CMS Proposes Further Expansion of Rewards for Medicare: Retailer Reward Programs

As we reported last week in our blog, on May 23, 2014, CMS released provisions giving MA plans more flexibility to reward Medicare recipients for healthy behavior.

As we reported last week in our blog, on May 23, 2014, CMS released provisions giving MA plans more flexibility to reward Medicare recipients for healthy behavior. This codified several key provisions including removing the $50 per year and $15 per action dollar limit, expanding the types of behavior for which beneficiaries could be rewarded, and allowing rewards for meeting “incremental goals” rather than just for achieving the completion of a program.  The revised CMS policies took effect 60 days after the May 23 publication of the final rule in the Federal Register. For the new regulations and associated comments see the following link: http://linkis.com/federalregister.gov/BpZWu

CMS took another step on October 3 to expand the use of rewards for Medicare beneficiaries. On October 3, CMS proposed new safe harbors to the anti-kickback program would open the door for retailers to clearly allow customers to receive coupons and reward benefits under loyalty type programs when purchasing drugs and other services covered in whole or in part by federal health care programs, under a rule published in the Federal Register on Oct. 3.

The proposed regulations amend the definition of “remuneration” in the CMP regulations at 42 CFR 1003 by adding certain statutory 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

https://www.federalregister.gov/articles/2014/10/03/2014-23182/medicare-and-state-health-care-programs-fraud-and-abuse-revisions-to-safe-harbors-under-the

Section 6402(d)(2)(B) of ACA adds an exception for rebate or reward programs as section 1128A(i)(6)(G) of the Act by excluding them from the definition of “renumeration” under the Act if they meet three criteria:

The following is an interpretation of the three criteria:

• Criteria 1: the free or less-than-fair-market-value items or services must consist of coupons, rebates, or other rewards from a retailer. This would include coupons (20% discount), buy one get one free, rebate of a portion of a purchase price and “other rewards” such as free items or services, such as store merchandise, gasoline, frequent flyer miles, etc.

• Criteria 2:  the items or services be offered or transferred on equal terms to the public, regardless of health insurance status. This would prohibit discriminating against (“lemon drop”)—or, conversely, “cherry picking”—certain patients on the basis of health insurance status. For example,  a retailer that targets its rewards program to Medicare beneficiaries only would not meet this criterion. On the other hand, if a retailer mailed a coupon for $10 off the next purchase of any item in its store, including prescriptions, to every resident in the surrounding ZIP Code, such a promotion likely would be in compliance with this provision because the coupon would be offered on equal terms to everyone in the ZIP Code, without regard to health insurance status.

• Criteria 3: the offer or transfer of the items or services not be tied to the provision of other items or services reimbursed in whole or in part by Medicare or an applicable State health care program. The objective of this criterion is to attenuate any connection between federally payable items and services and a loyalty program’s rewards; this attenuation should be present both in the manner in which a reward is earned and in the manner in which the reward is redeemed, as explained further below. At the front end of a transaction (“earning” the reward), the reward should not be conditioned on the purchase of goods or services reimbursed in whole or in part by a Federal health care program and should not treat federally reimbursable items and services in a manner that is different from that in which non-reimbursable items and services are treated. For instance, a drugstore program that offered a $20 coupon to customers, including Medicare beneficiaries, who transferred their prescriptions to the drugstore would not meet this criterion because the $20 coupon would be tied to the drugstore’s getting the recipients’ Medicare Part D prescription drug business. On the other hand, a program that awarded a $20 coupon once a customer spent $1,000 out-of-pocket in the store—even if a portion of that $1,000 included copayments for prescription drugs—would likely meet the criterion. We also believe that this attenuation must be present on the “redeeming” end of the transaction and therefore interpret it to exclude from protection rewards programs in which the rewards themselves are items or services reimbursed in whole or in part by a Federal health care program. Thus, if Epsilon Store allowed its customers to redeem reward points only for cost-sharing (i.e., the customer’s out-of-pocket costs) on DME, prescription drugs, or other federally payable items or services, that program would not meet this criterion. On the other hand, if the $10 coupon referenced in the first example could be redeemed on anything purchased in the store, including the customer’s out-of-pocket costs for federally reimbursable items, the coupon could meet the terms of the exception.

CMS has requested comment to the proposed regulations. In their final form, in addition to the expansion of reward programs noted above for MA plans passed on May 23, providing retailers with the opportunity to expand their reward offerings in the Medicare context should provide further opportunity to leverage rewards to improve Medicare beneficiary health status.

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