Moving the HME Industry Forward

General Healthcare

Reduction of Patient’s Copayment

July 28, 2014

AMARILLO, TX – Assume that a DME supplier desires to implement a policy entitled, “Collection of Deductibles and Copayments and Economic Hardship Waivers” (“Policy”). Assume that under the proposed Policy, the supplier desires to waive a patient’s copayment if (i) the patient’s family income is less than 400% of the federal poverty guidelines (“FPG”) and (ii) the patient does not have secondary insurance.

Assume that the supplier’s experience is that many patients who have family incomes between 200 and 400% of the FPG are unable to afford copayments. Lastly, assume that the supplier takes into consideration the fact that individuals at this income level may qualify for premium assistance under the Patient Protection and Affordable Care Act (“PPACA”).

Applicable Law
Under the federal anti-kickback statute, DME suppliers may not “knowingly and willfully offer or pay any remuneration . . . to any person to induce such person . . . to refer” business reimbursable by a federal health care program.  The Office of Inspector General (“OIG”) has indicated that routine waivers or reductions of copayments implicate the federal anti-kickback statute.  However, DME suppliers do not violate the anti-kickback statute if they waive cost-sharing obligations after the patient has proven a financial hardship.

The OIG has identified procedures that will reduce the risk that a supplier will violate a federal statute. The OIG recommends that suppliers adopt written criteria for determining a patient’s financial need. The OIG has indicated that “[t]he ‘financial need criterion’ is not limited to ‘indigence,’ but can include any reasonable measures of financial hardships . . . [such as] the local cost of living; a patient’s income, assets, and expenses; a patient’s family size; and the scope and extent of the patient’s medical bills.”

PPACA extends financial assistance to individuals with incomes of 400% of the FPG.  Similarly, this income level may be a reasonable measure of financial hardship for purposes of reduced copayments as long as the supplier evaluates the totality of the patient’s circumstances and implements other safeguards to avoid a practice of routinely waiving copayments.

Premium Assistance under PPACA
Individuals who meet the following conditions are eligible for premium assistance under PPACA: (1) the individual’s employer does not offer coverage, or coverage offered by the employer is underfunded ; (2) the individual is not covered by a federal health care program; and (3) the individual’s modified adjusted income  is between 100 and 400% of the FPG.  Individuals eligible for premium assistance will receive a subsidy based on their income level.

For those eligible for premium assistance under PPACA, the law establishes the maximum percent of the individual’s modified adjusted income that the individual will have to pay toward the premium of the second lowest cost silver plan.  If the cost of the premium for this plan exceeds the maximum percent of an individual’s income identified under PPACA, then the individual may receive financial assistance.

For example, assume Mr. Smith’s income for 2014 is $28,735, which is 250% of the federal poverty line. The cost for the second lowest cost silver plan in his area is $5,733. Under PPACA, Mr. Smith may receive financial assistance if the cost of the premium is greater than 8.05% of his income (i.e. $2,313). Therefore, Mr. Smith will receive premium assistance in the amount of $3,420. This is the amount of the premium ($5,733) minus $2,313 (i.e. the limit established under PPACA for Mr. Smith’s income level).

As long as the DME supplier assesses an individual’s ability to pay a copayment in a manner similar to that of PPACA and implements other safeguards against routine waivers, the supplier may consider income at 400% of the applicable FPG eligible for a copayment reduction. In a manner similar to the assessment under PPACA, the supplier should consider the amount of the copayment and all sources of income available to the patient when the supplier determines whether or not to waive or reduce the patient’s copayment. The supplier should also implement other safeguards discussed below to avoid a practice of routinely waiving patients’ cost-sharing obligations.

Safeguards against Routine Waivers
A business practice of routinely waiving patients’ cost-sharing obligations may violate the federal anti-kickback statute, as well as state law. To avoid concerns that the supplier may be engaging in a routine business practice of waiving copayments, the supplier may want to implement the following safeguards:

1) The supplier should ensure the Policy reflects the supplier’s actual practices.

2) The supplier should require patients who may qualify for a full or partial waiver to complete and sign the application required under the Policy. Furthermore, the supplier should keep the signed applications on file.

3) The supplier should request some form of documentation verifying the application (e.g., a pay stub or W-2) when possible. Moreover, the supplier should require such documentation in the event the supplier has any doubts regarding the validity of information provided on the application.

4) The amounts of the copayment reductions should be granted on a sliding scale that is based upon the patients’ resources. For example, patients with incomes at 100% of the FPG may be eligible for full waivers whereas patients with incomes between 200 and 400% of the FPG may only qualify for partial waivers. The amount of the actual waiver should depend on the particular patient’s resources, and the supplier should attempt to collect some copayment for patients with income levels above 100% of the applicable FPG.

5) The patient’s income level should not be the sole factor considered by the supplier. The supplier should evaluate the totality of the patient’s circumstances to determine whether the copayment is truly a financial hardship for the patient. Therefore, among other items, the supplier should consider the amount of the copayment, resources available to the individual, and the individual’s expenses.

6) The supplier should periodically assess the percentage of its patient population that receives reduced copayments. If the percentage is 10% or greater, then an enforcement authority may allege that the supplier is engaging in a routine business practice of waiving copayments. Accordingly, the supplier will need to take steps to reduce the qualifying percentages for full or partial waivers.  

Conclusion
A patient with an income at 400% of the applicable FPG is a reasonable measure of the person’s ability to afford his or her copayment. Even though this is a reasonable measure, the supplier should implement additional safeguards to avoid routinely waiving copayments.

Jeff Baird and Louis Feuer will be co-presenting a webinar for AAHomecare on Thursday, August 14.
See details below:

AAHOMECARE’S EDUCATIONAL WEBINAR
Innovative Marketing While Remaining Within Legal Parameters

Presented by:
Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Louis Feuer, Dynamic Seminars & Consulting, Inc.

Thursday, August 14, 2014
2:30-4:00 p.m. EASTERN TIME

Sign up now for Innovative Marketing While Remaining Within Legal Parameters on Thursday, August 14, 2014, 2:30-4:00 pm ET, with Jeffrey S. Baird, Esq., Chairman of the Health Care Group of Brown & Fortunato, PC and Louis Feuer of Dynamic Seminars & Consulting, Inc.

Contact Ika Sukh at ikas@aahomecare.org to register.
FEES:    Member: $99.00    Non-Member: $129.00

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. He represents pharmacies, HME companies, and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization. He can be reached at (806) 345-6320 or jbaird@bf-law.com.