmacies they operate are also licensed and regularly 
inspected by state boards of pharmacy. Clearly, pharmacists are not the 
kind of fly-by-night business owners the surety bond was aimed at.
  Congress already exempted physicians and other health care 
practitioners from the surety bond requirement, but HCFA has determined 
that this exemption does not extend to pharmacists since they do not 
typically bill Medicare for the services they provide. My legislation 
would simply ensure that pharmacists receive the same treatment as 
other licensed health care practitioners for purposes of the DME surety 
bond requirement.
  Without this legislation, older Americans stand to lose access to 
needed durable medical equipment and prescription drugs. Pharmacies are 
reputable and convenient providers of medical equipment, and in many 
rural areas, they are the only local medical suppliers. In addition, 
since HCFA now requires that prescription drugs covered by Medicare be 
purchased from a pharmacy, driving pharmacies out of Medicare will 
reduce patient access not only to medical equipment but also to 
prescription drugs.
  Pharmacies dropping out of the Medicare program is not an 
unjustifiable fear; it may be an economic reality. For the vast 
majority of pharmacies, providing durable medical equipment constitutes 
less than 10 percent of their total business. Yet, they provide this 
service for the convenience of their Medicare customers. If required to 
purchase even the minimum surety bond of $50,000, pharmacists have told 
me they will be forced to drop out of the Medicare program because it 
would actually cost them money to participate. For instance, in an 
informal survey of North Dakota pharmacists, 75 percent did less than 
$5,000 in business annually as a Medicare supplier, and not 
coincidentally, 70 percent said they would have to drop out of Medicare 
if they must purchase a surety bond.

[[Page S1013]]

  I am pleased to have worked with and have the support of the National 
Community Pharmacists Association, the American Pharmaceutical 
Association, the North Dakota Pharmaceutical Association, and many 
individual pharmacists. I ask unanimous consent that letters of support 
from these organizations be included in the Record.
  I hope my colleagues will join me in supporting this common-sense 
bill and acting on it promptly before Medicare beneficiaries lose 
access to dependable suppliers of medical equipment.
  I ask unanimous consent that the full text of the bill be printed in 
the Record.

                                S. 1680

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION. 1. EXEMPTION OF LICENSED PHARMACISTS FROM SURETY 
                   BOND REQUIREMENTS.

       (a) In General.--The last sentence of section 1834(a)(16) 
     of the Social Security Act (42 U.S.C. 1395m(a)(16)) (as added 
     by section 4312(c) of the Balanced Budget Act of 1997 (Public 
     Law 105-33; 111 Stat. 387)) is amended by inserting before 
     the period at the end the following: ``, except that the 
     Secretary may not impose a surety bond described in 
     subparagraph (B) of that sentence on suppliers that are 
     licensed pharmacies for which the person signing the supplier 
     application is a licensed pharmacist under State law who has 
     the authority to bind the business entity''.
       (b) Effective Date.--The amendment made by subsection (a) 
     takes effect as if included in the enactment of the Balanced 
     Budget Act of 1997 (Public Law 105-33; 111 Stat. 251).
                                                                    ____

                                                National Community


                                      Pharmacists Association,

                                Alexandria, VA, December 16, 1997.
     Hon. Byron L. Dorgan,
     Hart Senate Office Building,
     Washington, DC.
       Dear Senator Dorgan: We are especially appreciative of your 
     initiative to amend the recently enacted Medicare Provider 
     Surety Bond program to exempt licensed pharmacists who supply 
     Medicare beneficiaries with covered products. We have worked 
     closely with Stephanie Mohl and the North Dakota Pharmacist 
     Association and look forward to a sensible solution that will 
     assure continued access for Medicare beneficiaries and is 
     consistent with the exemption for other licensed health care 
     providers.
       If appropriate we can target your legislation in early 
     March at our 30th Annual Legislative Conference.
           Warm Regards,
                                             John M. Rector, Esq.,
          Senior Vice President of Government Affairs and General 
     Counsel.
                                                                    ____



                          American Pharmaceutical Association,

                                 Washington, DC, January 28, 1998.
     Hon. Byron L. Dorgan,
     U.S. Senate,
     Washington, DC.
       Dear Senator Dorgan: The American Pharmaceutical 
     Association (APhA), the national professional society of 
     pharmacists, would like to express its support for your 
     legislation to exempt pharmacists from the surety bond 
     requirement for Medicare suppliers of durable medical 
     equipment. APhA, the first established and largest 
     association of pharmacists in the United States, has a 
     membership of more than 50,000 practicing pharmacists, 
     pharmaceutical scientists, and pharmacy students. This 
     requirement will have serious consequences for both 
     pharmacists and their patients as many pharmacies who bill 
     Medicare for less than the required $50,000 bond amount will 
     be unable to continue supplying beneficiaries with much 
     needed durable medical equipment. In addition, the bonding 
     requirement would impose a regulation upon a health care 
     profession that is already licensed and regulated by State 
     Boards of Pharmacy.
       APhA appreciates the work you and your staff have expended 
     to exempt pharmacists from this additional regulation. As you 
     know, congressional conferees specifically indicated in 
     report language for the Balanced Budget Act of 1997 that they 
     did not intend for this regulation to be imposed upon health 
     care professionals. Unfortunately, the proposed rules issued 
     by the Health Care Financing Administration (HCFA) do not 
     reflect this intent. APhA believes that your legislation is 
     an important first step towards realizing the intentions of 
     the Conferees.
       Please feel free to contact Lisa Geiger of my staff should 
     you require any assistance from APhA and its members. Again, 
     thank you for your work on this important issue for the 
     profession of pharmacy.
           Sincerely,
                                                     John A. Gans,
     PharmD, Executive Vice President.
                                                                    ____

                                                      North Dakota


                                   Pharmaceutical Association,

                                   Bismarck, ND, January 26, 1998.
     Hon. Byron Dorgan,
     U.S. Senate, Hart Senate Office Building, Washington, DC.
       Dear Senator Dorgan: This letter is to inform you of the 
     strong support of the North Dakota Pharmaceutical Association 
     for the introduction of legislation to exempt pharmacists and 
     certain other licensed health care providers from the DMEPOS 
     Surety Bond requirement. This requirement is a result of the 
     Balanced Budget Act of 1997. The exemption for licensed 
     pharmacists will place them in the same position as 
     physicians and other practitioners who are currently exempted 
     from the requirement.
       Now that HCFA has published the rules notice for Medicare 
     DME suppliers, we can see that our members are faced with a 
     very difficult situation. In the proposed rules, HCFA 
     estimates that the minimum $50,000 bond will cost 
     approximately $788--an amount greater than we had originally 
     heard from the bonding companies. In the proposed rules HCFA 
     estimated that Medicare accounts for approximately 40% of the 
     average supplier's revenue and that for most suppliers the 
     additional costs of the bond would be outweighed by the 
     benefits gained by continuing to be a supplier. A survey of 
     our members showed that these figures certainly do not apply 
     to the pharmacists of North Dakota who act as suppliers. 
     Approximately 75% of pharmacists responding to the survey did 
     less than $5,000 business annually as a Medicare supplier. 
     Less than 5% indicated doing more than $25,000 in Medicare 
     business. When asked if they would continue providing 
     Medicare supplies if bond costs were $400-500, almost 70% 
     indicated that they would drop out of the Medicare program.
       The bonding requirement will drive a number of pharmacies 
     out of the Medicare supplier business. Those who stay will 
     essentially be paying a bonding fee that exceeds their 
     revenue from the Medicare program. In North Dakota rural 
     areas, the local pharmacy is a supplier that can be relied 
     upon to obtain supplies for Medicare eligible patients. While 
     provision of these supplies is not even a profitable portion 
     of pharmacists' business under the present circumstances, it 
     is an important service that they provide to their patients 
     and community. The surety bond requirement will cause 
     patients to lose access to a local supplier with the ability 
     to assist them in a place and manner that is most convenient. 
     Quality of health care outcomes for these patients will 
     suffer.
       We feel that you are taking the right approach with 
     legislation to exempt pharmacists from the DME supplier 
     surety bond requirement on the same basis as other licensed 
     health care practitioners. The pharmacists of North Dakota 
     are personally licensed and regulated by the State Board of 
     Pharmacy. The Board also licenses the pharmacy facilities 
     where they practice. These licensure provisions along with 
     other requirements for insurance and state accountability 
     insure that pharmacists doing business as Medicare suppliers 
     are already sufficiently screened and regulated.
       Our Association feels that legislation to exempt 
     pharmacists from surety bond requirements is very significant 
     to our profession and we will support your efforts to the 
     fullest. More significantly it will preserve high quality 
     local access service to Medicare beneficiaries in all rural 
     areas and under served areas of our country. This action will 
     be a benefit for Medicare patients at a time when our 
     population is aging and access to services must be 
     maintained. Please let us know what additional actions we can 
     take to assist you on this issue. Thank you for all the 
     efforts that you make on behalf of pharmacy and for the 
     patients we serve.
           Sincerely,
                                                     Galen Jordre,
                                  R.Ph., Executive Vice President.

  Mr. JOHNSON. Mr. President, today I am pleased to join my colleagues 
from North Dakota, Senators Dorgan and Conrad, and our distinguished 
Minority Leader and my friend from South Dakota, Senator Daschle, in 
introducing this legislation which will clarify that licensed 
pharmacies are not included, nor were they ever intended to be 
included, in the surety bond requirements imposed on certain health 
care providers under the Balanced Budget Act of 1997. At a time when we 
are properly addressing the rise in fraud and abuse of the Medicare 
system, we must also be cognizant of the impact some of these efforts 
will have on the intended beneficiaries of Medicare. This 
misapplication of the surety bond requirement is one such circumstance, 
and I urge my colleagues to join us in clarifying that licensed 
pharmacies were not intended to be in the scope of the surety bond 
requirement.
  While the vast majority of health care providers are honest and do 
their best to comply with Medicare rules, repeated studies have found a 
great amount of Medicare fraud within the national system--some 
estimates would place the cost to the American taxpayers at an 
incredible $24 billion per year. These are dollars that could be used 
to better compensate honest health care providers, or expand Medicare 
coverage. I have always been supportive of, and will continue to 
strongly support, these efforts to crack down on fraud and abuse. We 
must continue our efforts in that regard.
  As part of the effort to curb fraud and abuse in the Medicare system, 
last year Congress enacted a $50,000 surety

[[Page S1014]]

bond requirement for home health agencies, Durable Medical Equipment 
(DME) providers, rehabilitation services providers and ambulance 
services. The law was aimed at fly-by-night home health agencies and 
DME providers who abuse the system, and not small rural pharmacies. 
Unfortunately, these pharmacies have been caught up in this broadly 
written provision of last year's budget reconciliation.
  Under the definitions incorporated in this surety bond provision, all 
pharmacies are considered to be DME providers if even a small portion 
of their business is DME-related. Thus, they must obtain a minimum 
$50,000 surety bond regardless of how much or how little of their 
business consists of providing durable medical equipment to Medicare 
beneficiaries.
  The surety bond requirement is intended to ensure that the federal 
government will have recourse in the event of fraud. Many of the 
perpetrators of fraud and abuse are fly-by-night organizations that can 
quickly disappear. Many rural pharmacies, however, only offer DME as a 
service to their Medicare patients. It is not a major profit center for 
them, and many will stop providing this service rather than undergo the 
expense of obtaining a minimum $50,000 bond. Rural Medicare patients 
would then have greater difficulty in obtaining needed DME.
  The surety bond requirement attacks fraud indirectly, by mandating 
financial accountability. Pharmacies engaging in fraud will still be 
liable for their actions. This bill would clarify that the federal 
surety bond requirement does not apply to licensed pharmacies. It 
allows states to enforce their own licensing requirements, which can 
include surety bonds if states feel it necessary.
  Mr. President, while we must continue our efforts to root out the 
fraud and abuse that is plaguing our Medicare system, this important 
clarification will help ensure that our efforts are appropriately 
targeted and do not have the unintended consequence of denying critical 
services to Medicare beneficiaries, and I urge my colleagues to support 
our efforts and to support this bill.
  Mr. DASCHLE. Mr. President, it is my pleasure today to join my 
colleagues, Senator Dorgan, Senator Conrad and Senator Johnson, in 
introducing legislation to clarify that licensed pharmacists are not 
subject to a surety bond requirement under the Medicare program. This 
bill will help ensure continued access to durable medical equipment 
(DME) in rural areas for those covered by Medicare.
  The Balanced Budget Act of 1997 requires that all DME suppliers 
purchase a surety to qualify for a supplier number. The minimum amount 
for the bond is $50,000. The Health Care Financing Administration has 
estimated that these bonds will cost about $788 per year for each 
supplier. Many South Dakota pharmacists do not take in sufficient 
revenue from Medicare DME sales to support the purchase of a bond. 
Therefore, the surety bond requirement in the Balanced Budget Act could 
severely compromise the availability of services for Medicare patients 
in rural areas.
  The surety bond requirement was established as an important way to 
combat Medicare fraud and abuse. I remain in strong support of efforts 
to combat fraud and abuse, because they are crucial to protecting and 
strengthening the Medicare program. Because the ultimate aim of fraud 
and abuse measures is to improve Medicare, they should be applied in 
ways that are consistent with the goal of quality health care and 
should not jeopardize access to necessary services and supplies.
  This legislation retains the surety bond requirement for many DME 
suppliers, but it exempts licensed pharmacists. This policy is not only 
logical in terms of fairness to these pharmacists; it is the right 
thing to do for the beneficiaries who depend on their services.
  I urge my colleagues to join me in support of this amendment to title 
XVIII of the Social Security Act. It will lift an unreasonable burden 
from small pharmacists without jeopardizing fraud and abuse prevention 
efforts, and it will enable pharmacists to continue to provide quality 
health care services in their local communities.

                          ____________________