[Federal Register Volume 66, Number 235 (Thursday, December 6, 2001)]
[Rules and Regulations]
[Pages 63449-63451]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-30183]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 17

RIN 2900-AK85


Copayments for Medications

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: This document amends VA's medical regulations to set forth 
copayment requirements for medications. This is necessary to implement 
provisions of the Veterans Millennium Health Care and Benefits Act.

DATES: Effective Date: February 4, 2002.

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: In a document published in the Federal 
Register on July 16, 2001, we proposed to amend VA's medical 
regulations to set forth copayment requirements for medications 
provided to veterans by VA (66 FR 36960). Interested persons were given 
60 days to submit comments. We received over 1000 comments, almost all 
of which opposed all or portions of the proposal. Based on the 
rationale set forth in the proposed rule and this document, we are 
adopting the provisions of the proposed rule as a final rule.
    A number of commenters asserted that VA should not charge any 
veteran a medication copayment. Other commenters asserted that VA 
should not charge veterans who had combat service a medication 
copayment. Other commenters asserted that military retirees should not 
be charged a medication copayment. Other commenters asserted that 
veterans who are service-connected should not be charged a medication 
copayment for any condition. No changes are made based on these 
comments. With certain statutory exceptions set forth in Sec. 17.110(c) 
of this final rule, the provisions of 38 U.S.C. 1722A require veterans 
to pay a copayment for each 30-day or less supply of medication 
furnished on an outpatient basis. The applicable statutory provisions 
do not allow an exemption based merely on the fact that an individual 
is a veteran, that an individual was a combat veteran, or that a 
veteran is a military retiree. The provisions in the final rule 
concerning service-connection are also reflections of statutory 
requirements. The final rule exempts from the copayment requirements 
medication for a veteran who has a service-connected disability rated 
50% or more based on a service-connected disability or unemployability. 
The final rule also exempts from the copayment requirements medication 
for a veteran's service-connected disability. However, VA has no 
authority to exempt from the medication copayments medication for a 
nonservice-connected condition of a veteran whose total service-
connected disabilities are rated at less than 50%.
    The vast majority of commenters opposed the proposal to increase 
the copayment amount from $2 to $7. Some asserted there should be no 
increase at all. Others asserted that the increase was just too great. 
Others asserted that the increase would cause them a financial 
hardship. Some of the commenters asserted that the Prescription Drug 
Component of the Medical Consumer Price Index should not be used to 
determine whether the copayment amount should be increased since this 
is typically greater than the overall inflation rate. A number of the 
commenters also asserted that the copayment increase also would cause 
the annual caps to be too high. A few were in favor of the proposal. No 
changes are made based on these comments.
    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 until now has never been 
changed. The Veterans Millennium Health Care and Benefits Act, Public 
Law 106-117, amended 38 U.S.C. 1722A authorizing VA to increase the 
copayment amount and to establish maximum annual copayment amounts. 
Clearly, the statutory intent was for VA to increase the copayment 
amount. In helping VA to determine the amount of the copayment, the 
House Conference Report (H. Rept. 106-237, July 16, 1999) specifically 
noted that the copayment for DOD's Tricare Prime Plan included a $9 
copayment for each 30-day prescription. Further, the House Conference 
Report indicated, at page 42, that ``[a] survey of copayment trends in 
1996-7 found the most common [prescription drug] copayment among 
members of the American Association of Health Plans * * * [to be] in 
the range of $5 to $10 per prescription.'' Also, as we stated in the 
proposal, 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. Many recent newspaper articles have 
reported dramatic increases throughout the health care industry for 
medication copayment amounts which are reflective of increases in 
medication costs. Accordingly, even with the increase we may have one 
of the lowest copayment amounts. Under these circumstances, we believe 
that a $7 copayment amount is reasonable. Further, we believe that 
increases should be based on the Prescription Drug Component of the 
Medical Consumer Price Index since it is most relevant to the cost of 
prescriptions and thereby should be relevant to any general increases 
in medication copayments in the private sector.
    Also, as we stated in the proposal, 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,

[[Page 63450]]

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.
    A number of commenters asserted that the increase in the medication 
copayment would cause them a financial hardship, particularly in those 
cases when a veteran would obtain multiple prescriptions requiring 
multiple copayments. No changes are made based on these comments. The 
issue of financial hardship caused by copayments was addressed by 
statute. The text portion of this document restates statutory 
provisions by providing that certain veterans whose income is less than 
the VA pension level are exempt from the copayment requirements. 
Moreover, the final rule includes an annual cap to help eliminate 
financial hardships for veterans who in unusual circumstances need a 
significant number of prescriptions. Furthermore, VA has statutory 
authority under 38 U.S.C. 5302 to waive debts arising from a veteran's 
failure to pay the pharmacy copayment when collection of the debt would 
be against equity and good conscience. One factor VA uses in 
determining whether collection would be against equity and good 
conscience is whether it would cause undue hardship by depriving the 
veteran and his or her family of basic necessities.
    One commenter asserted that the income threshold for requiring a 
medication copayment should be raised. No changes are made based on 
this comment. This reflects a statutory requirement and we have no 
authority to change the amount.
    A number of commenters indicated that they would return to private-
sector health care if the copayment were increased. Although some might 
choose not to obtain their medications from VA, as we indicated above, 
we believe that our copayment amount is still on the low end of the 
private-sector copayment scale.
    A number of commenters asserted that VA should not charge 
copayments in those cases when VA is reimbursed by Medicare. No changes 
are made based on these comments. Medicare does not provide medication 
coverage and does not reimburse VA for medication costs.
    One commenter suggested that the copayment amount should vary based 
on geographic location. No changes are made based on this comment. We 
do not believe that this would be administratively feasible.
    One commenter suggested that we refrain from establishing a new 
copayment amount based on the conclusion that the copayment authority 
is scheduled to expire September 30, 2002. No changes are made based on 
this comment. We anticipate that a timely extension of the copayment 
authority will be enacted into law. If this does not occur we would 
delete the copayment provisions.

Compliance With the Congressional Review Act and Executive Order 
12866

    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 who receive prescriptions 
for other than service-connected conditions and who have been paying 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 
as copayments. This rule would increase the copayment from the current 
$2 level to $7. We do not believe the 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

    In addition to alternatives discussed above, 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.

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.

OMB Review

    This rule is economically significant under Executive Order 12866 
and major under the Congressional Review Act. This rule has been 
reviewed by OMB.

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.


[[Page 63451]]


    Approved: November 30, 2001.
Anthony J. Principi,
Secretary of Veterans Affairs.


    For the reasons set out in the preamble, 38 CFR part 17 is 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. Section 17.110 is added under the undesignated center heading 
COPAYMENTS to read as follows:


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 February 4, 2002 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 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
    (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. 01-30183 Filed 12-5-01; 8:45 am]
BILLING CODE 8320-01-P