Source: https://healthlaw.org/resource/q-a-hipaa-remuneration-and-medicaid-share-of-cost/
Timestamp: 2019-04-24 15:55:00+00:00

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Q. The hospital has been covering my client?s Medicaid share of cost (aka spend down), thus allowing her to obtain outpatient overage for her chronic condition early in the month. I understand that the facility has followed this policy for a number of beneficiaries. The provider is now telling my client that it cannot pay the share of cost because of HIPAA. Is this correct?
A. Medicaid-participating providers may be exposing themselves to the risk of a civil money penalty if they routinely pay their patients? spend down amounts so that the patients can qualify for Medicaid.
Thirty-five states and the District of Columbia have medically needy programs. In these states, individuals qualify for Medicaid by spending down?incurring medical expenses that are sufficient to bring their incomes to a level at or below the state-set medically needy income level. See 42 C.F.R. § 435.811(a). Operationally, incurred medical expenses are deducted during the budget period?a period of between one month and six months as selected by the State. Id. at § 435.831(a). To apply a medical bill toward the spend down, it need only be incurred and not necessarily paid up front. 42 U.S.C. § 1396a(a)(17)(D). Medical expenses incurred by the applicant, family member, or financially responsible relative count toward the spend down if they are not subject to payment by a ?liable third party.? 42 C.F.R. § 435.811(d). A liable third party is defined as ?[a]ny individual, entity or program that is or may be liable to pay all or part of the cost of medical or remedial treatment for injury, disease, or disability of an applicant or recipient of Medicaid ? CMS, State Medicaid Manual § 3628. In this context, liability connotes a legal liability to pay all or part of the cost.
Federal and State Medicaid authorities have instituted fraud and abuse programs since the early days of the Medicaid program. In 1976, Congress established the Office of Inspector General (OIG) within the U.S. Department of Health and Human Services as an independent unit responsible for conducting audits and investigations and developing fraud control policies. In addition to these federal responsibilities, the OIG works with State fraud control programs. 42 U.S.C. § 1396a(a)(61).
[a]ny person (including an organization, agency, or other entity, but excluding a beneficiary, ?) that ? (5) offers to or transfers remuneration to any individual eligible for benefits under ? a State health care program [including Medicaid] ? that such person knows or should know is likely to influence such individual to order or receive from a particular provider, practitioner, or supplier any item or service for which payment may be made, in whole or in part, under ? a State heath care program?.
HIPAA, § 231(h) (adding § 1128A(a)(5) to the Social Security Act, codified at 42 U.S.C. § 1320a-7a(a)(5)); see also 42 C.F.R. §§ 1003.100(b)(1)(xii), 1003.102(b)(13) (implementing regulations).

References: § 435
 § 435
 § 1396
 § 435
 § 3628
 § 1396
 § 231
 § 1128
 § 1320