Waiving Co-Payments and Deductibles Required Under
Medicare Part B Is a Basis for a Whistleblower to Bring a Claim
Under the Federal False Claims Act
All About the Medicare Part B Program
Title XVIII of the Social Security Act
prescribes coverage requirements under Part B of the Medicare
program. Medicare Part B covers services and items including
durable medical equipment ("DME"). DME is "equipment furnished by a
supplier . . . that -- (1) can withstand repeated use; (2) is
primarily and customarily used to serve a medical purpose; (3)
generally is not useful to an individual in the absence of an
illness or injury; and (4) is appropriate for use in the home." 42
C.F.R. § 414.202.
Medicare Part B covers blood sugar self-testing
equipment, including blood sugar monitors, blood sugar testing
strips, lancet devices, lancets and glucose control solutions if
the patient meets these requirements: 1) the patient is under a
physician's care for diabetes; 2) the accessories and supplies have
been ordered by the patient's treating physician; 3) the patient
(or patient's caregiver) has been trained to use the required
equipment in an appropriate manner; and 4) the equipment is
designed for home rather than clinical use.
To become a Medicare DME supplier, an entity
must complete a CMS Form 855S (Medicare Enrollment Application for
Durable Medical Equipment, Prosthetics, Orthotics, and
Supplies). In this form, suppliers must certify the
I agree to
abide by the Medicare laws, regulations and program instructions
that apply to this supplier. The Medicare laws, regulations, and
program instructions are available through the Medicare contractor.
I understand that payment of a claim by Medicare is conditioned
upon the claim and the underlying transaction complying with such
laws, regulations, and program instructions (including, but not
limited to, the Federal anti-kickback statute and the Stark law),
and on the supplier's compliance with all applicable conditions of
participation in Medicare.
DME suppliers are also required to meet certain
"supplier standards" under the applicable statutes. 42 CFR
§424.57(c). A supplier must meet and must certify in its
application for billing privileges that it "[o]perates its business
and furnishes Medicare-covered items in compliance with all
applicable Federal and State licensure and regulatory
requirements." 42 CFR §424.57(c)(1).
In order to bill to Medicare Part B for diabetic
supplies, entities must complete and submit an application to the
National Supplier Clearinghouse. If accepted, the supplier is
issued a DME "supplier number." Suppliers submit claims under their
supplier numbers for reimbursement to DME regional carriers
("DMERCs"). DMERCs are under contract with the Center for Medicare
and Medicaid Services ("CMS"), the agency which administers the
Under Medicare Part B, payment for diabetic
supplies is divided into two elements: 1) a deductible and/or
co-pay that is paid by the beneficiary (or secondary insurance),
and 2) the allowable cost that is paid by the government.
Providers - in this case, Defendants - have the responsibility to
bill and collect the deductible and/or co-pay directly from the
Low-income Medicare Part B beneficiaries may
qualify for a waiver of the copayment they owe for diabetic
supplies if the beneficiary's income is no more than 149% of the
federal poverty guideline (see "HHS Poverty
Guidelines", available from the U.S. Department of Health and Human
Services' website at http://aspe.hhs.gov), and his/her
assets, not including the personal residence, are less than $11,990
($23,970 for a married couple). In order to qualify for the waiver,
the beneficiary must complete a financial disclosure form and
provide documentation of proof of income. 42 C.F.R. §
The Medicare Part B diabetic supplies landscape
is currently under reform. Section 302 of the Medicare
Modernization Act of 2003 ("MMA") established requirements for a
new Competitive Bidding Program for certain Durable Medical
Equipment, Prosthetics, Orthotics, and Supplies ("DMEPOS"). Under
the Competitive Bidding Program, DMEPOS suppliers submit
competitive bids to furnish diabetic supplies and CMS awards
contracts to enough suppliers to meet beneficiary demand for the
bid items. The bids represent the amount a DMEPOS supplier is
willing to accept to provide specified items or services to a
Medicare beneficiary. All DMEPOS suppliers must comply with
Medicare enrollment rules, be licensed and accredited, and meet
certain financial standards.
DMEPOS suppliers submitted bids for the first
round of the Competitive Bidding Program in late October of 2009.
The bidding window closed in December of that same year. On January
1, 2011, CMS began the new payment system under the Competitive
Bidding Program for this first round. The Competitive Bidding
Program is now operating in nine metropolitan areas.
In 2013, the program will be expanded to,
inter alia, a national mail order program for diabetic
supplies. Mail order diabetic suppliers that are awarded a
contract will be required to furnish mail order diabetic testing
supplies to Medicare beneficiaries in all parts of the United
States, including the fifty states, the District of Columbia,
Puerto Rico, the U.S. Virgin Islands, Guam, and American
Samoa. CMS opened the sixty-day bid window for national mail
order competition on January 30, 2012. CMS expects to begin
the contracting process in the Fall of 2012 and implement the
contracts and prices in July 2013. If a diabetic supply
company does not receive a contract from CMS through this process,
it cannot be reimbursed by Medicare Part B for diabetic supplies it
provides to beneficiaries. This is a death knell for a diabetic
supply company, since the government is the primary payer for such
The federal Anti-Kickback Statute, 42 U.S.C. §
1320a-7b(b), arose out of congressional concern that remuneration
provided to those who can influence healthcare decisions would
result in goods and services being provided that are medically
unnecessary, of poor quality, or harmful to a vulnerable patient
population. To protect the integrity of the Medicare and Medicaid
programs from these harms, Congress enacted a prohibition against
the payment of kickbacks in any form. First enacted in 1972,
Congress strengthened the statute in 1977 and 1987 to ensure that
kickbacks masquerading as legitimate transactions did not evade its
reach. See Social Security Amendments of 1972, Pub. L. No.
92-603, §§ 242(b) and (c); 42 U.S.C. § 1320a-7b, Medicare-Medicaid
Antifraud and Abuse Amendments, Pub. L. No. 95-142; Medicare and
Medicaid Patient and Program Protection Act of 1987, Pub. L. No.
The Anti-Kickback Statute prohibits any person
or entity from offering, making, soliciting, or accepting
remuneration, in cash or in kind, directly or indirectly, to induce
or reward any person for purchasing, ordering, or recommending or
arranging for the purchasing or ordering of federally-funded
medical goods or services:
and willfully offers or pays any remuneration (including any
kickback, bribe, or rebate) directly or indirectly, overtly or
covertly, in cash or in kind to any person to induce such
(A) to refer an
individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in
whole or in part under a Federal health care program, or
(B) to purchase,
lease, order, or arrange for or recommend purchasing, leasing, or
ordering any good, facility, service, or item for which payment may
be made in whole or in part under a Federal health care program,
shall be guilty of a felony and upon conviction thereof, shall be
fined not more than $25,000 or imprisoned for not more than five
years, or both. 42 U.S .C. § 1320a-7b(b). Violation of the statute
also can subject the perpetrator to exclusion from participation in
federal health care programs and, effective August 6, 1997, civil
monetary penalties of $50,000 per violation and three times the
amount of remuneration paid.
42 U.S.C.§1320a-7(b)(7) and 42 U.S.C.
§1320a-7a(a)(7). Violation of the statute also can subject
the perpetrator to exclusion from participation in federal health
care programs and, effective August 6, 1997, civil monetary
penalties of $50,000 per violation and three times the amount of
remuneration paid. 42 U.S.C. §1320a-7(b)(7) and 42 U.S.C.
The waiver of co-payments, deductibles, and
other payments owed by Medicare beneficiaries has been directly
addressed in government program guidance and advisory opinions for
more than 15 years. The authorities, without exception, hold
that these waivers violate the Anti-Kickback Statute.
OIG Special Fraud Alert. 59 F.R. 242 (December 19,
In 1994, the Office of Inspector General ("OIG")
issued a Special Fraud Alert on Routine Waiver of Copayments or
Deductibles under Medicare Part B. In this fraud alert, the OIG
Routine waiver of
deductibles and copayments by charge-based providers, practitioners
or suppliers is unlawful because it results in (1) false claims,
(2) violations of the anti-kickback statute, and (3) excessive
utilization of items and services paid for by Medicare.
provider, practitioner or supplier is one who is paid by Medicare
on the basis of the ``reasonable charge'' for the item or service
provided. 42 U.S.C. 1395u(b)(3); 42 CFR 405.501. Medicare typically
pays 80 percent of the reasonable charge. 42 U.S.C. 1395l(a)(1).
The criteria for determining what charges are reasonable are
contained in regulations, and include an examination of (1) the
actual charge for the item or service, (2) the customary charge for
the item or service, (3) the prevailing charge in the same locality
for similar items or services. The Medicare reasonable charge
cannot exceed the actual charge for the item or service, and may
generally not exceed the customary charge or the highest prevailing
charge for the item or service. In some cases, the provider,
practitioner or supplier will be paid the lesser of his [or her]
actual charge or an amount established by a fee schedule.
practitioner or supplier who routinely waives Medicare copayments
or deductibles is misstating its actual charge. For example, if a
supplier claims that its charge for a piece of equipment is $100,
but routinely waives the copayment, the actual charge is $80.
Medicare should be paying 80 percent of $80 (or $64), rather than
80 percent of $100 (or $80). As a result of the supplier's
misrepresentation, the Medicare program is paying $16 more than it
should for this item.
In certain cases, a
provider, practitioner or supplier who routinely waives Medicare
copayments or deductibles also could be held liable under the
Medicare and Medicaid anti-kickback statute. 42 U.S.C. 1320a-7b(b).
The statute makes it illegal to offer, pay, solicit or receive
anything of value as an inducement to generate business payable by
Medicare or Medicaid. When providers, practitioners or suppliers
forgive financial obligations for reasons other than genuine
financial hardship of the particular patient, they may be
unlawfully inducing that patient to purchase items or services from
At first glance, it
may appear that routine waiver of copayments and deductibles helps
Medicare beneficiaries. By waiving Medicare copayments and
deductibles, the provider of services may claim that the
beneficiary incurs no costs. In fact, this is not true. Studies
have shown that if patients are required to pay even a small
portion of their care, they will be better health care consumers,
and select items or services because they are medically needed,
rather than simply because they are free. Ultimately, if Medicare
pays more for an item or service than it should, or if it pays for
unnecessary items or services, there are less Medicare funds
available to pay for truly needed services.
OIG Report: Blood Glucose Test Strips: Marketing to
Medicare Beneficiaries. OEI-03-98-00231 (June 2000).
In June 2000, the OIG published a report
entitled, "Blood Glucose Test Strips: Marketing to Medicare
Beneficiaries." The OIG reemphasized its concern with routine
waiver of copayments and deductibles, stating:
beneficiaries who utilize medical supplies on a repeated basis,
such as blood glucose test strips, may be strongly influenced by
marketing practices. Manufacturers' rebates, special dealer sales,
coupons, discounts, and similar financial inducements are all
designed to sway consumer product choice. Entities interested in
reaching diabetics who use testing supplies resort to a variety of
media to promote their products, including radio, television,
specialized periodicals, and newspapers.
incentives which indicate or imply a routine waiver of coinsurance
or deductible could be in violation of 42.U.S.C. 1320a-7b(b), the
Medicare and Medicaid anti-kickback statute. According to an Office
of Inspector General Medicare Fraud Alert (94-04), such routine
waivers of coinsurance or deductibles are unlawful because they
could result in (1) false claims, (2) violations of the
anti-kickback statute, and (3) excessive utilization of items and
services paid for by Medicare. Anyone who routinely waives
copayments or deductibles can be criminally prosecuted and excluded
from participating in Medicare and State health care programs.
42.U.S.C. 1320a-7a(a) (5) prohibits a person from offering or
transferring remuneration to a beneficiary that such person knows
or should know is likely to influence the beneficiary to order
items or services from a particular provider or supplier for which
payment may be made under a Federal health care program.
"Remuneration" is defined as including a waiver of coinsurance and
deductible amounts, with exceptions for certain financial hardship
waivers, which are not prohibited.
OIG Special Advisory Bulletin: Offering Gifts and Other
Inducements to Beneficiaries (August 2002)
In August 2002, the OIG issued a Special
Advisory Bulletin entitled, "Offering Gifts and Other Inducements
to Beneficiaries," which stated:
1128A(a)(5) of the Social Security Act (the Act), enacted as part
of Health Insurance Portability and Accountability Act of 1996
(HIPAA), a person who offers or transfers to a Medicare or Medicaid
beneficiary any remuneration that the person knows or should know
is likely to influence the beneficiary's selection of a particular
provider, practitioner, or supplier of Medicare or Medicaid payable
items or services may be liable for civil money penalties (CMPs) of
up to $10,000 for each wrongful act. For purposes of section
1128A(a)(5) of the Act, the statute defines "remuneration" to
include, without limitation, waivers of copayments and deductible
amounts (or any part thereof) and transfers of items or services
for free or for other than fair market value. (See section
1128A(i)(6) of the Act.)
Congress has long viewed the elimination of
kickbacks as central to any efforts to combat
Medicare fraud and abuse. See United States v.
Greber, 760 F.2d 68, 70-71 (3d. Cir. 1985). Because
kickback schemes negatively affect the integrity of federal health
care programs, the United States has a strong interest in ensuring
the continued viability of False Claims Act
actions to deter and redress health care fraud predicated upon
kickbacks. United States ex rel. Charles Wilkins and Daryl
Willis v. United Health Group, Inc. et al., (3d Cir. Oct.
2010)(No. 10-2747) (Brief for the United States as Amicus Curie
Supporting Appellant)("Amicus Brief").
To protect against the erosion of patient care
and patient safety, courts uniformly agree that compliance with the
Anti-Kickback Statute is a material condition of payment under the
Medicare program. See United States ex rel. Schmidt v.
Zimmer, Inc., 386 F.3d 235, 243 (3d Cir. 2004); United
States ex rel. Conner v. Salina Regional Health Ctr., 543
F.3d 1211, 1223 n.8 (10th Cir. 2008); United States ex rel.
McNutt v. Haleyville Medical Supplies, 423 F.3d 1256,
1259-1260 (11th Cir. 2005); and United States v.
Rogan, 459 F. Supp. 2d 692, 717 (N.D. Ill. 2006),
aff'd, 517 F.3d 449 (7th Cir. 2008).
These and other courts have held that a person
or entity who violates the Anti-Kickback Statute and submits a
claim or causes another to do so has violated the False Claims Act
regardless of what form the claim or statement takes. Many of
these courts have reasoned that the claims are false, and thus
violate the False Claims Act, because there is a false
certification - either express or implied - as to compliance with
the Anti-Kickback Statute each time a claim is submitted.
Moreover, the Anti-Kickback Statute was recently
amended to expressly state what these courts had already held,
namely, that a violation of the Anti-Kickback Statute constitutes a
"false or fraudulent" claim under the False Claims Act. 42
U.S.C. § 1320(a)-7b(g).
For more information on whistleblower claims and to
speak with a whistleblower attorney, please contact Shauna Itri
at email@example.com or
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For further reading:
Firm's Approach to Whistleblower Cases and Claims
Healthcare, Pharmaceutical and Medical Device Fraud Law
Whistleblower Litigation Trends: Medical Fraud Recovered
Government Fraud Under the State False Claims Act
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