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.
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.