UNITED STATES COURT OF APPEALS FOR VETERANS CLAIMS

No. 16-0338

DONALD E. ZEGLIN, APPELLANT,

V.

ROBERT L. WILKIE,

SECRETARY OF VETERANS AFFAIRS, APPELLEE.

On Appeal from the Board of Veterans' Appeals

(Decided August 28, 2018)

Donald E. Zeglin, pro se.

Meghan Flanz, Interim General Counsel; Mary Ann Flynn, Chief Counsel; Selket N. Cottle, 

Deputy Chief Counsel; and Sarah W. Fusina, all of Washington, D.C., were on the brief for the 

appellee.1

Before SCHOELEN, BARTLEY, and TOTH, Judges.

BARTLEY, Judge, filed the opinion of the Court. TOTH, Judge, filed a concurring 

opinion.

BARTLEY, Judge: Self-represented veteran Donald E. Zeglin appeals a May 29, 2015,

Board of Veterans' Appeals (Board) decision that found proper the incurrence of a VA copayment 

debt for medication filled at a VA pharmacy between November 2011 and July 2013 for treatment 

of non-service-connected conditions. Record (R.) at 3-15.2 This matter was referred to a panel of 

 

1 Meghan Flanz was Interim General Counsel for the appellee when his brief was submitted to the Court, but 

James M. Byrne has since been appointed General Counsel. In addition, since briefing was completed, Sarah E. Wolf

replaced Sarah W. Fusina as lead representative of record for the appellee. 

2 The Board remanded the issues of proper accounting as to the debt and whether Mr. Zeglin is entitled to a 

waiver of the debt. R. at 13-15. Because this action does not constitute a final decision of the Board subject to judicial 

review, the Court does not have jurisdiction to consider these issues at this time. See Howard v. Gober, 220 F.3d 1341, 

1344 (Fed. Cir. 2000); Breeden v. Principi, 17 Vet.App. 475, 478 (2004) (per curiam order); 38 C.F.R. § 20.1100(b) 

(2018). In response to the Court's October 5, 2017, order, the Secretary informed the Court that the remanded claims 

are still pending before VA. Secretary's November 9, 2017, Response at 3-4; see Supplemental R. at 293-95, 297-303, 

305-13. In addition, the Board referred to the agency of original jurisdiction (AOJ) for appropriate action the issue of 

whether VA improperly recouped the debt by offsetting Mr. Zeglin's disability compensation benefits. R. at 4. The 

Court has jurisdiction to review a referred issue only to the extent that the appellant argues that remand, rather than 

referral, was appropriate. See Young v. Shinseki, 25 Vet.App. 201, 202-03 (2012) (en banc order). Because Mr. Zeglin 

has not challenged the propriety of the Board's referral, the Court will not address the referred issue. See Link v. West, 

12 Vet.App. 39, 47 (1998) ("Claims that have been referred by the Board to the [AOJ] are not ripe for review by the 

Court.").
2

the Court to address two issues relating to veterans health care: (1) VA's authority to verify that 

reimbursement it receives from a veteran's private health insurance carrier is comparable to the 

private health insurance carrier's reimbursements paid to non-federal health care entities; and 

(2) VA's policy to offset a veteran's medication copayment responsibility by the reimbursement it 

receives from the veteran's private health insurance carrier. 

On March 6, 2018, a panel of this Court issued a decision that affirmed the May 29, 2015, 

Board decision. On March 20, 2018, Mr. Zeglin filed a motion for reconsideration or, in the 

alternative, a motion for full Court review pursuant to Rule 35 of the Court's Rules of Practice and 

Procedure. In a May 4, 2018, order, the panel, inter alia, granted the motion for reconsideration 

and withdrew its March 6, 2018, decision, indicating that a new decision would be issued after 

receiving additional responses from both parties.3 For the reasons that follow, the Court will affirm 

the May 29, 2015, Board decision.

I. FACTS

Mr. Zeglin served on active duty in the U.S. Army from September 1969 to September 

1971. R. at 135. 

In September 2010, Mr. Zeglin applied for VA health benefits. R. at 317-18. At that time, 

he indicated that he did not wish to provide financial information and, therefore, he "agree[d] to 

pay applicable VA copayments." R. at 317. In October 2010, VA informed him that, because he 

did not disclose income information, he would be required to pay an $8 copayment for each 30-

day supply of medication provided by a VA pharmacy for treatment of non-service-connected 

conditions. R. at 319. 

Beginning in November 2011, VA notified Mr. Zeglin that he had accrued an outstanding 

balance due to unpaid medication copayments and requested payment to satisfy the outstanding 

charges. R. at 358-59; see R. at 360-71, 461, 494 (similar billing statements dated between January 

2012 and July 2013). In response, Mr. Zeglin sent correspondence to a VA medical center (VAMC) 

stating that he "dispute[d] the correctness of all debts and charges listed on the [November 2011] 

 

3 The Court's May 4, 2018, order requested that the Secretary respond to the motion for reconsideration within 

21 days and provided Mr. Zeglin a period of 14 days within which to respond to the Secretary's response, if he desired. 

Both parties filed timely responses. 
3

Statement." R. at 405. He sent similar correspondences to the VAMC following subsequent billing 

statements. R. at 406-21, 446-47.

In November 2012, Mr. Zeglin was informed by the Mid-Atlantic Consolidated Patient 

Account Center (MACPAC) that he could request waiver of the existing pharmacy copayment 

debt if the debt were no older than 180 days. R. at 457-59. He formally requested waiver in 

February 2013, R. at 444-45, which was denied by the Committee on Waivers and Compromises 

(COWC) because he did not complete a financial status report, R. at 439-40. 

In March 2013, Mr. Zeglin sent correspondence to the MACPAC indicating that he wanted 

to appeal both the incurrence of the debt and the denial of waiver of the incurred debt. R. at 426-

33. In April 2013, COWC again denied his waiver request for failure to complete a financial status 

report. R. at 423-24. In June 2013, he was afforded a hearing before the Director of MACPAC. R. 

at 438. A Statement of the Case was issued in June 2013, R. at 401-02, and Mr. Zeglin perfected 

an appeal to the Board in October 2013, R. at 377. An addendum Statement of the Case was issued 

in May 2014. R. at 455-56. In August 2014, Mr. Zeglin provided testimony at a Board hearing. R. 

at 277-91. 

In the May 2015 decision on appeal, the Board found that VA properly charged Mr. Zeglin 

an $8 copayment for each 30-day or less supply of medication for his non-service-connected 

conditions and that he was responsible for such payment. R. at 11-13. In the same decision, the 

Board remanded the issues of the proper calculation of the incurred debt and whether he was 

entitled to waiver.4 R. at 13-14. This appeal followed. 

II. ANALYSIS

The crux of this appeal centers around charges billed by VA arising from the provision of 

outpatient medications and how these different charges are related. The two charges at issue are: 

(1) a copayment charge VA billed as the health care provider (second party) to the veteran as the 

health care recipient (first party), and (2) a service charge VA (second party) billed to the veteran's 

private health insurance carrier (third party). As this case involves an area of veterans benefits not 

 

4 At various points in the May 2015 decision, including on the caption page, the Board incorrectly 

characterizes the remanded issues as involving an overpayment. R. at 3-4, 13-14. This mischaracterization appears to 

be a typographical error as it is not disputed that this case involves a debt incurred by Mr. Zeglin, not excess 

remuneration paid to him. 
4

previously discussed in detail in precedent case law, the Court finds it necessary to sufficiently 

outline these two charges and their relationship prior to discussing the parties' nuanced arguments. 

A. Background Information

1. Medication Copayments

A veteran is required to pay VA a copayment for each 30-day or less supply of medication 

VA provides on an outpatient basis for the treatment of a non-service-connected condition, unless 

otherwise exempted. 38 U.S.C. § 1722A(a); 38 C.F.R. § 17.110(b)(1) (2018); see Heino v. 

Shinseki, 683 F.3d. 1372, 1375-77 (Fed. Cir. 2012). In 1990, Congress initially fixed the 

copayment charge at $2 per medication. Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 

101-508, § 8012, 104 Stat. 1338 (1990) (codified as 38 C.F.R. § 622A (1990)); 38 U.S.C. 

§ 1722A(a) (1988, Supp. 1991). 

In 1999, Congress gave the Secretary the authority to increase the medication copayment 

amount and to establish maximum (monthly and annual) medication copayment amounts for each 

veteran. Veterans Millennium Health Care and Benefits Act, Pub. L. No. 106-117, § 201, 113 Stat. 

1545 (1999) (codified at 38 U.S.C. § 1722A(b) (1994, Supp. 1999)). In February 2002, VA 

promulgated a regulation increasing the medication copayment from $2 to $7 and established 

maximum amounts for veterans enrolled in priority categories 2 through 6 of VA's health care 

system. 38 C.F.R. § 17.110 (2002); 66 Fed. Reg. 63449 (Dec. 6, 2001); see 38 C.F.R. § 17.36 

(2018) (establishing priority groups for access to health care services based on certain factors, 

including combined schedular evaluation and income). In January 2006, the Secretary increased 

the medication copayment to $8, 70 Fed. Reg. 72326 (Dec. 2, 2005), and in June 2010 increased 

the copayment to $9 for veterans in priority groups 7 and 8, 75 Fed. Reg. 32670 (Jun. 9, 2010). In 

February 2017, VA restructured its medication copayment framework and implemented a tiered 

system for medication copayments, where the amount of a veteran's copayment charge (either $5, 

$8, or $11) depends on the type of medication provided by VA, not on the priority category of the 

veteran. 38 C.F.R. § 17.110 (2018); 81 Fed. Reg. 89383 (Dec. 12, 2016).

2. VA Service Charge to Private Health Insurance Carrier for the 

Provision of a Veteran's Medication 

When VA furnishes medical care or services to a veteran for a non-service-connected 

condition, including providing medications on an outpatient basis, VA may seek reimbursement 

of reasonable charges for such care or services from the veteran's private health insurance carrier. 
5

38 U.S.C. § 1729(a)(1). Reasonable charges VA seeks to recover from the third party "may not 

exceed the amount that such third party demonstrates to the satisfaction of the Secretary it would 

pay for the care or services if provided by [a non-federal entity] in the same geographic area." 

38 U.S.C. § 1729(c)(2)(B); see 38 C.F.R. § 17.101(a)(4) (2018). Third-party payors may pay 

either (1) the charge billed by VA or (2) an amount that it demonstrates it would pay a non-federal

entity for providing the same service in the same geographic area. 38 C.F.R. § 17.101(a)(4). If the 

third-party payor pays an amount less than the amount billed, VA will accept it as sufficient 

payment, subject to verification at VA's discretion. Id. If VA accepts as sufficient an amount less 

than that billed, the service charge is considered fully satisfied. In that case, the veteran is not 

responsible for any remaining portion of the service charge, but will still owe the copayment 

charge. See, e.g., Veterans Health Administrative (VHA) Directive 2012-005, 4c (issued January 

23, 2012; expired January 31, 2017; rescinded May 18, 2017). If VA accepts an amount less than 

that billed, it may request that the third-party payor submit evidence to substantiate the 

appropriateness of the payment amount, including health plan or insurance policy documents, 

provider agreements, medical evidence, or proof of payment to other providers in the same 

geographic area for the same services. Id.

Previously, VA billed private health insurance carriers a flat rate of $51 for each 

prescription dispensed for a non-service-connected condition regardless of the length of supply 

(30, 60, or 90 days). 74 Fed. Reg. 32819, 32820 (Jul. 9, 2009); 75 Fed. Reg. 61621 (Oct. 6, 2010); 

see 38 C.F.R. § 17.101(m) (2010); 38 C.F.R. § 17.102(h) (2010). VA based this flat rate on (1) the 

national average of VA's drug costs for all prescriptions, and (2) the national average of VA's 

administrative costs associated with furnishing medications, including general overhead costs,

such as buildings and maintenance, and dispensing costs, such as labor, packaging, and mailing. 

74 Fed. Reg. at 32820; 75 Fed. Reg. at 61622. 

In March 2011, VA changed its billing practices to more accurately reflect the actual cost 

of providing each medication. See 74 Fed. Reg. 32819; 75 Fed. Reg. 61621. VA now bills private 

health insurance carriers a variable rate based on (1) the "actual amount expended by the VA 

facility for the purchase of the specific drug," and (2) the national average of VA's administrative 

costs associated with furnishing medications. 38 C.F.R. § 17.101(m).5

 

5 The administrative cost component is determined annually based on the average administrative cost for the 
6

3. VA's Offset Policy

VA applies any reimbursement it receives from a veteran's private health insurance carrier

for VA's service charge, on a dollar-for-dollar basis, to offset a veteran's copayment responsibility.

If VA receives reimbursement from the insurance carrier that is equal to or more than a veteran's 

copayment charge, then the veteran's copayment responsibility is satisfied in full. See VHA 

Directive 2012-0056; see also VHA Directive 2006-040 (issued June 27, 2006; expired 

June 30, 2011); Secretary's November 9, 2017, Response Appendix B. 

For example, if VA bills the veteran's private health insurance carrier a service charge of 

$15 for administering a prescription, and VA receives reimbursement from the insurance carrier 

in the amount of $10, VA may accept that reimbursement as sufficient payment for the service

charge. 38 C.F.R. § 17.101(a)(4). Applying the offset policy, if the veteran's copayment is $9, then 

the $10 reimbursement from the private health insurance carrier for VA's service charge would 

fully satisfy the veteran's $9 copayment responsibility. See VHA Directive 2012-005, Example 4; 

Secretary's November 9, 2017, Response Appendix B. Each provision of services is treated 

independently; therefore, any excess reimbursement received for the provision of one medication 

is not credited toward the veteran's copayment responsibility for another medication or provision 

of other medical care or services. See VHA Directive 2012-005, Example 4. 

 

prior fiscal year. 38 C.F.R. § 17.101(m). The total VA national general overhead costs are added to the total VA 

national drug dispensing costs; that sum is divided by the total number of VA prescriptions filled annually. Id. For 

calendar year 2009 (based on fiscal year 2008), the administrative cost component was $11.17. 74 Fed. Reg. at 32820. 

For calendar year 2012 (based on fiscal year 2011), the administrative cost component was $12.39. Heino, 683 F.3d 

at 1380. For calendar year 2018 (based on fiscal year 2017), the administrative cost component is $16.64. 82 Fed. 

Reg. 59213 (Dec. 14, 2017). 

6 Although VHA Directive 2012-005 was rescinded in May 2017, it was in effect for almost the entirety of 

the time period relevant to this appeal. Moreover, attached to the Secretary's November 2017 response is a declaration 

from the Deputy Chief Counsel with the Collections National Practice Group, Office of General Counsel, in which 

she averred that VA's policy remains to offset on a dollar-for-dollar basis and that VHA Directive 2012-005 was 

rescinded because the offset policy was included in the Consolidated Patient Account Center Policy Guide. Secretary's 

November 9, 2017, Response Appendix C; see id. at Appendix B (VHA Procedure Guide 1601C.04, Chapter 3, 

Section C.8). Moreover, the Deputy Chief Counsel averred that VHA has applied an offset policy pursuant to 1990 

and 1996 Office of General Counsel opinions and, although neither opinion specifically mentions a dollar-for-dollar 

policy, VHA decided to implement a dollar-for-dollar policy "for ease of implementation and administration." 

Secretary's November 9, 2017, Response Appendix C; see VA Gen. Coun. Prec. Op. 13-1990 (May 2, 1990); VA 

Gen. Coun. Prec. Op. 3-1996 (May 23, 1996). Concerning the above, the Court notes that it is not relying on such 

evidence to reach its holding that the Court lacks jurisdiction to review VA's verification of third-party 

reimbursements. See Kyhn v. Shinseki, 716 F.3d 572, 578 (Fed. Cir. 2013) (noting that the Court is prohibited from 

considering evidence not in the record before the Board).
7

If, however, VA receives reimbursement from the private health insurance carrier for VA's

service charge that is less than the veteran's copayment, the veteran is responsible for the 

copayment charge balance. See VHA Directive 2012-005; Secretary's November 9, 2017, 

Response Appendix B. 

For example, if VA bills the veteran's private health insurance provider $15 for VA's

service charge, and VA receives $3 in reimbursement, VA may accept that $3 to satisfy the service 

charge. 38 C.F.R. § 17.101(a)(4). Applying the offset policy, if the veteran's copayment is $9, the

$3 reimbursement from the private health insurance carrier is applied to offset the veteran's $9 

copayment, and the veteran would be responsible for the remaining $6. See id. As mentioned 

above, the veteran is not responsible for any portion of the service charge billed to the private 

health insurance carrier. 

B. May 2015 Board Decision 

In its decision, the Board found that VA properly charged Mr. Zeglin a copayment charge 

of $8 for each medication VA provided on an outpatient basis for his non-service-connected 

conditions. R. at 11-12. The Board noted that, although 38 C.F.R. § 17.110(c) provides exemptions 

from copayment responsibility, Mr. Zeglin did not allege and the evidence did not otherwise 

demonstrate that he fell into one of the exempt categories. Id. The Board, therefore, found that Mr. 

Zeglin was responsible for paying the $8 copayment per medication provided as treatment for his

non-service-connected conditions. R. at 12.7

In addressing several of Mr. Zeglin's arguments, the Board noted that the incurred debt 

appeared to have arisen due to the March 2011 change in the service charge VA bills to private 

health insurance carriers. R. at 6. The Board noted Mr. Zeglin's contention that, due to the March 

2011 change in VA billing practices, the amount remitted by his private health insurance carrier, 

Blue Cross Blue Shield of South Carolina, no longer satisfied his copayment responsibility, so VA 

charged him the excess. R. at 7; see R. at 279-80. However, the Board stated that "in a vacuum, 

the amount that is billed by VA to the [third-party payor] does not affect the amount that [Mr. 

Zeglin] himself must pay for his prescriptions." R. at 11. 

 

7 Although not discussed by the Board, it is undisputed that Mr. Zeglin is a service-connected veteran 

assigned to priority group 3. R. at 348, 424, 440. Therefore, throughout the entire relevant time period, the correct 

copayment charge was $8. See 70 Fed. Reg. 72326; 75 Fed. Reg. 32670. Neither party argues that the $8 charge was 

not the correct copayment amount. 
8

The Board also noted Mr. Zeglin's argument that VA should contact his private health 

insurance carrier to determine whether the amount it had reimbursed for his medications is 

comparable to its reimbursement to non-federal entities for the same medications in the same 

geographic area. R. at 12. However, the Board found that "§ 17.101(a)(4) does not provide VA the 

authority to do so." R. at 12. Instead, the Board found that § 17.101(a)(4) "places the burden on 

the private insurance company to demonstrate that the charges . . . are excessive." R. at 11. 

In addressing Mr. Zeglin's arguments, the Board also discussed VA's offset policy. The 

Board noted that VA policy "is that '[r]reimbursements received from insurance carriers will be 

used to offset or eliminate [a veteran's] copayment on a dollar-for-dollar basis.'" R. at 12 (citing a 

VA pamphlet entitled "Facts You Should Know About Medication Copayments"8). The Board did 

not specifically discuss how the third-party reimbursement payments are applied, but implied that 

a veteran's copayment responsibility is only offset if the reimbursement received by VA exceeds

the service charge VA billed to the third-party payor. Specifically, the Board noted that, following 

the March 2011 change in how VA's charge to the third-party payors is calculated, the third party's 

"reimbursement to VA was no longer enough to cover the required copayment." R. at 12. The 

Board further stated that § 17.101(a)(4) provides a ceiling amount that has been negotiated 

between VA and the third-party payor and that the "negotiated amount is not intended to cover 

[Mr. Zeglin's] copayment, and it is not a high enough sum to cover the copayment once the cost to 

produce the drugs and the administrative fees have been paid." 

C. Arguments and Analysis

Mr. Zeglin does not contend that VA does not have the authority to charge veterans 

copayments for medications or that he is exempt from payment. Appellant's Brief (Br.) at 1. 

Instead, he challenges several of the Board's findings regarding VA's offset policy and VA's 

authority to verify the appropriateness of the reimbursement from his private health insurance 

 

8 The VA pamphlet cited by the Board is not contained in the record of proceedings. The version that appears 

to be the one cited by the Board was revised in May 2010 and is available at: https://www.va.gov/healthbenefits/

assets/documents/publications/MedicationCopayBrochure.pdf (last visited August 27, 2018). The Court takes judicial 

notice, however, that various versions of this pamphlet have been published by VA over the years. See Information 

on Veteran's Health Insurance and Copays at VA (February 2010) (https://www.va.gov/healthbenefits/assets/

documents/publications/HealthInsCopays.pdf); Veteran's Health Insurance and Copayments at VA (April 2015) 

(https://www.va.gov/healthbenefits/resources/publications/IB10-77_health_insurance_copays.pdf); Medication 

Copayments: Facts You Should Know (February 2016) (https://www.va.gov/healthbenefits/resources/publications/

IB10-971_medication_copayment_brochure.pdf) (all last visited August 27, 2018); see also Monzingo v. Shinseki, 

26 Vet.App. 97, 103-04 (2012) (noting that the Court may take judicial notice of facts not subject to reasonable 

dispute). These pamphlets all provide the same language about a "dollar-for-dollar" offset policy. 
9

carrier. Id. at 1-2. In this regard, the Secretary seeks dismissal of the pending appeal, arguing that 

Mr. Zeglin's challenges are not with the propriety of the incurred debt, but with the proper 

accounting of the debt, an issue that the Board remanded in its May 2015 decision. Secretary's Br. 

at 5-6. The Court disagrees. 

Although the two issues are related, the Board made clear findings of fact regarding how 

the debt was incurred. The Board found that VA had authority to charge Mr. Zeglin a copayment 

for VA medications for his non-service-connected conditions. R. at 11-12. The Board also found 

that VA's offset policy, as applied in Mr. Zeglin's case, did not result in sufficient reimbursement 

to fully satisfy his copayment responsibility. R. at 12. The Board further found that VA does not 

have the authority to verify the appropriateness of the reimbursement it receives from his private 

health insurance carrier. Id. In consideration of these findings, the Board found that the debt 

incurred by Mr. Zeglin was proper. R. at 13. The Board then remanded the issue of the proper 

calculation of the debt for a detailed accounting of the incurred charges. R. at 13 ("Having 

established VA's authority to charge the prescription copayment, and having determined 

. . . whether the Veteran's private insurance provider should, in fact, be responsible for the 

copayment, the Board now turns to the issue[] of [] calculating the amount of the debt itself."). 

Despite the Secretary's arguments to the contrary, the Board clearly remanded the issue of 

calculating the amount of the debt after it made adverse findings of fact regarding the process of 

how the debt was incurred. Therefore, the Court properly will consider Mr. Zeglin's arguments in 

the context of a final Board decision and will adjudicate the case on the merits. 

1. VA's Offset Policy

Mr. Zeglin argues that the Board erred in its interpretation of VA's offset policy. He argues 

that the Board's interpretation of VA's offset policy—that a veteran's copayment responsibility is 

offset only to the extent that third-party reimbursement exceeds the service charge VA bills the 

third-party payor—is illogical because § 17.101(a)(4) provides third-party payors the option of 

reimbursing VA the lesser of two amounts—the service charge billed by VA or the amount the 

third-party payor reimburses non-federal entities for providing the same service in the same 

geographic area—such that the third party would never reimburse at a rate that exceeds the service 

charge billed by VA. Reply Br. at 10-11. He argues that VA's policy is to apply third-party 

reimbursements to offset a veteran's copayment responsibility irrespective of the amount of 
10

reimbursement VA receives or whether it exceeds the service charge VA billed to the third-party 

payor. See, e.g., Reply Br. at 9-11. 

Although the Secretary initially espoused the Board's interpretation, Secretary's Br. at 10, 

he later retracted his interpretation and now agrees that the Board erred in its discussion of VA's 

offset policy, Secretary's November 9, 2017, Response at 5. In a declaration attached to the 

Secretary's November 2017 response, the Deputy Chief Counsel with the Collections National 

Practice Group, Office of General Counsel, confirmed that VA's policy "is to offset a veteran's 

copayment charge dollar-for-dollar with the amount received from a third[-]party insurance 

company regardless of whether that amount is less than the amount billed to the third party." 

Secretary's November 9, 2017, Response Appendix C (emphasis added). 

Although both parties now agree that the Board erred in its discussion of VA policy, its 

error is inconsequential. See 38 U.S.C. § 7261(b)(2) (requiring the Court to "take due account of 

the rule of prejudicial error"). Mr. Zeglin acknowledges that VA is applying the reimbursement it 

receives from his private health insurance carrier to offset his copayment responsibilities on a 

dollar-for-dollar basis, see Reply Br. at 10, and the Board's discussion is not reflective of how 

reimbursements were actually applied to his copayment responsibilities. However, he makes no 

argument as to how he was harmed by the Board's inaccurate description of VA policy. See

Appellant's Motion for Reconsideration at 7 ("I have never claimed to have suffered such harm, 

nor will I do so now. . . . In fact, prior to the Board's totally unexpected and unnecessary 

introduction of its distorted view of VA's offset policy into the case, the policy itself was simply 

not an issue."). Therefore, the Board's error in this regard is harmless and a remand for the Board 

to correct its error would serve no purpose. See Shinseki v. Sanders, 556 U.S. 396, 409 (2009) 

(explaining that "the burden of showing that an error is harmful normally falls upon the party 

attacking the agency's determination"); Soyini v. Derwinski, 1 Vet.App. 540, 546 (1991) (holding 

that strict adherence to the reasons-or-bases requirement is not warranted where it would impose 

additional burdens on the Board with no benefit flowing to the veteran); see also Hilkert v. West, 

12 Vet.App. 145, 151 (1999) (en banc) (holding that the appellant has the burden of demonstrating 

error), aff'd per curiam, 232 F.3d 908 (Fed. Cir. 2000) (table). 

2. Authority to Verify Third-Party Reimbursements

The thrust of Mr. Zeglin's arguments is that the Board erred in its finding that VA does not

have the authority to verify that reimbursements it receives from third-party payors are comparable 
11

to that which the third party would pay to a non-federal entity for provision of the same medication. 

Appellant's Br. at 19-21. The Court determines that the Board also erred in this regard. Section 

1729(c)(2)(B) and § 17.101(a)(4) clearly provide VA authority to request that a third-party payor 

demonstrate that the reimbursement is comparable to what it would remit to a non-federal entity 

for provision of the same service in the same geographic area. 38 U.S.C. § 1729(c)(2)(B); 

38 C.F.R. § 17.101(a)(4). The Secretary does not disagree. Secretary's November 9, 2017, 

Response at 6. Mr. Zeglin again fails, however, to demonstrate how the Board's error is prejudicial. 

See 38 U.S.C. § 7261(b)(2). 

Although the Board and the Secretary have, at times, misconstrued Mr. Zeglin's arguments, 

he has consistently argued that the purported debt resulted from a decrease in reimbursement 

payments remitted by his private health insurance carrier following VA's March 2011 change in 

its third-party payor billing practice. He further argues that his private health insurance carrier is 

remitting reimbursement at an amount less than what VA has billed and VA has failed to ensure 

that the reimbursement it received from his private health insurance carrier was comparable to 

what the insurance carrier would remit to a non-federal health care provider. 

In various correspondences, Mr. Zeglin seemingly takes discordant views of VA's authority 

to verify third-party reimbursements as either mandatory or discretionary. At times, he argues that 

VA has a statutory and regulatory duty to verify the appropriateness of reimbursements from thirdparty payors and VA's failure to verify those reimbursements is a violation of that duty. Appellant's 

Br. at 10 (VA "has a duty to seek evidence and information [regarding the appropriateness of 

payment] and cannot avoid that duty by contract and agree to simply accept whatever amount [his 

private health insurance carrier] offers."); Appellant's Motion for Reconsideration at 11 (noting 

the Secretary's "duty to verify the appropriateness of insurer's reimbursements to VA"); Appellant's 

June 7, 2018, Response at 3 (arguing that VA is not "complying with its statutory and regulatory 

duty to verify the appropriateness of the amounts [his] private insurer reimbursed VA for [his] 

medication"). 

To the extent that Mr. Zeglin argues that VA is under a statutory and regulatory obligation 

to verify reimbursements rates it receives from third-party payors, the Court disagrees. A "duty" 

is a "legal obligation that is owed or due to another and that needs to be satisfied; an obligation for 

which somebody else has a corresponding right." BLACK'S LAW DICTIONARY 580 (9th ed. 2009). 

In contrast, a "discretionary duty" is "[a] duty that allows a person to exercise judgment and choose 
12

to perform or not perform." Id. at 581. The statutory and regulatory provisions clearly reflect 

discretionary authority to verify the appropriateness of third-party reimbursements. 38 U.S.C. 

§ 1729(c)(2)(B) (The amount sought to be collected "may not exceed the amount such third party 

demonstrates to the satisfaction of the Secretary it would pay for the care or services" as a nonfederal entity in the same geographic area.) (emphasis added); 38 C.F.R. § 17.101(a)(4) ("VA will 

accept the submission as payment, subject to verification at VA's discretion.") (emphasis added). 

At other times, Mr. Zeglin properly characterizes VA's authority to verify reimbursement 

rates as discretionary and argues that failure to verify those reimbursements is an abuse of 

discretion. See, e.g., Appellant's Br. at 19 (noting that "VA may seek verification"); Appellant's 

Motion for Reconsideration at 8-11 (characterizing the authority to verify reimbursements as 

"discretionary statutory and regulatory duty"). In this vein, Mr. Zeglin argues that "VA has never 

sought verification from [his private health insurance carrier] . . . [and] it is this general failure to 

exercise its discretionary statutory and regulatory duty to verify that demonstrates the arbitrary and 

capricious nature of VA's lack of action." Appellant's Motion for Reconsideration at 8; see

Appellant's Br. at 6; Appellant's June 7, 2018, Response at 3-4. As evidence of VA inaction, he 

relies on conversations with VA employees, Appellant's Br. at 5, 10, and that "the Secretary has 

never provided a shred of evidence that VA has ever actually attempted to verify the 

appropriateness of any insurers' reimbursements," Appellant's June 7, 2018, Response at 3. As a 

result, and based on VA's offset policy, he contends that, without any verification of 

reimbursement rates, VA has no basis to conclude that the medication co-payment charges are 

correct. Appellant's Br. at 22-26; Appellant's Motion for Reconsideration at 11; Appellant's June 

7, 2018, Response at 4. 

The Secretary avers that VA maintains a reimbursement contract with Caremark, the 

private pharmacy benefit manager associated with Blue Cross and Blue Shield of South Carolina, 

and that Caremark remits reimbursement consistent with the terms of that contract. Secretary's 

November 9, 2017, Response at 6-7; see Secretary's November 9, 2017, Response Appendix D. 

The Secretary further responds that, effective January 1, 2013, VA has an established third-party 

payor review process that evaluates reimbursement rates that takes into consideration market 

conditions, regional rates, and payment trends. See Secretary's November 9, 2017, Response at 7

and Appendix E; Secretary's May 24, 2018, Response. "[W]hen a third-party health insurance 

carrier reimburses VA below a market average, VA initiates a formal rate verification with the 
13

health insurance carrier," which "requires the health insurance carrier to make available all 

provider agreements within the same geographic area, as well as submit historical claims data as 

proof of payment to other providers in the same geographic area to verify the appropriate 

reimbursement rate." Secretary's November 9, 2017, Response at 7. The Secretary further noted 

that, "[a]lthough VA did not have a policy prior to 2013, such a policy is not required as VA's right 

to recover or collect reimbursement is based on federal law, which provides VA with discretionary 

authority to verify reimbursements from third-party payers." Secretary's May 24, 2018, Response 

at 2 (citing 38 U.S.C. § 1729(c)(2)(B) and 38 C.F.R. § 17.101(a)(4)). 

"[T]he Court has no authority to review decisions made by the Secretary which rest entirely 

within his discretion." Willis v. Brown, 6 Vet.App. 433, 435-36 (1994); see Malone v. Gober, 

10 Vet.App. 539, 544 (1997). If no judicially manageable standards are available for judging how 

and when an agency should exercise its discretion, then it is impossible to evaluate agency action 

for "abuse of discretion." See Heckler v. Chaney, 470 U.S. 821, 830-33 (1985) (noting that an 

agency's decision not to take action is presumptively immune from judicial review, but the 

presumption may be rebutted where the statute has provided guidelines for the agency to follow in 

exercising its authority); see also Freeman v. Shinseki, 24 Vet.App. 404, 416 (2011) ("[W]hen an 

agency has been given discretionary authority, it cannot be compelled to exercise that authority 

unless there are sufficient standards to govern when the authority must be exercised." (citing 

Chaney, 470 U.S. at 830)). If there are no standards for judicial review, the proper recourse is to 

dismiss the case on the merits because the appellant cannot show that the agency's action is 

unlawful. See Builders Bank v. Fed. Deposit Ins. Corp., 846 F.3d 272, 274-75 (7th Cir. 2017). 

Where either the statutory or regulatory provision places limitations on such discretionary 

authority, however, compliance with such criteria is subject to judicial review. See Friedsam v. 

Nicholson, 19 Vet.App. 555, 563 (2006); Malone, 10 Vet.App. at 545 ("Even where a matter is 

left to the discretion of the Secretary by statute, the Secretary would still be bound by any 

limitations placed upon the exercise of that discretion by regulation, and the Secretary's 

compliance with such regulatory criteria is subject to judicial review."). The Court may also review 

challenges to policies, interpretative guidance, or directives that relate to how an agency may 

exercise its discretionary authority. See, e.g., Chaney, 470 U.S. at 835-36. Judicial review in those 

circumstances is guided by whether the Secretary's action is "arbitrary, capricious, an abuse of 
14

discretion, or otherwise not in accordance with law." 38 U.S.C. § 7261(a)(3)(A); see Friedsam, 

19 Vet.App. at 563. 

Neither the wording of the relevant statute nor the implementing regulation places a 

limitation on VA's discretionary authority to verify third-party reimbursements. The statute 

provides VA a right to recover reasonable charges for the provision of medical care or services, 

but also that "[t]he Secretary may compromise, settle, or waive any claim" for reimbursement. 

38 U.S.C. § 1729(c)(1). The statute further provides that reasonable charges may not exceed the 

amount the third-party payor demonstrates to the satisfaction of the Secretary that it would pay for 

the same care or services to a non-federal entity in the same geographic area. 38 U.S.C. 

§ 1729(c)(2)(B). The implementing regulation provides that VA has discretion to verify the 

appropriateness of the reimbursement amount. 38 C.F.R. § 17.101(4). Although the regulation 

specifies what type of evidence VA may request from a third-party payor to properly verify the 

payment, there are no instructive standards regarding when and how VA will exercise its 

discretion.

Mr. Zeglin argues that, although the Secretary has averred that a VA policy in verifying 

reimbursement rates existed as of January 1, 2013, the absence of a policy prior to that date or any 

evidence of VA actually verifying reimbursements rates from his private health insurance carrier 

is reflective of VA's abuse of discretion. Appellant's Motion for Reconsideration at 10-11; 

Appellant's June 4, 2018, Response at 3-4. The fact that VA had established internal procedures 

for verifying reimbursement rates from third-party payors for only a portion of the relevant period 

during which Mr. Zeglin incurred copayment charges does not abrogate VA's discretionary 

authority to seek verification. The existence of an implemented policy does not necessarily provide 

a judicially manageable standard capable of review. See Chaney, 470 U.S. at 836-37. Furthermore, 

Mr. Zeglin has not offered argument based on any internal restraints of discretionary authority; 

instead, he has simply maintained that VA's purported inaction is clear evidence of an abuse of its 

discretion. See, e.g., Appellant's Motion for Reconsideration at 11; Appellant's June 7, 2018, 

Response at 2-4.

Absent any judicially manageable standard in either the statute or regulation, the Court 

concludes that VA's authority to seek verification from third-party payors regarding the 

appropriateness of reimbursement payments is wholly discretionary and not subject to judicial 

review. See Chaney, 470 U.S. at 830-31; Freeman, 24 Vet.App. at 416; see also Norton v. S. Utah 
15

Wilderness All., 542 U.S. 55, 63 (2004) (noting that the only agency action that can be compelled 

is such action an agency is legally required to perform). The Court emphasizes that our conclusion 

regarding VA's discretionary authority in this context is based on a review of the applicable statute 

and regulation, not on VA's internal procedures described by the Secretary in several responses in 

this case. See Kyhn, 716 F.3d at 578. 

Review of the record confirms Mr. Zeglin's contention that he began consistently accruing 

an outstanding debt associated with his medication copayments after VA changed its practice 

regarding billing third-party payors in March 2011. See R. at 307-12, 316. Although the Secretary 

initially averred that Mr. Zeglin's private health insurance carrier was reimbursing at a rate equal 

to what VA billed, Secretary's Br. at 8, he later retracted that statement, Secretary's November 9, 

2017, Response at 8. Moreover, it appears from the record that his private health insurance carrier 

is remitting less reimbursement to VA than it did prior to the March 2011 billing change for 

provision of the same services. See R. at 316. 

The amount of reimbursement VA receives from Mr. Zeglin's private health insurance 

carrier has a direct effect on the copayment charge he incurs. Nevertheless, VA has discretion in 

whether to seek verification from his private health insurance carrier regarding the appropriateness 

of the amount of reimbursement it receives. The decision whether to seek verification from Mr. 

Zeglin's private health insurance carrier is not reviewable. Therefore, although the Board erred in 

stating that VA lacked authority to verify reimbursement amounts, the Board's error is harmless 

because VA's authority is wholly discretionary. See 38 U.S.C. § 7261(b)(2); see also Sanders,

556 U.S. at 409; Hilkert, 12 Vet.App. at 151. 

In sum, Mr. Zeglin agrees with the Board's ultimate conclusion that VA has the authority 

to charge him medication copayments for treatment of non-service-connected conditions, which 

serves as the primary basis for the incurred debt. Although the Board erred in its discussion 

regarding VA's offset policy, Mr. Zeglin acknowledges that VA is applying an offset of his 

copayment responsibility on a dollar-for-dollar basis with reimbursement it receives from his 

private health insurance carrier. Finally, although the Board erred in finding that VA does not have 

the authority to verify the appropriateness of third-party reimbursements, which are used as offsets 

of his copayment responsibility, the Board's error in this regard is harmless because VA's authority 

to verify third-party reimbursements is wholly discretionary. Accordingly, this matter will be 

affirmed. 
16

III. CONCLUSION

Upon consideration of the foregoing, the May 29, 2015, Board decision is AFFIRMED.

TOTH, Judge, concurring: I agree that the Board's error was harmless and join the Court's 

opinion in full. I write separately only to note that our reasoning in no way suggests that all actions 

or policies related to section 1729 are shielded from review simply because the statute contains

discretionary language. I read our invocation of the non-reviewability doctrine as a narrow, meritsbased (and not jurisdictional) determination that is directed by the nature of Mr. Zeglin's claim of 

error.

Specifically, Mr. Zeglin never actually formulated any claim that, even liberally construed, 

amounted to a challenge to any discrete action, policy, or interpretation of law on VA's part. And 

although he mentioned policies and used terminology associated with various aspects of 

administrative review, his claim of error even on reconsideration never evolved beyond where it 

began: as a dispute about debt amounts resulting from VA's failure to take action in his case. 

Section 1729 accords VA the discretion whether to take action and so there is no judicially 

manageable standard by which we can review its decision not to act.