Hospital officials may be excused if they are bewildered about federal policy on waiving deductibles and coinsurance payments for Medicare beneficiaries. So is one of the nation's top federal fraud fighters.
The confusion developed after D. McCarty Thornton told a recent meeting of the National Health Lawyers Association that waiving deductibles and copay-ments under the Medicare Select managed-care program would be illegal on Jan. 1. Thornton is chief counsel to HHS' inspector general's office.
He contended such waivers, a common provider practice, constitute an illegal kickback under a new health insurance reform law passed by Congress in its last session.
Rumors quickly spread throughout the provider community that HHS' enforcement arm would be coming after hospitals that handed out waivers.
But after congressional officials intervened, he backed off on that assertion in an exclusive interview with MODERN HEALTHCARE*last week.
Hospitals that have joined a Medicare Select network often waive deductibles and copayments to lure Medicare beneficiaries. Hospitals join Medicare Select and accept the lower payments from beneficiaries because they stand to increase their volume of Medicare patients.
Medicare Select is a Medigap insurance policy under which insurers can offer supplemental benefits through a network of preferred providers.
The insurance reform law-called the Kassebaum-Kennedy law for its chief sponsors-generally imposes civil fines on providers that compensate Medicare beneficiaries when the providers know or should know that the compensation will influence beneficiaries' decision of where to seek care.
It defines coinsurance and deductibles waivers as improper compensation, but it notes four exceptions. The waivers aren't improper if providers do not advertise their waivers publicly, do not routinely offer waivers, base waivers on financial need or fail to collect the deductible after making reasonable collection efforts.
It also continues to exempt waivers that were immune from prosecution under HHS' so-called "safe harbor" regulations of 1992. The regulation specifically said the waiving of coinsurance payments and deductibles of Medicare Select policyholders wouldn't be considered an illegal kickback under the federal Medicare and Medicaid fraud and abuse statutes. The anti-kickback provisions of the statutes bar any form of remuneration to induce the use of Medicare or Medicaid services.
In an initial interview with MODERN HEALTHCARE, Thornton specifically said the anti-fraud language of the Kassebaum-Kennedy legislation banned such waivers under Medicare Select as illegal kickbacks to beneficiaries that will increase utilization and cost to the Medicare program.
But after congressional staff members objected to that analysis, Thornton acknowledged in a second interview that the law's anti-fraud language allows arrangements blessed by existing anti-fraud safe harbors.
He criticized the anti-fraud language for not clarifying what Congress meant when it banned providers from "routinely" offering waivers.
Thornton said such a term is "subject to interpretation." But he added, "We do not intend to proceed against Medicare Select under this authority."
Characterized by some industry sources as a "bomb thrower" who is closely aligned with anti-fraud crusader Rep. Fortney "Pete" Stark (D-Calif.), Thornton in the past has been active in trying to clamp down on healthcare transactions that could fall under anti-kickback laws.
In particular, he has warned that hospitals could be prosecuted under anti-kickback laws for overpricing physician practices when buying them because it can be viewed as an inducement to increase referrals to the hospital.
Healthcare industry sources said Thornton's most recent comments on Medicare Select send mixed signals to providers about the future of the program, which Congress only last year expanded to all 50 states.
"Congress just extended Medicare Select," said a healthcare source who asked not to be identified. "It would be unbelievable to have passed something that would have essentially killed it.
"If he was going to make that proclamation, he should have cleared it with Congress or HHS confirming that it was congressional intent or HHS' interpretation," the source said.
Thornton's initial analysis "makes it very difficult for the industry to project what HCFA's position really is," said a consultant who had received several calls from clients fearing that Medicare Select was in jeopardy.
Thornton added that he believes some hospitals in Florida and other parts of the country may be in violation of the coinsurance waiver prohibitions, although he would not identify them. He said the agency doesn't have "any particular targets at this time."