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CMS office's warning about third-party payments seemingly contradicts recent HHS message


By Joe Carlson
Posted: November 5, 2013 - 6:30 pm ET
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An office of the CMS is warning hospitals that it will frown upon healthcare providers that help patients buy coverage through a health insurance exchange. But that warning comes just days after the Obama administration seemed to say such a practice would be legal under the anti-kickback law.

The CMS' Center for Consumer Information and Insurance Oversight published a one-paragraph statement Nov. 4 that encouraged health plans not to accept payments from hospitals seeking to buy coverage on an insurance exchange for their patients.

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Allowing hospitals to pay for patients' insurance costs, officials said, would “skew the insurance risk pool and create an unlevel field” in the exchanges: “HHS discourages this practice and encourages issuers to reject such third party payments. HHS intends to monitor this practice and to take appropriate action, if necessary.”

But it's not clear what action would be possible, because the guidance comes just five days after HHS Secretary Kathleen Sebelius wrote that health plans sold on the new exchanges are outside the purview of the kickback law.

The anti-kickback statute makes it illegal to provide anything of value to generate business reimbursed by a federal health program, like Medicare, because such payments could increase waste by encouraging unneeded services.

But the law doesn't apply to private insurance. So over the summer, Sebelius was asked by Rep. Jim McDermott (D-Wash.) whether the federal subsidies that will help low- and middle-income Americans buy insurance on the new exchanges will legally transform those plans into “federal health care programs.”

The answer was no. “This conclusion was based upon a careful review of the definition of 'federal health care program' and an assessment of the various aspects of each program under Title I of the Affordable Care Act and consultation with the Department of Justice,” Sebelius' letter says.

The answer surprised some healthcare lawyers because federal prosecutors generally don't have a reputation for relinquishing jurisdiction over how federal money is spent.

Follow Joe Carlson on Twitter: @MHJCarlson


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