Government Scrutiny of Copayment and Deductible Waivers

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By Adrienne Dresevic, Esq. and Leslie Rojas, Esq. of The Health Law Partners, P.C. 

On January 5, the US Department of Justice announced that the government intervened in two qui tam lawsuits against a Florida physician and his medical practice. The complaints allege that the physician performed unnecessary peripheral artery interventions and induced patients to undergo those procedures by routinely waiving the patients’ 20% Medicare copayment – regardless of financial hardship. While the performance of unnecessary procedures is a more obvious form of Medicare fraud, some physicians do not realize that a seemingly well-intentioned waiver of a copayment may subject the physician to liability under the False Claims Act, Anti-Kickback Statute, and Civil Monetary Penalties Laws. Other third-party payors are also targeting their participating physicians for the practice of routinely waiving copayments and deductibles.


Prohibition Against the Routine Waiver of Copayments and Deductibles

The reduction or waiver of copayments and deductibles has been on the government’s radar for quite some time. In 1994, the OIG issued a Special Fraud Alert discussing the illegality of the reduction or waiver of copayments and deductibles (available here).The alert explains that such a waiver is illegal because it results in (i) false claims, (ii) violations of the Anti-Kickback Statute (AKS), and (iii) excessive utilization of items and services paid for by Medicare.

More specifically, a waiver of a copayment may result in a false claim because the provider is misstating the actual charge. For example, if a provider charges $100 for a service, but routinely waives the 20% Medicare copayment, then the actual charge is $80. Therefore, Medicare should pay 80% of $80 ($64), not 80% of $100 ($80). As a result of the provider’s misrepresentation, Medicare would pay $16 more than it should for the service.

Further, a waiver of copayment may result in a violation of the AKS because the statute prohibits the exchange of (or offer or solicitation of) anything of value in an effort to induce the referral of federal health care program business. When a provider waives a copayment, the provider forgives a financial obligation of the patient (ie, offers something of value to the patient). If the offer is an attempt to induce the patient to purchase items or services from the provider, then this violates the AKS.


Exceptions to the Prohibition

There are, however, exceptions to the prohibition against waiving copayments and deductibles. One exception is if the waiver is in consideration of a patient’s financial hardship. In order for this exception to apply, the provider must not routinely waive copayments or deductibles. To illustrate this point, the OIG identified “suspect” acts that indicate the routine waiver of copayments and deductibles, such as:

  • Advertisements that state: “Medicare Accepted As Payment in Full,” “Insurance Accepted As Payment in Full,” or “No Out-Of-Pocket Expense”
  • Advertisements promising that “discounts” will be given to Medicare beneficiaries
  • Routine use of “financial hardship” forms that state the patient is unable to pay the copayment/deductible, but there is no good-faith attempt to determine the beneficiary’s actual financial condition
  • Collection of copayments and deductibles only where the beneficiary has Medicare supplemental insurance (Medigap) coverage
  • Charges to Medicare beneficiaries that are higher than those made to other persons for similar services and items (ie, the higher charges offset the waiver of coinsurance)
  • Failure to collect copayments or deductibles for a specific group of Medicare patients for reasons unrelated to financial hardship (eg, a supplier waives copayments for all patients from a particular hospital in order to get referrals)

In addition, there are exceptions for hospitals that waive copayments for inpatient services as long as certain requirements are met and federal qualified health care centers or certain other health care facilities (under the Public Health Services Act and Social Security Act) that waive copayments for patients who qualify for certain subsidized services.


Penalties for the Waiver of Copayments or Deductibles

Providers who unlawfully waive copayments or deductibles subject themselves to heavy penalties. Submission of a false claim subjects a provider to imprisonment, criminal fines, civil damages and forfeitures, civil monetary penalties, and exclusion from Medicare and state health care programs. A violation of the AKS may result in fines up to $25,000 and imprisonment for up to five years. Moreover, under the Civil Monetary Penalties Laws, a provider may be ordered to pay treble damages plus $50,000 for each violation of the AKS.

Additionally, many third-party payors target providers who routinely waive their beneficiaries’ copayments and deductibles. Such routine waivers may result in the termination of a provider’s participation agreement. Additionally, as a result of the waiver, the payor may claim that there was an overpayment and seek to recoup the money paid to the provider. Therefore, providers should carefully consider their practice of waiving copayments and deductibles, not only for Medicare beneficiaries, but for private insurance company beneficiaries as well.


What Can Providers Do to Protect Themselves? 

First, providers must educate themselves and their staff about the prohibition against the blanket reduction/waiver of copayments and deductibles (as well as the exceptions). Second, as part of an effective compliance program, providers should adopt a policy addressing when and if it is appropriate to waive a copayment or deductible. This policy should include proper documentation guidelines, including, for example, a “Patient Request for Reduction/Waiver of Copayment or Deductible Due to Financial Hardship” form to use to properly review claims of financial hardship. When used correctly (ie, when a good-faith attempt to determine the patient’s actual financial condition is documented), this type of form is helpful to defend against claims of wrongdoing.

The government’s intervention in the above-mentioned lawsuits demonstrates that the government intends to target providers for the unlawful waiver of copayments and deductibles. The penalties are steep, and providers should take proactive steps to protect themselves.

Adrienne Dresevic, Esq. graduated Magna Cum Laude from Wayne State University Law School. Practicing healthcare law, she concentrates in Stark and fraud/abuse, representing various diagnostic imaging providers, e.g., IDTFs, mobile leasing entities, and radiology and multi-specialty group practices.

Leslie Rojas, Esq. graduated from Wayne State University Law School and is licensed to practice law in Michigan and Illinois. Practicing healthcare law, she concentrates on fraud/abuse issues, compliance with federal and state healthcare regulations, health information privacy and technology issues, and transactional and corporate aspects of healthcare.

The authors are members of The Health Law Partners, P.C. and may be reached at (248) 996-8510 or (212) 734-0128, or at

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