On December 7, 2016, the Office of Inspector General for the U.S. Department of Health and Human Services (“OIG”) issued a Policy Statement that increased the thresholds for gifts to Medicare and Medicaid beneficiaries to be considered “nominal” under the beneficiary inducement provisions of the civil monetary penalties law (section 1128A(a)(5) of the Social Security Act) (“CMP Law”).  The previous thresholds were $10 per item or service and $50 in the annual aggregate per beneficiary.  The new thresholds are $15 per item or service and $75 in the annual aggregate per beneficiary.

OIG’s announcement is effective immediately and intended to account for inflation, marking the first time since 2000 that OIG has made such an adjustment.

The CMP Law generally prohibits a health care provider from providing a gift to a Medicare or Medicaid beneficiary if the provider knows or should know that the gift is likely to influence the beneficiary’s selection of a particular provider of Medicare or Medicaid payable items or services, subject to a limited number of exceptions.  The OIG has advised that gifts of “nominal value” are not prohibited by the CMP Law and do not need to meet an exception.  65 Fed. Reg. 24400, 24410 (Apr. 26, 2000).

While the Policy Statement notes that violations of the CMP Law could result in penalties of “up to $10,000” per violation, HHS has already increased those penalties to $15,024 per violation in its interim final rule back in September.  81 Fed. Reg. 61538, 61543 (Sept. 6, 2016).

When assessing the value of a gift to a Medicare or Medicaid beneficiary, providers should look to the retail value of the item—as opposed to the cost of acquisition.  Gifts and incentives may exceed the $15 per item and $75 annual aggregate thresholds, provided they meet an enumerated exception to the CMP Law, such as the retailer rewards exception or the preventive care exception.  However, OIG reiterated in its Policy Statement that gifts, regardless of amount, cannot constitute cash or cash equivalents.