Conflicting messages over third-party help

When Wisconsin booted thousands of people from Medicaid by changing income eligibility rules for 2014, one of the state's biggest hospital systems responded by contributing $2 million to a charity that is helping local low-income adults who lost their coverage buy policies through the new insurance exchange.

“It really is a matter of good public health to get people in-sured, but we also have self interest because it is an expensive proposition to treat people in the emergency department who don't have health insurance,” said James Dechene, senior vice president and general counsel for the University of Wisconsin Hospitals and Clinics.

UW and other hospitals across the country are asking their lawyers whether they can legally help their uninsured patients pay premiums to buy exchange coverage, as they previously have done for patients with standard insurance. Similarly, pharmaceutical companies have long given patients discounts and other assistance for high-priced drugs, and they want to know if they can do the same for exchange-plan enrollees.

Both industry groups are worried about the 1972 federal anti-kickback law that prohibits providers from offering patients financial incentives to use medical services paid for by federal healthcare programs. That law has never been applied to privately insured patients. The issue is whether exchange plans are considered government programs under that law, particularly given that many exchange plan enrollees will receive federal premium tax credits to help them pay the premiums.

Over the past two weeks, the Obama administration has sent mixed signals on the question.

HHS Secretary Kathleen Sebelius, in an Oct. 30 letter to Rep. Jim McDermott (D-Wash.), wrote that plans sold on exchanges are not “federal healthcare programs” under the anti-kickback law, apparently allowing hospitals and drugmakers to help patients pay for premiums and cost-sharing.

Then last week, the CMS' Center for Consumer Information and Insurance Oversight published an online answer to a “frequently asked question” urging insurers offering plans on the exchanges to reject any premium payments that come from healthcare providers on behalf of patients. The Nov. 4 statement said such financial support could negatively affect exchange plan risk pools. That reflected insurers' concerns that hospital premium contributions would increase the proportion of sicker people in the exchange plan, said Ankur Goel, a partner at McDermott Will & Emery and former federal prosecutor.

The insurance industry welcomed the CMS office's position. Robert Zirkelbach, a spokesman for America's Health Insurance Plans, said hospitals and drugmakers pay patients' premiums and copays to benefit themselves by boosting utilization of hospital services and drugs. “This practice undermines efforts to reward high-quality, cost-efficient care and drives up healthcare costs for consumers, employers and taxpayers,” he said.

The pharmaceutical industry also is very concerned about the issue. Drugmakers, which have offered patients assistance with copayments and coinsurance that can add up to hundreds of dollars a month for some drugs, welcomed Sebelius' statement.

But insurers and pharmacy-benefit managers warn that such assistance hampers their efforts to shift patients toward lower-cost generic drugs. “The goal is to induce consumers to use the most expensive options available,” said Mark Merritt, president of the Pharmaceutical Care Management Association.

Sebelius also came under political attack for her position. At a Nov. 6 Senate Finance Committee hearing, Sen. Charles Grassley (R-Iowa) asked her whether she had any authority to decide how the federal anti-kickback law should be interpreted. She replied that “these are private insurance plans, they are not government programs.”

Kevin McAnaney, an attorney who formerly headed HHS' inspector general's industry guidance office, said Sebelius' statement in the letter to McDermott “has no legal significance.” The only reason it could be meaningful is because the anti-kickback law requires violators to have “knowingly” violated the law, and the letter could provide legal cover, he said. “I would be surprised if Justice really agreed with the determination.”

McDermott, senior Democrat on the House Ways and Means Health Subcommittee, said he received numerous inquires from hospitals about whether they could underwrite premiums for uninsured patients. But he doubted Sebelius' response will end the debate. “I think we'll have to let it play out,” McDermott said in an interview. “It should have been clarified in the law when it was written, but it wasn't.”

An American Hospital Association official questioned why anyone would oppose letting hospitals help uninsured patients obtain coverage, particularly since nearly half the states have not approved the reform law's Medicaid expansion and millions of low-income Americans will go uninsured in those states. “I thought the overriding goal of the Affordable Care Act was to make sure that people who needed health insurance the most got access to it,” said Melinda Hatton, the AHA's senior vice president and general counsel.

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