[Federal Register: May 19, 2004 (Volume 69, Number 97)]
[Rules and Regulations]
[Page 28842-28846]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19my04-10]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of Inspector General
42 CFR Part 1003
RIN 0991-AB30
Medicare and State Health Care Programs; Fraud and Abuse: OIG
Civil Money Penalties Under the Medicare Prescription Drug Discount
Card Program
AGENCY: Office of Inspector General (OIG), HHS.
ACTION: Interim final rule with comment period.
-----------------------------------------------------------------------
SUMMARY: In accordance with section 1860D-31 of the Social Security
Act, this rule sets forth the OIG's new authority for imposing civil
money penalties (CMPs) against endorsed sponsors under the Medicare
prescription drug discount card program that knowingly engage in false
or misleading marketing practices; overcharge program enrollees; or
misuse transitional assistance funds.
DATES: Effective date: These regulations are effective on June 18,
2004.
Comment date: We will consider comments if we receive them at the
appropriate address, as provided in the address section below, no later
than 5 p.m. on July 19, 2004.
ADDRESSES: In commenting, please refer to file code OIG-54-FC. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission. Please mail or deliver your written
comments to the following address: Office of Inspector General,
Department of Health and Human Services, Attention: OIG-54-FC, Room
5246, Cohen Building, 330 Independence Avenue, SW,. Washington, DC
20201.
Please allow sufficient time for us to receive mailed comments on
time in the event of delivery delays. Because access to the Cohen
Building is not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the OIG drop box located in the main lobby of the building. For
information on viewing public comments, see section IV. in the
SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Joel Schaer, Office of Management and
Policy, (202) 619-0089; or Niteesha Gupte, Office of Counsel to the
Inspector General, (202) 619-1306.
SUPPLEMENTARY INFORMATION:
I. OIG Civil Money Penalties
In 1981, Congress enacted the civil money penalty statute, section
1128A of
[[Page 28843]]
the Social Security Act (42 U.S.C. 1320a-7a), as one of several
administrative remedies to combat increases in fraud and abuse. The
civil money penalty (CMP) law authorized the HHS Secretary and the
Inspector General to impose CMPs and program exclusions on individuals
and entities whose wrongdoing caused injury to HHS programs or their
beneficiaries. Since 1981, the CMP provisions have been expanded to
apply by reference to numerous types of fraudulent and abusive
activities.
II. The Medicare Prescription Drug, Improvement, and Modernization Act
Section 101 of the Medicare Prescription Drug, Improvement, and
Modernization Act (MPDIMA) of 2003, as enacted by Public Law 108-173
and codified in section 1860D-31 of the Social Security Act (the Act),
provides for a voluntary prescription drug discount card program for
Medicare beneficiaries entitled to benefits, or enrolled, under Part A
or enrolled under Part B, excluding beneficiaries entitled to medical
assistance for outpatient prescription drugs under Medicaid, including
section 1115 waiver demonstrations. Eligible beneficiaries may access
negotiated prices on prescription drugs by enrolling in drug discount
card programs offered by Medicare-endorsed sponsors.\1\ The Medicare
drug discount card program is intended to serve as a transitional
program providing immediate assistance to Medicare beneficiaries with
prescription drug costs during calendar years 2004 and 2005 while
preparations are made for implementation of the Medicare drug benefit
under Medicare Part D in 2006.
---------------------------------------------------------------------------
\1\ Eligible beneficiaries may enroll in the Medicare drug
discount card program beginning no later than 6 months after the
date of enactment of MPDIMA and ending December 31, 2005. After
December 31, 2005, beneficiaries enrolled in the program may
continue to use their drug discount card during a short transition
period beginning January 1, 2006 and ending upon the effective date
of a beneficiary's outpatient drug coverage under Medicare Part D,
but no later than the last day of the initial open enrollment period
under Part D.
---------------------------------------------------------------------------
The implementing regulations establishing the requirements for the
MPDIMA program were published in the Federal Register as an interim
final rule with comment period by the Centers for Medicare & Medicaid
Services (CMS) on December 15, 2003 (68 FR 69840).\2\
---------------------------------------------------------------------------
\2\ Section 902 of MPDIMA has established timelines for the
publication of the Medicare rules under section 1871(a) of the Act.
This provision requires CMS to publish a final rule within 3 years
of the publication of the interim final rule.
---------------------------------------------------------------------------
1. Eligibility Procedures and Enrollment
Sections 1860D-31(b)(1) and (2) of the Act, and 42 CFR 403.810(a)
and (b) of the CMS regulations, establish the eligibility criteria for
the Medicare drug discount card program and for transitional
assistance. Section 1860D-31(f)(1)(A) of the Act directs the Secretary
to specify the procedures for determining a beneficiary's eligibility
for the Medicare drug discount card program or transitional assistance,
and section 1860D-31(c)(1) directs the Secretary to establish a process
for eligible beneficiaries enrolling in, and disenrolling from, an
endorsed program. These provisions have been codified, respectively, in
42 CFR 403.810 and 403.811 of the CMS regulations.
2. Endorsed Sponsors
Section 1860D-31(a)(1)(A) of the Act requires the Secretary to
endorse qualified applicants seeking to offer endorsed discount card
programs to Medicare beneficiaries. MPDIMA sets forth specific
requirements that applicants must satisfy to be eligible for
endorsement and that endorsed sponsors must meet to retain their
endorsement. The obligations of endorsed sponsors related to
eligibility determinations and enrollment are specifically set forth in
section II.C.6. of the preamble to the interim final rule.
3. Transitional Assistance
Under MPDIMA, certain low-income Medicare beneficiaries enrolled in
the Medicare drug discount card program are eligible to receive
transitional assistance of up to $600 per year, which may be applied
toward the cost of covered discount card drugs obtained under the
program. Section 1860D-31(h)(1)(C) of the Act requires endorsed
sponsors to administer the transitional assistance on behalf of CMS and
to demonstrate to the Secretary that they have satisfactory
arrangements to account for the transitional assistance provided to
transitional assistance enrollees. These requirements are codified in
42 CFR 403.806(e).
4. Information and Outreach
Section 1860D-31(d)(2)(A) of the Act requires that each
prescription drug card endorsed sponsor that offers an endorsed
discount card program make available to beneficiaries eligible for the
discount card program--through the internet and otherwise--information
that the Secretary identifies as being necessary to promote informed
choice among endorsed discount card programs, including information on
enrollment fees and negotiated prices for covered discount card drugs.
In addition, section 1860D-31(h)(7)(A) of the Act limits drug card
endorsed sponsors to providing under their endorsements only products
and services directly related to covered discount card drugs, or
discounts on over-the-counter drugs; and section 1860D-31(h)(7)(B)
prohibits endorsed sponsors from marketing, under their endorsements,
any products and services other than those described in section 1860D-
31(h)(7)(A). The requirements for information to be included in
materials are contained in the CMS regulations at 42 CFR 403.806(g).
III. Civil Money Penalties Under Public Law 108-173
Section 1860D-31(i)(3) of the Act authorizes the imposition of CMPs
against endorsed sponsors that knowingly engage in conduct that
violates the requirements of section 1860D-31 of the Act or engage in
false or misleading marketing practices. Section 403.820(b) of the CMS
regulations interpreted this to mean that those endorsed sponsors that
knowingly engage in conduct that violates the conditions of their
endorsement agreement with the Department or that constitutes false or
misleading marketing practices may be subject to CMPs.
The Department has divided the sanction authority between CMS and
the OIG. Where CMP authority is shared between CMS and the OIG, the
Department has assigned sanction authority to the OIG for those
violations that concern misleading or defrauding a beneficiary. The
Department also assigned sanction authority to the OIG for misuse of
transitional assistance funds.\3\ On the other hand, CMS has the
authority to impose CMPs in those instances where the endorsed
sponsor's conduct constitutes non-compliance with an operational
requirement not directly related to beneficiary protection. (Section
403.802(b)(2) of the CMS regulations sets forth a full listing of the
CMS CMP authorities related to MPDIMA.)
---------------------------------------------------------------------------
\3\ Technical assistance, as defined in Sec. 403.802 of the CMS
regulations, refers to the subsidy funds that transitional enrollees
may apply toward the cost of covered discount card drugs in the
manner described in Sec. 403.808(d).
---------------------------------------------------------------------------
As a result, in accordance with CMS's Medicare prescription drug
discount card implementing regulations (68 FR 69787; December 15,
2003), in addition to or in place of sanctions that CMS may impose, as
set forth in 42 CFR 403.820(a), the OIG has been authorized to impose
CMPs against an endorsed
[[Page 28844]]
sponsor whom it determines knowingly (as defined in 42 CFR
1003.102(e)):
Misrepresented or falsified information in outreach
material or comparable material provided to a program enrollee or other
person;
Charged a program enrollee in violation of the terms of
the endorsement contract; or
Used transitional assistance funds in any manner that is
inconsistent with the purpose of the transitional assistance program.
The OIG may impose CMPs of no more than $10,000 for each of these
violations. A violation is deemed to occur in each instance when an
endorsed sponsor (1) provides misleading information to a program
enrollee or other person; (2) overcharges a program enrollee; or (3)
misuses the transitional assistance funds of a program enrollee. Appeal
rights will be afforded in accordance with the appeal procedures set
forth in 42 CFR parts 1003 and 1005.
IV. Provisions of This Final Rule
To address these new OIG civil money penalty authorities, we are
amending 42 CFR part 1003 as follows:
In Sec. 1003.100, Basis and purpose, we are revising
paragraphs (a) and (b) to state the broad purpose of these new CMP
authorities.
In Sec. 1003.101, Definitions, we are adding a definition
for the term ``transitional assistance,'' consistent with the
definition in 42 CFR 403.802.
In Sec. 1003.102, Basis for CMPs and assessments, we are
adding new paragraphs (b)(17), (b)(18) and (b)(19) to cross-reference
the implementing CMS regulations and the OIG's authority to impose
penalties for violations.
In Sec. 1003.103, Amount of penalty, we are adding a new
paragraph (k) to address the $10,000 maximum penalty amounts for each
of these violations.
The OIG specifically seeks public comments on the possible
inclusion of specific mitigating and aggravating factors to be
considered in determining penalty amounts.
We note that in addition to the CMPs set forth above, a card
sponsor's misuse of the Medicare name or emblem may subject them to
CMPs in accordance with 42 U.S.C. 1320b-10 and the OIG regulations at
Sec. 1003.102(b)(7), which prohibit the misuse of the Medicare name
and emblem. In general, in accordance with the statute and the
implementing regulations, the OIG may impose penalties on any person
who misuses the term ``Medicare,'' or other names associated with DHHS
in any item constituting a communication in a manner which the person
knows or should know gives the false impression that the item is
approved, endorsed, or authorized by the Department. Violators are
subject to fines of up to $5,000 per violation or, in the case of a
broadcast or telecast violation, $25,000.
V. Regulatory Impact Statement
A. Regulatory Analysis
We have examined the impacts of this proposed rule as required by
Executive Order 12866, the Regulatory Flexibility Act (RFA) of 1980,
the Unfunded Mandates Reform Act of 1995, and Executive Order 13132.
1. Executive Order 12866
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulations are
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health, and safety
effects; distributive impacts; and equity). A regulatory impact
analysis must be prepared for major rules with economically significant
effects ($100 million or more in any given year). This is not a major
rule as defined at 5 U.S.C. 804(2), and it is not economically
significant since it would not have a significant effect on program
expenditures and there would be no additional substantive cost to
implement the resulting provisions. The OIG has significant experience
in enforcing CMPs for a wide variety of violations and fraudulent
conduct. Over the past three fiscal years (FYs), total CMPs levied by
the OIG for various violations and fraudulent conduct has averaged
about $2.2 million annually ($1.1 million in FY 2001; $2.4 million in
FY 2002; and $3.1 million in FY 2003). In addition, the revisions to 42
CFR part 1003 set forth in this rule are designed to further clarify
statutory requirements, and hence the economic effect of these
regulatory provisions should impact only those limited few endorsed
sponsors that would perhaps engage in prohibited behavior in violation
of the statute. Given the OIG's enforcement history and the nature of
the entities subject to CMPs, we do not believe that these regulations
will result in a significant economic impact or have an appreciable
effect on the economy or on Federal or State expenditures.
2. Regulatory Flexibility Act
The RFA, and the Small Business Regulatory Enforcement and Fairness
Act of 1996, which amended the RFA, requires agencies to analyze
options for regulatory relief of small businesses. For purposes of the
RFA, small entities include small businesses, nonprofit organizations,
and government agencies. Most providers are considered to be small
entities by having revenues of $6 million to $29 million or less in any
one year. For purposes of the RFA, most physicians and suppliers are
considered to be small entities. In addition, section 1102(b) of the
Social Security Act requires us to prepare a regulatory impact analysis
if a rule may have a significant impact on the operations of a
substantial number of small rural providers. This analysis must conform
to the provisions of section 604 of the RFA.
Because of the requirements to be an endorsed sponsor, we
anticipate that few, if any, endorsed sponsors will be small entities
and none will be rural providers. However, even if some sponsored
entities are small entities, we believe that the aggregate economic
impact of this rulemaking is minimal since it is the nature of the
conduct and not the size or type of the entity that would result in a
violation of the statute and the regulations. As a result, we have
concluded that this rulemaking rule should not have a significant
impact on the operations of a substantial number of small or rural
providers, and that a regulatory flexibility analysis is not required
for this rulemaking.
3. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (Public Law
104-4) also requires that agencies assess anticipated costs and
benefits before issuing any rule that may result in expenditure in any
one year by State, local, or tribal governments, in the aggregate, or
by the private sector, of $110 million. As indicated, these proposed
revisions comport with congressional and statutory intent and clarify
the Department's legal authorities against those who defraud or
otherwise act improperly against the Federal and State health care
programs. As a result, we believe that there are no significant
expenditures required by these revisions that would impose any mandates
on State, local, or tribal governments, or the private sector that will
result in an expenditure of $110 million or more (adjusted for
inflation) in any given year, and that a full analysis under the
Unfunded Mandates Reform Act is not necessary.
4. Executive Order 13132
Executive Order 13132, Federalism, establishes certain requirements
that an agency must meet when it promulgates a rule that imposes
substantial direct requirements or costs on State and local
governments, preempts State law, or
[[Page 28845]]
otherwise has Federalism implications. In reviewing this rule under the
threshold criteria of Executive Order 13132, we have determined that
this proposed rule would not significantly affect the rights, roles,
and responsibilities of State or local governments.
The Office of Management and Budget (OMB) has reviewed this final
rule in accordance with Executive Order 12866.
B. Paperwork Reduction Act
The provisions of this rulemaking impose no express new reporting
or recordkeeping requirements on health care providers or endorsed
sponsors.
VI. Response to Public Comments
Comments will be available for public inspection beginning on June
2, 2004, in Room 5518 of the Office of Inspector General at 330
Independence Avenue, SW., Washington, DC, on Monday and through Friday
of each week from 8 a.m. to 4 p.m., (202) 619-0089. Because of the
large number of comments we normally receive on regulations, we cannot
acknowledge or respond to comments individually. However, we will
consider all timely and appropriate comments when developing any
revised final rulemaking.
VII. Waiver of Proposed Rulemaking
We ordinarily publish a proposed rule in the Federal Register and
provide a period for public comment before we publish a final rule. We
may waive this procedure, however, for good cause if we find that the
notice and comment procedure is impracticable, unnecessary, or contrary
to the public interest and if we incorporate a statement of this
finding and its reasons in the rule issued. We find it unnecessary to
undertake notice and comment rulemaking in this instance because we
believe that it is in the public interest to comply with the statutory
requirement in section 1860D-31(a)(2)(B) of the Act, which authorizes
interim final rules for implementing the prescription drug discount
card program. The statute is clear on the penalty provisions and
affords the OIG little discretion, and does not make or change
substantive policy, but merely sets forth the statutorily specified
penalty provisions in the OIG enforcement regulations. Therefore, in
accordance with MPDIMA and the Administrative Procedure Act (APA) (5
U.S.C. 553(b)(B)), for good cause, we waive notice and comment
procedures.
This rulemaking provides for a 60-day public comment period.
List of Subjects in 42 CFR Part 1003
Administrative practice and procedure, Fraud, Grant programs--
health, Health facilities, Health professions, Maternal and child
health, Medicaid, Medicare, Penalties, Social security.
0
Accordingly, 42 CFR part 1003 is amended as set forth below:
PART 1003--CIVIL MONEY PENALTIES, ASSESSMENTS AND EXCLUSIONS
0
1. The authority citation for part 1003 is revised to read as follows:
Authority: 42 U.S.C. 262a, 1302, 1320-7, 1320a-7a, 1320b-10,
1395u(j), 1395u(k), 1395cc(j), 1395w-141(i)(3), 1395dd(d)(1),
1395mm, 1395nn(g), 1395ss(d), 1396b(m), 11131(c), and 11137(b)(2).
0
2. Section 1003.100 is amended by revising paragraph (a); republishing
the introductory text for paragraphs (b) and (b)(1); revising
paragraphs (b)(1)(xv) and (b)(1)(xvi); and by adding a new paragraph
(b)(1)(xvii) to read as follows:
Sec. 1003.100 Basis and purpose.
(a) Basis. This part implements sections 1128(c), 1128A, 1140,
1860D-31(i)(3), 1876(i)(6), 1877(g), 1882(d) and 1903(m)(5) of the
Social Security Act; sections 421(c) and 427(b)(2) of Pub. L. 99-660;
and section 201(i) of Pub. L. 107-188 (42 U.S.C. 1320-7(c), 1320a-7a,
1320b-10, 1395w-141(i)(3), 1395dd(d)(1), 1395mm, 1395ss(d), 1396b(m),
11131(c), 11137(b)(2) and 262).
(b) Purpose. This part--
(1) Provides for the imposition of civil money penalties and, as
applicable, assessments against persons who--
* * * * *
(xv) Violate the Federal health care programs' anti-kickback
statute as set forth in section 1128B of the Act;
(xvi) Violate the provisions of part 73 of this title, implementing
section 351A(b) and (c) of the Public Health Service Act, with respect
to the possession and use within the United States, receipt from
outside the United States, and transfer within the United States, of
select agents and toxins in use, or transfer of listed biological
agents and toxins; or
(xvii) Violate the provisions of part 403, subpart H of this title,
implementing the Medicare prescription drug discount card and
transitional assistance program, by misleading or defrauding program
beneficiaries, by overcharging a discount program enrollee, or by
misusing transitional assistance funds.
* * * * *
0
3. Section 1003.101 is amended by republishing the introductory text
and by adding, in alphabetical order, a definition for the term
``transitional assistance'' to read as follows:
Sec. 1003.101 Definitions.
For purposes of this part:
* * * * *
Transitional assistance means the subsidy funds that Medicare
beneficiaries enrolled in the prescription drug discount card and
transitional assistance program may apply toward the cost of covered
discount card drugs in the manner described in Sec. 403.808(d) of this
title.
0
4. Section 1003.102 is amended by republishing the introductory text
for paragraph (b); and by adding new paragraphs (b)(17), (b)(18), and
(b)(19) to read as follows:
Sec. 1003.102 Basis for civil money penalties and assessments.
* * * * *
(b) The OIG may impose a penalty and, where authorized, an
assessment against any person (including an insurance company in the
case of paragraphs (b)(5) and (b)(6) of this section) whom it
determines in accordance with this part--
* * * * *
(17) Is an endorsed sponsor under the Medicare prescription drug
discount card program who knowingly misrepresented or falsified
information in outreach material or comparable material provided to a
program enrollee or other person.
(18) Is an endorsed sponsor under the Medicare prescription drug
discount card program who knowingly charged a program enrollee in
violation of the terms of the endorsement contract.
(19) Is an endorsed sponsor under the Medicare prescription drug
discount card program who knowingly used transitional assistance funds
of any program enrollee in any manner that is inconsistent with the
purpose of the transitional assistance program.
0
5. Section 1003.103 is amended by adding a new paragraph (m) to read as
follows:
* * * * *
Sec. 1003.103 Amount of penalty.
* * * * *
(m) For violations of section 1860D-31 of the Act and 42 CFR part
403, subpart H, regarding the misleading or defrauding of program
beneficiaries, or the misuse of transitional assistance funds, the OIG
may impose a penalty of not more than $10,000 for each individual
violation.
[[Page 28846]]
Dated: February 17, 2004.
Dara Corrigan,
Acting Principal Deputy Inspector General.
Approved: March 1, 2004.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-11191 Filed 5-18-04; 8:45 am]
BILLING CODE 4152-01-P