Proposed Rule Centers on Medicare Overpayment

We often report on the widespread epidemic of healthcare fraud within the United States, particularly occurring in conjunction with Medicare and Medicaid patients. These cases often involve healthcare facilities that engage in unethical kickback or referral schemes in order to increase profits and incentivize doctors to use a certain lab or hospital. Other types of fraud include upcoding, a practice whereby a healthcare facility bills Medicare or Medicaid for medical services more costly than those actually performed. The federal government, through its Department of Health and Human Services and the Department of Justice, has engaged in a steadfast upheaval against this type of fraud and has successfully prosecuted hundreds of medical facilities over the past several years.

In response to the widespread fraud, a proposed rule is in the works involving overpayment to medical facilities by Medicare. More specifically, the rule would apply to Medicare Advantage (MA) – Part C participants and those enrolled in the Part D prescription drug benefits program. The proposal was drafted in light of several requirements contained within the Affordable Care Act addressing reporting and disclosure regulations in the event Medicare overpays a participant for certain services or prescriptions. Unbeknownst to many Medicare patients, the Affordable Care Act implements strict rules to address the situation in which a medical services organization, supplier of medical products, or prescription drug plan sponsor receives extra reimbursement for services and goods above and beyond the invoiced amount. This is known as overpayment. An organization can face significant fines and penalties for failing to report and repay the overpayment within 60 days

Highlights of Proposed Rule

Six-Year Look Back Period: The proposed rule implements a six-year look period within which Medicare can review a patient’s payment records to identify incidents of overpayment. According to Centers for Medicaid and Medicare Services, this look-back period “balances the interests of the federal government in recouping overpayments with Plan Sponsors’ desire for certainty and finality.” However, overpayments as a result of fraud are not subject to any statute of limitations and may be addressed by authorities at any time.

Definition of ‘Overpayment:’ One important part of the proposed rule is the official definition of the word ‘overpayment.’ The proposal currently defines overpayment as any payment made to a Plan Sponsor who (i) has actual knowledge of the overpayment, (ii) shows reckless disregard to whether an overpayment occurred, or (iii) remains deliberately ignorant to the presence of an overpayment. This definition does not directly address a situation wherein an overpayment has occurred of which the Plan Sponsor is not aware, and it is unclear from the rules of the proposal whether a patient or facility falling within that category would face the same liability as one who intentionally avoided refunding an overpayment.

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