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New Advisory Opinions on Waiver of Co-insurance for Municipalities

In a pair of related advisory opinions, Numbers 04-12 and 04-13, the Department of Health and Human Services’ (DHHS) Office of Inspector General (OIG) has concluded that it would not impose penalties against municipalities in two separate, but similar, arrangements to waive co-insurance payments (i.e., insurance-only billing). The OIG is the office of the federal government that, among other duties, monitors healthcare providers for violations of the Anti-Kickback Act.

The advisory opinions were requested by two municipalities that each owned their own EMS service. It was noted that both of these services ran all of the emergency calls in their areas and ran no non-emergent calls. Also, these services did not subcontract ambulance service to a third party. One municipality based its proposal to waive copayments on the theory that revenue received from local income taxes satisfied payments for EMS services for residents of the city. Any individual who paid city income taxes was treated as a “resident.” The other entity, a municipal fire district, proposed to waive insurance copays under the theory that local real estate tax revenue was sufficient for payment of EMS services. For the purpose of this arrangement, “residents” included actual property owners as well as employees of property tax-paying businesses while the employee was working on the premises. The OIG accepted both of these definitions.

The Anti-Kickback Act (AKA) generally makes it a criminal offense to intentionally give or receive anything of value in exchange for the referral of Medicare patient business. Under the Social Security Act, remuneration paid to patients/beneficiaries is also a violation. Any arrangement where one purpose of the remuneration is to obtain money for the referral of services or to induce referrals can be a violation. It has long been OIG policy that waiver of co-insurance premiums for reasons unrelated to individualized, good-faith assessments of financial hardship may be considered violations of the Act. Violation of the statute is a criminal felony punishable by a fine of up to $25,000 and/or imprisonment of up to five years. A conviction of an AKA crime can also lead to exclusion from the Medicare and Medicaid programs, meaning that the provider can no longer bill government insurance programs. There can further be civil liabilities, which would require all funds received as part of the illegal activity to be returned to the government, along with additional penalties.

The OIG based its decisions on a “special rule” in the Centers for Medicare & Medicaid Services (CMS) Medicare Benefit Policy Manual (BPM), formerly the Medicare Carrier’s Manual (MCM) and the Medicare Intermediary Manual (MIM). According to chapter 16, section 50.3 of the BPM, a state or local government provider that reduces or waives its charges for patients unable to pay, or charges patients only to the extent of their Medicare and other health insurance coverage, is not viewed as furnishing free services and may therefore still receive payments from Medicare and other government insurance programs. Given this language, the OIG said that waiver of copayments for bona fide residents would not be a violation of the Anti-Kickback Act. While it appears that this section of the BPM only applies to an ability-to-pay analysis, the OIG did not discuss the need to determine ability to pay, but allowed for the municipalities to categorically waive copays for all residents who pay income or property taxes.

The opinions went on to discuss a related issue regarding private services contracting with municipalities for the provision of ambulance services. The OIG stated that the policy of allowing waiver of copays does NOT apply to contracts with outside ambulance suppliers. For example, where a municipality contracts with an outside ambulance provider for services to the municipality’s residents, the municipality cannot require the ambulance provider to waive out-of-pocket co-insurance amounts unless the municipality pays the copays itself through some appropriate arrangement (this topic was discussed in another advisory opinion article published in the November 2003 issue of EMS Magazine). Thus, the OIG points out that there is a significant difference between a municipality’s ambulance service waiving insurance copays for its tax-paying residents and a municipality requiring (or a private service offering) the waiver of copays as a condition of getting the municipality’s ambulance business.

As with any advisory opinion, the OIG stated that these were based on the information given to it by the requesting municipalities, and therefore were dependent on the full and truthful disclosure of facts. In both cases, the opinions cannot and should not be relied upon by parties other than the ones specifically requesting these advisories. The OIG and the federal government are not bound by these opinions and reserve the right to change their position in the future. Specific facts often lead to very different results (for example, the difference between a municipality and a private company contracting with a municipality), therefore, you should consult an attorney before beginning any course of action that you have questions about.

For the same reasons, nothing in this article is intended by the author to be construed as legal advice.

The opinions can be found at; and

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