Background

		VHA Health Care Eligibility and Enrollment

To obtain VHA health care, most veterans submit an application by mail  or online to VHA’s Health Eligibility Center (HEC) in Atlanta or in person  at a local VHA medical center. Generally, the nature and extent of an  individual veteran’s service-connected medical conditions are established  through VBA. HEC processes applications and assigns veterans to one  of eight priority groups based on their service-connected disabilities;  special treatment authorities, such as exposure to Agent Orange or  ionizing radiation; and income level. Whether VHA charges a veteran a  copayment for medical services it provides is determined, in part, by the  veteran’s priority group. For example, veterans in priority group 1 are not  required to pay any copayments, and veterans in priority groups 7 and 8  are generally required to pay copayments for all types of medical  services. See appendix II for additional details on the enrollment and  eligibility process, including priority groups and requirements for  copayments.
When VHA is notified by VBA of a change in a veteran’s service- connected conditions or disability rating, VHA is responsible for  reevaluating the veteran’s priority group status and reviewing the  veteran’s account to determine whether any copayment charges that  were assessed after the effective date of the VBA award should be  canceled or refunded, if applicable, or whether any copayments should be  charged.

		Medical Service and Copayment Billing

Veterans’ health records are stored in the Computerized Patient Record  System (CPRS) application of the Veterans Health Information Services  and Technology Architecture (VistA) system. CPRS includes information  on veterans’ rated service-connected conditions and special treatment  authorities. When a veteran receives a VHA-provided medical service, the  provider identifies in CPRS whether the service provided was related to  the veteran’s service-connected conditions or provided under a special  treatment authority.
When medical services provided to a veteran are not otherwise precluded  from copayment billing, VistA automatically establishes a copayment  charge to the veteran’s account. VistA prevents copayment charges to a  veteran when    a provider indicates in CPRS that the medical service provided was  related to a veteran’s service-connected conditions or special  authority;   the medical service provided is one that is exempt from copayments  for all veterans, such as preventive screenings, immunizations, and  some laboratory services; and     a veteran receives more than one medical service in a single day.
If a veteran has third-party medical insurance, VistA puts the copayment  charge placed on the veteran’s account on hold for up to 90 days to allow  time for VHA to process a claim for reimbursement from the third-party  insurer. To the extent that VHA receives third-party reimbursement  attributable to the medical service that resulted in a copayment being  charged to a veteran’s account, VHA’s policy is to apply the insurance  reimbursement to reduce or eliminate the related pending copayment  charge. The third-party insurance offset process is a manual process that  is to be performed, according to VHA policy, on a daily basis by local  medical center staff.
See appendix II for additional details on the copayment billing process.

		Fiscal Year 2010 Medical Services and Copayment Charges

According to fiscal year 2010 VA information, VHA provided  approximately 576 million medical services to over 5.6 million veterans  through VHA’s 21 health care networks composed of 153 medical  centers, 768 outpatient clinics, and 134 nursing homes located in all 50  states, the District of Columbia, and territories including Puerto Rico and  the Virgin Islands. When VHA facilities are not capable of furnishing  economical hospital care or medical services because of geographic  inaccessibility or are not capable of furnishing the care or services  required, VHA may authorize and pay a non-VHA provider to provide  certain veterans hospital care and medical services. When authorized,  VHA identified these as fee basis services. Table 1 shows the types,  number, and percentage of medical services provided by type— outpatient, prescription, inpatient, extended care, and fee basis.
VA is also authorized, by statute to bill certain veterans for medical  service copayments (38 U.S.C. § 1710, 1710B, 1722A), and, if applicable,  their third-party medical insurance when the medical services VHA  provides are not related to the veteran’s service-connected medical  conditions or associated with special treatment authorities (38 U.S.C. §  1729). These collections supplement VA’s appropriations and are used to  fund VHA medical services to veterans.
When VHA provides medical services that are not associated with a  veteran’s service-connected conditions or special treatment authorities  and the veteran has third-party medical insurance, VHA is authorized by  statute (38 U.S.C. § 1729) to pursue insurance reimbursement to the  extent available under the veteran’s coverage from the veteran’s third- party insurance. Veterans who owe copayment charges for medical  services for non-service-connected conditions or for conditions not related  to special treatment authorities must be allowed to benefit from their third- party insurance to satisfy their VHA obligations. Therefore, VHA is  required to apply any insurance reimbursement it receives from a  veteran’s third-party insurance to the related copayment charge to reduce  or eliminate the copayment charge owed by the veteran.
VHA billed veterans for over 56.5 million copayment charges totaling over  $1 billion in fiscal year 2010. These copayment charges were related to  approximately 9.8 percent of the total of approximately 576 million VHA  medical services provided. Individual veteran copayment amounts in  fiscal year 2010 ranged from a low of $5 for some extended care services  to a high of $1,100 for the first 90 days of an inpatient hospital stay. Most  billed copayment charges (88 percent) were for prescription medications,  for which the copayment charge is generally $8 or $9 for up to a 30-day  supply of medication. Table 2 shows the number, amounts, and related  percentages associated with the copayment charges billed to veterans in  fiscal year 2010 by type of service.

	Statistical Tests of VHA’s Fiscal Year 2010 Copayment Charges Found That an Estimated 96 Percent Were Accurate

Based on our tests of a probability sample of billed copayment charges,  we estimate that 96 percent of VHA’s fiscal year 2010 copayment  charges were accurate and 4 percent were inaccurate or erroneous. We  selected a probability sample of 100 fiscal year 2010 copayment charges  billed to veterans, which included only prescription and outpatient  services, and found 4 erroneous copayment charges, each of which  resulted in an overbilling to a veteran. Based on these test results, we  estimate that of VHA’s 56.5 million fiscal year 2010 copayment charges,  approximately 54.2 million (96 percent) were accurate and approximately  2.3 million (4 percent) were inaccurate. In addition, none of the four  copayment errors we found involved underbilling of veterans.
In fiscal year 2010, more than 90 percent of VHA’s medical services did  not result in billed copayment charges. To assess the completeness of  the billed copayment charge population and the extent of possible  underbilling errors associated with those medical services, we also  selected a second probability sample of 100 unbilled medical services to  assess whether VHA had correctly determined that each of the tested  medical services should not have been billed. We did so because  incorrect “no bill” determinations by VHA would represent underbilling  inaccuracies associated with VHA’s fiscal year 2010 copayment charges.  Our tests of 100 unbilled medical services found that VHA correctly  determined that each of the medical services should not have resulted in  a veteran copayment charge—a 100 percent accuracy rate for this  probability sample. As a result, we are 95 percent confident that for fiscal  year 2010, VHA’s rate of error in the population of unbilled medical  services associated with incorrectly determining that medical services  should not have resulted in a copayment charge was between 0 percent  and 3 percent. (See table 3.)
With respect to erroneous copayment charges and our estimated error  rate of 4 percent, we found that each of the four copayment errors  occurred in overbilling to a veteran because   the veteran was billed for an incorrect amount,   the charge should have been reversed or offset, or   if paid, the amount should have been refunded to the veteran.
Also, three of the four errors we found had not been identified by VHA  prior to our selection of the copayment charges for testing. For the fourth  error, VHA learned about the error when the veteran notified VHA after  receiving a monthly statement containing the wrong copayment charge  amount.
The four overbilling errors we found resulted from three causes. For one  of the errors, the copayment should not have been billed to the veteran  because, prior to billing the veteran, VHA had received sufficient third- party insurance reimbursement to offset the copayment and eliminate any  amount owed by the veteran. Two of the errors involved copayment  charges that were paid by the veterans but were not later refunded by  VHA as would have been correct following VBA decisions that resulted in  a retroactive change to the veterans’ priority group status. VBA had  informed VHA that it had retroactively awarded the veterans either an  additional service-connected condition or increased a veteran’s disability  rating, which led VHA to change the two veterans’ priority groups. With a  (retroactive) change in priority group back to an effective date prior to the  medical service that led to the copayment charge we tested, each of the  veterans was no longer responsible for the copayment charge they had  paid. Once VHA revised the veterans’ priority group status in response to  VBA’s retroactive decisions, the veterans were due refunds for the two  paid copayment charges we tested. VHA had been aware of VBA’s  retroactive award decisions for at least 4 months prior to our identification  of the copayments as errors; however, VHA had not determined that the  veterans were due refunds for the tested copayment charges. Following  our test-related inquiries, VHA officials provided us with documentation  that refunds to the veterans had been approved by VHA. The fourth  copayment error resulted when VHA incorrectly billed a veteran a  copayment amount for a 90-day prescription, instead of the smaller  copayment amount that was due for the 30-day prescription supply the  veteran received. After the veteran inquired about the erroneous charge,  VHA corrected it on the veteran’s subsequent monthly statement.

		Case Study Tests Found Copayment Errors

Three types of VHA medical services—inpatient, extended care, and fee  basis services—together represented less than 1 percent of VHA’s fiscal  year 2010 copayment charge population. Therefore, to provide some  limited insight into copayments related to these infrequently billed  services, we tested—as case studies—three small probability samples  consisting of 10 each for inpatient, extended care, and fee basis  services.
We found four inaccurate copayment charges—two errors each  associated with inpatient and extended care services. Three of the four  copayment errors represented overbilling (two extended care services  and one inpatient service) and the other represented an underbilling error  (one inpatient service). In each case, VHA had not identified the  copayment errors we found prior to our selecting the copayment charges  for testing. Two of the three overbilling errors we found in our case study  tests involved VHA’s incorrect application of the veterans’ third-party  insurance reimbursement to offset the veterans’ copayment charges. The  third overbilling error occurred when VHA billed the veteran for a second  copayment charge in the same day, which generally is not permitted  under VHA’s policy. The one underbilling error occurred when VHA  incorrectly billed a veteran a lower copayment amount based on the 2009  copayment rate instead of the higher 2010 copayment rate that was  applicable at the time medical service was provided.
Our case study test results are not generalizable to the larger populations  of medical services from which the samples were drawn. However, they  may provide some limited insight into copayment errors affecting these  infrequently billed types of medical services. Copayment errors identified  in both the probability sample and the case study test work mostly  involved overbillings, including errors resulting from VHA’s incorrect  handling of third-party insurance reimbursements. The case study errors  we found do not affect our estimate of VHA’s overall error rate for fiscal  year 2010 copayment charges.
VHA’s processes for determining copayment charges for many of the  copayments we tested resulting from inpatient, extended care, and fee  basis services are more complicated and generally require greater VHA  staff involvement and review compared with the processes for  determining the copayment charges associated with the more routine  outpatient and prescription services. This difference in complexity may  help explain why we found four copayment errors—two each in two of the  three small probability samples we tested in our case studies.

		Veteran-Specific Data Issues Could Affect Other Copayment-Related Billing Decisions

In conducting our tests of the accuracy of VHA’s copayment charges and  “no bill” decisions, we compared relevant veteran-specific data  maintained by VBA and VHA’s HEC and local medical centers to  determine whether the VHA data were consistent and correct. The  relevant data we compared included each veteran’s recorded service- connected conditions, degree of disability, and priority group status.  These data are key to correctly determining whether a medical service  should be billed to a veteran as a copayment charge and, if so, the  correct amount of the copayment. Of the 200 medical services we tested,  we found that the key data for 197 veterans were consistently and  correctly recorded by VBA and VHA’s HEC and local medical centers. We  found two instances where specific elements of veteran data were not  consistently recorded in VHA records and one instance in which the  recorded data were incorrect. After following up with VHA on these  instances, VHA corrected the data. While these data recording errors did  not cause the particular copayment–related charge or “no bill” decision  we tested to be inaccurate, they could have affected other VHA  copayment–related decisions for these veterans.
In one of the two data inconsistencies we found, HEC and the local VHA  medical center’s records had the veteran’s combined service-connected  condition percentage lower than what VBA had established, which  resulted in the veteran being assigned to an incorrect priority group. As a  result, if the veteran had been provided certain other medical services,  the data inconsistency could have caused the veteran to be incorrectly  charged a copayment. VHA officials said that the cause for the incorrect  data related to the data transfer from VBA to VHA’s HEC and local  medical centers. According to VHA, the data transfer issue and the  incorrect data have since been corrected. In the other data inconsistency  instance, the disability rating recorded in HEC’s and the medical center’s  records were inconsistent, resulting in the medical center having the  veteran in an incorrect priority group. According to VHA, the data error  was due to problems during registration at the medical center, which have  since been resolved. The third data error involved a local medical center’s  records having an incorrect priority group for a veteran. The medical  center had not received the information needed to update the veteran’s  financial assessment (also known as a means test), which was necessary  to keep the veteran in a priority group that would have made him exempt  from paying certain copayments. After our follow-up inquiries, VHA  confirmed that at the time the medical service was provided, the veteran’s  recorded priority group was incorrect, and the center has since received  the information necessary to update the financial assessment, and the  veteran’s recorded priority group is now correct.

	VHA Does Not Monitor Its Systemwide Copayment Error Rates

While various activities performed by VHA staff involve examining or  reviewing the accuracy of some individual veteran copayment charges,  we found that those activities do not provide VHA with systematic VHA- wide information on the accuracy of copayment charges needed to  effectively monitor—over time—the rates of and causes for copayment  errors. We also found that VHA has not established a performance  measure or goal for the level of accuracy it wants to achieve for the  copayment charges it bills to veterans. As a result, it was not clear how  the copayment charge error rates we observed in our probability samples  would compare to rates of error VHA would consider acceptable or  whether corrective action needs to be taken to reduce the error rates to  lower levels. In addition, without procedures to periodically assess the  accuracy and completeness of its copayment charges, VHA does not  have the information needed to determine whether changes in its  accuracy rates are occurring over time.
In reviewing VHA’s copayment billing process and the extent to which  VHA systematically monitors its copayment charges for accuracy, we  identified various activities that generally involved reviewing or checking  the accuracy of some individual copayment charges; however, those  activities are performed for reasons other than a systematic VHA-wide  assessment of the accuracy of billed copayment charges and do not  provide sufficient information for systemwide monitoring.     Responding to veteran inquiries. VHA responds to veteran-related  questions or inquiries concerning specific copayment charges. In  doing so, VHA may evaluate some individual copayment charges and  determine whether they were accurate. However, VHA does not  systematically track and analyze the results of these individual  reviews, including whether the copayment charges were accurate or  inaccurate and, if applicable, the cause of any inaccuracies.     Revenue reviews. Staff from VA’s Management Quality Assurance  Service’s (MQAS) Health Care Financial Assurance Division may  evaluate specific veteran copayment bills on a limited, ad hoc basis as  part of the recurring reviews of VA revenue activities at selected  individual medical centers. During these reviews, MQAS officials said  they devote most of their resources to evaluating third-party insurance  collections, as they make up the majority of the Medical Care  Collections Fund (MCCF). These revenue reviews are focused on  third-party insurance recoveries and in only some instances may  involve reviewing the accuracy of individual veteran copayment  charges.      Local compliance programs. Individual medical centers and  Consolidated Patient Account Centers (CPAC) have decentralized  compliance programs that include varied processes and procedures  related to reviewing some individual copayment charges. The scope  and results of these compliance reviews may involve reviewing  copayment–related charges but do not routinely include a systematic  assessment of a probability sample of copayment charge accuracy. In  addition, the results of any reviews of copayment charge accuracy at  medical centers and CPAC locations are not consolidated and  reported to VHA management.     Targeted reviews of certain copayment charges. VHA instituted a  policy in October 2006, in response to a VA Inspector General  report, requiring VHA’s Compliance and Business Integrity (CBI)  Office to identify delinquent copayment debts for certain veterans  whose accounts were being referred to debt collection. VHA facilities  were required to review the accounts to help ensure that the referrals  were not based on inaccurate copayment charges. Initially, the policy  required the VHA facilities to report to the CBI Office the results of  their targeted reviews until the error rate in the applicable copayment  charges went below 10 percent for two consecutive quarters. As a  result of a sustained decrease in the related billing error rate, in  October 2009, the CBI Office stopped collecting national monitoring  results from VHA facilities, and in March 2010, VHA rescinded the  requirements for facilities to report the results of their quarterly  reviews to the CBI Office. However, VHA facilities are still  responsible for conducting the reviews.
As noted, these activities are conducted for specific reasons and are not  intended to provide VHA with systematic VHA-wide information on the  accuracy and completeness of copayment charges needed to effectively  monitor—over time—the rates of and causes for copayment errors. Also,  having meaningful performance information to provide to stakeholders,  including veterans organizations and Congress, could be useful in cases  where questions regarding the accuracy and completeness of copayment  charges are raised.

	Conclusions

Our tests of a probability sample of VHA copayment charges found  copayment errors which we estimate to be 4 percent or approximately 2.3  million of VHA’s 56.5 million fiscal year 2010 copayment charges.  However, because VHA does not have established acceptable or  tolerable error rates for copayment charges, the extent to which the error  rates we observed would compare to levels of performance that VHA  would consider acceptable is unclear. We believe that it is important for  VHA to establish a performance measure for the copayment accuracy  rate it wants to achieve in billing copayment charges to veterans and,  once it is established, to periodically assess—on a systematic basis—the  accuracy and completeness of its copayment charges. With such  information, VHA would be able to make informed decisions concerning  the rates and causes of erroneous copayment charges, including whether  any actions are needed to lower its overall error rate. Such periodic  assessments could be integrated into VHA’s existing quality assurance  monitoring efforts and provide meaningful management information on  various aspects of its copayment billing systems and processes, including  whether key veteran data were consistently and correctly recorded in  VHA records and systems. Further, having meaningful performance  information regarding copayment accuracy to provide to stakeholders,  including veterans organizations and Congress, could assist VA in  responding to any questions concerning the accuracy and completeness  of copayment charges.

	Recommendations for Executive Action

To provide VHA with the information needed to adequately monitor the  accuracy of copayment charges VHA-wide and to assess and respond to  the causes of copayment errors, the Secretary of Veterans Affairs should  direct VHA to take the following two actions:     establish an accuracy performance measure or goal for copayment  charges billed to veterans and    establish and implement a formal process for periodically assessing— VHA-wide—the accuracy of veteran copayment charges and taking  corrective actions as necessary.

	Agency Comments and Our Evaluation

In its written comments, VA generally agreed with our conclusions and  agreed with our recommendations. It also provided an overview of  planned actions, starting in fiscal year 2012, including plans to establish  an initial national performance measure for copayment charge accuracy  and implement a periodic assessment of billed copayment accuracy. As  VA implements these plans, it will be important for these actions to  provide the information needed to monitor VHA-wide copayment accuracy  and completeness and to assess and respond to the causes of  copayment errors. Such plans, if fully and effectively implemented in  accord with our conclusions and recommendations, should respond to the  conditions we found. We also incorporated VA’s technical comments  where appropriate. VA’s comments are reprinted in appendix III.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Veterans  Affairs, appropriate congressional committees, and other interested  parties. The report will also be available at no charge on the GAO website  at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-9095 or raglands@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Major contributors to this report are listed in  appendix IV.

Appendix I: Objectives, Scope, and Methodology

Pursuant to a request from members of the Subcommittee on Health,  House Committee on Veterans’ Affairs, we reviewed the Veterans Health  Administration’s (VHA) copayment billing practices to determine (1) the  accuracy rate for VHA copayment charges, including causes for any  under- and overbilling errors, and (2) whether VHA had systems and  processes in place to adequately monitor the accuracy of copayment  charges billed to veterans.

	Assessment of VHA Copayment Charge Accuracy

To determine the accuracy rate and any causes for under- and overbilling  errors, we used as our criteria applicable law and VHA policy. To gain an  understanding of VHA’s policies, procedures, systems, and processes  related to copayment billing practices, we performed walk-throughs of  applicable processes with appropriate VHA staff at a medical center. We  reviewed and discussed with agency officials and staff applicable  processes related to VHA’s copayment billing practices. We also  interviewed Veterans Benefits Administration (VBA) officials and staff  about VBA decisions related to veterans’ service-connected conditions  and disability ratings and the transfer of that information to VHA. In  addition, to assess the reliability of data and information used in this  report, we reviewed Department of Veterans Affairs’ (VA) procedures for  ensuring the reliability of data and information generated by key VHA  systems used in the copayment billing process, including VHA’s Veterans  Health Information Systems and Technology Architecture (VistA),  Performance and Operations Web-Enabled Reports (POWER), and  Prescription Benefits Management systems. We determined that the data  and information generated from key VHA systems used in the copayment  billing process were sufficiently reliable for the purposes of our testing.

		Probability Sample of VHA Copayment Charges

To determine the accuracy of the copayment amount billed to veterans,  we selected a simple probability sample of 100 copayment charges from  the population of approximately 56.5 million fiscal year 2010 copayment  charges in POWER. This sample was designed to estimate the error  rates in the population, if errors were found in the sample, or to conclude  with 95 percent confidence that the population error rate is less than 3  percent, if no errors were found in the sample. The population consisted  of five broad types: (1) prescription, (2) outpatient, (3) inpatient,   (4) extended care, and (5) fee basis (see table 4).
To assess the reliability of population data used to select the sample, we  (1) reviewed related documentation, (2) reviewed internal and external  reports related to the systems, and (3) interviewed knowledgeable VHA  officials. We also, as part of our testing of unbilled medical services,  determined that for the purposes of our testing, the population of fiscal  year 2010 copayment charges was materially complete. Based on our  data reliability analysis, we determined that the population data, obtained  from POWER, were sufficiently reliable for the purposes of our testing.  For each sampled item, we obtained applicable information and  supporting documentation from VHA and VBA and determined whether a  veteran’s copayment charge was accurate in accordance with VHA’s  established policies, procedures, systems, and guidance. For each  inaccurate copayment charge, we determined the cause and provided  VHA with an explanation of the error, the related cause, and any other  relevant information. Table 5 contains a detailed breakout of the causes  of the errors in copayment charges.
There were limitations because of the nature of the testing we performed.  We did not  test the medical determinations (i.e., diagnosis and whether the  service was related to a veteran’s service-connected conditions or  special treatment authority) of the medical service provider (including  the pharmacist, doctor, nurse, or other medical staff);  test the determinations made as a result of the adjudication process at  VBA to determine the veteran’s service-connected conditions and  related disability rating percentages;  test the determination made by VHA on whether to bill a third-party  insurer for the medical service or the third-party insurer’s  determination to pay, including the amount of that payment; and   confirm through outside sources (including contacting applicable  veterans) the accuracy or completeness of veteran-specific  information relied on by VHA as part of its decision to bill tested  copayment charges.
In table 6, we present our statistical results as (1) our projection of the  estimated error overall and (2) the 95 percent, two-sided confidence  intervals for the projections.
To (1) assess the completeness of the population of fiscal year 2010  copayment charges billed to veterans and (2) determine the accuracy of  VHA’s decisions not to bill veterans copayments for medical services  provided in fiscal year 2010, we selected for review a probability sample  of 100 unbilled medical services from the population of VHA’s  approximately 576 million fiscal year 2010 medical services.
Our sampling frame for this sample was developed by combining  databases from three VHA data warehouses (the National Patient Care  database, Purchased Care Data warehouse, and Pharmacy Data  warehouse), which totaled approximately 576 million medical services  provided in fiscal year 2010. VHA’s databases do not separately identify  or track unbilled services, so this set of databases contained both billed  and unbilled fiscal year 2010 medical services. The population of medical  services consisted of five broad types: (1) prescription, (2) outpatient,   (3) inpatient, (4) extended care, and (5) fee basis (see table 7).
Because the VHA-provided population of all medical services from which  we selected our sample included services that resulted in copayment  charges, we initially selected a larger probability sample of 150 medical  services. After checking billing records, we excluded any sampled  medical services that resulted in a copayment charge. From the  remaining medical services, we selected the first 100 as our probability  sample of unbilled medical services.
This sample was designed to test for a 3 percent tolerable error rate so  that if we found no billing errors in the sample, we would be able to  conclude with 95 percent confidence that (1) the population of fiscal year  2010 unbilled medical services did not include a material number (more  than 3 percent) of medical services that should have been billed as  copayment charges and (2) the population of billed fiscal year 2010  copayment charges was materially complete for the purposes of our tests.  If errors were found, this sample could be used to estimate the rate of  copayment underbilling errors associated with incorrect VHA  determinations not to bill medical services in this population.
To assess the reliability of population data used to select this sample for  testing, we (1) reviewed related documentation, (2) reviewed any internal  or external reports related to the systems, and (3) interviewed  knowledgeable VHA officials. Based on our data reliability analysis, we  determined that the population data were sufficiently reliable for the  purposes of our testing. For each of the unbilled medical services we  tested, we obtained applicable information and supporting documentation  from VHA and VBA to determine whether VHA correctly determined that  the 100 tested fiscal year 2010 medical services should not have resulted  in copayment charges, in accordance with VHA’s established policies,  procedures, systems, and guidance.
There were limitations because of the nature of the testing we performed.  We did not  test the medical determinations (i.e., diagnosis and whether the  service was related to a veteran’s service-connected conditions or  special treatment authority) of the medical service provider (including  the pharmacist, doctor, nurse, or other medical staff);  test the determinations made as a result of the adjudication process at  VBA to determine the veteran’s service-connected conditions and  related disability rating percentages;  test VHA’s ability to record all of the medical services in the medical  center–level VistA system, or VHA’s ability to transfer all the medical  services to the appropriate data warehouse; and  confirm through outside sources (including contacting applicable  veterans) the accuracy or completeness of veteran-specific  information relied on by VHA as part of its decision to not bill for  tested medical services.
In table 8, we present our statistical results as (1) our projection of the  estimated error overall and (2) the 95 percent, two-sided confidence  intervals for the projections.
In addition to our statistical samples of copayment charges and unbilled  medical services, we tested—as case studies—three small,  nongeneralizable samples consisting of 10 copayment charges each from  inpatient, extended care, and fee basis services. These three types of  medical services combined represented less than 1 percent of the VHA- wide fiscal year 2010 copayment population. Results from our  nongeneralizable case study samples cannot be used to make inferences  about any population; consequently, results obtained from these cases  are specific to the particular cases selected. We conducted this testing to  provide limited insight into possible errors in copayments billed for these  types of medical services. For each case study, we obtained applicable  information and supporting documentation from VHA and VBA and  determined whether a veteran’s copayment charge was accurate in  accordance with VHA’s established policies, procedures, systems, and  guidance. For each inaccurate case study copayment charge, we  determined the cause and provided VHA with an explanation of the error,  the related cause, and any other relevant information. Table 9 contains a  breakout of the results of the testing of the case studies.

	VHA Monitoring of Copayment Accuracy

To determine whether VHA had systems and processes in place to  adequately monitor the accuracy of copayment charges, we identified  relevant policies, procedures, systems, practices, and related  documentation, whether at a national, regional, or local level, related to  VHA’s efforts to monitor copayment accuracy. We reviewed the  documentation provided to determine whether it contributed to VHA  periodically assessing the accuracy of copayment charges and taking  appropriate action to address the underlying causes when errors or  inaccuracies are found. We also interviewed knowledgeable staff and  officials from VHA and VA’s Office of Inspector General.
We conducted this performance audit from February 2010 through August  2011 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Appendix II: Enrollment in VA Health Care and Copayment Billing Process

As part of our review of the accuracy of Veterans Health Administration  (VHA) copayment charges, we gained an understanding of key aspects of  veteran eligibility and enrollment for veteran health services, veteran  medical services and related copayment charges, and copayment billing  and adjustments.

	Veteran Eligibility and Enrollment

Veterans are eligible for Department of Veterans Affairs (VA) health care  benefits based on their period of and separation from military service  under any condition other than a dishonorable separation. To obtain VHA  medical services, most veterans must take action to enroll in the VHA  health care system. To initiate their enrollment, veterans submit a  completed enrollment application (VA Form 10-10EZ) either by mail or  online to VHA’s Health Eligibility Center (HEC) in Atlanta for review and  processing, or veterans may visit a local VHA medical center or facility  where they can receive assistance in completing the enrollment form.
HEC establishes a veteran’s enrollment status (priority group), which is  primarily affected by decisions made by the Veterans Benefits  Administration (VBA), which establishes and administers a variety of  nonhealth benefits and services for veterans. VBA is responsible for  determining a veteran’s service-connected conditions and, to the extent  applicable, a veteran’s disability rating. In doing so, VBA adjudicates  veteran claims by determining whether a veteran’s illness or injury was  incurred in or aggravated by the veteran’s military service (i.e., a service- connected condition). Once awarded to a veteran, a service-connected  condition is considered a “rated” service-connected condition. Additional  service-connected conditions may also result in a change to a veteran’s  disability rating. VBA sends the veteran a notification letter informing him  or her of the award decision, including the additional service-connected  condition, applicable changes in disability rating, and the effective date of  the award determination. Information on VBA award decisions is also  automatically transmitted to HEC. VBA may grant additional service- connected conditions and change disability ratings retroactively by  establishing an effective date that precedes the date VBA makes the  determination.
Based on a veteran’s service, including rated service-connected  conditions, applicable disability rating, special treatment authorities, and  other enrollment information such as the results of a financial assessment  (called a means test), HEC assigns veterans to one of eight enrollment  priority groups. Special treatment authorities include care provided  pursuant to 38 U.S.C. § 1710(e), and implementing regulations at 38  C.F.R. §§ 17.36 (a)(3) and 17.36 (b)(6), which authorizes treatment for  disorders that may be associated with a Vietnam-era veteran’s exposure  to herbicide (including Agent Orange); certain diseases deemed to be  related to exposure to radiation; disorders that may be related to service  in the Southwest Asia theater of operation during the Persian Gulf War;  illnesses that may be related to services in a qualifying combat theater;  and disorders that may be related to participation in certain biological and  chemical warfare testing, including Project SHAD (Shipboard Hazard and  Defense Project). Veterans covered by section 1710(e) are enrolled in  priority group 6. Generally speaking, the more service-connected  conditions, higher disability rating, and special treatment authorities that  apply to a veteran, the less likely a veteran will be subject to copayment  charges. Table 10 shows the eight priority groups and their eligibility  factors.

	Medical Services and Copayment Charges

Medical services provided by VHA include inpatient and outpatient  services, prescription medication, and extended services. When VHA  facilities are not capable of furnishing economical hospital care or medical  services because of geographic inaccessibility or are not capable of  furnishing the care or services required, VHA may authorize and pay a  non-VHA provider to provide certain veterans hospital care and medical  services. When authorized, VHA identifies these as fee basis services.
VHA’s clinical and health records system—the Computerized Patient  Record System—contains, among other things, information on veterans’  rated service-connected conditions and special treatment authorities.  When a veteran receives medical services, the provider indicates in the  system whether the service provided was related to a veteran’s service- connected conditions or special authorities, which affects whether a  copayment will be charged to the veteran.
According to VHA, almost 95 percent of the approximately 576 million  medical services provided to veterans in fiscal year 2010 consisted of  outpatient services (70.8 percent) and prescription services (23.6  percent). (See table 11.)
Outpatient services. There are three copayment tiers or categories that  apply to outpatient services–no copayment, basic $15 copayment, and  specialty $50 copayment. For example, an outpatient visit for  immunizations or preventive screenings is included in the no copayment  tier. A basic (nonspecialty) outpatient service, which includes primary  care visits for diagnosis and management of acute and chronic  conditions, has a $15 copayment. A specialty outpatient service, which  requires a referral, includes cardiology services and radiology services,  such as magnetic resonance imagery, has a $50 copayment. If the  medical service, which might otherwise have an applicable copayment, is  determined to be related to a veteran’s service-connected condition or  special treatment authority, then no copayment charge would be due.  Generally, only veterans in priority groups 7 and 8 are charged for  applicable outpatient copayments. Further, when a veteran in priority  group 7 or 8 receives more than one outpatient service in a single day,  only one copayment—the highest applicable amount—is to be charged to  the veteran for that day.
Prescription services. Veterans can fill prescriptions for medications at  a VHA pharmacy or through the mail. Veterans whose prescriptions  require a copayment are charged either $8 (for veterans in priority groups  2 through 6) or $9 (for priority groups 7 and 8) for supplies of 30 days or  less. If authorized, prescriptions may be filled for up to a 90-day period at  a time with a corresponding copayment charge based on a longer number  of days. Priority group 1 veterans do not pay any prescription copayment  charges. Veterans in priority groups 2 through 6 are subject to applicable  copayment charges but have an annual cap that limits their total  prescription copayment charges to $960 per year. Priority group 7 and 8  veterans are generally subject to applicable prescription copayments but  do not have an annual cap.
Inpatient services. Inpatient stay copayment charges are $1,100 for up  to the first 90 days of care during a 365-day period and $550 for each  additional 90 days. In addition to the inpatient stay copayment charges,  patients are also subject to inpatient per diem charges of $10 per day. As  with other medical services, no inpatient copayment or per diem will be  charged if the stay is related to the veteran’s service-connected  conditions or special treatment authority. Generally, only veterans in  priority groups 7 and 8 are charged applicable inpatient copayment and  per diem charges.
Extended care services. Extended care services generally include both  institutional (inpatient) and noninstitutional (outpatient) services. VHA  does not charge any copayments for the first 21 days of extended care  services in any 12-month period. Extended care copayment charges are  capped at a maximum of $97 per day for institutional nursing home or  institutional respite care, $5 per day for institutional domiciliary care, and  $15 per day for noninstitutional adult day health care and noninstitutional  respite care services. No extended care copayments will be charged if the  services are related to a veteran’s service-connected conditions or  special treatment authorities. Generally, only veterans in priority groups 4  through 8 may be subject to extended care copayment charges.
Fee basis care services. VHA may authorize certain veterans to receive  hospital care and medical services from non-VHA providers. When this  occurs, VHA refers to these services as fee basis care. Non-VHA  providers submit bills to VHA for medical services provided to veterans.  Copayment amounts and requirements related to fee basis services are  otherwise the same as those for services provided in VHA facilities.
Determining the correct applicable copayment charge depends on many  factors, including the underlying medical service provided, a veteran’s  applicable service-connected conditions and special treatment authorities,  priority group, and established copayment amount. Table 12 provides  general information on whether copayment charges may apply to  veterans in particular priority groups.
While table 12 reflects the general applicability of copayment charges by  priority group, some exceptions apply, including the following:    Former prisoners of war, who make up part of priority group 3, are not  subject to any prescription copayment charges.    Copayment requirements do not apply to priority group 6 veterans if  medical service is related to the priority group 6 placement.    For priority group 7 veterans, the inpatient stay copayment rate  ($1,100) is reduced by 80 percent.    Veterans may be exempted from copayments based on results of the  financial assessment.    Veterans who experience temporary financial difficulties may apply to  their local VHA facility for hardship waivers to eliminate copayments  for a defined short-term period or to have VHA waive a specified  amount of outstanding debt incurred for prior medical services.

	Copayment Billing and Adjustments

Generally, when a copayment charge is applicable to a medical service,  the billing system determines whether that medical service should result  in a copayment amount being charged to a veteran’s account based on  information recorded by the service provider and the veteran’s specific  enrollment information, including priority group status. The billing system  also tracks all prescription copayment charges billed to a veteran at all  medical center sites to ensure that the annual maximum prescription  billing cap is not exceeded. For fee basis care, staff at the local VHA  facilities who process claims submitted by non-VHA providers for  reimbursement for the cost of medical services provided to veterans  outside of VHA medical centers also manually establish a veteran  copayment charge in the billing system if the medical service in question  would have resulted in a copayment charge had the service been  provided in a VHA facility.
If a veteran has active third-party health insurance, VHA’s policy is to file  a claim with the veteran’s third-party insurer seeking reimbursement of  costs related to medical services covered by the veteran’s third-party  insurance that were not related to a veteran’s service-connected  conditions or special treatment authorities. VHA is authorized to pursue  reimbursement from third-party insurers regardless of whether the  services were provided by VHA or non-VHA providers. Under this policy,  VHA is required to apply any related insurance reimbursement received  to reduce or eliminate any related pending copayment charges due from  the veteran. As a result, if a veteran has third-party insurance and is  subject to a copayment charge, the copayment charge is not billed to the  veteran on the monthly statement for up to 90 days to allow time for VHA  to receive and apply reimbursement from the veteran’s third-party insurer.  If the reimbursement received does not fully cover or offset the veteran’s  copayment obligation, the veteran is responsible for any balance.
Unless reimbursement received from a veteran’s third-party health insurer  is applied to eliminate or reduce the pending copayment charge, the  original copayment charge is released after 90 days, and the charge  appears on the veteran’s subsequent monthly billing statement.  Applicable third-party insurance reimbursement received after the  copayment charge is billed to the veteran should still be applied to reduce  or eliminate a copayment charge if still unpaid, or used to provide a  refund of the billed amount if the veteran has paid the amount. According  to VHA procedures, this process, which is known as the third-party  insurance offset, is manual and is to be performed on a daily basis after  third-party insurance reimbursement is received by local facility staff.
VHA is expected to adjust copayment charges or issue copayment  refunds when certain matters related to the billed amount change. When  a third-party insurance reimbursement that would fully offset or reduce a  billed copayment charge is received, VHA is expected to eliminate or  reduce the amount billed to the veteran’s account, and if the amount was  previously paid by the veteran, VHA is responsible for initiating a refund  to the veteran. In addition, when VBA notifies VHA of a new retroactively  awarded service-connected condition or an increased disability rating for  a veteran, VHA staff are to review the veteran’s account to determine  whether any previously billed copayment charges for services provided  after the effective date of the retroactive VBA award determination should  be canceled (if unpaid) or refunded (if paid).

Appendix III: Comments from the Department of Veterans Affairs

Appendix IV: GAO Contact and Staff Acknowledgments

	GAO Contact

	Staff Acknowledgments

In addition to the contact named above, John J. Reilly, Assistant Director;  Wilfred Holloway, Assistant Director; Mark Ramage, Assistant Director;  Sophie Brown; James Healy; Diane Morris; Quang Nguyen; Gabrielle  Perret; Sabrina Rivera; and Matthew Zaun made key contributions to this  report.

Summary:
Why GAO Did This Study

In fiscal year 2010, the Department of Veterans Affairs' (VA) Veterans Health Administration (VHA) billed veterans millions of medical copayment charges totaling more than $1 billon. Witnesses at a 2009 Subcommittee on Health, House Committee on Veterans' Affairs, hearing raised concerns about inappropriate copayment charges, including some associated with veterans' service-connected conditions. As a result, members of the Subcommittee asked GAO to review (1) VHA copayment charge accuracy, including error rates and related causes, and (2) VHA efforts to monitor copayment charge accuracy. To assess the accuracy of VHA's billed copayment charges, GAO evaluated samples of fiscal year 2010 billed and unbilled medical services to determine copayment error rates and related causes. GAO also reviewed VHA practices related to monitoring the accuracy of copayment charges..

What GAO Found

Of the more than 56 million fiscal year 2010 veteran copayment charges billed by VHA, GAO estimates, based on its test of a probability sample of copayment charges, that 96 percent (or approximately 54.2 million) of the copayment charges were accurate and 4 percent (or approximately 2.3 million) were inaccurate. GAO's tests of a separate probability sample of the approximately 519 million VHA medical services that did not result in copayment charges showed that each of those VHA determinations was accurate. These and other estimated percentages are based on test results of probability samples and are subject to sampling error. Appendix I of this report contains additional information on the samples and the 95 percent confidence intervals for the estimates contained in this report. (1) Since the errors identified in GAO's probability sample all involved copayment overbilling, GAO estimates that 4 percent of the copayment charges involved overbilling of veterans. The errors GAO found were due to various factors, including inadequate review of previously billed copayment charges following retroactive changes in a veteran's service-connected conditions and the incorrect application of related medical reimbursements received from veterans' third-party insurance. (2) In tests GAO performed on another probability sample to identify underbilling errors in the approximately 519 million medical services that did not result in copayment charges, GAO found that VHA correctly determined that each tested service should not have resulted in a copayment charge. As a result, GAO tests showed that VHA accurately did not bill copayment charges for these services, which made up more than 90 percent of the approximately 576 million medical services provided during fiscal year 2010. While VHA performed various activities that involved reviewing the accuracy of some individual billed copayment charges, these activities do not constitute a systematic process for providing VHA-wide information on the accuracy and completeness of its copayment charges over time. In addition, GAO found that VHA had not established a performance measure for the accuracy level it wants to achieve in billing copayment charges. Without such a measure, it is not clear how the error rates GAO found would compare to error rates that VHA would consider acceptable, or if VHA would determine whether corrective actions need to be taken to reduce the error rates to lower levels. In addition, without a performance measure and periodic, systemwide information on the accuracy of its copayment charges, VHA cannot monitor changes in error rates and related causes over time. VHA also does not have meaningful performance information that it can provide to interested stakeholders when questions or concerns are raised concerning the accuracy of VHA's copayment charges billed to veterans.

What GAO Recommends

GAO makes two recommendations to the Secretary of Veterans Affairs to (1) establish a copayment accuracy performance measure and (2) establish and implement a formal process for periodically assessing the accuracy of veteran copayment charges VHA-wide. In written comments on a draft of this report, VA agreed with GAO's recommendations.