On  November  7,  2014,  the  United  States  Supreme Court agreed to hear another case involving the Affordable Care Act (“ACA”). King v. Burwell  challenges the availability of tax credits (“subsidies”) for consumers shopping on HealthCare.gov,  the federal health insurance marketplace (also known as “exchanges”).

Currently, states can either run their own insurance exchanges or forego that option in favor of  participating in the federally run marketplace. IRS regulations created under the ACA expressly  authorize subsidies—in the form of federal tax credits—for consumers with certain income  restrictions who purchase health insurance through a state exchange. But the King v. Burwell case  calls into question whether the IRS may extend tax credits to individuals purchasing health  insurance though the federally run marketplace.

In the lower court, the Fourth Circuit Court of Appeals held that the IRS  regulations permissibly  authorize tax credits for both state and federally run marketplaces. The petitioners argue in part  that, given the language of the ACA, Congress intended to limit the tax credits to the state  marketplaces only, and there is no authority for subsidies in federally established exchanges. This becomes an issue of substantial concern because while more  than  30   states  have  refused  or  failed  to  establish  an  exchange,  federal exchanges are still available, and, under the IRS rules, so are subsidies.

The crux of the challenge is that the existence of subsidies triggers a scheme of potential  penalties under the ACA’s employer and individual mandates. The King challengers advocate for a  strict interpretation of the ACA which would limit the subsidies to only those relatively few  states having state-based exchanges. If they are successful, the expansive availability of  subsidies will fail, and so will the threat presented by the controversial mandates.

The case is currently pending before the Supreme Court as Case Number 14-114. This appeal will be  briefed, argued, and decided in the Court’s current 2014-2015 term. More information can be found  on the Supreme Court docket. The lower court opinion of the Fourth Circuit Court of Appeals can be  found here.

Protecting the Integrity of Medicare Act of 2014 (PIMA)

The House Ways and Means Subcommittee on Health recently released a discussion draft of legislation  intended to protect the Medicare program against fraud, waste, and abuse. The “Protecting the  Integrity of Medicare Act of 2014” (“PIMA”) is a bi- partisan effort that includes a 25-point plan  to both strengthen and  streamline Medicare fraud enforcement efforts. The more noteworthy features  of the proposed legislation include:

  • Section 7: to expand the reach of Medicaid Fraud Control Units to investigate and prosecute  complaints of abuse and neglect of Medicaid patients in home and community-based facilities.
  • Section 10: to require the  Secretary to develop a  plan to incentivize greater individual  participation in reporting Medicare fraud and abuse, including  the enhancement of reporting  rewards under the Senior Medicare Patrol (“SMP”) program, expanding the SMP program to the Medicaid  program, and improving public awareness of the program.
  • Section 15: to allow the Secretary to extend the bidding cycle for Medicare Administrative  Contractors (“MAC”) contracts from 5 years to 10 years – although longer term contracts would still  be subject to annual renewal based on MAC performance.
  • Section 17: to design programs to prevent Medicare Part D prescription drug abuse, including the  creation of a high-risk beneficiary drug management program and expanding the activities of  Medicare Drug Integrity Contractors (“MEDICs”). One feature would be to “lock in” high-risk  beneficiaries to one prescriber and one pharmacy for certain opioids and high-risk drugs under  Medicare (and Medicaid).
  • Section 19: to mandate that providers convicted of Medicare fraud will lose their own eligibility  for Medicare benefits unless they work “40 honest quarters” to re- earn their entitlement.
  • Section 20: a widely applauded provision proposing to require the Secretary to study  hospital-physician gainsharing arrangements and recommend appropriate changes in anti-fraud laws.
  • Section 21: to require each home health agency to obtain a $50,000 minimum surety bond as a  Condition of Participation in Medicare. The intent is to make the bond commensurate with the volume  of payments to the home health agency.
  • Section 22: to establish a prior authorization requirement for chiropractors meeting certain  criteria (e.g., chiropractors identified as having aberrant billing patterns) for spinal  manipulation reimbursement after 12 visits.

PIMA remains in discussion draft form, and comments from stakeholders were accepted   through    September  1,   2014.  Organizations   including   the  American 

Hospital Association,  American  Podiatric  Medical  Association,  and Federation  of American Hospitals submitted comments to committee chair Kevin Brady (R-TX). To date, PIMA has not  been formally introduced into the House of Representatives for consideration.

More detailed information about PIMA and a copy of the draft bill can be found here.

Other Healthcare Regulatory News and Updates

The 2015 OIG Workplan: The U.S. Department  of Health and Human Services (“HHS”) Office of  Inspector General (“OIG”) recently released its “Work Plan” for the 2015 fiscal year. The Work Plan  identifies new and continuing focus areas for enforcement initiatives to protect programs  administered by HHS agencies. A copy of the Work Plan can be found here.

Potential Revisions to Permissive Exclusion Criteria: Over the summer, OIG announced its intent to  revise the longstanding criteria (in place since 1997) for implementing permissive exclusion —a  penalty for violations of the Federal False Claims Act, Civil Monetary Penalties Law, and Federal  Anti-Kickback Statute. [Section 1128(b)(7) of the Social Security Act.] (See OIG Final Policy  Statement published December 24, 1997, 62 FR 67392.)

In contemplating revisions to the non-binding criteria, OIG seeks to create greater transparency in  its decision-making process and provide updated guidance for the healthcare community to reflect  the current state of the industry. Specifically, the OIG requested comments on: (i) whether there  should be differences in the exclusion criteria for individuals and entities, and (ii) whether and  how to consider a defendant’s existing compliance program.  OIG is accepting comments through  December 29, 2014 and will then decide whether and how to revise the criteria.

A copy of OIG’s official announcement can be found here. For more information about the current  criteria for permissive exclusion, click here.

Proposal to Amend Safe Harbor Provisions: OIG also recently announced a proposed rule to amend the  safe harbor provisions of the Federal Anti-Kickback Statute and Civil Monetary Penalties Law. The  OIG wishes to incorporate new safe harbors for payments and practices permitted under the  Affordable Care Act (ACA) and the Medicare Prescription Drug, Improvement, and Modernization Act of  2003 (MMA). In addition, OIG proposed revisions to the definition of “remuneration” for consistency  with the Balanced Budget Act of 1997 and Affordable Care Act. Overall, OIG seeks to balance  arrangements that are beneficial and enhance the effective delivery of health care with the risk of  harm from improper referral payments.

OIG is accepting comments on the proposed rule through December 2, 2014.  For more information, a complete copy of the rule can be found here.