The Office of Inspector General of the Department of Health and Human Services (OIG) has recently issued an Advisory Opinion approving yet another request regarding the use of a preferred hospital organization as part of Medicare Supplemental Health Insurance (Medigap) policies.
Medicare patients have significant cost-sharing obligations. The Medicare Part A hospital inpatient deductible is currently $1,288 per benefit period, which begins the day you are admitted as an inpatient and ends when you have not had inpatient hospital care for 60 days in a row. As a solution to these cost-sharing obligations, Medicare patients can purchase Medigap policies, which reduce or eliminate a patient's out-of-pocket costs.
Medigap insurers often indirectly contract with hospitals through preferred hospital networks. Outside of Maryland, the participating hospitals offer Medigap insurers discounts on deductibles (in Maryland, hospitals are not permitted to offer discounts), and, in return, the Medigap insurers share the savings with their policyholders in the form of a premium credit, which incentivizes patients to go to the hospitals that are part of the network.
However, these arrangements have the potential to implicate both the federal anti-kickback statute and the federal Civil Monetary Penalties Law. Therefore, several Medigap insurers have asked the OIG to offer guidance in the form of an advisory opinion.
A. The Facts
In the situation addressed in the recent Advisory Opinion, hospitals within a network would provide discounts of up to 100 percent on Medicare inpatient deductibles incurred by the particular Medigap plan policyholders, which would result in savings to the Medigap insurers because they would otherwise be responsible to pay such deductibles. In turn, the Medigap insurers would share the savings with the policyholders in the form of a $100 Premium Credit.
Of particular importance to the OIG, the proposed arrangement would not affect the liability of any policyholder for payments for covered services, whether provided by a hospital within the network or any other hospital. Furthermore, any accredited, Medicare-certified hospital that contractually agrees to the proposed discounts and is compliant with applicable state laws can join the network. And, because the savings realized by the Insurers would be reflected in the Insurers' annual experience exhibits, the savings realized would be taken into account when the state insurance departments review and approve rates.
B. The Analysis
The federal anti-kickback statute prohibits the knowing and willful offer, payment, solicitation, or receipt of anything of value to induce or reward the referral of federal health care program business, which includes waivers of Medicare cost-sharing amounts.
Nevertheless, the OIG gave five reasons for its conclusion that the proposed arrangement presented a sufficiently low risk of fraud or abuse under the anti-kickback statute, and is therefore, permissible:
1. Neither the discounts nor the premium credits would increase or affect per-service Medicare payments, because Part A payments for inpatient services are fixed.
2. It is unlikely the proposed arrangement would increase utilization, because the discounts apply only to the portion of the policyholder's cost-sharing obligations that the Medigap policy already covers. Furthermore, the OIG has long held that the waiver of co-pays for inpatient services is unlikely to result in significant increases in patients deciding to subject themselves to hospitalization.
3. There should not be any impact on competition among hospitals, because membership in the network is open.
4. It is unlikely that there would be any effect on professional medical judgment, because there is no remuneration for the policyholder's physicians or surgeons.
5. The policyholders remain free to choose any hospital without incurring additional liability or receiving a penalty.
The Premium Credit also potentially triggers the federal Civil Monetary Penalty Law which, among other things, prohibits paying remuneration to induce patients to use certain providers. However, the definition of remuneration under the Civil Monetary Penalty Law includes an exception for differentials in coinsurance and deductible amounts, as long as the differentials are properly disclosed in writing to all beneficiaries, third party payors, and providers to whom claims are presented.
Therefore, because the Premium Credit has substantially the same purpose and effect as a differential under the exception, and because the proposed arrangement would be shared with policyholders, the OIG held that the Premium Credit presents a sufficiently low risk of fraud or abuse under the prohibition on inducements to beneficiaries, and is, therefore, permissible.
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