OIG Says Medigap Deductible Coverage Through PPO Network Not a Kickback

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By Eric Topor  


Discounts on inpatient deductibles for Medicare Supplemental Insurance (Medigap) enrollees through contracts with preferred provider organizations would not violate the federal anti-kickback statute, according to an advisory opinion (No. 13-01) posted March 26 by the Department of Health and Human Services Office of Inspector General.

The proposed agreement involved Medigap insurance providers contracting with PPO organizations, who themselves have contracts for discounted services with networks of area hospitals.

In-network hospitals would discount up to 100 percent of Medicare Part A inpatient deductibles, for the opinion requestors' Medigap enrollees. Medigap providers would pay an administrative fee to contracted PPOs.

The opinion requestors were specific in noting that the Medigap enrollees would not be pushed to obtain health services at hospitals within the PPO network, however. The proposed agreement specified that the Medigap providers would cover an enrollee's entire deductible from any hospital whether it was in the PPO network or not.

The requestors' proposal said any savings realized would be included in annual reports filed with state insurance departments, which regulate premium rates for Medigap insurers.

The proposed arrangement also noted that the PPO hospital networks would be open to any Medicare-certified hospital.

No Kickback Violation

The opinion requestors inquired about whether the arrangement ran afoul of the Social Security Act's anti-kickback provisions (42 U.S.C. §1320a-7b), including the exclusion authority (§1128(b)(7)) and civil monetary penalty provisions (§1128A(a)(5) and §1128A(a)(7)).

In the advisory opinion, dated March 19, OIG concluded that as long as the intent of the arrangement was not to induce referrals for federal health care programs to in-network hospitals, OIG would not seek to impose administrative sanctions on the opinion requestors.

Of particular importance to OIG was the requestors' assurance that Medigap policyholders would be clearly informed that they could seek treatment at any hospital without penalty or additional financial liability.

OIG said that while waivers of Medicare cost sharing can constitute a prohibited kickback, discounts on inpatient deductibles by PPO network hospitals through Medigap coverage “present a low risk of fraud or abuse.”

OIG listed a number of reasons for its finding:

• Waivers would not affect Medicare payments to hospitals for Part A services.

• Waivers of cost sharing that a Medicare beneficiary's supplemental insurance would already cover would not increase utilization.

• Opening PPO networks to any Medicare-certified hospital would negate any unfair competition effects among hospitals.

• The professional judgment of doctors would be unaffected because no physician or surgeon would receive additional compensation under the proposal.

• The arrangement would be transparent in stating that Medigap policyholders may choose to receive treatment at any hospital without additional cost.

• Reporting the proposal's realized savings to state regulators has the potential to lower Medigap insurance costs for all policyholders.

Opinion Limits

The advisory opinion stated that, as to the unnamed requestors, the proposed arrangement presented no federal anti-kickback liability as long as all material facts concerning the arrangement were disclosed.

OIG noted, however, that the opinion was only binding to HHS regarding the anti-kickback statute specifically. OIG stated the opinion was not applicable to any other governmental agency, and did not speak to any potential liability the requestors' proposal may invite under the False Claims Act, or other state or federal statutes.

By Eric Topor  

The advisory opinion is at http://op.bna.com/rel.nsf/r?Open=etor-966p9h.

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