CMS UPS THE ANTE FOR PLAN FRAUD AND ABUSE RISKS CONCERNING CONTRACTS WITH PROVIDERS OF ADMINISTRATIVE SERVICES

August 28, 2024

CMS recently adopted new rules that regulate the amount that Medicare Advantage and MAPD plans can pay to third parties for providing administrative services. These services include providing Health Benefit Assessment support and call center services, developing software to permit agents to compare plan benefits, helping beneficiaries fill out forms and monitoring agent licensure and training, etc. (“Administrative Services”). Under the old rules, CMS limited Plans’ third-party compensation for these services to fair market value. The new rule limits payment for these services to $100 per member per year (“Fixed Fee Provision”).

CMS also adopted a requirement that prevents Plan contracts with brokers, etc. from including contract terms that impair an agent’s ability to “objectively assess” the advantages of one plan over another (“Contract-Terms Restriction”). This rule applies to contract terms that have “the direct or indirect effect of creating an incentive that would reasonably be expected to inhibit an agent’s or broker’s ability to objectively assess and recommend which plan best meets the health care needs of a beneficiary (emphasis added).”

As CMS explained, its rationale for adopting these new rules is to level the marketing playing field between large national plans and smaller regional plans (“2024 Rule”). A group of Broker Trade Associations and others sued CMS, obtaining a nationwide injunction covering both of these rules. The injunction remains in place until the underlying litigation, and any appeal, is concluded, which could extend the injunction through 2026.

However, the language that CMS used in adopting these rules, and in reacting to the injunction, could signal risks for plans following current practices. The 2024 Rule states that Plan payments that follow current practices, and contract terms that incent an agent to favor one plan over another, could result in payments that exceed fair market value. CMS then states that under governing law, such payments could violate the Anti-kickback statute. While the 2024 Rule does not state explicitly that continuing current practices will result in anti-kickback issues, CMS seems to be teeing this up. CMS issued a memorandum following the issuance of the injunction, stating that the federal law that governed Administrative Payments prior to the adoption of the 2024 Rule continues to be governing law. CMS did not mention the injunction, nor did it retract or revise any of the 2024 Rule’s cautionary language.

In adopting the 2024 Rule, CMS included language that is critical of existing practices. Stating that “agents and brokers are presented with a suite of questionable financial incentives that are likely to influence which MA plan an agent encourages a beneficiary to select during enrollment.” CMS says that it adopted these rules to ensure that the “compensation paid to agents and brokers incentivizes them to enroll individuals in the MA plan that is intended to best meet their health care needs.” CMS observed that complaints about administrative payments “have escalated at a pace that mirrors the growth of administrative or add-on payments, which we contend are being misused to pay agents and brokers over and above the CMS-set compensation limits on payment to agents and brokers.” CMS continued “we believe payments categorized by MA organizations as ‘administrative expenses,’ paid by MA organizations to agents and brokers, have significantly outpaced the market rates for similar services provided in non-MA markets, such as Traditional Medicare with Medigap.”

CMS identified current practices that potentially create fraud and abuse risks, which we note below. Recall that when CMS discusses a troubling practice, CMS includes contract terms that indirectly incent the disfavored practice:i

• Compensation or contract renewal terms that are contingent upon attaining enrollment targets.

• Contracts that specify that broker/TMPO bonuses must be paid to agents who achieve prespecified enrollment targets.

• Expense reimbursement paid on a “per enrollment” basis for marketing events reaching many potential enrollees.

• Contracts that pay a broker/agent/TMPO a bonus for declining to represent a competing plan.

• Contracts that offer separate compensation for “conducting health risk assessments (HRAs).” CMS cites a study reported by the Centers for Disease Control that apparently finds that the FMV payment rate for this service, when performed by non-medical personnel, should be $12.50 per hour, and that the service should take 20 minutes to complete.

• Contracts that offer separate compensation for the “cost of a customer relationship management (CRM) system (the software used to connect and log calls to potential enrollees).” CMS reports that this tool should cost $50.00 per month, noting that a single successful enrollment would cover the annual cost of this expense. Contracts that offer separate compensation for broker/agent “licensing, training and testing, and [call] recording requirements.” CMS notes that the FMV for licensing, training and testing should be $31.00 per individual.ii

• Compensation that is tied to the health status of the beneficiary (for example, cherry-picking). Mann Legal has a great deal of experience in these matters and would be pleased to advise. Find us at www.mannlegalteam.com.

Mann Legal provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Readers should not act upon this information without seeking advice from professional advisers.

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Medicare Program; Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Program for Contract Year 2024-Remaining Provisions and Contract Year 2025 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All Inclusive Care for the Elderly (PACE)”, 89 FR 30448 at 30616-26.

Interestingly, CMS acknowledges that it lacks the data and access to private contracts to precisely identify the fair market value for the services that it defines as administrative services. CMS states “the true cost of most administrative expenses can vary greatly from one agent or broker to another and is based in data and contracts that CMS does not have access to, so it would be extremely difficult for us to accurately capture, making a line-item calculation not practicable.” 89 FR 30626.