United States: Medicare Part D: Limitations Imposed on Residential Services Providers in Assisting Residents to Choose Their Plan

Although the new Medicare Part D prescription drug benefit will have its greatest direct impact on elderly individuals, prescription drug plans ("PDPs") and pharmacies, certain aspects of the new law concerning "marketing activities" apply directly to nursing facilities, assisted living residences and other residential providers. It is natural, for example, for individuals residing in assisted living or skilled nursing facilities to seek assistance from staff in making the decision of which Part D plan to choose, and some providers are inclined to provide this assistance as a service to their residents. In addition to an altruistic desire to be helpful, some facilities, in order to streamline the provision of pharmacy services, may prefer that their residents choose a PDP that has a contract with a pharmacy that has a historical relationship with the facility. There may be a tendency, or a planned effort, to direct residents to the PDP preferred by the facility. However, the Centers for Medicare and Medicaid Services ("CMS") has imposed strict prohibitions on Part D "marketing activities" that limit the steps providers may take to direct their residents’ choice.

In its marketing guidelines for Part D plans, a 173- page document,ⁱ CMS has imposed significant restrictions on the manner in which PDPs can market their plans. These restrictions have implications for providers who want to assist their residents in selecting a Part D plan.

A PDP sponsor is responsible for ensuring that any provider contracted with the plan or a subcontractor of the plan does not steer or attempt to steer an undecided potential enrollee toward a particular plan based on the financial interest of the provider. The marketing guidelines define the term "provider," as used in specific guidance about provider activities, as an entity contracted with a PDP or a subcontractor of a PDP, e.g., a pharmacy.ⁱⁱ Accordingly, any residence that has a relationship with a pharmacy or other entity that contracts or subcontracts with a PDP will be required by the PDP to refrain from "steering" beneficiaries.ⁱⁱⁱ

Providers may properly assist a beneficiary in an objective assessment of the beneficiary’s needs and potential plan options that may meet those needs, and CMS encourages providers to do so. They may not, however, advise beneficiaries on plan options. In addition, all residences, whether or not they contract with a PDP or a pharmacy, are subject to existing prohibitions stemming from federal and state antikickback laws and the federal laws prohibiting inducements to beneficiaries. These laws preclude providers from offering incentives to residents to enroll in one plan over another.

The CMS marketing guidelines list, in summary form, the following activities in which providers are permitted to engage:^iv

• Provide the names of plans with which they contract and/or participate.
• Provide information and assistance in applying for the low-income subsidy.
• Provide objective information on specific plan formularies, based on a particular patient’s medications and healthcare needs.
• Provide objective information regarding specific plans, such as covered benefits, cost sharing and utilization management tools.
• Distribute PDP and Medicaid/MA-PD marketing materials, including enrollment application forms. (A provider must inform individuals that they can obtain information on all available options within the particular service area from www.medicare.gov or by calling 1-800-MEDICARE.)
• Refer residents to other sources of information, such as State Health Insurance Assistance Programs, plan marketing representatives, the state Medicaid office, the local Social Security Administration office, CMS’ Web site at www.cms.hhs.gov, or by calling 1-800-MEDICARE.

• Print out and share with residents information from CMS’Web site.
• Use comparative marketing materials comparing plan information created by a third party that is not providing a benefit or a service.

According to the marketing guidelines, providers are not permitted to engage in the following practices:^v

• Direct, urge or attempt to persuade any prospective enrollee to enroll in a particular plan or to insure with a particular company based on the financial or any other interest of the provider.

• Collect enrollment applications.

• Offer inducements to persuade beneficiaries to enroll in a particular plan or organization.
• Health screen when distributing information to patients.
• Offer anything of value to induce plan enrollees to select them as their provider.
• Expect compensation in consideration for the enrollment of a beneficiary.
• Expect compensation directly or indirectly from the plan for beneficiary enrollment activities.

Only PDPs, and not their subcontractors or providers, are directly subject to the Part D rules. However, PDPs are obligated to ensure that "steering" of enrollees does not occur. Consequently, PDPs are likely to attempt to pass on their legal responsibilities to their subcontractors, including pharmacies, and pharmacies are, in turn, likely to try to impose their responsibilities on facilities through contractual provisions. Residences that have contracts with pharmacies should scrutinize the contractual requirements carefully to ensure that the provisions concerning marketing are not overreaching.

CMS has contracted with private organizations, called Medicare Drug Integrity Contractors ("MEDICs"), to manage CMS’ audit, oversight, and fraud and abuse prevention efforts. One of the main functions of a MEDIC is to serve as auditor of PDP and subcontractor Part D operations.^vi It is predicted that existing healthcare "fraud and abuse" laws, i.e., the anti-kickback laws and laws proscribing inducements to beneficiaries, will likely form the primary basis for enforcement actions taken as a result of MEDIC activities and those of other enforcement arms. Residential providers should make certain that their practices do not run afoul of these laws, as it appears that the Part D benefit will provide fertile ground for yet another area of enforcement activity by government officials.

It is not surprising that CMS marketing guidelines have added another layer of confusion in the implementation of the troubled Part D benefit. The restrictions on helping residents choose their plan present significant risks for the residence that wants to assist its residents in the Part D decision. Providers may attempt to supply information that is objective and allows free choice, while not crossing the line to "steering," in order to ensure compliance with the anti-kickback and beneficiary inducement laws.

Endnotes

^{i Final Marketing Guidelines (as revised Nov. 1, 2005), available at www.cms.hhs.gov/PrescriptionDrugCovContra/ Downloads/MarketingGuidelines_11.01.05.pdf.}

ii Final Marketing Guidelines at p. 130.

iii Those residences that have no contractual relationship with a pharmacy or a PDP will not be impacted by the Part D marketing rules.

iv Final Marketing Guidelines at p. 134.

v Final Marketing Guidelines at p. 135.

vi See draft of Chapter 9 ("Part D Program to Control Fraud, Waste and Abuse") of CMS Prescription Drug Benefit Manual, pp. 9-11.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, among the 100 largest law firms in the United States, is a full-service firm of more than 600 lawyers. In addition to legal services, Duane Morris has independent affiliates employing approximately 100 professionals engaged in other disciplines. With offices in major markets, and as part of an international network of independent law firms, Duane Morris represents clients across the nation and around the world.