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Offering gifts and other inducements to beneficiaries



August 2002


Under section 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.) The statute and implementing regulations contain a limited number of exceptions. (See section 1128A(i)(6) of the Act; 42 CFR 1003.101.)

Offering valuable gifts to beneficiaries to influence their choice of a Medicare or Medicaid provider1 raises quality and cost concerns. Providers may have an economic incentive to offset the additional costs attributable to the giveaway by providing unnecessary services or by substituting cheaper or lower quality services. The use of giveaways to attract business also favors large providers with greater financial resources for such activities, disadvantaging smaller providers and businesses.

The Office of Inspector General (OIG) is responsible for enforcing section 1128A(a)(5) through administrative remedies. Given the broad language of the prohibition and the number of marketing practices potentially affected, this Bulletin is intended to alert the health care industry as to the scope of acceptable practices. To that end, this Bulletin 1For convenience, in this Special Advisory Bulletin, the term “provider” includes practitioners and suppliers, as defined in 42 CFR 400.202. provides bright-line guidance that will protect the Medicare and Medicaid programs, encourage compliance, and level the playing field among providers. In particular, the OIG will apply the prohibition according to the following principles:

First, the OIG has interpreted the prohibition to permit Medicare or Medicaid providers to offer beneficiaries inexpensive gifts (other than cash or cash equivalents) or services without violating the statute. For enforcement purposes, inexpensive gifts or services are those that have a retail value of no more than $10 individually, and no more than $50 in the aggregate annually per patient.

Second, providers may offer beneficiaries more expensive items or services that fit within one of the five statutory exceptions: waivers of cost-sharing amounts based on financial need; properly disclosed copayment differentials in health plans; incentives to promote the delivery of certain preventive care services; any practice permitted under the federal anti-kickback statute pursuant to 42 CFR 1001.952; or waivers of hospital outpatient copayments in excess of the minimum copayment amounts.

Third, the OIG is considering several additional regulatory exceptions. The OIG may solicit public comments on additional exceptions for complimentary local transportation and for free goods in connection with participation in certain clinical studies.

Fourth, the OIG will continue to entertain requests for advisory opinions related to the prohibition on inducements to beneficiaries. However, as discussed below, given the difficulty in drawing principled distinctions between categories of beneficiaries or types of inducements, favorable opinions have been, and are expected to be, limited to situations involving conduct that is very close to an existing statutory or regulatory exception.
In sum, unless a provider’s practices fit within an exception (as implemented by regulations) or are the subject of a favorable advisory opinion covering a provider’s own activity, any gifts or free services to beneficiaries should not exceed the $10 per item and $50 annual limits.2

In addition, valuable services or other remuneration can be furnished to financially needy beneficiaries by an independent entity, such as a patient advocacy group, even if the benefits are funded by providers, so long as the independent entity makes an independent determination of need and the beneficiary’s receipt of the remuneration does not depend, directly or indirectly, on the beneficiary’s use of any particular provider. An example of 2The OIG will review these limits periodically and may adjust them for inflation if appropriate such an arrangement is the American Kidney Fund’s program to assist needy patients with end stage renal disease with funds donated by dialysis providers, including paying for their supplemental medical insurance premiums. (See, e.g., OIG Advisory Opinion No. 97-1 and No. 02-1.)

Elements of the Prohibition
  • Remuneration
  • Inducement
  • Beneficiaries
  • Provider, Practitioner, or Supplier
  • Additional Regulatory Considerations
  • Complimentary local transportation
  • Government-sponsored clinical trials
  • Conclusion

Congress has broadly prohibited offering remuneration to Medicare and Medicaid beneficiaries, subject to limited, well-defined exceptions. To the extent that providers have programs in place that do not meet any exception, the OIG, in exercising its enforcement discretion, will take into consideration whether the providers terminate prohibited programs expeditiously following publication of this Bulletin.

The Office of Inspector General (OIG) was established at the Department of Health and Human Services by Congress in 1976 to identify and eliminate fraud, abuse, and waste in the Department’s programs and to promote efficiency and economy in departmental operations. The OIG carries out this mission through a nationwide program of audits, investigations, and inspections.

The Fraud and Abuse Control Program, established by the Health Insurance Portability and Accountability Act of 1996 (HIPAA), authorized the OIG to provide guidance to the health care industry to prevent fraud and abuse and to promote the highest level of ethical and lawful conduct. To further these goals, the OIG issues Special Advisory Bulletins about industry practices or arrangements that potentially implicate the fraud and abuse authorities subject to enforcement by the OIG.

State Rules

State chiropractic laws and rules often place restrictions on chiropractic advertising:

  1. Defining and restricting false or misleading advertising
  2. Prohibiting promises of a cure
  3. Requiring the name of the chiropractor to be included in all advertising
  4. Testimonial prohibitions which often require a signed written statement by the patient
  5. Requirements for a signed warning by the patient when discounted services end and fee for services begin

Each state has its own nuances which require a state by state analysis coupled with the specific advertising the chiropractic clinic is interested in doing.

Financial Hardship and Chiropractic Advertising

The federal government and most states allow for special discounts for patient with financial hardship. The key issues in giving discounts for financial hardship are avoiding using it as a blanket way to offer deals and when used, have a set clinic policy that makes sense and is consistently applied.