Category: Affordable Care Act

The State of Health Insurance After President Obama

In President Obama’s weekly address on December 10, 2016, the President encouraged Americans who do not currently have healthcare, to enroll in a health insurance plan under the Affordable Care Act (ACA). In the address, the President likely also wanted to remind everyone listening that the threat of Republicans in Congress repealing this law was now a real possibility. President Obama stated “that if Congress repeals Obamacare as they’ve proposed, nearly 30 million Americans would lose their coverage. Four in five of them would come from working families. More than nine million Americans who would receive tax credits to keep insurance affordable would no longer receive that help.” Now that President-elect Trump will take office in a matter of days, what is the fate of healthcare in America?

“The first order of business is to keep our promise to repeal Obamacare and replace it with the kind of healthcare reform that will lower the cost of health insurance without growing the size of government,” Vice President Elect Pence told a news conference recently. Pence also said that Trump would work with congressional leaders for a “smooth transition to a market-based healthcare reform system” through legislative and executive action. House Speaker Paul Ryan said that lawmakers would take action that did not “pull the rug out from anybody” and that the party had “plenty of ideas.” Democrats and many health-care experts are warning that a swift repeal could lead insurers to stop selling policies to individuals on federally mandated exchanges. More than 12 million Americans are covered under those policies.

The current Health and Human Services Secretary, Sylvia Mathews Burwell, briefed Senate Democrats on December 8, 2016, on the expected unraveling of Obamacare’s insurance exchanges. As previously discussed on the MDM&C blog, Trump’s selection of Representative Tom Price to the position of Secretary of Health and Human Services seems to be Trump’s first step towards repealing the ACA. Price has been a regular voice in opposition to the ACA. Price’s philosophy on fixing Obamacare is rooted in “clear[ing] out the bureaucratic impediments” to health-care providers so that the marketplace can figure out the best way to get people health insurance.

Some commentators have stated that a possible less drastic route Congress may go is to replace the ACA rather than an all-out repeal. Congress could pass a plan that doesn’t call for repeal for several years. Between now and then, there would need to be some kind of transition to whatever replaces Obamacare that did not just dump people off coverage with no alternative. However, others still believe that the Republican Congress will swiftly replace ACA’s ban on health status underwriting and pre-existing condition exclusions, as well as its individual mandate, with a continuous coverage guarantee and high-risk pools. This could mean that if individuals were initially uninsured or if they had to drop coverage because of financial hardship, they may face a penalty when they seek coverage significantly greater than the repealed individual mandate penalty. Many argue that these Republican plans would fall far short of the assistance lower-income Americans need, who are currently being helped by ACA.

However, in his recent 60 Minutes interview, President-Elect Trump assured the public that he agrees with certain parts of ACA. Trump plans to keep the ACA policy that allows young adults to stay on their parents’ insurance plans until age 26, as well as the provision that insurers must cover people with pre-existing conditions.

We are likely to know more in the coming months as Congress and the President-Elect begin to take action.

The Future Is Uncertain For the Patient Protection and Affordable Care Act

With the election of Donald Trump to the office of President of the United States, Republicans and their supporters began implementing plans for the repeal and replacement of President Obama’s signature legislation, the Patient Protection and Affordable Care Act (“ACA”). President-Elect Trump’s selection of Representative Tom Price (R-GA) to the position of Secretary of Health and Human Services signaled the next step in those efforts.

Dr. Price, an orthopedic surgeon, has been a regular voice in opposition to the ACA and many in Congress and the media see this selection as confirmation that every effort will be made to replace the ACA. Several Democrats have already come forth indicating they plan to challenge Dr. Price’s selection as they see any threat to the ACA as a threat to thousands of patients that have only received insurance as a result of the ACA.

While a repeal of the ACA is still not guaranteed and many are already challenging whether it could even be effectuated without significant impacts on the health insurance industry and millions of Americans, it is nevertheless important to understand what a replacement program might look like. Dr. Price has previously submitted one of the more detailed Republican plans to replace the ACA. His previously proposed legislation is known as the Empowering Patients First Act.

Unlike the ACA, Dr. Price’s legislation seeks to minimize government’s role in health care. The following are five key elements of Dr. Price’s prior proposal:

  1. Fixed tax credits that rise with age so that patients can purchase their own insurance on the private market, including across state lines. The tax credits would not fluctuate based on income.
  2. Expand health savings accounts to further incentivize patients to contribute to such accounts to pay co-pays and deductibles.
  3. Preexisting conditions would continue to be excluded as a basis to deny coverage but only if the patient has had continuous insurance for eighteen months prior to selecting a new policy. If not, coverage might be denied for up to eighteen months under the new policy.
  4. Limiting the amount of money companies can deduct from their taxes for employee health insurance expenses.
  5. States would be paid federal funds to set up high risk pools to assist those with preexisting conditions that cannot afford insurance on the private market.

While Dr. Price has indicated his willingness to negotiate and compromise on what the ultimate replacement looks like, it remains to be seen how flexible he and the Republicans will be on a substitute for the ACA. Regardless of the final form, one cannot forget that as Secretary of HHS, Dr. Price would ultimately control the authoring of the enabling regulations to implement the new legislation.

It is anticipated that during President-Elect Trump’s first 100 days in office this issue will be addressed.

CMS Brings Clarity to ACA’s 60-Day Overpayment Rule

Part of the antifraud provisions of the Affordable Care Act (ACA) requires any person who receives an “overpayment” of Medicare or Medicaid funds to “report and return” said overpayment to HHS, the State, or another party if appropriate within sixty (60) days of the “date on which the overpayment was identified.” See, 42 U.S.C. § 1320a-7k(d)(1).  A violation of this so-called “Sixty-Day Rule” is a per se violation of the False Claims Act (FCA) which may lead to treble damages, fines of between $5,500 – $11,000 per claim, and possible imprisonment. Id. § 1320a-7k(d).   See, 31 U.S.C. § 3729(a).

Since the ACA’s enactment there have been serious questions raised by providers regarding when an “overpayment” is “identified” for purposes of starting the clock under the Sixty-Day Rule. Finally, on February 11, 2016, CMS released a final rule, effective March 14, 2016, (the “Final Rule”) which clarifies that : (1) the 60 day window for refunding overpayments is not triggered until both the fact and amount of an overpayment are known; (2) the standard for knowledge is not “actual knowledge,” but when the provider would have identified the overpayment had it exercised reasonable diligence; and (3) the manner in which the refund must be made.

Prior to this Final Rule, it was unclear when the 60-day period began to run, leaving courts to interpose their own interpretation of the ACA in this regard. As we have previously discussed on this blog, U.S. ex rel. Kane v. Continuum Health Partners, No. 11 Civ. 2325, 2015 WL 4619686 (S.D.N.Y. Aug. 3, 2015), addressed that very issue.  In Kane, three hospitals received payment for Medicaid claims that should never have been submitted.  In September 2010, auditors from the New York State Comptroller’s office raised the potential overpayments and determined that these claims were caused by a third-party’s software glitch. The glitch was fixed in December 2010.  The hospitals’ management asked relator Robert Kane to identify claims potentially implicated by the glitch. On February 4, 2011, Kane wrote an email to management attaching a spreadsheet of approximately 900 claims totaling over $1 million that had potentially been affected by the glitch.  Four days later, Kane was terminated, allegedly in retaliation.

Kane filed an FCA and wrongful termination suit on April 5, 2011, which is exactly 60 days after he provided his spreadsheet. In June 2014, the United States government and New York Attorney General intervened on Kane’s behalf, alleging that by failing to further investigate the potential overpayments identified by Kane and delaying repayment for over two years, the hospitals improperly withheld “overpayments” in violation of the Sixty-Day Rule.

The hospitals moved to dismiss, stating that Kane’s spreadsheet had not identified any overpayment for purposes of the ACA, but was merely preliminary. Further, they claimed that because the overpayments had not been definitively ascertained, the sixty-day clock did not start and that they had no obligation to begin repayment for claims until they determined with certainty that those claims had, in fact, been overpaid, and to what extent.

The District Court rejected this argument, and held that the 60-day period begins to run when a provider is put “on notice of a potential overpayment, rather than the moment when an overpayment is conclusively ascertained.” If left as precedent, this would have dramatically lowered the knowledge requirement to sustain a violation of the Sixty-Day Rule, potentially exposing Medicaid providers and suppliers to a myriad of liability under the FCA for “overpayments” not repaid within sixty days.  CMS’s Final Rule changes this, clarifying that the 60-day period for refunding overpayments is not triggered until both the fact and amount of an overpayment are known. The CMS final rule also stated that the standard for knowledge is not “actual knowledge,” but when the provider would have identified the overpayment had it exercised reasonable diligence.  While providers must act with due alacrity to investigate possible overpayments, they need not fear that mere possibility of an overpayment will lead to liability under the FCA unless it is repaid within sixty days.

Although it remains to be seen how the court will apply the Final Rule under the facts and circumstances of Kane, it seems likely that the defendants will renew their motion to dismiss armed with CMS’s new interpretation set forth in the Final Rule.

Supreme Court of the United States to Decide Fate of Federal ACA Subsidies

The Affordable Care Act’s future is again before the U.S. Supreme Court. Today, the Court agreed to review the Fourth Circuit’s decision in King v. Burwell, which this past July upheld the provision of taxpayer-funded subsidies for low income families and individuals seeking to purchase health insurance on one of the thirty-four federally-run exchanges. Approximately 4.7 million people, or 86 percent of all enrollees, qualified for a subsidy in 2014.  The sixteen state-run exchanges will not be affected by this decision.

King was decided the same day as Halbig v. Burwell.  In that case, a three-judge panel of the D.C. Court of Appeals found that the IRS exceeded its authority by establishing the federal exchanges.  This split between the D.C. and Fourth Circuits was resolved in September when the D.C. Circuit vacated the three-judge panel’s ruling and agreed to rehear the case with all eleven judges of the court on December 17, 2014.

As we previously discussed, at issue in both cases is the ACA’s statutory language that authorizes subsidies in the form of tax credits for health insurance bought “through an exchange established by the State.” (emphasis added).

Four justices must agree for a case to be reviewed by the Supreme Court.  In this situation where there is no obvious split among the lower courts on the issue, the fact that four justices voted to take this case may indicate skepticism of the Fourth Circuit’s decision upholding the subsidies.   A decision is expected by June 30, 2015 when the Court’s term officially ends.

CMS to Propose Revisions to the Safe Harbors under the Anti-Kickback Statute, and to the Civil Monetary Penalty Rules Regarding Beneficiary Inducements and Gainsharing

It is anticipated that today the Center for Medicare and Medicaid Services (“CMS”) will publish in the Federal Register a set of proposed rules that would amend the safe harbors to the anti-kickback statute and the civil monetary penalty (“CMP”) rules under the authority of the Office of Inspector General.

The proposed rules will seek to add new safe harbors consistent with statutory provisions of the Medicare Prescription Drug, Improvement and Modernization Care Act, Pub. L. No. 111-148, and the Patient Protection and Affordable Care Act, Pub. L. No. 111-152.  In particular, CMS seeks to amend 42 C.F.R. 1001.952 to make the following changes:

  • a technical correction to the existing safe harbor for referral services;
  • protection for certain cost-sharing waivers, including: pharmacy waivers of cost-sharing for financially needy Medicare Part D beneficiaries; and waivers of cost-sharing for emergency ambulance services furnished by State- or municipality owned ambulance services;
  • protection for certain remuneration between Medicare Advantage organizations and federally qualified health centers;
  • protection for discounts by manufacturers on drugs furnished to beneficiaries under the Medicare Coverage Gap Discount Program; and
  • protection for free or discounted local transportation services that meet specified criteria.

Additionally, CMS seeks to amend the definition of “remuneration” under the CMP regulations at 42 C.F.R. 1003 by adding certain exceptions for:

  • copayment reductions for certain hospital outpatient department services;
  • certain remuneration that poses a low risk of harm and promotes access to care;
  • coupons, rebates, or other retailer reward programs that meet specified requirements;
  • certain remuneration to financially needy individuals; and
  • copayment waivers for the first fill of generic drugs.

CMS also propose to codify the gainsharing CMP set forth in section 1128A(b) of the Social Security Act.

For further information please refer to the Proposed Rule which is available here and which it is anticipated will be officially published to the Federal Register on October 3, 2014. Comments on the proposed amendments will be due within 60 days of the publication of the proposed rules.

D.C. Circuit to Reconsider Key ACA Subsidy Provision En Banc, Any Possible Review by SCOTUS Unlikely Until 2015 at the Earliest

As we discussed approximately six weeks ago, two separate federal appeals courts reached opposite conclusions regarding a key provision of the Affordable Care Act (ACA) that makes subsidies available to individuals who purchase coverage through federally-run exchanges in thirty-six states.  Opponents of the ACA have argued that the tax credits and other subsidies are only authorized in exchanges “established by the State,” not the federal government.

On July 22, 2014, in Halbig v. Burwell, the D.C. Circuit Court of Appeals agreed with the challengers’ position, concluding that “the ACA “unambiguously restricts” the section 36B subsidy to insurance purchased on Exchanges ‘established by the State.’”    Later that same day, the Fourth Circuit Court of Appeals issued a unanimous contradictory ruling in King v. Burwell, a separate case that raised the same challenge to subsidies provided through federally-run exchanges.  In King, the court remarked that challengers could not “rely on our help to deny to millions of Americans desperately-need health insurance through a tortured, nonsensical construction of a federal statute whose manifest purpose, as revealed by the wholeness and coherence of its test and structure, could not be more clear.”

On September 4, 2014, the D.C. Circuit Court of Appeals granted the Government’s request that the entire eleven-judge panel (composed of seven Democratic and four Republican appointees) rehear the case.  Argument is scheduled for December 17, 2014.  A decision can be expected sometime in early/mid-2015.  In addition to Halbig and King, identical challenges to the ACA subsidy provision are before courts in Oklahoma and Indiana.

This recent order by the D.C. Circuit diminishes the immediate likelihood of a review by the Supreme Court, which is unlikely to intervene unless there is an obvious clash among Courts of Appeals.  If the D.C. Circuit aligns itself with the Fourth Circuit, there would be no obvious reason for the Supreme Court to take up this issue unless the other cases raising this challenge to the ACA create a split with the Seventh (which includes Indiana) or Tenth (which includes Oklahoma) Circuit.  On the other hand, if the D.C. Circuit affirms its earlier ruling sometime in the first half of 2015, that issue would not likely reach the Supreme Court this term which ends June 30, 2015, but might be considered during the 2015-2016 Term.  This has the potential to once again propel the ACA into the spotlight just in time for the November 2016 Presidential election.

The Affordable Care Act – Proof of Eligibility

One of the most significant provisions in the Patient Protection and Affordable Care Act (a/k/a “Obamacare”) is the requirement that every citizen or legal resident of the United States, with few exceptions, have suitable health coverage. For persons not covered by employer-provided healthcare, coverage can be obtained from the Health Benefit Exchange in their state of residence, primarily through

As everyone knows, suffered numerous technical difficulties during the initial 90 days of operation. Certain problems continue including the ability to verify whether a person is eligible to obtain coverage from a Health Benefit Exchange. When the initial enrollment period ended in April 2014, approximately 1,000,000 people had insurance applications with inconsistencies.

Many of these cases have been resolved, but a significant number of persons have not responded to requests for documents to verify their eligibility. On August 12, 2014, letters were mailed to 310,000 persons by the Center for Medicare and Medicaid Services (“CMS”) requesting documentation by September 5. Officials at CMS stated that beginning on September 30, CMS would start to notify insurers to discontinue the policies of persons who fail to provide the requested documentation. With the passage of today’s deadline the coming weeks will tell whether CMS carries out their threat and begins contacting insurers to discontinue policies.


Congress Considering Extension of Medicaid Enhanced Payments to Primary Care Physicians Through 2019

One of the signature goals of the Affordable Care Act is to increase Medicaid beneficiary access to primary care services.  To that end, Section 1202 of the Healthcare Education and Reconciliation Act of 2010 provided $230 million in federal funding for “Enhanced Payments” to Medicaid primary care providers from 2011 through 2015.  Momentum now appears to be building to extend these Enhanced Payments through 2019.

In the Senate, the “Community-Based Medical Education Act of 2014” would provide $420 million in funding to extend Enhanced Payments until 2019 and expand the definition of “primary care” to include “family medicine, internal medicine, pediatrics, internal medicine-pediatrics, obstetrics and gynecology, psychiatry, general dentistry, pediatric dentistry, or geriatrics.”  Similarly, in the House, Section 304 of “CHIP Extension and Improvement Act of 2014” proposes an extension of Enhanced Payments through 2019.

There has been some confusion regarding Enhanced Payments as they apply to group practices and whether such payments were required to be paid to the rendering employee physician.  Since then, CMS has issued an informal clarification in the form of a “Q and A” sheet which clarifies that that payment increases to the rendering physician are not absolutely mandatory in all cases, saying “where there is an employment agreement between the physician and the employing entity, the employment agreement might account for the payment increase by noting that the physician accepts his or her salary as payment in full, regardless of Medicaid reimbursement levels.”

If Enhanced Payments continue through 2019 as seems likely, this issue should be addressed by practice group managers and individual physicians to avoid any possible misunderstanding regarding their contracts or with Medicaid managed care organizations which administer the Enhanced Payments.

Federal Appeals Courts Disagree On Subsidies, Creating More ACA Uncertainty

Two separate federal appeals courts have come to opposite conclusions regarding key provisions of the Affordable Care Act (ACA) that make subsidies available to individuals who purchase coverage through federally-run exchanges in thirty-six states.  Approximately 4.7 million people, or 86 percent of all enrollees, qualify for a subsidy to assist in offsetting the cost of coverage in 2014.

Mid-morning on Tuesday, July 22, 2014 a three-judge panel of the U.S. Court of Appeals for the District of Columbia held that the IRS exceeded their jurisdiction when it extended subsidiaries through federally-run exchanges in the states refused or failed to set up their own.  Hours later, the Fourth Circuit of Appeals sitting in Richmond, Virginia upheld the IRS’s authority to grant the subsidies in question.  Statutory language in the ACA which authorizes subsidies in the form of tax credits specifically for insurance bought “through an exchange established by the State,” (emphasis added) is central to both rulings.  Although the contradictory decisions will have no immediate impact on consumers, they have cast additional doubt on the long-term survival of the ACA.

The first opinion, Halbig v. Burwell, held the IRS regulation authorizing tax credits in federal exchanges was invalid. Judge Griffith, writing for the majority, concluded that “the ACA “unambiguously restricts” the section 36B subsidy to insurance purchased on Exchanges ‘established by the State.’”  The court reaffirmed the principle that the law is what Congress enacts, the text of the statute itself, and not the unexpressed intentions or hopes of legislators or a bill’s proponents.  Acknowledging the far-reaching ramifications of its ruling, Judge Randolph, concurring, noted the majority’s hesitancy, saying, “[w]e reach this conclusion, frankly, with reluctance. At least until states that wish to can set up their own Exchanges, our ruling will likely have significant consequences both for millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly.” If upheld, this decision could lead many, if not most, individuals who received subsidies through a federally-run exchange unable to pay their future healthcare premiums.  The Department of Justice has indicated its intention to file a request that all eleven judges of the D.C. Circuit Court of Appeals hear the case en banc.

The ink had barely dried on Halbig when a three-judge panel of the Fourth Circuit Court of Appeals issued a unanimous contradictory ruling in King v. Burwell, a separate case that raised the same challenge to subsidies provided through federally-run exchanges.  In King, the court remarked that challengers could not “rely on our help to deny to millions of Americans desperately-need health insurance through a tortured, nonsensical construction of a federal statute whose manifest purpose, as revealed by the wholeness and coherence of its test and structure, could not be more clear.”

The ACA has been subject to a series of legal challenges since it was enacted four years ago.  Although it has not escaped unscathed, it has thus far survived any cataclysmic damage from the courts.   It seems all but certain that the Government will ask that Halbig be heard en banc by the D.C. Circuit Court of Appeals where Democratic appointees outnumber Republicans seven-to-four.  If the judges vote along partisan lines, that would resolve the split with King from the Fourth Circuit.  These cases are not the last word on this issue, however; similar challenges to the federal subsidies are currently before courts in Oklahoma and Indiana.

Although the Supreme Court could be petitioned to review the matter, the Court is unlikely to intervene unless there is an obvious clash among Courts of Appeals.  Because it is not yet clear if a true schism exists among the Courts of Appeal on this issue, the Supreme Court is unlikely to consider the issue imminently, but would be more likely to do so if a split emerges in the coming months among the lower courts.  For the time being, the Government has indicated that the IRS will continue to provide ACA subsidies in the form of tax credits.

DOJ Intervenes In False Claims Act Case and Alleges Violation for Failure to Return Medicaid Overpayment Within 60 Days of “Identification”

The need to investigate and “identify” potential Medicare and Medicaid overpayments promptly and diligently after they have come to the attention of hospitals and health care providers was underscored by recent action of the Department of Justice (DOJ). On June 27, 2014, DOJ intervened in a qui tam whistleblower lawsuit pending in the United States District Court for the Southern District of New York. It joined in claims under the federal False Claims Act against New York City’s Continuum Health Partners and its constituent hospitals based on the defendants’ failure to return Medicaid overpayments within sixty (60) days of identifying them, as required by § 6402(d) of the Affordable Care Act (ACA). United States ex rel. Kane v. Continuum Health Partners, Inc., et al, (Civil Action No. 11-2325 (ER)) (Complaint in Intervention filed June 27, 2014). These allegations are based solely on the fact that repayment did not occur within the 60-day timeframe required by the ACA and were brought despite defendants’ repayment of all amounts in dispute.

 The qui tam lawsuit that had been filed under seal in the Federal Court for the Southern District of New York included claims against the Healthfirst MCO, its affiliate entities, a large number of New York hospitals and also 20 New Jersey hospitals.  On June 26, 2014 the United States Attorney for the Southern District of New York and the New York Attorney General intervened in part of the case involving New York hospitals.  That same day, the qui tam Amended Complaint was unsealed.  It includes allegations that the 20 New Jersey hospitals had also erroneously billed Medicaid and attempted to unlawfully retain the overpayments in an aggregate amount of approximately $125 million.  In the Third Count, the qui tam Plaintiff asserts claims against the New Jersey hospitals under the New Jersey False Claims Act, N.J.S.A. 2A:32C(g), based on the hospitals’ alleged knowing failure to report and return the overpayments.  The State of New Jersey has not yet indicated whether it will intervene or not.

 Section 6402(d) of the ACA requires any “overpayment” to be reported, explained and returned within 60 days after the date on which it is identified or any corresponding cost report was due, as applicable. 42 U.S.C. § 1320a-7k(d). An “overpayment” is defined as “any funds that a person receives or retains under… [Medicare or Medicaid] to which the person, after applicable reconciliation, is not entitled under such title.” 42 U.S.C. § 1320a-7k(d)(4)(B).  Although to date CMS has not issued expected final regulatory guidance, the statutory text indicates that any overpayment retained past this deadline can lead to liability under the False Claims Act (FCA) in the form of treble damages, civil monetary penalties between $5,000 to $11,000 per violation, attorney’s fees and/or exclusion from Medicare participation. 31 U.S.C. § 3729; 42 U.S.C. § 1320a-7.

 In Kane, the overpayments were not the fault of any of the providers involved, but rather the result of coding errors by Healthfirst, the MCO which contracted with the Continuum providers for services to New York Medicaid managed care enrollees. Starting around early 2009, these errors caused Healthfirst to erroneously authorize the hospitals to seek additional payments from secondary payers. As a result, Continuum impermissibly submitted claims to New York Medicaid on behalf of its constituent providers

 The complaint alleges that in September 2010, the State of New York identified a small number of claims submitted by Continuum on behalf of its hospitals as having been wrongly submitted to Medicaid as secondary payer. Less than six months later, according to the DOJ, an internal investigation at Continuum revealed that approximately 900 specific claims totaling over $1 million may have been submitted to, and paid by Medicaid as a secondary payer, in error. While Continuum eventually made final repayment of all amounts in issue, that process was not completed until March 2013 and only after the Government issued a Civil Investigative Demand concerning these payments in June 2012.

 The DOJ is seeking treble damages in an amount to be determined, penalties of $11,000 for each overpayment retained beyond the 60-day deadline created by the ACA, and costs of suit. This is believed to be the first instance where damages under the FCA are sought solely as a result of failing to comply with the ACA’s requirement that overpayments be returned within 60 days.

 When exactly each alleged overpayment was “identified” by the defendants will be a crucial issue in Kane. This ambiguity concerning the “identification” of overpayments under § 6402(d) has been the source of industry concern since the ACA’s enactment. In February 2012, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule addressing this, at least in part. See 77 Fed. Reg. 32, 9179-9187 (Feb. 16, 2012) (the “Proposed Rule”). In speaking to Medicare, (leaving “[o]ther stakeholders, including, without limitation… Medicaid MCOs … [to] be addressed at a later date”), CMS advocated a knowledge requirement similar to that which exists under the FCA, stating that an overpayment has been identified for purposes of the ACA when “the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate indifference of the overpayment.” Id. at 9180, 9187 (proposed 42 C.F.R. § 401.305(a)(2)).

Concerning “identification,” of overpayments, the Proposed Rule states that a provider “may receive information concerning a potential overpayment that creates an obligation to make a reasonable inquiry to determine whether an overpayment exists.” Id. at 9182. Failure to make such a “reasonable inquiry” with “all deliberate speed after obtaining the information could result in the provider knowingly retaining an overpayment because it acted in reckless disregard or deliberate ignorance of whether or not it received such an overpayment.” Ibid.

Illustrative examples of wrongfully retained overpayments, apropos of Kane, provided in the Proposed Rule include instances where a provider “is informed by a government agency of an audit that discovered a potential overpayment, and… fails to make a reasonable inquiry.” Ibid. In CMS’s view, “[w]hen government agency informs a provider or supplier of a potential overpayment, the provider or supplier has an obligation to accept the finding or make a reasonable inquiry. If the provider’s or supplier’s inquiry verifies the audit results, then it has identified an overpayment and, assuming there is no applicable cost report, has 60 days to report and return the overpayment.” Ibid.

Though the Proposed Rule was never enacted, that is not of any significance in light of the plain language of the statute. Confirming this, CMS warned “all stakeholders that even without a final regulation they are subject to the statutory requirements found in… [Section  6402(d) of the ACA] and could face potential False Claims Act liability, Civil Monetary  Penalties Law liability, and exclusion from Federal health care programs for failure to report and return an overpayment.” Id. at 9180-81.

 By intervening in Kane, the DOJ has signaled its expansive view of what constitutes “identification” of these overpayments and its willingness to seek the draconian remedies permitted by the FCA.