The Office of Inspector General (OIG), Health and Human Services, issued an Advisory Opinion allowing an arrangement between a licensed offeror of Medicare Supplemental Health Insurance policies (Medigap Offeror) and a preferred hospital organization (PHO) having network hospitals across the U.S. (the “Arrangement”). Under the Arrangement, the PHO’s network hospitals would provide discounts of up to 100% on Medicare Part A inpatient deductibles incurred by patients who are Medigap policyholders (the “Arrangement”). Normally, these deductibles would have been covered by the Medigap Offeror. Each time a network hospital provides a discount, the Medigap Offeror would pay the PHO an administrative services fee. If a policyholder were admitted to a hospital not in the network, the Medigap Offeror would pay the full Part A hospital deductible to the hospital.
The MediGap Offeror would return a portion of its savings from the Arrangement directly to any policyholder who had an inpatient stay at a network hospital, in the form of a $100 credit toward the next renewal premium for the Medigap policy. Savings realized by the Medigap Offeror would also be reflected in annual loss ratios filed with state insurance departments, to be taken into account when rates are reviewed and approved by the states.
Although the OIG found that the Arrangement could potentially implicate the anti-kickback statute as well as the civil monetary penalty prohibition on beneficiary inducements, the OIG concluded that it would not impose administrative sanctions. The OIG reasoned that the Arrangement would present a sufficiently low risk of fraud or abuse, based on factors including:
- neither the discounts nor the premium credits would increase or otherwise affect Medicare payments;
- the Arrangement would be unlikely to increase utilization because it would only apply to the payment responsibilities that would normally be covered by the Medigap Offeror and, in addition – as the OIG pointed out – it has long held that the waiver of fees for inpatient services is unlikely to result in significant increases in utilization;
- the Arrangement should not result in unfair competition because PHO’s hospital network would be open to any accredited, Medicare-certified hospital meeting state law requirements;
- it would be unlikely to affect professional medical judgment because physicians and surgeons would not receive remuneration under the Arrangement;
- patients would remain free to go to any hospital without incurring additional out-of-pocket expenses for their inpatient stay; and
- the Arrangement would operate transparently, since policyholders would be clearly informed of their freedom to choose any hospital without incurring additional liability or penalties.