Testimony of 
Lewis Morris 
Chief Counsel to the Inspector General 
 
Good morning Mr. Chairman and Members of the Subcommittee.  I am here today to 
discuss the Office of Inspector Generals (OIGs) views on the discounts that hospitals 
offer to uninsured patients and to others who are unable to pay their hospital bills.  We 
understand that there is widespread concern about hospitals billing and collection 
practices as those practices affect patients who cannot afford to pay their hospital bills.  
I want to assure the Committee that OIG fully supports efforts that hospitals have made 
to help financially needy patients.  We appreciate the opportunity to address this issue 
and to discuss OIGs legal authorities in this area.   
 
Simply put, the fraud and abuse laws enforced by OIG allow hospitals and other health 
care providers and suppliers to offer discounts to patients who cannot afford to pay for 
their care.  Indeed, our legal authorities have extremely limited application to discounts 
offered to uninsured patients.  When the patients health care is covered under a Federal 
health care program, such as Medicare or Medicaid, our legal authorities have greater 
application.  But even then, the laws and regulations clearly enable hospitals and others to 
help patients who are experiencing financial hardship.  OIG has long-standing and clear 
guidance on this point. 
 
While todays presentation focuses on discounts that hospitals offer to uninsured and 
financially needy patients, the underlying principles apply equally to the rest of the 
Medicare- and Medicaid-serving health care industry.  Before I discuss OIGs views, it is 
important to note that a thorough discussion of hospital discounts for patients with 
financial hardship also involves questions for the Centers for Medicare & Medicaid 
Services (CMS).  CMS has programmatic responsibility for the Medicare program and 
has established the cost reporting and bad debt rules relevant to hospital discounting 
practices.  A CMS witness is also testifying today and will address the CMS issues. 
 
From OIGs perspective, discounts offered to uninsured patients are analyzed under two 
fraud and abuse laws:  the Federal anti-kickback statute and the permissive exclusion 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 1  authority prohibiting providers and suppliers from charging Medicare or Medicaid 
substantially more than they usually charge other customers.  Discounts offered to 
financially needy Medicare or Medicaid beneficiaries also must be analyzed under the 
civil monetary penalty (CMP) statute that prohibits offering inducements to Medicare and 
Medicaid beneficiaries. 
 
Today, I will begin by describing the limited application of OIGs legal authorities to 
discounts offered to uninsured patients.  Next, I will describe how a hospital may reduce 
or waive cost-sharing amounts for Medicare or Medicaid beneficiaries experiencing 
financial hardship.  Finally, I will explain how hospitals and other health care providers 
and suppliers can obtain further guidance from OIG on these issues.  
 
DISCOUNTS FOR UNINSURED PATIENTS  
 
OIG authorities allow hospitals to offer discounts to uninsured patients.  It has been 
suggested that two fraud and abuse laws -- the Federal anti-kickback statute and the 
exclusion authority prohibiting excessive charges to Medicare and Medicaid -- prevent 
hospitals from offering discounted prices to patients who do not have health care 
coverage.  This view reflects a misunderstanding of the law. 
 
The Federal Anti-Kickback Statute 
 
The Federal anti-kickback statute is a criminal statute that prohibits the purposeful offer, 
payment, solicitation, or receipt of anything of value in exchange for, or to induce, 
business payable by any Federal health care program, including Medicare and Medicaid.  
Congress was concerned that improper financial incentives often lead to abuses, such as 
overutilization, increased program costs, corruption of medical-decision making, and 
unfair competition.  Accordingly, Congress banned kickbacks in the Federal health care 
programs.   
 
Giving something of value (such as a discount on hospital charges) to an uninsured 
patient does not implicate the Federal anti-kickback statute, unless the patient is in a 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 2  position to generate Federal health care program business.  For example, a hospital asked 
OIG about the propriety of offering discounts to doctors who self-pay.   Such discounts 
would implicate the statute if one purpose were to induce the doctors to refer Medicare or 
Medicaid business to the hospital.  But those situations are not, in our view, typical of 
hospital policies for discounting to the uninsured.  Rather, most need-based discounting 
policies are aimed at making health care more affordable for the millions of uninsured 
citizens who are not referral sources for the hospital.  For discounts offered to these 
uninsured patients, the anti-kickback statute simply does not apply. 
 
The Excessive Charges Exclusion Authority 
 
By statute, OIG is authorized, but not required, to exclude from participation in the 
Federal health care programs any provider or supplier that charges Medicare or Medicaid 
substantially more than it usually charges other customers.  This law is intended to 
protect the Medicare and Medicaid programs  and the taxpayers  from providers and 
suppliers that routinely charge the Medicare or Medicaid programs substantially more 
than they usually charge other customers. 
 
Some providers have expressed concern that discounting to uninsured patients might 
skew their usual charges to other customers and possibly subject them to exclusion 
under this provision.  Let me assure you that this is not the case.  OIG has never excluded 
or even contemplated excluding any provider or supplier for offering discounts to 
uninsured patients or other patients who cannot afford their care.   
 
OIG believes that the statute can be reasonably interpreted as allowing providers to 
exclude discounts to these patients when calculating their usual charges to other 
customers.  To this end, when we proposed regulations in connection with this exclusion 
authority, we included a provision that would clarify that free or substantially reduced 
prices offered to uninsured patients do not need to be factored into a hospitals usual 
charges for purposes of the exclusion authority.  Those proposed regulations are still 
under development.   
 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 3  To further assure the industry with respect to discounts to the uninsured, we issued 
guidance in February that, pending issuance of final regulations or a decision not to 
proceed with final regulations, we will continue our enforcement policy that, when 
calculating their usual charges, providers and suppliers need not consider free or 
substantially reduced charges to uninsured patients.   
 
In sum, no OIG authority or policy should deter hospitals and others from offering 
financial relief to uninsured patients. 
 
WAIVERS OF COST-SHARING AMOUNTS FOR FINANCIALLY NEEDY  
 MEDICARE AND MEDICAID BENEFICIARIES 
 
A discount offered to a Medicare or Medicaid beneficiary generally takes the form of a 
waiver of all or a portion of the Medicare or Medicaid program copayment or deductible, 
that is, the portion of the bill that the beneficiary owes.  Routine waivers of Medicare or 
Medicaid cost-sharing amounts are problematic under the fraud and abuse laws because 
they may be used impermissibly to induce Federal health care program business.  For 
example, many fraud schemes use the promise of free or no out-of-pocket cost 
medical items or services to attract Medicare or Medicaid beneficiaries.   
 
However, the law also clearly permits health care providers to waive Medicare and 
Medicaid cost-sharing amounts for financially needy beneficiaries.  OIG has a long-
standing and well-publicized position supporting such financial hardship waivers.  For 
example, the ability to forgive Medicare cost-sharing amounts in consideration of a 
patients financial hardship is discussed in a 1992 OIG special fraud alert on the waiver 
of copayments and deductibles.  The alert is available on our web site, along with other 
guidance on this subject, at http://oig.hhs.gov/fraud/fraudalerts.html. 
 
The Civil Money Penalty Prohibiting Beneficiary Inducements  
 
While the Federal anti-kickback statute may be implicated in some cases, the primary 
legal authority in the area of waivers of Medicare and Medicaid cost-sharing amounts is 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 4  the CMP prohibiting inducements to beneficiaries.  Enacted as part of HIPAA in 1996, 
the CMP prohibits offering a beneficiary anything of value, including waivers of cost-
sharing amounts, that is likely to influence the beneficiarys selection of a provider, 
practitioner, or supplier of Medicare or Medicaid payable items or services.  Beneficiary 
inducements are of particular concern because vulnerable beneficiaries may be enticed to 
obtain services that are medically unnecessary, overpriced, or of substandard quality.   
 
While generally banning routine cost-sharing waivers, such insurance only billing and 
the like, the Congress recognized that some beneficiaries might not be able to afford their 
cost-sharing amounts.  The statute thus includes an express exception for waivers on the 
basis of financial need.  The exception has three requirements: 
 
  the waivers may not be routine; 
  the waivers may not be offered as part of any advertisement or solicitation; 
and  
  the waivers may only be made after determining in good faith that the 
individual is in financial need or that reasonable collection efforts have failed. 
 
This exception is available to hospitals and others that want to provide relief to Medicare 
and Medicaid beneficiaries who cannot afford their cost-sharing amounts.   
 
We recognize that what constitutes a good faith determination of financial need may vary 
depending on individual patient circumstances.  We believe that hospitals should have 
flexibility to consider relevant variables.  For example, hospitals may consider:   
 
  the local cost of living;  
  a patients income, assets, and expenses;  
  a patients family size; and 
  the scope and extent of a patients medical bills.  
 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 5  A hospitals financial need guidelines should be reasonable, based on objective criteria, 
appropriate for the hospitals locality, and applied uniformly to all patients.  Hospitals 
should take reasonable measures to document the financial need determination.  We are 
mindful that there may be situations when patients are reluctant or unable to provide 
documentation of their financial status.  In such cases, hospitals may be able to use other 
reasonable, documented methods for determining financial need, including, for example, 
patient interviews or questionnaires. 
 
As discussed in our 1992 special fraud alert and elsewhere, it is OIGs position that the 
principles articulated in this CMP exception apply equally to financial need-based  cost-
sharing waivers under the Federal anti-kickback statute.  There also is a safe harbor under 
the Federal anti-kickback statute that protects certain cost-sharing waivers for inpatient 
hospital services (waivers protected under this safe harbor are also protected under the 
CMP).  The safe harbor contains a number of conditions designed to prevent abusive 
waiver practices, but does not require a determination of financial need.  
 
In sum, the fraud and abuse laws clearly allow hospitals to provide relief to Medicare and 
Medicaid beneficiaries who cannot afford their cost-sharing amounts. 
 
OBTAINING OIG GUIDANCE  
 
As evidenced by the number and range of fraud alerts, bulletins, and other guidance we 
have issued, OIG has a strong commitment to providing guidance to the health care 
provider community.  As previously noted, in February we issued specific guidance on 
OIGs fraud and abuse authorities and their application to hospital discounting practices.  
This guidance, titled Hospital Discounts Offered to Patients Who Cannot Afford to Pay 
Their Hospital Bills (Discounts Guidance), is available on our website at 
www.oig.hhs.gov and is attached to this testimony. 
 
In addition to these resources, OIGs advisory opinion process is available to hospitals or 
others that want to know how OIG views a particular discount arrangement.  OIG 
advisory opinions are written legal opinions that are binding on OIG, the Department of 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 6  Health and Human Services, and the party that requests the opinion.  To obtain an 
opinion, the requesting party must submit a written description of its existing or proposed 
business arrangement.  Further information about the process, including frequently asked 
questions, can be found on OIGs web site at: 
 
 http://oig.hhs.gov/fraud/advisoryopinions.html   
 
In addition, our web site contains the Discount Guidance, the proposed regulations on the 
excessive charges exclusion authority, and a special advisory bulletin discussing the CMP 
statute, as well as special fraud alerts and bulletins, safe harbor regulations, compliance 
program guidances, and advisory opinions that relate to the issues I have discussed today.  
 
CONCLUSION 
 
In conclusion, I want to assure the Committee that OIG fully supports efforts to ensure 
that a patients financial need is not a barrier to health care.  Furthermore, OIG legal 
authorities permit hospitals and others to offer bona fide discounts to uninsured patients 
and to Medicare or Medicaid beneficiaries who cannot afford their health care bills. 
 
Mr. Chairman and Members of the Committee, thank you for inviting OIG to testify 
today.  I would be happy to answer any questions you may have.  
 
Attachments 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 7  SUMMARY OF TESTIMONY 
 
Lewis Morris, Chief Counsel, HHS Office of Inspector General 
 
  The fraud and abuse laws enforced by OIG allow hospitals and other health care 
providers and suppliers to offer discounts to patients who cannot afford to pay for 
their care.  OIG fully supports efforts by providers and suppliers to help financially 
needy patients. 
 
  The principles underlying OIGs guidance on hospital discounts to uninsured patients 
and waivers of cost-sharing for financially needy Medicare or Medicaid beneficiaries 
apply equally to the rest of the Medicare- and Medicaid-serving health care industry. 
 
  Giving a discount on hospital charges to an uninsured patient does not implicate the 
Federal anti-kickback statute, unless the patient is in a position to generate Federal 
health care program business.  The anti-kickback statute simply does not apply to 
discounts offered to the vast majority of uninsured patients  who are not referral 
sources. 
 
  It is OIGs enforcement policy that providers and suppliers do not need to consider 
free or substantially reduced charges to uninsured patients when calculating their 
usual charges for purposes of OIGs permissive exclusion authority against 
providers or suppliers that charge Medicare or Medicaid substantially more than they 
usually charge other customers.  
 
  While routine waivers of Medicare or Medicaid cost-sharing amounts are problematic 
under the fraud and abuse laws, the laws clearly permit health care providers to waive 
Medicare and Medicaid cost-sharing amounts for financially needy beneficiaries, 
provided the waivers are not routine or advertised and are based on a good faith 
determination that the individual is in financial need or that reasonable collection 
efforts have failed.  Financial need guidelines should be reasonable, based on 
objective criteria, appropriate for the hospitals locality, and applied uniformly to all 
patients.  Providers should take reasonable measures to document financial need 
determinations. 
 
  There is a safe harbor under the Federal anti-kickback statute that protects certain 
cost-sharing waivers for inpatient hospital services and does not require a 
determination of financial need.   
 
  Further information on the application of OIGs fraud and abuse authorities is 
available at www.oig.hhs.gov.  In addition, OIGs advisory opinion process is 
available to hospitals or others that want to know how OIG views a particular 
discount arrangement. 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 8   
 
 
HOSPITAL DISCOUNTS OFFERED TO PATIENTS WHO CANNOT AFFORD 
TO PAY THEIR HOSPITAL BILLS 
  
This document addresses the views of the Office of Inspector General ("OIG) on the 
following topics:  (1) discounts provided by hospitals for uninsured patients who cannot 
afford to pay their hospital bills and (2) reductions or waivers of Medicare cost-sharing 
amounts by hospitals for patients experiencing financial hardship.  For the following 
reasons, the OIG believes that hospitals have the ability to provide relief to uninsured and 
underinsured patients who cannot afford their hospital bills and to Medicare beneficiaries 
who cannot afford their Medicare cost-sharing amounts.  The OIG fully supports 
hospitals' efforts in this area.  
 
Discounts for Uninsured Patients Who Cannot Afford to Pay Their Hospital Bills 
  
No OIG authority prohibits or restricts hospitals from offering discounts to uninsured 
patients who are unable to pay their hospital bills.  It has been suggested that two laws 
enforced by the OIG may prevent hospitals from offering discounted prices to uninsured 
patients.  We disagree and address each law in turn. 
  
  The Federal Anti-Kickback Statute.1  The Federal anti-kickback statute 
prohibits a hospital from giving or receiving anything of value in exchange for 
referrals of business payable by a Federal health care program, such as Medicare 
or Medicaid.  The Federal anti-kickback statute does not prohibit discounts to 
uninsured patients who are unable to pay their hospital bills.  However, the 
discounts may not be linked in any manner to the generation of business payable 
by a Federal health care program.  Discounts offered to underinsured patients 
potentially raise a more significant concern under the anti-kickback statute, and 
hospitals should exercise care to ensure that such discounts are not tied directly or 
indirectly to the furnishing of items or services payable by a Federal health care 
program.  As discussed below, the statute and regulations offer means to reduce 
or waive coinsurance and deductible amounts to provide assistance to 
underinsured patients with reasonably verified financial need. 
  
  Section 1128(b)(6)(A) of the Social Security Act.2  This law permits -- but does 
not require -- the OIG to exclude from participation in the Federal health care 
                                                 
1 42 U.S.C.  1320a-7b(b). 
 
2 42 U.S.C.  1320a-7(b)(6)(A). 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 9  programs any provider or supplier that submits bills or requests for payment to 
Medicare or Medicaid for amounts that are substantially more than the provider's or 
supplier's usual charges.  The statute contains an exception for any situation in which 
the Secretary finds "good cause" for the substantial difference.  The statute is 
intended to protect the Medicare and Medicaid programs -- and taxpayers -- from 
providers and suppliers that routinely charge the programs substantially more than 
their other customers.  
 
The OIG has never excluded or attempted to exclude any provider or supplier for 
offering discounts to uninsured or underinsured patients.  However, to provide 
additional assurance to the industry, the OIG recently proposed regulations that would 
define key terms in the statute.3  Among other things, the proposed regulations would 
make clear that free or substantially reduced charges to uninsured persons would not 
affect the calculation of a provider's or supplier's "usual" charges, as the term "usual 
charges" is used in the exclusion provision.  The OIG is currently reviewing the 
public comments to the proposed regulations.  Until such time as a final regulation is 
promulgated or the OIG indicates its intention not to promulgate a final rule, it will 
continue to be the OIG's enforcement policy that. when calculating their "usual 
charges" for purposes of section 1128&)(6)(A), individuals and entities do not need to 
consider free or substantiallv reduced charges to (i) uninsured patients or (ii) 
underinsured patients who are self-paying patients for the items or services furnished.  
 
As noted in the preamble to the proposed regulations, the exclusion provision does 
not require a hospital to charge everyone the same price; nor does it require a hospital 
to offer Medicare or Medicaid its "best price."  However, hospitals cannot routinely 
charge Medicare or Medicaid substantially more than they usually charge others.  
 
In addition to the two laws discussed above, it has been suggested that hospitals are 
reluctant to give discounts to uninsured patients because the OIG requires hospitals to 
engage in vigorous collection efforts against uninsured patients.  This misperception may 
be based on some limited OIG audits of specific hospitals' compliance with Medicare's 
bad debt rules.  The bad debt rules and regulations, including the scope of required 
collection efforts, are established by the Centers for Medicare & Medicaid Services 
("CMS").  No OIG rule or regulation requires a hospital to engage in any particular 
collection practices.  
 
  
 
                                                 
368 Fed. Reg. 53939 (Sept. 15, 2003). 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 10  Reductions or Waivers of Cost-Sharing Amounts for Medicare Beneficiaries 
Experiencing Financial Hardship 
  
The fraud and abuse laws clearly permit the waiver of all or a portion of a Medicare cost-
sharing amount for a financially needy beneficiary.4  Importantly, under the fraud and 
abuse laws, the "financial need" criterion is not limited to "indigence," but can include 
any reasonable measures of financial hardship. 
  
Like many private insurance plans, the Medicare program includes a cost-sharing 
requirement. Cost-sharing is an important control on overutilization of items and 
services.  If beneficiaries are required to pay for a portion of their care, they will be better 
health care consumers, selecting items or services because they are medically needed. 
  
The routine waiver of Medicare coinsurance and deductibles can violate the Federal anti-
kickback statute (discussed above) if one purpose of the waiver is to generate business 
payable by a Federal health care program.5  In addition, a separate statutory provision 
prohibits offering inducements -- including cost-sharing waivers -- to a Medicare or 
Medicaid beneficiary that the offeror knows or should know are likely to influence the 
beneficiary's selection of a particular provider, practitioner, or supplier.6  (This 
prohibition against inducements offered to Medicare and Medicaid beneficiaries does not 
apply to uninsured patients.)  
 
However, there are two important exceptions to the general prohibition against waiving 
Medicare coinsurance and deductibles applicable to hospitals, one for financial hardship 
situations and one for inpatient hospital services.  
 
First, providers, practitioners, and suppliers may forgive a Medicare coinsurance or 
deductible amount in consideration of a particular patient's financial hardship.  
Specifically, under the fraud and abuse laws, Medicare cost-sharing amounts may be 
waived so long as:  
 
  the waiver is not offered as part of any advertisement or solicitation;  
                                                 
4Hospitals still need to ensure that they comply with all relevant Medicare 
program rules. 
 
5In certain circumstances, the routine waiver of coinsurance and deductible 
amounts can implicate the False Claims Act, 31 U.S.C.  3729. See Special Fraud Alert: 
Routine Waiver of Copayments or Deductibles Under Medicare Part B, 59 Fed. Reg. 
65372, 65374 (Dec. 19, 1994), available on the OIG webpage at: 
http://oig.hhs.gov/fraud/docs/alertsandbulletins/121994.html.  
  
642 U.S.C.  1320a-7a(a)(5). The statute includes several other exceptions. One 
exception permits the waiver of cost-sharing amounts for certain preventive care services 
without any requirement to determine financial need. 42 U.S.C.  1320a-7a(i)(6)(D); 42 
C.F.R.  1003.101; see also 65 Fed. Reg. 24400, 24409 (April 26, 2000).  
 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 11    the party offering the waiver does not routinely waive coinsurance or deductible 
amounts; and  
 
  the party waives the coinsurance and deductible amounts after determining in 
good faith that the individual is in financial need reasonable collection efforts 
have failed.7 
  
The OIG recognizes that what constitutes a good faith determination of "financial need" 
may vary depending on the individual patient's circumstances and that hospitals should 
have flexibility to take into account relevant variables.  These factors may include, for 
example:  
 
  the local cost of living;  
  a patient's income, assets, and expenses;  
  a patient's family size; and  
  the scope and extent of a patient's medical bills.  
 
Hospitals should use a reasonable set of financial need guidelines that are based on 
objective criteria and appropriate for the applicable locality.  The guidelines should be 
applied uniformly in all cases.  While hospitals have flexibility in making the 
determination of financial need, we do not believe it is appropriate to apply inflated 
income guidelines that result in waivers for beneficiaries who are not in genuine financial 
need.  Hospitals should consider that the financial status of a patient may change over 
time and should recheck a patient's eligibility at reasonable intervals sufficient to ensure 
that the patient remains in financial need.  For example, a patient who obtains outpatient 
hospital services several times a week would not need to be rechecked every visit.  
Hospitals should take reasonable measures to document their determinations of Medicare 
beneficiaries' financial need.  We are aware that in some situations patients may be 
reluctant or unable to provide documentation of their financial status. In those cases, 
hospitals may be able to use other reasonable methods for determining financial need, 
including, for example, documented patient interviews or questionnaires.  
 
Second, another exception to the general prohibition against Medicare cost-sharing 
waivers is contained in an OIG "safe harbor" regulation related to inpatient hospital 
services.8  Compliance with a safe harbor regulation is voluntary, and failure to comply 
does not necessarily mean an arrangement is illegal.  However, a hospital that complies 
fully with a safe harbor is assured that it will not be prosecuted under the Federal anti-
kickback statute.9  
  
                                                 
742 U.S.C.  1320a-7a(i)(6)(A); Special Fraud Alert, supra note 5.  
  
842 C.F.R.  1001.952(k).  
 
9Furthermore, 42 U.S.C.  1320a-7a(i)(6)( B) provides that any waiver that fits in 
a safe harbor to the anti-kickback statute is similarly protected under the beneficiary 
inducements statute (discussed above). 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 12  The safe harbor for waivers of coinsurance and deductibles provides that a hospital may 
waive coinsurance and deductible amounts for inpatient hospital services for which 
Medicare pays under the prospective payment system if the hospital meets three 
conditions:  
 
  the hospital cannot claim the waived amount as bad debt or otherwise shift the 
burden to the Medicare or Medicaid programs, other payers, or individuals; 
 
  the waiver must be made without regard to the reason for admission, length of 
stay, or diagnostic related group; and 
 
  the waiver may not be part of a price reduction agreement between the hospital 
and a third-party payer (other than a Medicare SELECT plan).   
 
While the OIG is not concerned about bona fide cost-sharing waivers for beneficiaries 
with genuine financial need, we have a long-standing concern about providers and 
suppliers that use "insurance only billing" and similar schemes to entice Federal health 
care program beneficiaries to obtain items or services that may be medically unnecessary, 
overpriced, or of poor quality.  
 
OIG Advisory Opinion Process  
 
The OIG has an advisory opinion process that is available to hospitals or others that want  
assurance that they will not run afoul of the fraud and abuse laws.10  OIG advisory 
opinions are written opinions that are legally binding on the OIG, the Department of 
Health and Human Services, and the party that requests the opinion.  To obtain an 
opinion, the requesting party must submit a detailed, written description of its existing or 
proposed business arrangement.  The length of time that it takes for the OIG to issue an 
opinion varies based upon a number of factors, including the complexity of the 
arrangement, the completeness of the submission, and how promptly the requestor 
responds to requests for additional information.  Further information about the process, 
including frequently asked questions, can be found on the OIG webpage at 
http://oig.hhs.gov/fraud/advisoryopinions.html.  
 
  
  
 
                                                 
10Section 1128D(b) of the Social Security Act; 42 C.F.R. part 1008.  
 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 13  Conclusion 
  
Hospitals have the ability to provide discounts to uninsured and underinsured patients 
who cannot afford their hospital bills and to Medicare beneficiaries who cannot afford 
their Medicare cost-sharing obligations.  Nothing in the OIG rules or regulations 
prohibits such discounts, and the OIG fully supports the hospital industry's efforts to 
lower health care costs for those unable to afford care.  While every case must be 
evaluated on its own merits, it is important to note that the OIG has never brought a case 
based on a hospital's bona fide discounting of its bill for an uninsured or underinsured 
patient of limited means.   
 
Guidance about the anti-kickback statute and other fraud and abuse authorities is 
available on the OIG's webpage at http://oig.hhs.gov/. This guidance includes the Special 
Fraud Alert on Routine Waivers of Copayments and Deductibles under Medicare Part B; 
safe harbor regulations (and the "preamble" discussions that include explanatory 
information), the compliance program guidance for hospitals, and OIG advisory opinions. 
 
  
February 2, 2004  
  
 
 
House Committee on Energy and Commerce 
Subcommittee on Oversight and Investigations   --   Hearing:  June 24, 2004                                     Page 14