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Secretary of Health and Human Services Kathleen Sebelius announced that
the Obama administration will not consider the federal insurance exchange
or the subsidies the Government pays to insurance companies to be “federal
health care programs.”

For most people, the ruling will be a head-scratcher. It’s hard to
figure how you could argue that the federal insurance exchange is not
a “federal health care program.”

But whistleblower lawyers like me are disturbed about the decision, because
it has an extremely important consequence: it means that the insurance
companies on the exchanges don’t have to abide by the federal anti-kickback laws.

The anti-kickback statute, found at
42 U.S.C. § 1320a-7b(b), makes it illegal to pay somebody or give them valuable freebies in order
to get referrals from them or in order to generate Federal health care
program business.

Medicare and Medicaid fraud lawyers like me immediately saw a host of potential
problems. Drug companies will argue that now they can give coupons to
people who are buying insurance on the federal exchange. The coupons –
which of course will only be for the newer, more expensive drugs –
will lower the cost of the drugs to patients, but will cost taxpayers
more as they will have to buy the more expensive drug.

According to a New York Times article,
Strategic Move Exempts Health Law From Broader U.S. Statute, the president of the Pharmaceutical Care Management Association warned
that: “The coupons steer consumers away from lower-cost alternatives
to more expensive drugs, increasing costs to insurers and to the government.”

It is hard to reconcile the new ruling with what HHS has said about the
anti-kickback laws in the past. According to Health and Human Services,
the purpose of the anti-kickback laws “is to protect the Medicare
and Medicaid programs from increased costs and abusive practices resulting
from provider decisions that are based on self-interest rather that cost,
quality of care or necessity of services.”

The New York Times noted that HHS’s decision may not be the final
word if a federal court rejects HHS’s interpretation in a lawsuit
filed by a whistleblower under the False Claims Act.

Until a whistleblower steps forward with information about how a company
has been defrauding the government through the exchange, we’d better
get used to paying more of our tax money toward drugs and medical care.

The federal anti-kickback statutes are similar to, but distinct from, the
Stark Law, found at 42 U.S.C. § 1395nn. The Stark Law is aimed at
stopping what had become an fairly widespread industry practice, in which
physicians referred patients for health services they themselves owned,
or in which hospitals paid physicians for patient referrals. The concern,
of course, was that an objective doctor might not believe the patient
needed the services at all, or might conclude that a different service
provider could better meet the needs of the patient. The law prohibits
the physician from referring the patient, and also makes it illegal for
the health service to bill Medicare for treating a patient who is referred
in violation of the law. The hospital and the doctor have to return the
overpayments even if they did not intend to violate the law. If the violation
was intentional, they may face penalties and even being excluded from
the Medicare program.