Obama exempts health insurers from law that bans kick-backs

The Obama administration has ruled that neither the federal insurance exchange nor the federal subsidies paid to insurance companies on behalf of low-income people are “federal health care programs.” http://www.nytimes.com/2013/11/05/us/politics/federal-health-law-may-not-be-a-federal-health-care-program.html?ref=us
The surprise decision, disclosed last week, exempts subsidized health insurance from a law that bans rebates, kickbacks, bribes and certain other financial arrangements in federal health programs, stripping law enforcement of a powerful tool used to fight fraud in other health care programs, like Medicare.
Under the Affordable Care Act, millions of people will be able to buy insurance from “qualified health plans” offered on exchanges, or marketplaces, run by the federal government and by some states.
Most of the buyers are expected to be eligible for subsidies to make insurance more affordable. The subsidies, paid directly to insurers from the United States Treasury, start in January and are expected to total more than $1 trillion over 10 years.
Ms. Sebelius said the Health and Human Services Department “does not consider” the subsidies to be federal health care programs. She reached the same conclusion with respect to federal and state exchanges, built with federal money, and with respect to “federally funded consumer assistance programs,” including the counselors, known as navigators, who help people shop for insurance and enroll in coverage through the exchanges.
The federal exchange has been plagued with problems since it opened on Oct. 1. The Obama administration said that the online enrollment system for the exchange was out of service again for 90 minutes on Monday afternoon in an “unscheduled outage.” That was in addition to the scheduled down time from 1 a.m. to 5 a.m. each day.
Lawyers and law enforcement officials said Ms. Sebelius’s decision was unexpected because the insurance exchanges and subsidy payments appeared to fit the definition of federal health care programs in the anti-kickback statute.
Generally, the law makes it a crime to pay or receive anything of value in return for the referral of patients or as an inducement for people to buy goods and services reimbursed by federal health care programs. Such programs are defined broadly as “any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States government.”
“The secretary’s decision will have some very significant consequences,” said D. McCarty Thornton, former chief counsel to the inspector general at the Health and Human Services Department. “The federal anti-kickback statute will, in most cases, not apply to subsidized health plans or the items and services furnished by those plans.”
The Justice Department announced on Monday that Johnson & Johnson would pay more than $2.2 billion to resolve criminal and civil investigations. The government said the company had, among other things, paid kickbacks to doctors and nursing home pharmacies to promote the use of certain drugs.
Ms. Sebelius may not have the last word, lawyers said. A whistle-blower could file suit under the False Claims Act, charging that health care providers, health plans or drug makers had defrauded the government, and a federal court might then decide whether the federal exchange or subsidy payments were federal health care programs.

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