[Federal Register Volume 75, Number 195 (Friday, October 8, 2010)]
[Proposed Rules]
[Pages 62348-62353]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-25363]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 17

RIN 2900-AN55


Reimbursement Offsets for Medical Care or Services

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its 
regulations concerning the reimbursement of medical care and services 
delivered to veterans for nonservice-connected conditions. The proposed 
rule would apply in situations where third-party payers are required to 
reimburse VA for costs related to care provided by VA to a veteran 
covered under the third-party payer's plan. This proposed rule would 
add a new section barring offsets by third-party payers and 
establishing a process by which third-party payers would submit a 
request for a refund on claims for which there is an alleged 
overpayment.

DATES: Comments must be received on or before December 7, 2010.

ADDRESSES: Written comments may be submitted through http://www.Regulations.gov; by mail or hand delivery to the Director, 
Regulations Management (02REG), Department of Veterans Affairs, 810 
Vermont Avenue, NW., Room 1068, Washington, DC 20420; or by fax to 
(202) 273-9026. Comments should indicate that they are submitted in 
response to ``RIN 2900-AN55, Reimbursement Offsets for Medical Care or 
Services.'' Copies of comments received will be available for public 
inspection in the Office of Regulation Policy and Management, Room 
1063B, between the hours of 8 a.m. and 4:30 p.m. Monday through Friday 
(except holidays). Please call (202) 461-4902 for an appointment. (This 
is not a toll-free number.) In addition, during the comment period, 
comments may be viewed online through the Federal Docket Management 
System at http://www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Anthony Norris, Program Analyst,

[[Page 62349]]

Business Operations, Chief Business Office (168), Veterans Health 
Administration, Department of Veterans Affairs, 810 Vermont Avenue, 
NW., Washington, DC 20420, (202) 461-1593. (This is not a toll free 
number.)

SUPPLEMENTARY INFORMATION: Pursuant to 38 U.S.C. 1729, a third-party 
payer, such as a private medical insurer, has an obligation to pay the 
United States reasonable charges for the cost of medical care or 
services furnished to a veteran for a nonservice-connected disability 
when the veteran or the provider of the care or services would 
otherwise be eligible to receive payment for such medical care from the 
third-party payer. The obligation to pay is to the extent that the 
beneficiary would be eligible to receive reimbursement or 
indemnification from the third-party payer if the beneficiary were to 
incur the costs on the beneficiary's own behalf. VA's authority under 
section 1729 is generally implemented in 38 CFR 17.101 through 17.105. 
However, the topic of addressing reimbursement offsets for medical care 
or services as proposed in this rulemaking is not covered by current VA 
regulations. As explained below in further detail, this proposed rule 
is consistent with regulations promulgated by the Department of Defense 
(DOD) in 32 CFR part 220. DOD's collection statute, 10 U.S.C. 1095, is 
similar to VA's collection statute, 38 U.S.C. 1729. Therefore, VA 
proposes to implement section 1729 in a manner substantially similar to 
DOD's implementation of section 1095. VA's implementation of these 
changes will provide clarity and uniformity in how third-party payers 
interact with both Departments.
    As a matter of common business practice, third-party payers who are 
(or who believe that they are) owed a refund from VA based on an 
overpayment often recoup such money by unilaterally offsetting a future 
payment amount to VA. As a purchaser and provider of care, VA medical 
centers are subject to this practice of unilateral offsets. An offset 
occurs when the payer, alleging that it made an earlier overpayment to 
VA, reduces or takes back the alleged overpayment by withholding 
payment owed to VA on an unrelated debt transaction. In an attempt to 
recoup the overpayment, the payer seldom associates the reduced payment 
with the alleged overpaid claim. Third-party payer unilateral offsets 
disrupt VA accounting practices and present certain challenges to VA in 
managing third-party collections and evaluating account receivables for 
deficient payments. Further, such practices eliminate VA's opportunity 
to validate the alleged overpayment and pursue proper review, if deemed 
appropriate given the circumstances.
    This proposed rule would address third-payer offsets and certain 
policy exclusions and, consequently, improve VA's administration of 
account receivables and increase efficiency in maintaining third-party 
payer debts. The proposed rule would provide specific procedures that 
VA will use to recover payments from third-parties, consistent with our 
interpretation of our authority to recover payments from third-parties 
under section 1729. We believe that VA's statutory right to recovery of 
payment is not contingent upon a third-party payer's assertions 
regarding previous alleged overpayments and that the authority to 
compromise a claim rests with the government, not with the payer. 
Without the consent of the government, a third-party payer cannot 
compromise a claim premised on a separate disputed transaction. A 
request must be submitted and adjudicated separately. Several states 
prohibit third-party payer automatic offsets and require some form of 
notice and due process. We believe that VA should have protection from 
off-setting practices similar to that afforded individual states. 
Although section 1729 does not specifically address all of the issues 
that are addressed by this proposed rule, we believe that our proposed 
implementation of the statute is consistent with Congress' intent.

General Rule and Definitions

    Proposed paragraph (a)(1) of the proposed rule would explain the 
general rule, discussed above, that VA has the authority to recover or 
collect reasonable charges from third-party payers for medical care or 
services provided for nonservice-connected disability to a veteran who 
is also covered by the third-party payer's plan. We also state that our 
right to recover or collect is limited to ``the extent that the 
beneficiary or a non-government provider of care or services would be 
eligible to receive reimbursement or indemnification from the third-
party payer if the beneficiary were to incur the costs on the 
beneficiary's own behalf.'' This limitation is statutory, because 
section 1729 states that VA's right applies only ``to the extent that 
the veteran (or the provider of the care or services) would be eligible 
to receive payment for such care or services from such third-party if 
the care or services had not been furnished by a department or agency 
of the United States.'' Proposed paragraph (a)(1) would essentially 
restate the statute.
    Proposed paragraph (a)(2) would provide several definitions 
applicable to this section. These definitions incorporate and interpret 
the statutory definitions of health-plan contract and third-party in 
section 1729(i). Also, as noted above, this proposed rule would be 
based upon and consistent with DOD's collection regulations in 32 CFR 
part 220. We propose to adopt, with only minor non-substantive changes, 
certain definitions promulgated by DOD in 32 CFR 220.14. Specifically, 
we propose to define the following terms consistent with the same or 
similar terms in Sec.  220.14: Automobile liability insurance, health-
plan contract, Medicare supplemental insurance plan, No-fault 
insurance, participating provider organization, and third-party payer. 
We intend that these definitions will clearly state the meaning of 
these terms as commonly used in the insurance industry.

Calculating Reasonable Charges

    Proposed paragraph (b)(1) would explain that ``reasonable charges'' 
for the purposes of section 1729 are calculated using the regulatory 
method applicable to the particular charge as prescribed in current 38 
CFR 17.101. We intend no substantive change regarding VA's reasonable 
charges methodology and propose this provision only to provide notice 
that VA would bill third parties a ``reasonable charge'' as determined 
under current regulations for its services.
    Proposed paragraph (b)(2) would explain that, ``If the third-party 
payer's plan includes a requirement for a deductible or copayment by 
the beneficiary of the plan, VA will recover or collect reasonable 
charges less that deductible or copayment amount.'' This merely 
restates the statutory requirement in section 1729(a)(3)(B) that the 
collectible or recoverable amount must be reduced by any deductible or 
copayment or both.

VA's Right To Recover or Collect Is Exclusive

    Proposed paragraph (c) would establish that VA's right to recover 
or collect under this section is exclusive and prescribe that ``[t]he 
only way for a third-party payer to satisfy its obligation under this 
section is to pay the VA facility or other authorized representative of 
the United States. Payment by a third-party payer to the beneficiary 
does not satisfy the third-party's obligation under this section.'' 
This statement would address confusion on the part of third-party 
payers

[[Page 62350]]

regarding whether VA permits offsetting, and explain that payment must 
be provided to VA and not to any other party. For example, this 
provision would proscribe third-party payments made directly to the 
beneficiary for care or service provided in or through a VA medical 
facility. Section 1729 provides to VA (and not to a third-party 
beneficiary) the right to recover or collect payments, as we have 
explained above. Accordingly, payments to anyone other than VA, 
including payments made by a third-party directly to the patient, 
cannot satisfy 1729.
    Proposed paragraph (c)(1) would allow the United States to file a 
claim for payment or institute and prosecute legal proceedings against 
a third-party payer, within six years, to enforce a right of the United 
States under 38 U.S.C. 1729 and this section. This proposed provision 
would restate section 1729(b)(2).
    Proposed paragraph (c)(2) would restate the United States' right to 
compromise, settle or waive a claim under the proposed rule, consistent 
with section 1729(c)(1).
    Proposed paragraph (c)(3) would list the statutory authority for 
the remedies available to the United States in collection actions under 
section 1729. These remedies include administrative offset and other 
means to collect.
    Pursuant to section 1729(a) and (f), the United States has a right 
to collect, consistent with the statutory terms, the reasonable charges 
for medical care and services from a third-party payer. This right is 
not contingent upon a third-party payer's unsubstantiated assertions 
regarding previous alleged overpayments, rather a third-party payer 
must provide information sufficient for VA to determine that an 
overpayment occurred. Under section 1729(c)(1) and 38 CFR part 2, the 
authority to compromise, settle, or waive a claim rests with the 
government, not with the payer.
    Therefore, proposed paragraph (c)(4) would prescribe that, without 
the consent of the government, a third-party payer cannot unilaterally 
compromise or settle a claim premised on a separate disputed 
transaction. It would also prohibit offsetting and reducing subsequent 
payments. A request for refund is a claim against the United States and 
must be submitted and adjudicated separately.

Assignment of Benefits or Other Submission by Beneficiary Not Necessary

    Proposed paragraph (d) would address whether beneficiaries must 
execute an assignment of benefits form for the third-party payer to 
pay. No such form would be needed because, under section 1729, the 
right to collect is already assigned to the government. Unless the 
patient actually incurs some expenses for the hospital care provided in 
or through a VA medical facility, the patient likely has no benefit to 
assign under the terms of the third-party payer's plan. Thus, in 
general, assuming that the patient has made no payment for the services 
received, the third-party payer need only recognize that its sole 
obligation for payment is to the United States and that this obligation 
is not dependent upon any assignment of benefits. Proposed paragraph 
(d) would reflect this.

Preemption of Conflicting State Laws and Contracts

    Proposed paragraph (e) would restate section 1729(f) and prescribe 
that any law or regulation of a State or political subdivision thereof 
and any provision of any contract or agreement that purports to 
establish any requirement on a third-party payer that would prevent 
recovery or collection by the United States will have no force or 
effect on a third-party payer's responsibility under section 1729 or 
proposed Sec.  17.106.

Impermissible Exclusions by Third-Party Payers

    Proposed paragraph (f) would implement section 1729(f), which 
states: ``[N]o provision of any contract or other agreement, shall 
operate to prevent recovery or collection by the United States.'' 
Proposed paragraph (f)(1) would restate this statutory requirement.
    Proposed paragraph (f)(2) would establish several general rules 
derived from the statutory requirements. These general rules would help 
interested parties resolve issues that may arise in the course of 
collection actions and are intended to generally clarify VA's 
interpretation of its authority under section 1729.
    The first general rule, in proposed paragraph (f)(2)(i), would 
state one of the clear mandates of section 1729(f): Express exclusions 
of limitations inconsistent with 38 U.S.C. 1729 are inoperative under 
Federal law. We provide, for clarification, that an example of an 
impermissible exclusion under this paragraph is a provision that 
purports to disallow payment for services provided by a government 
entity or paid for by a government program.
    Proposed paragraph (f)(2)(ii) would prescribe that no objection, 
precondition or limitation may be asserted that defeats the statutory 
purpose of collecting from third-party payers. This would extend the 
first general rule to cover situations in which a third-party payer's 
plan might at first not appear to treat VA medical facilities less 
favorably, but nonetheless produces that effect. This interpretation is 
based on the statutory formulation of the prohibition in terms of 
provisions that have the effect of excluding or limiting payment. A 
clarifying example is provided in the proposed text, and explains that 
a third-party payer cannot refuse or reduce payment based on a 
provision in the third-party payer's plan that purports to disallow 
payment when the beneficiary has no legal obligation to pay. Such an 
exclusion is impermissible under section 1729(a)(1), which provides 
that the government's right to collect is to the extent the beneficiary 
or nongovernment provider would receive reimbursement.
    A basic statutory characteristic of VA health care and services is 
that veterans have no obligation to pay (except the nominal co-payments 
for medication required by 38 U.S.C. 1722A). Recognizing this, Congress 
concluded that the government collects from third parties as if the 
veteran has an obligation to pay. Thus, we interpret section 1729 to 
mean that the fact that a veteran has no actual obligation is 
irrelevant. The same conclusion would apply to any other exclusion in a 
third-party plan that is expressed in similar language, such as that no 
charge would be made if the person had no health insurance.
    Proposed paragraph (f)(2)(iii) would restate statutory requirements 
and prescribe that third-party payers may not treat claims arising from 
services provided in or through VA medical facilities less favorably 
than they treat claims arising from services provided in other 
hospitals. Under section 1729(f), VA has the right to collect 
reasonable charges from a third-party payer to the extent that the 
third-party payer would pay for care or services furnished by providers 
other than VA. The general rule disallowing less favorable treatment 
would provide a useful method of analyzing situations to assure 
compliance with the statute.
    The proposed clarifying example concerns an employer-sponsored 
health plan that purports to make ineligible for coverage individuals 
who are provided medical care and services in or through a VA medical 
facility. Such an exclusion would clearly have the effect of treating 
VA medical facilities less favorably than other hospitals.
    Proposed paragraph (f)(2)(iv) would prescribe that payments cannot 
be refused or reduced based on the lack of a participation agreement or 
the absence

[[Page 62351]]

of a specific contractual relationship (referred to as ``privity of 
contract'') between a third-party payer and VA or a VA medical 
facility. This further explains the general rule that disallows 
preconditions that are inconsistent with the basic nature of medical 
care and services provided to veterans in or through VA medical 
facilities.
    We note that some VA medical facilities have understandings or 
agreements with some third-party payers concerning claims procedures 
for the purpose of facilitating administration of health care and 
collection of payments. Such understandings or agreements would not 
offend our rule as long as they do not purport to be preconditions to 
complying with statutory and regulatory requirements.
    Proposed paragraph (f)(2)(v) and (vi) would set forth rules 
relating to Medicare carve-out and Medicare secondary payer provisions. 
The usual procedure for Medicare supplemental carriers is to accept 
claims only after the primary claim has been processed and paid by 
Medicare. In this way, the remaining liability, which becomes the 
responsibility of the supplemental policy, is apparent. However, a 
different process is required in section 1729 cases because, under 
section 1729(i)(1)(B)(i), there is no claim submitted to Medicare. 
Instead, the third-party payer is statutorily required to accept the 
claim as involving Medicare covered services from an authorized 
provider. Supplemental insurers do not have a statutory entitlement to 
a particular government adjudicatory process.
    Proposed paragraph (f)(2)(vii) would bar Health Maintenance 
Organizations (HMOs) from excluding claims or refusing to certify 
emergent and urgent services provided within the HMO's service area or 
otherwise covered non-emergency services provided out of the HMO's 
service area. In addition, it would provide that opt-out or point-of-
service options available under an HMO plan may not exclude services 
otherwise payable under section 1729 or this section. We interpret 
section 1729 to mean that HMO plans must pay only to the extent that 
HMO plans generally cover services (e.g., emergencies) provided by 
health care facilities not affiliated with the HMO. Further, we 
interpret the statute to mean that HMO plans that have a point-of-
service option are required to pay VA the same amount that would be 
paid under the plan to nongovernment providers.

Records

    Proposed paragraph (g) would restate section 1729(h), which 
requires that VA medical facilities make available for inspection and 
review to representatives of third-party payers appropriate health care 
records of patients. However, the records would be made available only 
to verify the care and services provided by VA for which payment, 
recovery, or collection is sought, and to verify that such care or 
services met the permissible criteria under the health plan involved. 
In light of privacy concerns, VA will not provide any other records 
maintained by a VA medical facility to a third-party payer.

Paperwork Reduction Act

    This document contains no new collections of information under the 
Paperwork Reduction Act (44 U.S.C. 3501-3521).

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed rule would not 
have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory Flexibility Act, 5 
U.S.C. 601-612. This proposed rule would affect mainly large insurance 
companies. This proposed rule might have an insignificant impact on a 
few small entities that do an inconsequential amount of their business 
with VA. Therefore, pursuant to 5 U.S.C. 605(b), this proposed rule is 
also exempt from the initial and final regulatory flexibility analyses 
requirements of sections 603 and 604.

Executive Order 12866

    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, when regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity). The Executive 
Order classifies a ``significant regulatory action,'' requiring review 
by the Office of Management and Budget (OMB) unless OMB waives such 
review, as any regulatory action that is likely to result in a rule 
that may: (1) Have an annual effect on the economy of $100 million or 
more or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities; (2) create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
Order.
    The economic, interagency, budgetary, legal, and policy 
implications of this proposed rule have been examined and it has been 
determined not to be a significant regulatory action under Executive 
Order 12866.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any given year. This proposed rule would have no such 
effect on State, local, and tribal governments, or on the private 
sector.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers and titles for 
the programs affected by this document are 64.009, Veterans Medical 
Care Benefits; 64.010, Veterans Nursing Home Care; 64.011, Veterans 
Dental Care; 64.012, Veterans Prescription Service; 64.013, Veterans 
Prosthetic Appliances; 64.014, Veterans State Domiciliary Care; 64.015, 
Veterans State Nursing Home Care; 64.016, Veterans State Hospital Care; 
64.018, Sharing Specialized Medical Resources; 64.019, Veterans 
Rehabilitation Alcohol and Drug Dependence; 64.022, Veterans Home Based 
Primary Care.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. John R. 
Gingrich, Chief of Staff, Department of Veterans Affairs, approved this 
document on September 10, 2010, for publication.

List of Subjects in 38 CFR Part 17

    Administrative practice and procedure, Alcohol abuse, Alcoholism, 
Claims Day care, Dental health, Drug abuse, Foreign relations, 
Government contracts, Grant programs--health, Grant programs--veterans, 
Health care, Health facilities, Health professions, Health records, 
Homeless, Medical and dental schools, Medical devices, Medical 
research, Mental health

[[Page 62352]]

programs, Nursing homes, Philippines, Reporting and recordkeeping 
requirements, Scholarships and fellowships, Travel and transportation 
expenses, Veterans.

    Dated: October 4, 2010.
Robert C. McFetridge,
Director, Regulation Policy and Management, Office of the General 
Counsel, Department of Veterans Affairs.

    For the reasons set forth in the preamble, VA proposes to amend 38 
CFR part 17 as follows:

PART 17--MEDICAL

    1. The authority citation for part 17 continues to read as follows:

    Authority:  38 U.S.C. 501, 1721, and as noted in specific 
sections.


Sec.  17.106  [Redesignated as Sec.  17.107]

    2. Redesignate Sec.  17.106 as Sec.  17.107.
    3. Add new Sec.  17.106 before the undesignated center heading 
``Disciplinary Control of Beneficiaries Receiving Hospital, Domiciliary 
or Nursing Home Care'' to read as follows:


Sec.  17.106  Third party claims for refunds based on amounts 
previously paid to the Department of Veterans Affairs (overpayments).

    (a)(1) General rule. VA has the right to recover or collect 
reasonable charges from a third-party payer for medical care and 
services provided for a nonservice-connected disability in or through 
any VA facility to a veteran who is also a beneficiary under the third-
party payer's plan. VA's right to recover or collect is limited to the 
extent that the beneficiary or a non-government provider of care or 
services would be eligible to receive reimbursement or indemnification 
from the third-party payer if the beneficiary were to incur the costs 
on the beneficiary's own behalf.
    (2) Definitions. For the purposes of this section:
    (i) Automobile liability insurance means insurance against legal 
liability for health and medical expenses resulting from personal 
injuries arising from operation of a motor vehicle. Automobile 
liability insurance includes:
    (A) Circumstances in which liability benefits are paid to an 
injured party only when the insured party's tortious acts are the cause 
of the injuries; and
    (B) Uninsured and underinsured coverage, in which there is a third-
party tortfeasor who caused the injuries (i.e., benefits are not paid 
on a no-fault basis), but the insured party is not the tortfeasor.
    (ii) Health-plan contract means any plan, policy, program, 
contract, or liability arrangement that provides compensation, 
coverage, or indemnification for expenses incurred by a beneficiary for 
medical care or services, items, products, and supplies. It includes 
but is not limited to:
    (A) Any plan offered by an insurer, re-insurer, employer, 
corporation, organization, trust, organized health care group or other 
entity.
    (B) Any plan for which the beneficiary pays a premium to an issuing 
agent as well as any plan to which the beneficiary is entitled as a 
result of employment or membership in or association with an 
organization or group.
    (C) Any Employee Retirement Income and Security Act (ERISA) plan.
    (D) Any Multiple Employer Trust (MET).
    (E) Any Multiple Employer Welfare Arrangement (MEWA).
    (F) Any Health Maintenance Organization (HMO) plan, including any 
such plan with a point-of-service provision or option.
    (G) Any individual practice association (IPA) plan.
    (H) Any exclusive provider organization (EPO) plan.
    (I) Any physician hospital organization (PHO) plan.
    (J) Any integrated delivery system (IDS) plan.
    (K) Any management service organization (MSO) plan.
    (L) Any group or individual medical services account.
    (M) Any participating provider organization (PPO) plan or any PPO 
provision or option of any third-party payer plan.
    (N) Any Medicare supplemental insurance plan.
    (O) Any automobile liability insurance plan.
    (P) Any no fault insurance plan, including any personal injury 
protection plan or medical payments benefit plan for personal injuries 
arising from the operation of a motor vehicle.
    (iii) Medicare supplemental insurance plan means an insurance, 
medical service or health-plan contract primarily for the purpose of 
supplementing an eligible person's benefit under Medicare. The term has 
the same meaning as ``Medicare supplemental policy'' in section 
1882(g)(1) of the Social Security Act (42 U.S.C. 1395, et. seq.) and 42 
CFR part 403, subpart B.
    (iv) No-fault insurance means an insurance contract providing 
compensation for medical expenses relating to personal injury arising 
from the operation of a motor vehicle in which the compensation is not 
premised on who may have been responsible for causing such injury. No-
fault insurance includes personal injury protection and medical 
payments benefits in cases involving personal injuries resulting from 
operation of a motor vehicle.
    (v) Participating provider organization means any arrangement in a 
third-party payer plan under which coverage is limited to services 
provided by a select group of providers who are members of the PPO or 
incentives (for example, reduced copayments) are provided for 
beneficiaries under the plan to receive health care services from the 
members of the PPO rather than from other providers who, although 
authorized to be paid, are not included in the PPO. However, a PPO does 
not include any organization that is recognized as a health maintenance 
organization.
    (vi) Third-party payer means an entity, other than the person who 
received the medical care or services at issue (first party) and VA who 
provided the care or services (second party), responsible for the 
payment of medical expenses on behalf of a person through insurance, 
agreement or contract. This term includes, but is not limited to the 
following:
    (A) State and local governments that provide such plans other than 
Medicaid.
    (B) Insurance underwriters or carriers.
    (C) Private employers or employer groups offering self-insured or 
partially self-insured medical service or health plans.
    (D) Automobile liability insurance underwriter or carrier.
    (E) No fault insurance underwriter or carrier.
    (F) Workers' compensation program or plan sponsor, underwriter, 
carrier, or self-insurer.
    (G) Any other plan or program that is designed to provide 
compensation or coverage for expenses incurred by a beneficiary for 
healthcare services or products.
    (H) A third-party administrator.
    (b) Calculating reasonable charges.
    (1) The ``reasonable charges'' subject to recovery or collection by 
VA under this section are calculated using the applicable method for 
such charges established by VA in 38 CFR 17.101.
    (2) If the third-party payer's plan includes a requirement for a 
deductible or copayment by the beneficiary of the plan, VA will recover 
or collect reasonable charges less that deductible or copayment amount.
    (c) VA's right to recover or collect is exclusive. The only way for 
a third-party payer to satisfy its obligation under this section is to 
pay the VA facility or other authorized

[[Page 62353]]

representative of the United States. Payment by a third-party payer to 
the beneficiary does not satisfy the third-party's obligation under 
this section.
    (1) Pursuant to 38 U.S.C. 1729(b)(2), the United States may file a 
claim or institute and prosecute legal proceedings against a third-
party payer to enforce a right of the United States under 38 U.S.C. 
1729 and this section. Such filing or proceedings must be instituted 
within six years after the last day of the provision of the medical 
care or services for which recovery or collection is sought.
    (2) An authorized representative of the United States may 
compromise, settle or waive a claim of the United States under this 
section.
    (3) The remedies authorized for collection of indebtedness due the 
United States under 31 U.S.C. 3701, et seq., 4 CFR parts 101-104, 28 
CFR part 11, 31 CFR part 900, and 38 CFR part 1, are available to 
effect collections under this section.
    (4) A third-party payer may not, without the consent of a U.S. 
Government official authorized to take action under 38 U.S.C. 1729 and 
this part, offset or reduce any payment due under 38 U.S.C. 1729 or 
this part on the grounds that the payer considers itself due a refund 
from a VA facility. A written request for a refund must be submitted 
and adjudicated separately from any other claims submitted to the 
third-party payer under 38 U.S.C. 1729 or this part.
    (d) Assignment of benefits or other submission by beneficiary not 
necessary. The obligation of the third-party payer to pay is not 
dependent upon the beneficiary executing an assignment of benefits to 
the United States. Nor is the obligation to pay dependent upon any 
other submission by the beneficiary to the third-party payer, including 
any claim or appeal. In any case in which VA makes a claim, appeal, 
representation, or other filing under the authority of this part, any 
procedural requirement in any third-party payer plan for the 
beneficiary of such plan to make the claim, appeal, representation, or 
other filing must be deemed to be satisfied. A copy of the completed VA 
Form 10-10EZ or VA Form 10-10EZR that includes a veteran's insurance 
declaration will be provided to payers upon request, in lieu of a 
claimant's statement or coordination of benefits form.
    (e) Preemption of conflicting State laws and contracts. Any 
provision of a law or regulation of a State or political subdivision 
thereof and any provision of any contract or agreement that purports to 
establish any requirement on a third-party payer that would have the 
effect of excluding from coverage or limiting payment for any medical 
care or services for which payment by the third-party payer under 38 
U.S.C. 1729 or this part is required, is preempted by 38 U.S.C. 1729(f) 
and shall have no force or effect in connection with the third-party 
payer's obligations under 38 U.S.C. 1729 or this part.
    (f) Impermissible exclusions by third-party payers. (1) Statutory 
requirement. Under 38 U.S.C. 1729(f), no provision of any third-party 
payer's plan having the effect of excluding from coverage or limiting 
payment for certain care if that care is provided in or through any VA 
facility shall operate to prevent collection by the United States.
    (2) General rules. The following are general rules for the 
administration of 38 U.S.C. 1729 and this part, with examples provided 
for clarification. The examples provided are not exclusive. A third-
party payer may not reduce, offset, or request a refund for payments 
made to VA under the following conditions:
    (i) Express exclusions or limitations in third-party payer plans 
that are inconsistent with 38 U.S.C. 1729 are inoperative. For example, 
a provision in a third-party payer's plan that purports to disallow or 
limit payment for services provided by a government entity or paid for 
by a government program (or similar exclusion) is not a permissible 
ground for refusing or reducing third-party payment.
    (ii) No objection, precondition or limitation may be asserted that 
defeats the statutory purpose of collecting from third-party payers. 
For example, a provision in a third-party payer's plan that purports to 
disallow or limit payment for services for which the patient has no 
obligation to pay (or similar exclusion) is not a permissible ground 
for refusing or reducing third-party payment.
    (iii) Third-party payers may not treat claims arising from services 
provided in or through VA facilities less favorably than they treat 
claims arising from services provided in other hospitals. For example, 
no provision of an employer sponsored program or plan that purports to 
make ineligible for coverage individuals who are eligible to receive VA 
medical care and services shall be permissible.
    (iv) The lack of a participation agreement or the absence of 
privity of contract between a third-party payer and VA is not a 
permissible ground for refusing or reducing third-party payment.
    (v) A provision in a third-party payer plan, other than a Medicare 
supplemental plan, that seeks to make Medicare the primary payer and 
the plan the secondary payer or that would operate to carve out of the 
plan's coverage an amount equivalent to the Medicare payment that would 
be made if the services were provided by a provider to whom payment 
would be made under Part A or Part B of Medicare is not a permissible 
ground for refusing or reducing payment as the primary payer to VA by 
the third-party payer unless the provision expressly disallows payment 
as the primary payer to all providers to whom payment would not be made 
under Medicare (including payment under Part A, Part B, a Medicare HMO, 
or a Medicare Advantage plan).
    (vi) A third-party payer may not refuse or reduce third-party 
payment to VA because VA's claim form did not report hospital acquired 
conditions (HAC) or present on admission conditions (POA). VA is exempt 
from the Medicare Inpatient prospective payment system and the Medicare 
rules for reporting POA or HAC information to third-party payers.
    (vii) Health Maintenance Organizations (HMOs) may not exclude 
claims or refuse to certify emergent and urgent services provided 
within the HMO's service area or otherwise covered non-emergency 
services provided out of the HMO's service area. In addition, opt-out 
or point-of-service options available under an HMO plan may not exclude 
services otherwise payable under 38 U.S.C. 1729 or this part.
    (g) Records. Pursuant to 38 U.S.C. 1729(h), VA shall make available 
for inspection and review to representatives of third-party payers, 
from which the United States seeks payment, recovery, or collection 
under 38 U.S.C. 1729, appropriate health care records (or copies of 
such records) of patients. However, the appropriate records will be 
made available only for the purposes of verifying the care and services 
which are the subject of the claim(s) for payment under 38 U.S.C. 1729, 
and for verifying that the care and services met the permissible 
criteria of the terms and conditions of the third-party payer's plan. 
Patient care records will not be made available under any other 
circumstances to any other entity. VA will not make available to a 
third-party payer any other patient or VA records.

(Authority: 31 U.S.C. 3711, 38 U.S.C. 501, 1729, 42 U.S.C. 2651)


[FR Doc. 2010-25363 Filed 10-7-10; 8:45 am]
BILLING CODE 8320-01-P