[Federal Register Volume 66, Number 136 (Monday, July 16, 2001)]
[Proposed Rules]
[Pages 36960-36963]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-17734]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 17

RIN 2900-AK85


Copayments for Medications

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: This document proposes to amend VA's medical regulations to 
set forth copayment requirements for medications. This document is

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necessary to implement provisions of the Veterans Millennium Health 
Care and Benefits Act.

DATES: Comments must be received on or before September 14, 2001.

ADDRESSES: Mail or hand-deliver written comments to: Director, Office 
of Regulations Management (02D), Department of Veterans Affairs, 810 
Vermont Ave., NW., Room 1154, Washington, DC 20420; or fax comments to 
(202) 273-9289; or e-mail comments to [email protected]. 
Comments should indicate that they are submitted in response to ``RIN 
2900-AK85.'' All comments received will be available for public 
inspection in the Office of Regulations Management, Room 1158, between 
the hours of 8:00 a.m. and 4:30 p.m., Monday through Friday (except 
holidays).

FOR FURTHER INFORMATION CONTACT: Nancy L. Howard at (202) 273-8198, 
Revenue Office (174), Office of Finance, Veterans Health 
Administration, 810 Vermont Avenue NW, Washington, DC 20420. (This is 
not a toll-free telephone number).

SUPPLEMENTARY INFORMATION: This document proposes to amend VA's medical 
regulations to set forth copayment requirements for medications 
provided to veterans by VA.
    The provisions of 38 U.S.C. 1722A require certain veterans to pay a 
copayment for each 30-day or less supply of medication furnished on an 
outpatient basis for the treatment of a nonservice-connected disability 
or condition. The copayment amount was set at $2 in 1990 by 38 U.S.C. 
1722A for each 30-day or less supply of medication and has never been 
changed. The Veterans Millennium Health Care and Benefits Act, Public 
Law 106-117, amended 38 U.S.C. 1722A to allow VA to increase the 
copayment amount and to establish maximum copayment amounts. This 
document proposes to increase the copayment amount from $2 to $7 
through December 31, 2002 and also proposes to establish an annual 
copayment cap of $840 through calendar year 2002 for veterans in 
certain enrollment priority categories. We also are proposing to 
establish escalator provisions to automatically increase the copayment 
and the cap amount under certain conditions.
    Based on a review of industry standards, we believe that the 
medication copayment should be increased from $2 to $7. We believe that 
the proposed $7 medication copayment would be lower than or equal to 
most medication copayments charged by the private health care industry. 
Further, we believe it is a reasonable amount for the majority of 
medications dispensed.
    Also, under 38 U.S.C. 1722A, VA may not require a veteran to pay an 
amount in excess of the actual cost of the medication and the pharmacy 
administrative costs related to the dispensing of the medication. VHA 
conducted a study of the pharmacy administrative costs relating to the 
dispensing of medication on an outpatient basis and found that VA 
incurred a cost of $7.28 to dispense an outpatient medication even 
without consideration of the actual cost of the medication. This amount 
covers the cost of consultation time, filling time, dispensing time, an 
appropriate share of the direct and indirect personnel costs, physical 
overhead and materials, and supply costs. Under these circumstances, we 
believe that a $7 copayment would not exceed VA's costs.
    We propose to include escalator provisions for the copayment 
amount. We propose that the copayment amount for each calendar year 
after 2002 would be established using the Prescription Drug component 
of the Medical Consumer Price Index as follows: For each calendar year 
beginning after December 31, 2002, the Index as of the previous 
September 30 will be divided by the Index as of September 30, 2001. The 
ratio so obtained will be multiplied by the original copayment amount 
of $7. The copayment amount for the new calendar year will be this 
result, rounded down to the whole dollar amount.
    This is intended to ensure that the copayment amounts increase with 
inflation. Also, increasing the copayment amount in whole dollar 
increments would be easily understood by veterans and lessen the 
administrative burden on VA. Further, based on commensurate increased 
costs to VA, we believe that VA's costs would remain higher than the 
increases made by the escalator provisions.
    For purposes of determining the copayment amount, we have added the 
following note to the proposed rule: ``Note to [Sec. 17.110] Paragraph 
(b)(1): Example for determining copayment amount. If the ratio of the 
Prescription Drug component of the Medical Consumer Price Index for 
September 30, 2003, to the corresponding Index for September 30, 2001, 
is 1.2242, then this ratio multiplied by the original copayment amount 
of $7 would equal $8.57, and the copayment amount for calendar year 
2004, rounded down to the whole dollar amount, would be $8.''
    We propose to establish a maximum annual copayment cap for certain 
veterans. Under the proposal, the total amount of copayments in a 
calendar year for a veteran enrolled in one of the priority categories 
2 through 6 of VA's health care system (see 38 CFR 17.36) would not 
exceed the cap established for the calendar year. We propose that the 
cap for the last quarter of calendar year 2001 would be $210 and that 
the cap for calendar 2002 would be $840. We also propose that the cap 
for each calendar year after calendar year 2002 would be $840 plus $120 
for each $1 increase in the copayment amount. This would increase the 
cap at the same rate as copayments would increase.
    The purpose of the annual cap is to help eliminate financial 
hardships for veterans who in unusual circumstances need a significant 
number of prescriptions. We believe the cap should apply to a veteran 
who averages more than 10 prescriptions per month. Accordingly, we 
calculated the annual cap of $840 by multiplying the $7 prescription 
amount by 120 (10 prescriptions per month multiplied by 12 months).
    The copayment cap would not apply to those in priority category 1 
because those individuals are statutorily exempt from the copayments. 
We propose that the cap would not apply to priority category 7 
veterans. These veterans have the lowest priority for enrollment in the 
VA health care system. Moreover, Congress has determined that these 
veterans have sufficient resources to contribute to VA inpatient and 
outpatient care. Consistent with this direction, we believe that the 
cap should not apply to these veterans.
    The proposal also sets forth certain exemptions from the medication 
copayment requirements. These are all statutory exemptions that were in 
place prior to the establishment of the Veterans Millennium Health Care 
and Benefits Act.

Compliance With the Congressional Review Act and Executive Order 
12866--Cost-Benefit Analysis

    This rule is economically significant under Executive Order 12866 
and constitutes a major rule under the Congressional Review Act. The 
rule is necessary to implement the provisions of section 201 of Public 
Law 106-117, The Veterans Millennium Health Care and Benefits Act. 
These provisions, which are set forth at 38 U.S.C. 1722A, authorize VA 
to set the copayment charge for medications.

I. Benefits Costs

    This rule would directly impact veterans that receive prescriptions 
for other than service-connected conditions

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that currently pay a $2 copayment. Based on VA records for fiscal year 
2000, we found that approximately 1.1 million veterans averaged 47 30-
day supply prescriptions per year. VA collected $101 million in fiscal 
year 2000 for this provision. This proposed rule would increase the 
copayment from the current $2 level to $7. We do not believe that this 
increase in the copayment amount will have an impact upon utilization. 
It is anticipated that the same number of veterans will continue to 
receive the same average number of prescriptions generating an increase 
in collections of $250 million annually.

II. Administrative Costs

    The estimated administrative cost for these increased collections 
would remain the same at the current collection expense of $17 million. 
This is based upon an average cost of a GS-5 at $12/hour  x  8.2 
million bills per year at the average rate of 10.3 minutes per bill.

III. Alternatives

    VA considered establishing higher and lower copayment and cap 
amounts and considered whether or not to have escalator provisions. 
However, for the reasons discussed above, we believe that the copayment 
and cap amounts, and the escalator provisions, are appropriate.

Administrative Requirements

Paperwork Reduction Act

    This document contains no provisions constituting a collection of 
information under the Paperwork Reduction Act (44 U.S.C. 3501-3520).

Unfunded Mandates

    The Unfunded Mandates Reform Act requires (in section 202) that 
agencies prepare an assessment of anticipated costs and benefits before 
developing any rule that may result in an expenditure by State, local, 
or tribal governments, in the aggregate, or by the private sector of 
$100 million or more in any given year. This rule would have no 
consequential effect on State, local, or tribal governments.

Executive Order 12866

    This document has been reviewed by the Office of Management and 
Budget under Executive Order 12866.

Regulatory Flexibility Act

    The Secretary hereby certifies that this regulatory amendment will 
not have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory Flexibility Act (RFA), 5 
U.S.C. 601-612. This amendment would not directly affect any small 
entities. Only individuals could be directly affected. Therefore, 
pursuant to 5 U.S.C. 605(b), this amendment 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 for the programs 
affected by this document are 64.005, 64.007, 64.008, 64,009, 64.010, 
64.011, 64.012, 64.013, 64.014, 64.015, 64.016, 64.018, 64.019, 64.022, 
and 64.025.

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.

    Approved: June 20, 2001.
Anthony J. Principi,
Secretary of Veterans Affairs.
    For the reasons set out in the preamble, 38 CFR part 17 is proposed 
to be amended as set forth below:

PART 17--MEDICAL

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

    Authority: 38 U.S.C. 501, 1721, unless otherwise noted.

    2. An undesignated centerheading and Sec. 17.110 are added to read 
as follows:

Copayments


Sec. 17.110  Copayments for medication.

    (a) General. This section sets forth requirements regarding 
copayments for medications provided to veterans by VA.
    (b) Copayments. (1) Unless exempted under paragraph (c) of this 
section, a veteran is obligated to pay VA a copayment for each 30-day 
or less supply of medication provided by VA on an outpatient basis 
(other than medication administered during treatment). For the period 
from [the effective date of the final rule] through December 31, 2002, 
the copayment amount is $7. The copayment amount for each calendar year 
thereafter will be established by using the Prescription Drug component 
of the Medical Consumer Price Index as follows: For each calendar year 
beginning after December 31, 2002, the Index as of the previous 
September 30 will be divided by the Index as of September 30, 2001. The 
ratio so obtained will be multiplied by the original copayment amount 
of $7. The copayment amount for the new calendar year will be this 
result, rounded down to the whole dollar amount.

    Note to Paragraph (b)(1): Example for determining copayment 
amount. If the ratio of the Prescription Drug component of the 
Medical Consumer Price Index for September 30, 2003, to the 
corresponding Index for September 30, 2001, is 1.2242, then this 
ratio multiplied by the original copayment amount of $7 would equal 
$8.57, and the copayment amount for calendar year 2004, rounded down 
to the whole dollar amount, would be $8.

    (2) The total amount of copayments in a calendar year for a veteran 
enrolled in one of the priority categories 2 through 6 of VA's health 
care system (see Sec. 17.36) shall not exceed the cap established for 
the calendar year. The cap for the last quarter of calendar year 2001 
is $210. The cap for calendar year 2002 is $840. If the copayment 
amount increases after calendar year 2002, the cap of $840 shall be 
increased by $120 for each $1 increase in the copayment amount.
    (c) Medication not subject to the copayment requirements. The 
following are exempt from the copayment requirements of this section:
    (1) Medication for a veteran who has a service-connected disability 
rated 50% or more based on a service-connected disability or 
unemployability;
    (2) Medication for a veteran's service-connected disability;
    (3) Medication for a veteran whose annual income (as determined 
under 38 U.S.C. 1503) does not exceed the maximum annual rate of VA 
pension which would be payable to such veteran if such veteran were 
eligible for pension under 38 U.S.C. 1521;
    (4) Medication authorized under 38 U.S.C. 1710(e) for Vietnam-era 
herbicide-exposed veterans, radiation-exposed veterans, Persian Gulf 
War veterans, or post-Persian Gulf War combat-exposed veterans;
    (5) Medication for treatment of sexual trauma as authorized under 
38 U.S.C. 1720D;
    (6) Medication for treatment of cancer of the head or neck 
authorized under 38 U.S.C. 1720E; and

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    (7) Medications provided as part of a VA approved research project 
authorized by 38 U.S.C. 7303.

(Authority: 38 U.S.C. 501, 1710, 1720D, 1722A)
[FR Doc. 01-17734 Filed 7-13-01; 8:45 am]
BILLING CODE 8320-01-P