[Federal Register Volume 76, Number 122 (Friday, June 24, 2011)]
[Rules and Regulations]
[Pages 37202-37206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-15854]



[[Page 37201]]

Vol. 76

Friday,

No. 122

June 24, 2011

Part II





Department of Veterans Affairs





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38 CFR Part 17





Reimbursement Offsets for Medical Care or Services; Final Rule

  Federal Register / Vol. 76, No. 122 / Friday, June 24, 2011 / Rules 
and Regulations  

[[Page 37202]]


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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: Final rule.

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SUMMARY: This document amends the regulations of the Department of 
Veterans Affairs (VA) concerning the reimbursement of medical care and 
services delivered to veterans for nonservice-connected conditions. 
This rule applies 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 final rule adds a new 
section barring offsets by third-party payers and requires that third-
party payers submit a request for a refund for claims when there is an 
alleged overpayment.

DATES: Effective Date: July 25, 2011.

FOR FURTHER INFORMATION CONTACT: Anthony Norris, Program Analyst, 
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 such 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.
    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 incur these unilateral offsets in the ordinary course of their 
business. 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. These 
unilateral offsets by third-party payers 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.
    In a document published in the Federal Register on October 8, 2010 
(75 FR 62348), we proposed to amend VA's regulations concerning the 
reimbursement of medical care and services delivered to veterans for 
nonservice-connected conditions to address reimbursement offsets. In 
the proposed rule we explained that the changes are 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. We intended that the proposed rule 
would clarify VA's interpretation of the statute. The purpose of the 
proposed rule is to proscribe offsetting by third-party payers, provide 
clarity and uniformity in how third-party payers interact with both VA 
and DOD, and eliminate disruptions to VA accounting, collections, and 
account receivables. We provided a 60-day comment-period, which ended 
on December 7, 2010. We received 3 comments, one from the general 
public and two from within the health insurance industry.
    One commenter agreed with our proposed rule and suggested that 
addressing third-party recovery of costs in this rule is an appropriate 
response to third-parties unilaterally offsetting payments. This 
commenter stated that the proposed rule would allow VA to efficiently 
track accounts without the complications caused by third-party offsets. 
The commenter asked whether the ``system will work in reverse'' if the 
third-party owes VA money. The commenter also asked whether third-party 
payers will be able to check the status of a request for reimbursement 
based upon an alleged overpayment. Finally, the commenter asked how 
long the process would take from the third party's submission of the 
claim seeking reimbursement from VA for alleged overpayments to receipt 
of reimbursement.
    Although the time to process third-party claims seeking 
reimbursement from VA for alleged overpayments will vary based on 
numerous factors such as the complexity of the claim and the 
sufficiency of the information submitted with the claim, most claims 
will be processed within 90 days. Our 90-day estimate is based upon 
current VA practice and claim-processing times. The third-party payer 
will have a payee address on file for each VA facility or Consolidated 
Patient Account Center (CPAC), and would use that contact information 
for written follow-up inquiries, or the third-party payer may 
communicate with the VA facility or CPAC through more direct means, 
such as telephone or e-mail.
    This commenter's questions suggest a possible misunderstanding 
concerning the scope of our proposal. We did not propose to establish 
an entirely new process for third parties seeking reimbursement from VA 
for alleged overpayments. Rather, we proposed to clarify the rules 
regarding VA collections and to require third-party payers to present 
any alleged overpayment claim to VA rather than unilaterally offsetting 
money owed to VA. To further clarify the purpose of this rulemaking, we 
have changed the heading for Sec.  17.106 from ``Third-party claims for 
refunds based on amounts previously paid to the Department of Veterans 
Affairs (overpayments)'' to ``VA collection rules; third-party 
payers.'' We made no further changes to the rule based upon these 
comments.
    Two commenters from within the health insurance industry asserted 
that the rule, in particular the language in Sec.  17.106(a)(1), is not 
authorized by 38 U.S.C. 1729. The commenters' position is that VA 
providers must meet the same timely filing rules insurers require of 
commercial or other providers or members in their coverage contracts, 
and argue that the rule would override insurers own time limits for 
filing claims applicable to providers. We disagree.
    Although beneficiaries of health insurers generally must file a 
claim for reimbursement within a specified period of time in order to 
seek reimbursement, the statutory authority granted to VA by Congress 
does not place such a time limit on VA's right to seek reimbursement 
from third-parties. This is clearly set forth in 38 U.S.C. 1729(f), 
which states that ``[n]o provision of any contract or other agreement, 
shall operate to prevent recovery or collection by the United States 
under this section or with respect

[[Page 37203]]

to care or services furnished under section 1784 of this title.'' 
Therefore, we make no changes based on this comment.
    Pursuant to 38 U.S.C. 1729(a)(1), VA's right to recover or collect 
from a third-party reasonable charges for medical care or services 
provided to a veteran is limited ``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 [VA].'' Under section 1729(b)(2)(C), 
the United States has the authority to institute proceedings to collect 
such payment within six years after the medical care or services were 
provided. We do not interpret these statutory provisions to be 
inconsistent. As reflected in the proposed and final rule text, we 
interpret the ``extent'' language in paragraph (a)(1) to refer to the 
amount for which VA may seek payment. In other words, VA cannot seek 
payment from the third-party that would be greater than what would be 
provided to another health care provider. This is consistent with the 
other provisions in both the statute and the regulation. For example, 
both the statute and the regulation preclude VA from collecting the 
amount of any applicable deductibles (38 U.S.C. 1729(a)(3); 38 CFR 
17.106(b)(2)); and both the statute and regulation limit the amount 
subject to collection to ``reasonable charges,'' which are defined by 
statute as ``the amount that [the] third party demonstrates * * * it 
would pay for the care or services if provided by [non-VA] facilities 
in the same geographic area'' (38 U.S.C. 1729(c)(1)(B)), and which VA 
calculates using 38 CFR 17.101. Thus, the restriction on when VA can 
collect the amount due is not limited by the ``extent'' language in 38 
U.S.C. 1729(a)(1). We do not interpret section 1729(a)(1) as binding VA 
to the internal processing rules of third parties.
    The commenters argue that the right of the United States to 
institute a collection action within six years applies only to lawsuits 
that the United States may bring against the third-party payer, but 
does not purport to allow VA to disregard insurers' timely filing rules 
applicable to providers. In response, we first point out that 38 U.S.C. 
1729(f) prescribes that ``[n]o law of any State or of any political 
subdivision of a State, and no provision of any contract or other 
agreement, shall operate to prevent recovery or collection by the 
United States under this section or with respect to care or services 
furnished under [38 U.S.C. 1784].'' This means that the United States 
is not bound by third-parties' rules and policies. Indeed, third-party 
rules on timely filing differ within individual insurance plans, and 
may be changed by the third-party without VA's consent and without 
notice to Congress. Congress did not intend to bind VA to varying, 
unpredictable policies over which VA has no control or input.
    The commenters' objections also seem to be that the statute gives 
the right of a cause of action to the ``United States'' and not 
specifically to VA. We disagree. We interpret ``United States'' as used 
by Congress in section 1729 to mean an action by the Federal government 
on behalf of a Federal department or agency. This final rule implements 
that interpretation in Sec.  17.106(c)(1).
    We also note that VA will make every effort to collect payments 
from a third-party in a timely manner, and has no intention of waiting 
six years to do so. However, there may be occasions when VA will be 
unable to do so within a particular time limitation established by a 
particular third-party. The imposition of a timely filing requirement 
by third parties is inconsistent with 38 U.S.C. 1729(f), which 
proscribes contract provisions that would operate to prevent VA 
collections. If a third-party denies payment on such a ground, the 
United States is then authorized to institute legal proceedings--so 
long as the proceeding is instituted within the six-year limit. Thus, 
the assignment of the right to the United States, rather than to VA, to 
institute a cause of action is a distinction without a difference. Any 
legal action to collect payments would be instituted by VA, and such 
action would be instituted only after the third-party has denied 
payment.
    One commenter requested that VA revise Sec.  17.106(c)(4), which 
prohibits a third-party payer from offsetting other claims due to the 
VA in order to recover an overpayment. The commenter recommended 
instead that the rule state that VA facilities and insurers may agree 
to permit offsets in lieu of a separate appeal and adjudication 
process. Similarly, another commenter stated that when a third-party 
offsets overpayments against amounts otherwise due a VA facility, the 
third-party is treating the VA facility like any other health care 
provider. The commenter asserted that VA has no legal right to seek a 
higher standing. We do not agree.
    As stated in the preamble to the proposed rule, one of the primary 
goals of this rulemaking is to prohibit a third-party payer from 
offsetting payments to VA. Under 38 U.S.C. 1729(a)(1), VA has the right 
to recover or collect reasonable charges for care or services from 
third-party payers. The right to collect reasonable charges is not 
dependent upon a third-party payer's contention regarding a previous 
alleged overpayment. It is consistent with the statute to bar a third-
party payer from offsetting a claim based on a different, disputed 
transaction. Moreover, under 38 U.S.C. 1729(c)(1), 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 some separate disputed transaction. 
Therefore, a third-party payer must submit a claim for a refund of 
monies allegedly owed to it and with sufficient specificity for VA to 
determine whether a third-party is due a refund. In doing so, VA will 
improve its accountability of payments and provide uniformity 
throughout the VA medical system. We make no changes based on this 
comment.
    Two commenters also requested that we delete proposed paragraph 
(f)(2)(iv), which reads ``[t]he 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.'' One commenter stated that under the proposed rule, preferred 
provider organization (PPO) plans would be required to reimburse VA 
facilities as preferred providers even if they have not entered into 
the same preferred provider agreement. The other industry commenter 
stated that since a PPO would not reimburse a non-preferred private 
provider as if it were preferred, the PPO need not treat a VA facility 
with which it does not have a preferred provider agreement as if it 
were a preferred provider. To the extent that the commenters appear to 
be disputing the amounts of payments owed to VA under this rule, there 
is simply no difference between the types of third-parties involved. 
The ``reasonable charges'' calculation will be made regardless of 
whether the payment is owed by a health maintenance organization (HMO), 
PPO, or any other type of health plan, for the reasons explained above. 
As previously stated, VA does not expect payment from a third-party, 
regardless of whether the payment is owed by a HMO, PPO, or any other 
type of third-party payer, that is greater than what the third-party 
would pay to a non-federal health care provider in the same geographic 
area. We make no changes based on this comment.
    Similar comments on this topic appear to dispute the range of 
services for which VA may seek reimbursement. A commenter argued that 
since an

[[Page 37204]]

exclusive provider organization (EPO) would not generally pay claims 
submitted by an out-of-network private provider, the EPO is not 
required under the statute to pay an out-of-network VA facility. The 
commenter asserted that the proposed rule, which noted that a third-
party payer must pay only to the extent covered by the payer's plan, 
supported the commenter's view.
    The full discussion of this matter in the proposed rule clearly 
indicates that we expect HMOs not to exclude claims or refuse to 
certify emergent care that would otherwise be covered by the plan, and 
that opt-out or point-of-service options also may not be used to 
exclude such services. See 75 FR 62351. However, if the HMO bars 
coverage for services provided by facilities not associated with the 
HMO, we would not expect the HMO to reimburse VA for those services. 
The extent of a HMO-like limitation would depend on the provisions in 
the EPO's specific plan and such provisions may not seek to only 
exclude payment of claims for medical care and services furnished by a 
department or agency of the United States. Moreover, we note that 
Congress clearly expressed its intent in 38 U.S.C. 1729(f) that ``[n]o 
provision of any contract or other agreement, shall operate to prevent 
recovery or collection by the United States.'' In 38 U.S.C. 
1729(i)(1)(a), Congress clearly defined a ``health-plan contract'' and 
only excluded Medicare and Medicaid from the definition as beyond VA's 
collection authority. We make no changes based on this comment.
    Based on the rationale set forth in the preamble to the proposed 
rule and in this preamble, VA is adopting the proposed rule as a final 
rule with the minor change noted above.

Effect of Rulemaking

    Title 38 of the Code of Federal Regulations, as revised by this 
final rule, represents VA's implementation of its legal authority on 
this subject. Other than future amendments to this regulation or 
governing statutes, no contrary rules or procedures are authorized. All 
existing or subsequent VA guidance must be read to conform with this 
final rule if possible or, if not possible, such guidance is superseded 
by this rulemaking.

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 regulatory action 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.
    The economic, interagency, budgetary, legal, and policy 
implications of this final 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 expenditure by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any given year. This final rule will have no such effect 
on State, local, and tribal governments, or on the private sector.

Paperwork Reduction Act

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

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 have an insignificant impact on large 
insurance companies and other large entities. Therefore, pursuant to 5 
U.S.C. 605(b), this proposed 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 and titles 
are 64.009 Veterans Medical Care Benefits, 64.010 Veterans Nursing 
Home Care and 64.011 Veterans Dental 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 June 9, 2011, 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, Government programs-
veterans, Health care, Health facilities, Health professions, Health 
records, Homeless, Medical and dental schools, Medical devices, Medical 
research, Mental health programs, Nursing home care, Veterans.

    Dated: June 21, 2011.
Robert C. McFetridge,
Director, Office of Regulation Policy and Management, Office of the 
General Counsel, Department of Veterans Affairs.
    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, and as noted in specific sections.


Sec.  17.106  [Redesignated as Sec.  17.107]

0
2. Redesignate Sec.  17.106 as Sec.  17.107.
0
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  VA collection rules; third-party payers.

    (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

[[Page 37205]]

that the beneficiary or a nongovernment 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:
    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.
    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, reinsurer, 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.
    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.
    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.
    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.
    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 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 through 
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

[[Page 37206]]

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. 2011-15854 Filed 6-23-11; 8:45 am]
BILLING CODE 8320-01-P