Determining When Copay Waivers Are Allowed

More education is needed to explain when waivers are allowed.

The age-old question of “can we offer cash-pay discounts, professional courtesy, and/or the waiver of co-payments or deductibles?” continues to be as relevant today as it was two decades ago. There have been a lot of opinions shared over the years by various investigational organizations, in addition to Medicare, but yet, here we are, still working towards educating healthcare professionals throughout our industry. So I thought I would focus on those opinions that have been the most definitive and consistent over the years.

I will begin with Medicare, whereby they state, “collection efforts to Medicare must be no less than to other beneficiaries (but can have less restrictive efforts for non-Medicare beneficiaries, including the uninsured), and substantial discounting to the uninsured, including the non-indigent, does not render a hospital’s charge structure entirely fictitious.” There is a published FAQ for hospitals on this topic, and it can be found online here. The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) has also published documents on this topic for hospitals, including this one, which focuses on “Hospital Discounts Offered to Patients Who Cannot Afford to Pay Their Hospital Bills.”

The OIG’s position with regard to these issues includes their concern with copay waivers serving as an inducement to Medicare beneficiaries to use an entity’s or individual’s services. It is critical to keep in mind that by statute, improper copay waivers can result in civil monetary penalties. The OIG has determined, consistent with the statute, that copay waivers are allowed if:

• There is an individualized determination of financial need;
• The determination is based on uniformly applied criteria;
• The financial need criteria are reasonable; and
• The policy is not advertised.

To take it a step further, with regard to determining whether financial need criteria are reasonable, OIG suggests considering the following:

• First is the local cost of living;
• Second is the patient’s income, assets, and expenses;
• Third is the patient’s family size; and
• Fourth is the scope and extent of a patient’s medical bills.

For those in a medical practice, the rules apply to you as well, with some minor variances making restrictions a bit less onerous. Keep in mind that when we are talking about violations, we are tying them (for the most part) to the federal programs, and as such, waiving copays and/or deductibles for government program beneficiaries potentially implicates at least the following laws:

1. Monetary Penalties Law, which falls under the federal Civil Monetary Penalties Law (CMPL), and prohibits offering or transferring remuneration to federal program beneficiaries if the provider knows or should know that the remuneration is likely to influence the beneficiary to order or receive items or services payable by federal or state healthcare programs, such as Medicare, from a particular provider. (42 USC 1320a-7a(a)(5)). Violations may result in penalties of $10,000 per item or service provided, treble damages, repayment of amounts paid, and exclusion from federal programs. (Id.; 42 CFR 1003.102). The CMPL specifically defines “remuneration” to include waivers of copays and deductibles. (42 USC 1320a-7a(i)).
2. Anti-Kickback Statute. The federal Anti-Kickback Statute (AKS) prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration to any person to induce such person to order or receive any items or service for which payment may be made under a federal healthcare program, unless the arrangement fits within a regulatory safe harbor. (42 USC 1390a-7b(b)). The AKS is violated if “one purpose” of the remuneration is to induce federal program business, and was highlighted in United States v. Greber, 760 F.2d 68 (3rd Cir. 1985)).

Violations may result in a five-year prison term, $25,000 criminal penalty, $50,000 administrative penalty, treble damages, and exclusion from Medicare and Medicaid. (Id.; 42 CFR 1003.102). The Patient Protection and Affordable Care Act (PPACA) also made an AKS violation an automatic violation of the False Claims Act, which may result in additional penalties of $5,500 to $11,000 per claim submitted, and repayment of amounts improperly received. (42 USC 1320a-7a(a)(7); 42 CFR 1003.102).

The HHS OIG has interpreted the Anti-Kickback Statute to apply to waiving patient cost-sharing amounts if “one purpose” of the waiver is to induce or reward federal program business: a difficult standard to defend against.

Understanding the areas of concern raised by the OIG will ensure that you mitigate your risks and stay within the lines of what is acceptable (i.e., legal). The OIG has specifically warned against the following practices:

• Advertisements that state “Medicare accepted as payment in full”, “insurance accepted as payment in full,” or “no out-of-pocket expenses.”
• Advertisements promising that “discounts” will be given to Medicare beneficiaries.
• Routine use of “financial hardship” forms, which state that the beneficiary is unable to pay the coinsurance/deductible (i.e., there is no good-faith attempt to determine the beneficiary’s actual financial condition).
• Collection of copayments and deductibles only when the beneficiary has Medicare supplemental insurance (“Medigap”) coverage (i.e., the items or services are “free” to the beneficiary).
• Charges to Medicare beneficiaries that are higher than those made to other persons for similar services and items (the higher charges offset the waiver of coinsurance.)
• Failure to collect copayments or deductibles for a specific group of Medicare patients for reasons unrelated to indigency (e.g., a supplier waives coinsurance or deductible for all patients from a particular hospital in order to get referrals).
• “Insurance programs” that cover copayments or deductibles only for items or services provided by the entity offering the insurance. The “insurance premium” paid by the beneficiary is insignificant and can be as low as $1 a month, or even $1 a year. These premiums are not based upon actuarial risks, but instead are a sham used to disguise the routine waiver of copayments and deductibles.

As I discussed earlier in this article, there are exceptions, and one of them includes “financial hardship.” OIG has confirmed that it will not enforce the CMPL and/or the AKS against providers that waive copays or deductibles due to “genuine financial hardship.” The CMPL specifically excludes from the definition of “remuneration” the waiver of copays and deductibles if all of the following conditions are satisfied:

• The waiver is not offered as part of any advertisement or solicitation;
• The person does not routinely waive coinsurance or deductible amounts; and
• The person
  • Waives the coinsurance and deductible amounts after determining in good faith that the individual is in financial need; or
  • Fails to collect coinsurance or deductible amounts after making reasonable collection efforts.

Beyond the laws discussed above, additional laws could be implicated with regard to waiving cost-sharing amounts. The waiver of copays and deductibles for referring physicians could establish a financial relationship that might trigger the federal Stark law, unless the arrangement was structured to fit within a regulatory safe harbor, such as the “professional courtesy” exception, which can be found at 42 USC 1395nn; 42 CFR 411.357(s). It is critical to keep in mind that states may also have their own anti-kickback statutes or laws prohibiting the waiver of copays or deductibles.

In conducting my research for this article, rather than using the typical states such as New York, Pennsylvania, Florida, Michigan, and Texas, I looked for a state that most might not think would be restrictive, and I landed on Idaho. Their law states, “It is unlawful for a service provider to engage in a regular practice of waiving, rebating, giving, paying, or offering to waive, rebate, give, or pay all or part of a claimant’s deductible or claim for casualty, disability insurance, worker’s compensation insurance, health insurance or property insurance.”(IC 41-348).

This is why it is critical to look within your specific state to determine the applicability of the laws, statutes, acts, and/or regulations. Here is the OIG published report from May 1991 I addressed earlier in this article, and on my recent Monitor Mondays segment: (https://oig.hhs.gov/fraud/docs/alertsandbulletins/121994.html)

The other question I often get regarding matters tied to waiver of co-pays and/or deductibles or cash pay discounts relates to private payers. Beyond the laws in your state that all of your private payers will refer to are the conditions of participation outlined by these payors in their contracts, which generally require that the provider collect copays and deductibles. In the event, you fail to make a reasonable attempt to collect, and should you fail to get the payors’ expressed written consent, you could wind up in violation of your contract terms and conditions, resulting in a breach of contract or the obligation to repay for over-estimating your costs. I do know from history that the majority of payers would not complain if you establish that the waiver of the cost-sharing amount was due to financial need. However, don’t just do it; get some type of confirmation from the payor.

To ensure compliance with all payors, make sure you have updated policies and procedures, and that you have trained your staff appropriately, so they know how to respond in the event a situation arises concerning waiver of copays and/or deductibles. If a true hardship situation should arise, make sure to document it thoroughly, in the event it causes a dispute with your payors’ policies, so that you have something defensible. As I tell my clients all the time, addressing issues upfront usually allows you to avoid costly repayments or adverse actions on the back end.

Programming Note: Listen to Sean Weiss live on Monitor Mondays, 10-10:30 a.m. EST.