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Washington, D.C. ­– U.S. Senator John McCain (R-AZ) today sent a letter to Kathleen Sebelius, Secretary of the Department of Health and Human Services, regarding the recent announcement that various elements of the Affordable Care Act are not considered “federal health care programs” and, therefore, will not be subject to important anti-fraud protections.

The text of the letter is below.


November 20, 2013


The Honorable Kathleen Sebelius


U.S. Department of Health & Human Services

200 Independence Avenue, S.W.

Washington, D.C.  20201


Dear Secretary Sebelius:

            I am seriously concerned about the Department of Health and Human Services’ (HHS) recent announcement that it does not consider the various elements of the Affordable Care Act (ACA) to constitute “federal health care programs” within the meaning of 42 U.S.C. § 1320a-7b.  Apparently, this decision came without congressional input, and its implementation would leave ACA programs outside of the scope of important anti-fraud protections.

           In an October 30, 2013, letter to Representative Jim McDermott, you claimed that HHS had engaged in a “careful review of the definition of ‘federal health care program.’”  Nonetheless, the public is left to wonder about the scope of that review, because specific evidence to support HHS’s interpretation has not been forthcoming.  As you know, the ACA contains subsidies and strict new regulation of health insurance markets.  Therefore, I am very much interested to know what rationale differentiates the legal status of the ACA from that of Medicare and Medicaid, both of which also offer large subsidies to health care providers and are appropriately considered “federal health care programs”.

            The importance of HHS’s interpretation stems from the fact that “federal health care programs” are subject to the federal anti-kickback statute.  That statute prevents health care providers from bribing consumers to subscribe to their plans.  By unilaterally exempting ACA programs from that statute, HHS would allow health insurance providers on the ACA exchanges to escape the anti-kickback statute’s jurisdiction, ultimately opening the door to fraud, bribery, and waste at the public’s expense. The federal government considers Medicare and Medicaid federal health care programs – allowing them to be covered by the anti-kickback statute.  This raises the question: why shouldn’t ACA programs receive the same treatment?

            In the health care context, Congress passed the anti-kickback statute to prevent illegitimate and unnecessary expenses designed solely to increase drug company profits at the public’s expense.  The anti-kickback statute has proven effective in reducing such fraud in Medicare and Medicaid. Under HHS’s interpretation, ACA programs would be exempt from this taxpayer-protection law.  Exemption from the anti-kickback statute allows drug companies to give coupons for discounts on drugs to consumers who purchase insurance through the ACA

exchanges.  Those coupons lead to consumers using more expensive drugs instead of less expensive but equally effective alternatives.  The use of unnecessarily expensive drugs raises costs for government health care subsidies under the ACA while steering money to pharmaceutical companies.  Medicare funds cannot be spent in that manner precisely because the anti-kickback statute prevents it. 

            My constituents need to know that their hard-earned tax dollars will be safeguarded in the ACA to the same extent as in similarly constructed programs like Medicare and Medicaid.  The American people are tired of this Administration’s broken promises regarding the implementation of the ACA.  HHS’s position that ACA programs are not a “federal health care program” is yet another revelation that will cost taxpayers by weakening the public’s defense against fraud. 

Congress needs to be kept involved in the process of implementation to ensure that the public be adequately protected.  With those concerns in mind, please answer the following questions:

1.         What was the legal authority, if any, to unilaterally declare that ACA programs do not constitute “federal health care programs” within the meaning of 42 U.S.C. § 1320a-7b?

2.         What was the legal rationale for declaring that ACA programs are not “federal health care programs”?

3.         Without using the anti-kickback statute, how will HHS ensure that ACA programs do not become subject to abuse by the drug companies to the detriment of taxpayers?

4.         Will drug companies be able to issue coupons to consumers through the ACA exchanges?  If so, what policy rationale exists to support allowing coupons to be used in ACA exchanges but not under Medicare or Medicaid?

5.         Has HHS evaluated whether the use of coupons will lead to higher costs for drugs for the federal government under the ACA?  If so, what is the HHS estimate of that cost-increase and how does HHS justify it?

In addition to answering these questions, please also provide a staff-level briefing on this topic.  Thank you for your attention to this important matter.  If you have any questions or concerns, please have your staff contact Jack Thorlin, Counsel to the Minority, Permanent Subcommittee on Investigations, at 202/224-XXXX.




John McCain                                                  

Ranking Minority Member                             

Permanent Subcommittee on Investigations