[Federal Register Volume 67, Number 20 (Wednesday, January 30, 2002)]
[Rules and Regulations]
[Pages 4357-4359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-2206]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 17

RIN 2900-AK89


Civilian Health and Medical Program of the Department of Veterans 
Affairs (CHAMPVA)

AGENCY: Department of Veterans Affairs.

ACTION: Interim final rule.

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SUMMARY: This rule implements provisions of the Floyd D. Spence 
National Defense Authorization Act for Fiscal Year 2001 and the 
Veterans' Survivor Benefits Improvements Act of 2001. These changes 
extend CHAMPVA eligibility to persons age 65 and over who would have 
otherwise lost their CHAMPVA eligibility due to attainment of 
entitlement to hospital insurance benefits under Medicare Part A. This 
rule also implements coverage of physical examinations required in 
connection with school enrollment for beneficiaries through age 17 and 
reduces the catastrophic cap for CHAMPVA dependents and survivors (per 
family) from $7,500 to $3,000 for each calendar year. These regulatory 
changes implement the statutory provisions.

DATES: Effective Dates: This document is effective on January 30, 2002; 
except for 38 CFR 17.271(b) and 17.272(a)(31)(x) which are effective 
October 1, 2001, and for 38 CFR 17.274(c) which is effective January 1, 
2002.
    Comment Date: Written comments must be received by VA on or before 
April 1, 2002.

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-AK89.'' All comments received will be available for public 
inspection in the Office of Regulations Management, Room 1158, between 
the hours of 8 a.m. and 4:30 p.m., Monday through Friday (except 
holidays).

FOR FURTHER INFORMATION CONTACT: Susan Schmetzer, Chief, Policy & 
Compliance Division, VA Health Administration Center, P.O. Box 65020, 
Denver, CO 80206-9020, telephone (303) 331-7552.

SUPPLEMENTARY INFORMATION:

I. Overview of the Rule

    CHAMPVA provides health care benefits to the dependents and 
survivors of veterans rated as 100% permanently and totally disabled 
from a service-connected condition; to the survivors of veterans who 
died from a service-connected medical condition; or to survivors of 
veterans who died in the line of duty and who are not otherwise covered 
under the TRICARE program.
    On October 30, 2000, the Floyd D. Spence National Defense 
Authorization Act for Fiscal Year 2001, Public Law 106-398, was 
enacted. On June 5, 2001, the Veterans' Survivor Benefits Improvements 
Act of 2001, Public Law 107-14, was enacted. This interim final rule 
implements these Acts for the CHAMPVA program. 38 U.S.C. 1713 requires 
CHAMPVA to provide the same or similar benefits as the DoD TRICARE 
program (formerly known as CHAMPUS).

[[Page 4358]]

II. CHAMPVA Eligibility for Individuals 65 Years of Age and Older

    Prior to October 1, 2001, CHAMPVA coverage was terminated when a 
beneficiary became entitled to Part A of Medicare by virtue of becoming 
age 65. The age limitation for the provision of benefits was the same 
for TRICARE beneficiaries. Public Laws 106-398 and 107-14 eliminated 
the age limitation. The following is an explanation of the amended 
regulations implementing this statutory change.
    CHAMPVA beneficiaries age 65 and older prior to June 5, 2001, 
regain eligibility effective October 1, 2001, for covered inpatient and 
outpatient benefits, secondary to Medicare and any other health 
insurance coverage. A beneficiary, who had Parts A and B of Medicare on 
June 5, 2001, must retain Part B to continue CHAMPVA eligibility. 
Beneficiaries age 65 on or after June 5, 2001, who are entitled to 
Medicare Part A must also be enrolled in Part B of Medicare to retain 
CHAMPVA eligibility effective October 1, 2001.
    To be eligible, the individual must be a dependent, spouse or 
surviving spouse, age 65 or older, of a veteran who is rated 100% 
permanently and totally disabled from a service-connected condition; 
died of a service-connected medical condition; or died in active duty. 
The dependent, spouse or surviving spouse must not otherwise be 
eligible for benefits under the DoD TRICARE program. Benefits include 
specified medical services and supplies from authorized civilian 
sources such as hospitals, other authorized institutional providers, 
physicians, other authorized professional providers, professional 
ambulance services, prescription drugs, authorized medical supplies, 
and rental or purchase of durable medical equipment. Benefits do not 
include services and supplies for conditions that are expressly 
excluded from the CHAMPVA benefit by statute or regulation. There may 
be services that are payable under Medicare that are not payable under 
CHAMPVA; or conversely there may be benefits that are payable under 
CHAMPVA that are not payable under Medicare. However, many health care 
services and supplies are a benefit provided and paid for by both 
Medicare and CHAMPVA.
    For all services and supplies, Medicare supplemental insurance 
plans or Medicare HMO plans are considered other health insurance and 
will pay prior to CHAMPVA. Cost sharing, deductible, and annual 
catastrophic cap requirements are applicable. Beneficiaries will 
continue to be responsible for payment of their applicable Medicare or 
CHAMPVA cost-share and deductible. For health care services for which 
payment may be made under both plans, CHAMPVA will pay up to the 
CHAMPVA allowable amount for the actual out-of-pocket costs incurred by 
the beneficiary over the sum paid by Medicare and the total of all 
amounts paid or payable by third party payers other than Medicare (such 
as other health insurance).
    When a Medicare+Choice enrollee obtains unauthorized out-of-system 
care that Medicare+Choice will not cover or only partially cover, 
CHAMPVA will not process the claim as primary. This is because Medicare 
already paid for the health care the beneficiary needs in the form of a 
capitation payment to the Medicare+Choice plan. CHAMPVA will not become 
the primary payer for services that would have been covered by the 
Medicare+Choice plan had the beneficiary followed applicable 
requirements.

III. School-Required Physicals

    Prior to October 1, 2001, CHAMPVA provided for routine physical 
examinations under the well-child care provisions for children from 
birth to age six. Public Law 106-398 extended the provision for school-
required physicals for TRICARE dependent children to age 12. This rule 
extends coverage of school-required physical examinations to CHAMPVA 
eligible beneficiaries through age 17. We believe the small size of 
CHAMPVA's population under age 18, and the added potential for 
financial vulnerability for children of 100% permanently and totally 
disabled veterans or veterans who died of a service-connected 
condition, supports expanding this benefit to beneficiaries through age 
17. Further, the costs required to support this benefit for all 
dependent children who are required to undergo a school physical is 
minimal since there are far fewer dependents in this age group than 
there are in TRICARE. The school-required physicals are subject to the 
applicable cost sharing and deductibles for all outpatient services.

IV. Reduction of Catastrophic Cap

    Previously, for CHAMPVA, the catastrophic cap was $7,500 per 
calendar year, per family. Under this rule, the catastrophic cap on 
payments is reduced to $3,000, per calendar year, per family, for 
CHAMPVA eligible beneficiaries. The benefit is the same as that 
provided under Public Law 106-398 for the TRICARE program with the 
exception of the effective date. TRICARE computes the catastrophic cap 
based on a fiscal year (October through September of the following 
year) whereas CHAMPVA computes the catastrophic cap based on a calendar 
year. For this reason the effective date for CHAMPVA beneficiaries is 
January 1, 2002.

V. Regulatory Procedures

Administrative Procedure Act

    The changes made by this interim final rule in large part reflect 
statutory changes. Moreover, we have found good cause to dispense with 
the notice-and-comment and delayed effective date provisions of the 
Administrative Procedure Act (5 U.S.C. 553). Compliance with such 
provisions would be impracticable, unnecessary, and contrary to the 
public interest. A delay in the establishment of the rule would result 
in significant delays in providing these increased benefits. Also, to 
avoid significant administrative confusion, it is in the public's 
interest to provide these benefits within approximately the same period 
as similar benefits are provided to DoD's TRICARE beneficiaries.

Paperwork Reduction Act

    This interim final rule will not impose additional information 
collection requirements on the public under the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501-3511).

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. It is estimated that there are approximately 89,500 
potential beneficiaries over age 65 that will use the benefit of 
coverage secondary to Medicare, approximately 2,000 beneficiaries 
impacted by the inclusion of school-required physical examination

[[Page 4359]]

benefit; and approximately 2,500 families benefiting from the reduction 
of the catastrophic cap. They are widely geographically diverse and the 
health care provided to them would not have a significant impact on any 
small businesses. 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

    There are no Catalog of Federal Domestic Assistance program numbers 
for the programs affected by this document.

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: November 21, 2001.
Anthony J. Principi,
Secretary of Veterans Affairs.


    For the reasons set forth in the preamble, 38 CFR part 17 is 
amended as follows:

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. In Sec. 17.271, paragraphs (a) introductory text and (b) are 
revised to read as follows:


Sec. 17.271  Eligibility.

    (a) General Entitlement. The following persons are eligible for 
CHAMPVA benefits provided that they are not eligible under Title 10 for 
the TRICARE Program or Part A of Title XVIII of the Social Security Act 
(Medicare) except as provided in paragraph (b) of this section.
* * * * *
    (b) CHAMPVA and Medicare entitlement.
    (1) Individuals under age 65 who are entitled to Medicare Part A 
and enrolled in Medicare Part B, retain CHAMPVA eligibility as 
secondary payer to Medicare Parts A and B, Medicare supplemental 
insurance plans, and Medicare HMO plans.
    (2) Individuals age 65 or older, and not entitled to Medicare Part 
A, retain CHAMPVA eligibility.

    Note to paragraph (b)(2): If the person is not eligible for Part 
A of Medicare, a Social Security Administration ``Notice of 
Disallowance'' certifying that fact must be submitted. Additionally, 
if the individual is entitled to only Part B of Medicare, but not 
Part A, or Part A through the Premium HI provisions, a copy of the 
individual's Medicare card or other official documentation noting 
this must be provided.

    (3) Individuals age 65 on or after June 5, 2001, who are entitled 
to Medicare Part A and enrolled in Medicare Part B, are eligible for 
CHAMPVA as secondary payer to Medicare Parts A and B, Medicare 
supplemental insurance plans, and Medicare HMO plans for services 
received on or after October 1, 2001.
    (4) Individuals age 65 or older prior to June 5, 2001, who are 
entitled to Medicare Part A and who have not purchased Medicare Part B, 
are eligible for CHAMPVA as secondary payer to Medicare Part A and any 
other health insurance for services received on or after October 1, 
2001.
    (5) Individuals age 65 or older prior to June 5, 2001, who are 
entitled to Medicare Part A and who have purchased Medicare Part B must 
continue to carry Part B to retain CHAMPVA eligibility as secondary 
payer for services received on or after October 1, 2001.
* * * * *
    3. In Sec. 17.272, paragraph (a)(31)(x) is added to read as 
follows:


Sec. 17.272  Benefit limitations/exclusions.

    (a) * * *
    (31) * * *
    (x) School-required physical examinations for beneficiaries through 
age 17 that are provided on or after October 1, 2001.
* * * * *
    4. Section 17.274 is revised to read as follows:


Sec. 17.274  Cost sharing.

    (a) With the exception of services obtained through VA facilities, 
CHAMPVA is a cost-sharing program in which the cost of covered services 
is shared with the beneficiary. CHAMPVA pays the CHAMPVA-determined 
allowable amount less the deductible, if applicable, and less the 
beneficiary cost share.
    (b) In addition to the beneficiary cost share, an annual (calendar 
year) outpatient deductible requirement ($50 per beneficiary or $100 
per family) must be satisfied prior to the payment of outpatient 
benefits. There is no deductible requirement for inpatient services or 
for services provided through VA facilities.
    (c) To provide financial protection against the impact of a long-
term illness or injury, a calendar year cost limit or ``catastrophic 
cap'' has been placed on the beneficiary cost-share amount for covered 
services and supplies. Credits to the annual catastrophic cap are 
limited to the applied annual deductible(s) and the beneficiary cost-
share amount. Costs above the CHAMPVA-allowable amount, as well as 
costs associated with non-covered services are not credited to the 
catastrophic cap computation. After a family has paid the maximum cost-
share and deductible amounts for a calendar year, CHAMPVA will pay 
allowable amounts for the remaining covered services through the end of 
that calendar year.
    (i) Through December 31, 2001, the annual cap on cost sharing is 
$7,500 per CHAMPVA-eligible family.
    (ii) Effective January 1, 2001, the cap on cost sharing is $3,000 
per CHAMPVA-eligible family.
    (d) If the CHAMPVA benefit payment is under $1.00, payment will not 
be issued. Catastrophic cap and deductible will, however, be credited.


    (Authority: 38 U.S.C. 1713)

[FR Doc. 02-2206 Filed 1-29-02; 8:45 am]
BILLING CODE 8320-01-P