In the first advisory opinion of 2022, the Department of Health and Human Services’ Office of Inspector General (OIG) allowed Medicaid beneficiaries to qualify for a benefit available to low-income individuals, even though the arrangement would not qualify as a “retailer reward.”

The OIG stated it would not seek enforcement of the federal Anti-Kickback Statute or the Beneficiary Inducements Civil Monetary Penalty Statute (CMP Law) for an arrangement proposed by a web-based retailer that that sells a wide variety of consumer goods and services, and that offers fee-based membership programs with a number of benefits, including pharmacy-related benefits.

The retailer requested an advisory opinion from OIG to allow individuals to use Medicaid enrollment to qualify as eligible for participation in the discount programs that provided certain expedited free shipping, and discounts on food and grocery items. In issuing a favorable advisory opinion, OIG determined that allowing individuals to use their Medicaid enrollment status as a qualification presented a minimal risk of fraud and abuse to federal health programs.

The arrangement would not qualify for any available fraud-and-abuse exception, including the CMP Law’s “retailer rewards” exception because the discount programs would not be offered on equal terms available to the general public, regardless of health insurance status.

Nevertheless, the OIG issued a favorable opinion, including because participation in the discount programs was substantially attenuated from any potential pharmacy purchases. In fact, the grocery discount program did not even apply to pharmacy purchases at all. Moreover, the OIG found that the membership discount, while it might encourage individuals to order from the retailer to take advantage of free expedited shipping, it wouldn’t encourage those individuals to purchase drugs that they wouldn’t otherwise order.

As a result of this advisory opinion, retailers may consider seeking approval of arrangements that provide benefits to Medicaid beneficiaries, particularly when the goal of those programs is to bring benefits to low-income individuals and the use of Medicaid enrollment status is only a proxy for low-income status.

Reed Smith will continue to track developments related to “retailer rewards” and OIG opinions on health care fraud-and-abuse regulations. Please reach out to the health care attorneys at Reed Smith if you have any questions about this opinion or seeking advisory opinions from the OIG.