[Federal Register Volume 75, Number 193 (Wednesday, October 6, 2010)]
[Rules and Regulations]
[Pages 61621-61623]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-25043]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 17
RIN 2900-AN15
Charges Billed to Third Parties for Prescription Drugs Furnished
by VA to a Veteran for a Nonservice-Connected Disability
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
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SUMMARY: This document amends the medical regulations of the Department
of Veterans Affairs (VA) concerning ``reasonable charges'' for medical
care or services provided or furnished by VA to a veteran for a
nonservice-connected disability. More specifically, VA amends the
regulations regarding charges billed for prescription drugs not
administered during treatment by changing the billing formula to
reflect VA's actual drug costs for each drug rather than using a
national average drug cost for all prescriptions dispensed. The revised
formula for calculating reasonable charges for prescription drug costs
will also continue to include an average administrative cost for each
prescription. The purpose is to provide VA with a more accurate billing
methodology for prescription drugs.
DATES: Effective Date: This final rule is effective on March 18, 2011.
Applicability Date: The final rule will apply to prescriptions
filled on or after March 18, 2011.
FOR FURTHER INFORMATION CONTACT: Romona Greene, Manager of Rates and
Charges, VHA Chief Business Office (168), Veterans Health
Administration, Department of Veterans Affairs, 810 Vermont Avenue,
NW., Washington, DC 20420, (202) 461-1595. (This is not a toll-free
number.)
SUPPLEMENTARY INFORMATION: Under 38 U.S.C. 1729, VA has the right to
recover or collect reasonable charges for medical care or services
(including the provision of prescription drugs) from a third party to
the extent that the veteran or the provider of the care or services
would be eligible to receive payment from the third party for:
A nonservice-connected disability for which the veteran is
entitled to care (or the payment of expenses of care) under a health
plan contract, 38 U.S.C. 1729(a)(2)(D), 38 CFR 17.101(a)(1)(i);
A nonservice-connected disability incurred incident to the
veteran's employment and covered under a worker's compensation law or
plan that provides reimbursement or indemnification for such care and
services, 38 U.S.C. 1729(a)(2)(A), 38 CFR 17.101(a)(1)(ii); or
A nonservice-connected disability incurred as a result of
a motor vehicle accident in a State that requires automobile accident
reparations (no-fault) insurance, 38 U.S.C. 1729(a)(2)(B), 38 CFR
17.101(a)(1)(iii).
However, under current 38 CFR 17.101(a)(4), which implements 38
U.S.C. 1729(c)(2)(B), a third-party payer liable for such medical care
and services under a health plan contract has the option of paying, to
the extent of its coverage, either the billed charges or the amount the
third-party payer demonstrates it would pay for care or services
furnished by providers other than entities of the United States for the
same care or services in the same geographic area.
Prior to the effective date of this document, VA billed for
prescription drugs not administered during treatment based on the sum
of two components: (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 prescription drugs. Further, in
accordance with Sec. 17.102(h), prior to the effective date of this
document, VA billed $51 for each prescription filled (see 70 FR 66866,
Nov. 3, 2005).
In a document published in the Federal Register on July 9, 2009 (74
FR 32819), we proposed to change the billing methodology for
prescription drugs not administered during treatment. With respect to
the portion of the billing concerning VA's cost for such prescription
drugs, we proposed to bill based on the actual cost to VA of each
prescription drug rather than the national average of drug costs for
all prescriptions. In this regard, we proposed to bill the total of:
[[Page 61622]]
The actual cost to VA for prescription drugs (i.e., the
cost to the facility that purchased the drugs); and
The average national administrative cost associated with
dispensing the drugs for each prescription.
We provided a 30-day comment period that ended on August 10, 2009.
We received comments from three commenters and the issues they raised
are discussed below. Based on the rationale set forth in the proposed
rule and this document, we are adopting the proposed rule with the
nonsubstantive changes discussed below.
Two commenters indicated that the final rule should ensure that
insurance companies pay VA in response to VA billing, and thereby
reduce or eliminate the veterans' copayment. We agree that the payment
practices of third-party payers need to be addressed. However, those
practices are not within the scope of this rulemaking. This rulemaking
concerns VA's methodology for determining reasonable charges for
prescription drugs. We did not propose to amend other VA regulations
regarding third-party payment procedures or to promulgate new
regulations regarding such procedures. However, we intend to separately
publish a proposed rule to address issues regarding requirements for
third-party payers making payments to VA.
Another commenter raised a number of issues. All of these issues
are discussed below.
The commenter indicated that the VA acquisition cost for
prescription drugs could be more than the third-party payer cost for
the same prescription drugs and seemed to suggest that the billing
amount for the cost of the drugs should not be more than the amount
that the third-party payer would be required to pay for the same
prescription drugs. The commenter also indicated that the VA
administrative fee of $11.17 is more than the average private
dispensing fee and that private industry has been successful in
negotiating such fees in the range of $1.50 to $2.00. We clarified what
is meant by administrative costs but made no other changes based on
these comments.
Under the provisions of 38 U.S.C. 1729, VA has authority to bill
third-party payers in an amount constituting ``reasonable charges.'' We
believe that the billing formula is warranted under the statute.
Moreover, VA has taken steps to keep costs at a minimum.
In most cases VA purchases drugs in bulk at discounted prices.
Also, insofar as possible, VA prescribes generic drugs.
Further, the $1.50 to $2.00 amounts quoted by the commenter were
represented as negotiated fees and not represented as covering the
actual administrative costs. We question whether these negotiated fees
include all of the actual administrative costs. The VA administrative
costs include general overhead costs, such as costs of buildings and
maintenance, utilities, billing, and collections, and includes
dispensing costs, such as costs of the labor of the pharmacy
department, packaging, and mailing.
Even so, in some cases, a third party payor may be allowed to pay
less than the VA billed amount. In this regard, under section 1729 a
third party payor has the option of paying, to the extent of its
coverage, either the billed charges or the amount the third-party payor
would pay for the prescription drugs to private sector providers in the
same geographic area. Accordingly, this alternative will continue to be
available to third party payors in accordance with the statutory
mandate (see 38 CFR 17.101(a)(4)).
The commenter questioned how VA will determine the price point
within the drug file and how this information will be communicated to
health plan payers. We made no changes based on this comment. The
proposed rule stated that the prescription cost will be obtained from
the Outpatient Pharmacy Prescription file or the Drug file at each VA
facility (74 FR 32820). The product cost of the prescription will be
calculated using the most recent purchase price of the product used by
VA to fill the prescription. VA's bill will reflect the cost of the
drugs, taking into consideration the quantity dispensed and VA's
national administrative cost. The total prescription cost will be
transmitted on a bill to a third-party payer.
In addition, the commenter also questioned what billing claim field
VA will use for submitting cost information. We made no changes based
on this comment. VA will combine the drug costs plus administrative
costs and provide the total prescription cost in the appropriate field
in the form submitted, e.g., National Council for Prescription Drug
Programs electronic format, UB04; Centers for Medicare and Medicaid
Services (CMS) 1500.
The commenter also suggested that VA have a graduated or phased
implementation so that third-party payers will have time to absorb the
increased cost of payments. We do not believe that a graduated or
phased implementation is necessary. Although payments made to VA by
third party payors will represent an increase in the amount of
collections, we believe that the overall impact on third party payors
will be minimal. In 2009, U.S sales of prescription drugs totaled
approximately $300.3 billion. In contrast, VA spent an estimated 4.9
billion on prescription drugs in 2009 (less than 2 per cent of the
total sales). A large portion of the prescription drugs distributed in
the U.S. are covered by third party payors. However, with or without
the changes made by this rule, VA would have collected less than $200
million in 2009 from third party payors.
Not only do we believe that the overall impact to third party
payors will be minimal because of VA's minimal share, but as noted
above, in some cases a third party payor may be allowed to pay less
than the VA billed amount based on the provisions in section 1729 which
provide that a third party payor has the option of paying, to the
extent of its coverage, either the billed charges or the amount the
third-party payor would pay for the prescription drugs to private
sector providers in the same geographic area.
The commenter suggested that the final rule become effective only
prospectively, questioned when the changes will become effective, and
expressed concerns regarding when VA will make system changes necessary
to implement the final rule. We agree with the commenter that the new
billing methodology should not be applied retrospectively. This final
rule is effective March 18, 2011. The system changes are scheduled to
be in place on that date. For further clarification, we have added in
the DATES section of this document a statement indicating that the
final rule will apply to prescriptions filled on or after the effective
date of this final rule. This will also provide some lead time for
third party payors to prepare for compliance with the amended
regulations.
We also added a clarifying change in paragraph (m). We inserted
``regarding VA charges'' after ``Notwithstanding other provisions of
this section'' to emphasize that paragraph (m) does not concern other
aspects of Sec. 17.101, such as the provisions of 38 CFR 17.101(a)(4),
which explain that a third-party payer's liability is limited, to the
extent of its coverage, to the lesser of the billed charges or the
amount that the third-party payer would pay to a provider other than
VA.
As required by 38 U.S.C. 1729(c)(2)(A), we consulted with the
Comptroller General of the United States prior to promulgating this
final rule.
[[Page 61623]]
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 an 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 year. This final rule will have no such effect on
State, local, and tribal governments, or on the private sector.
Paperwork Reduction Act
This document contains no collections of information under the
Paperwork Reduction Act (44 U.S.C. 3501-3521).
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 as 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.
VA has examined the economic, interagency, budgetary, legal, and
policy implications of this final rule and has concluded that it is a
significant regulatory action under Executive Order 12866 because it
may raise novel legal or policy issues arising out of legal mandates,
the President's priorities, or the principles set forth in the
Executive Order.
Regulatory Flexibility Act
The Secretary hereby certifies that this final rule will 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 final rule will mainly affect large insurance companies. This
final 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 final rule is exempt from the initial
and final regulatory flexibility analysis requirements of sections 603
and 604.
Catalog of Federal Domestic Assistance Numbers
The Catalog of Federal Domestic Assistance numbers and titles for
the programs affected by this document are 64.005, Grants to States for
Construction of State Home Facilities; 64.007, Blind Rehabilitation
Centers; 64.008, Veterans Domiciliary Care; 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.
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 programs, Nursing homes, Philippines, Reporting
and recordkeeping requirements, Scholarships and fellowships, Travel
and transportation expenses, Veterans.
Editorial Note: This document was received in the Office of the
Federal Register on September 30, 2010.
Approved: January 11, 2010.
John R. Gingrich,
Chief of Staff, Department of Veterans Affairs.
0
For the reasons stated in the preamble, VA amends 38 CFR part 17 as
follows:
PART 17--MEDICAL
0
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.
0
2. Revise the second sentence of paragraph (a)(2) and paragraph (m) of
Sec. 17.101 to read as follows:
Sec. 17.101 Collection or recovery by VA for medical care or services
provided or furnished to a veteran for a nonservice-connected
disability.
(a) * * *
(2) * * * In addition, the charges billed for prescription drugs
not administered during treatment will be the amount determined under
paragraph (m) of this section. * * *
* * * * *
(m) Charges for prescription drugs not administered during
treatment. Notwithstanding other provisions of this section regarding
VA charges, when VA provides or furnishes prescription drugs not
administered during treatment, within the scope of care referred to in
paragraph (a)(1) of this section, charges billed separately for such
prescription drugs will consist of the amount that equals the total of
the actual cost to VA for the drugs and the national average of VA
administrative costs associated with dispensing the drugs for each
prescription. The actual VA cost of a drug will be the actual amount
expended by the VA facility for the purchase of the specific drug. The
administrative cost will be determined annually using VA's managerial
cost accounting system. Under this accounting system, the average
administrative cost is determined by adding the total VA national drug
general overhead costs (such as costs of buildings and maintenance,
utilities, billing, and collections) to the total VA national drug
dispensing costs (such as costs of the labor of the pharmacy
department, packaging, and mailing) with the sum divided by the actual
number of VA prescriptions filled nationally. Based on this accounting
system, VA will determine the amount of the average administrative cost
annually for the prior fiscal year (October through September) and then
apply the charge at the start of the next calendar year.
* * * * *
[FR Doc. 2010-25043 Filed 10-5-10; 8:45 am]
BILLING CODE 8320-01-P