B-233300, Jan 9, 1989

B-233300, Jan 9, 1989

APPROPRIATIONS/FINANCIAL MANAGEMENT - Claims by Government - Past due accounts - Debt collection - Statutory compliance DIGEST: 1. Federal Claims Collection Act, 31 U.S.C. Sec. 3711(a)(1), requires Veterans Administration (VA) take reasonable action to enforce claims against: (1) Third party payers that insure veterans receiving medical care from VA under 38 U.S.C. Sec. 629(a)(1); and (2) Those veterans determined able to pay who receive medical care from VA under 38 U.S.C. Sec. 610(f)(1). Such action should be "aggressive," "time1y," with "effective follow-up,' and must include written demand for payment. C.F.R. Secs. 102.1 and 102.2 (1988). MISCELLANEOUS TOPICS - Human Resources - Health care - Health insurance - Payment deductions 2. "Deductible or copayment," as used in 38 U.S.C. Sec. 629(a)(3), refers to that which is required by private health plan contract under its terms with veteran and does not refer to deductible which Veterans Administration (VA) may require certain veterans to pay for receiving treatment in a VA facility under 38 U.S.C. Sec. 610(f). MISCELLANEOUS TOPICS - Human Resources - Health care - Veterans - Medicare - Payment procedures 3. Private insurance policy supplementing Medicare benefits would appear to fall within definition of "health plan contract" in 38 U.S.C. Sec. 629(i)(1)(A). Thus, under terms of such policy, it is appropriate for Veterans Administration to bill Medicare supplemental insurer to recover costs of treating insured veteran. 4. While 38 U.S.C. Sec. 629(i)(1)(B) specifically excludes the Veterans Administration (VA) right of recovery from Medicare for furnishing treatment to veterans, it does not explicitly prohibit VA from nominally seeking recovery from Medicare for limited purposes of satisfying conditions in supplemental insurer contracts. MISCELLANEOUS TOPICS - Human Resources - Health care - Outpatient - Administrative discretion 5. In absence of any statutory specification of what is outplacement visit, Veterans Administration has reasonable discretion to determine what would constitute "visit" for outplacement purposes, under 38 U.S.C Sec. 612(f)(4)(B). Veteran's Administration Recoveries of (1) Health Care Costs from Insurers and (2) Co-payments from Category C Veterans (File B-233300; Code 401973).

Assignment Manager, HRD - Walter Gembacz:

In connection with your review of the Veterans' Administration's (VA) implementation of provisions of the Consolidated Omnibus Budget Reconciliation Act of 1986, Pub.L. No. 99-272, Title XIX, Secs. 19001 19034, 100 Stat. 327-389 (1986), you have requested our opinion on seven legal issues. Your questions (in substance) and our answers, are set forth below.

Question 1: In reference to 38 U.S.C. Sec. 629, can the Veterans' Administration (VA) bill insurers at its own discretion or is it required to bill all health insurers that it identifies? If VA is not required to bill, we plan to recommend that Congress amend 38 U.S.C. to require that VA bill insurers for all care provided.

Answer: Section 629 (a)(l) of title 38, United States Code, establishes the "right" of the United States to recover the cost of treating certain veterans from their third party payers, such as insurers. /1/ While these words alone create no duty or obligation to bill third parties, the purpose of section 629 is to facilitate recovery by the United States from third-party insurers; it would be difficult to defend an interpretation of section 629 that permitted VA to ignore valid claims against such insurers.

In any event, it is not necessary to rely on inference from section 629 to conclude that VA must pursue these claims.

Another statute, the Federal Claims Collection Act, 31 U.S.C. Sec. 3711(a)(1), requires that an "executive or legislative branch" agency try to collect any money claim arising out of the activities of that agency. The VA is an "executive branch agency" within the meaning of that statute. 31 U.S.C. Sec. 3701(a)(4).

Hence, all VA medical centers are obligated to take reasonable action to collect all enforceable claims. According to regulations promulgated jointly by GAO and the Department of Justice, such action should be "aggressive" and "time1y," with "effective follow-up," and must include a written demand for payment. 4 C.F.R. Sec. 102.1 and 102.2 (1988). fact, the regulations contemplate three progressively stronger written demands at not more than 30-day intervals. Id. Sec. 102.2(a). Thus, you could recommend that, with respect to insurers, VA comply with the Claims Collection Act and implementing regulations.

Question 2: In 38 U.S.C. Sec. 629(a)(3)(A) and (B), does "deductible or copayment" refer to the veteran's insurance deductible or copayment? Does "deductible or copayment" refer to the amount determined in section 610(f)(2)?

Answer: Section 629(a)(3) deals with the right of the United States to recover from a third party payer, based on a health plan contract between the payer and a veteran which contains a deductible or copayment requirement. The statute provides:

"(3) In the case of a health-plan contract that contains a requirement for payment of a deductible or copayment by the veteran

"(A) the veteran's not having paid such deductible or copayment with respect to care or services furnished under this chapter shall not preclude recovery or collection under this section; and

"(B) the amount the United States may collect or recover under this section shall be reduced by the appropriate deductible or copayment amount, or both."

Thus, the deductible or copayment referred to in section 629 is explicitly that which is required by a health-plan contract. "Health plan contract" is defined in effect as the veteran's contract with a third party.

Section 610 of title 38 establishes the eligibility of veterans for care and treatment by the VA. Subsection (f) sets out a formula by which veterans who are able are required to defray the VA's cost of providing them with care. In effect, the section 610(f) formula requires that the veteran pay either as much as if he or she were covered by Medicare, or the cost of the care, if that is less. This is clearly not the same deductible referred to in section 629(a)(3). The formula therefore requires, in order to perform the comparison with what the cost to the veteran would have been under Medicare, use of the "inpatient Medicare deductible".

Simply put, under section 610(f), the United States requires the veteran to pay a deductible equivalent to that required under Medicare; under section 629, payment of a deductible required of the veteran by a third party insurer may not be used as a prerequisite for recovery by the United States from the insurer.

Hence, "deductible or copayment," as used in section 629(a)(3), does not refer to an amount required under section 610(f). However, as you suggest, a payment made by a veteran pursuant to section 610(f) would affect the amount which the United States could collect from third parties under section 629. We discuss this relationship in our answer to question 7.

Question 3: In section 629(i)(1), does the definition of "health plan contract" include insurance policies designed to supplement Medicare coverage?

Answer: The definition of "health-plan contract" in section 629(i)(1)(A) encompasses "an insurance policy ... or similar arrangement under which health services for individuals are provided or the expenses of such services are paid." Subsection (i)(l)(B) excludes from this definition Medicare Parts A and B, Medicaid, and certain workers' compensation plans not relevant here. The Senate Budget Committee stated that it intended that the definition "be construed broadly so as to achieve broad coverage under this aection with respect to the types of health plans under which recoveries and collections may be sought." S. Rep. No. 146, 99th Cong., 1st Sess. 633 (1985).

The type of insurance policy that you refer to, a private insurance policy supplementing Medicare benefits, would appear to fall within this definition and this result is consistent with the legislative history. Thus, it is appropriate for you to suggest that the VA bill Medicare supplemental insurers to recover the costs of furnishing treatment to veterans.

However, the VA's right to recover is limited by the statute "to the extent that the veteran (or the provider ...) would be eligible to receive payment". 38 U.S.C. Sec. 699(a)(1). Thus, the VA's rights, as pointed out by the Senate report, could be limited by the terms and conditions of each contract between a veteran and a supplemental insurer:

"... Contract requirements conditioning the third-party's liability (such as for prehospitalization screening, second opinions prior to surgery, or other specified utilization review procedures) would apply. Likewise, provisions imposing general limitations on the third party's liability -- such as contract clauses placing specific dollar limits on payments for certain procedures or limiting a carrier's liability to a percentage of certain charges -- would app1y." Id. at 577.

Question 4: Does section 629(i1(1)(B) or any other law prohibit VA from billing Medicare or can VA bill Medicare but just not recover any costs?

Answer: Section 629(i)(1)(B) of title 38 excludes Medicare from the definition of "health-plan contract." Thus, Medicare is excluded from the category of third party payers from which the VA has the right to recover reimbursement for having treated veterans. The conference committee report elaborates, by specifically stating that recovery may not be sought for care where the source of reimbursement is Medicare. H.R. Rep. No. 300, 99th Cong., 1st Sess. 790, 800 (1985). VA evidently believes that, as a result, it is prohibited from billing Medicare.

You raise the possibility that the VA might submit bills to Medicare, in order to satisfy conditions in contracts with other insurers of veterans that it treats. The purpose of submitting such bills would not be to recover from Medicare, but rather to satisfy conditions for recovery from thirdparty insurers.

We think a good argument exists that VAs submission to Medicare of a bill or detailed statement of services rendered is not necessarily prohibited by section 629(i)(1)(B). (While the law specifically excludes a right of recovery from Medicare, it does not explicitly prohibit VA from nominally seeking recovery from Medicare (conference committee language notwithstanding) for the limited purpose of satisfying conditions in supplemental insurer contracts. This is consistent with the express intent of the Senate Budget Committee that the VA adopt procedures to comply with requirements in contracts between veterans and their third party insurers "in order to make maximum collections under these health- plan contracts." S. Rep. No. 146, supra at 578.

However, we see no point in disputing VA's conclusion. First, VA may not be persuaded to agree with us. Since we cannot compel VA to do what it believes it is not authorized to do, any recommendation based on our interpretation of the law is likely to be academic. In addition, for VA to bill HCFA individually for services provided in VA facilities merely to establish that the bills will not be paid, would be administratively burdensome for both agencies.

Second, we understand that VA is planning to litigate this issue, and has a legal basis on which to do so. VA has a general statement from the Health Care Financing Administration (HCFA) to the effect that Medicare will under no circumstances reimburse VA for services provided in a VA facility to a Medicare-eligible veteran. This would provide a basis for arguing that individual billing is unnecessary.

An alternative argument which VA has considered and could also make is based on the legal theory that performance of a contract condition may be excused when unforeseen events beyond the control of either party to the contract make performance impossible. See, e.g., J. Calamari, J. Perillo, Contracts Sec. 13-4, at 486 (1977). Thus, a provision that first requires a billing to Medicare might be excused where such a billing is rendered impossible by a subsequent change in law.

Question 5: In reference to 38 U.S.C. 610(f)(1), is VA required to bill every category C veteran a copayment for the care provided?

Answer: Regarding a veteran who is determined to be able to pay (a "category C" veteran), paragraph 610(f)(1) stipulates that the VA "may not furnish" treatment unless that veteran "agrees to pay" the applicable copayment amount. Paragraph (f)(2) states that the veteran is "liable" to the United States for the copayment amount. The legislative history refers to these provisions as creating a "new requirement of payment." Rep. No. 146, supra at 565.

While paragraph 610(f)(1) clearly imposes upon all category C veterans a requirement to pay for care received, it is silent on whether an obligation is imposed upon VA to demand payment in all cases. mentioned in our answer to question 1 above, section 3711(a)(1) of title 31, United States Code, would require VA to take some reasonable action to collect on all claims arising out of its activities and applicable regulations require a written demand for payment. 4 C.F.R. Sec. 102.2 (1988). However, as discussed in our answer to question 7, there may be circumstances where the VA recovers the full amount of services rendered, including the veteran's copayment, from an insurer contractually bound to pay all the veteran's health care costs. In such an instance it would not be appropriate for VA to bill the veteran for this since the veteran's debt would already have been satisfied.

Question 6: In reference to section 612(f)(4)(B), what does "outpatient visit" mean? VA interprets an outpatient visit to be equivalent to one day of care, regardless of the amount of care (i.e. number of clinics visited) received on that day. Could outpatient visit be interpreted to mean a clinic visit?

Answer: Under section 612(f)(4)(B), a category C veteran furnished medical services

"... shall be liable to the United States, in the case of each visit in which such services are furnished to the veteran, for an amount equal to 20 percent of the estimated average cost (during the calendar year in which the services are furnished) of an outpatient visit in a Veterans' Administration facility. Such estimated average cost shall be determined by the Administrator."

In the absence of any definition or other specification of what is an outpatient visit, the Administrator "would have discretion to determine what would constitute a "visit" for outpatient purposes." S. Rep. No. 146, supra at 608. So long as such a determination is not unreasonable or an abuse of discretion, VA may define "outpatient visit" as it sees fit. In addition, the VA indicates that it determines the estimated average cost per day, consistent with its definition of outpatient visit as one day of care, thereby avoiding any inconsistency in computing the amount to be collected from veterans.

"Outpatient visit" could also be defined as a clinic visit with the average cost recomputed on that basis. VA points out that such an approach would entail an increase in its administrative burden; it would have to track and hill for individual clinic visits rather than just daily visits. Question 7: Consider a situation where a category C veteran has health insurance. For example, the cost of care provided to a category C veteran was $5,000. The amount which the veteran is required to pay under section 610(f)(1) was $540. What amount can VA legally bill the insurer for? Can VA bill the insurer for $5,000? Can VA bill the insurer $4,460? Is VA required to tell the insurer that the veteran is obligated to pay $540 of the $5,000 if it bills the insurer for $5,000? Could VA legally use the money recovered from the insurer to cover the veteran's debt of $540? If VA receives more than $5,000, who is VA required to refund the excess money to?

Answer: In our opinion, VA may bill the insurer of a category C veteran the full cost of care rendered ($5000 in your example) unless, prior to the date of that billing, the veteran had already paid the deductible required of him by section 610(f)(1). In the event the veteran has paid the deductible ($540 in your example), the insurer may be billed only for the balance due ($4460).

Typically, VA would not know the terms of the health insurance policy between a veteran and his insurer and, thus, would not know whether the insurer contracted to pay only a portion of health care costs or whether it agreed to pay all such costs, including the full amount of the veteran's VA deductible. We understand that it is VA's policy, therefore, to bill the insurer first and, after collecting whatever it can from the insurer, to bill the veteran for the balance, but not to exceed the veteran's maximum liability.

We were told by a VA attorney that the standard practice is first to send a statement to the veteran's insurer, indicating the cost of the care provided, the amount of the deductible owed by the veteran and whether or not the veteran has already paid the deductible. Where the insurer determines that it is obligated under the terms of its policy with the veteran for the entire cost of care, including the VA deductible, it will remit the entire amount to VA. In other cases, the insurer remits the cost of care minus the VA deductible and the deductible or copayment required under the insurer's contract with the veteran. If the veteran has not already paid it, the VA will then attempt to collect the balance, limited to the amount of the veteran's deductible ($540 in your example) directly from the veteran.

VA's practice comports with our reading of the law and its legislative history. Under section 629(a)(1), VA may collect from third party insurers only to the extent that such costs would be recoverable by the veteran if treated privately. Moreover, the Senate committee, reporting on section 610, indicated that "any amount collected from a veteran for hospital care or medical services ... would reduce the amount of reimbursement that VA could collect ... from third-party health-care contractors." S. Rep. No. 146 at 566. In the event that VA receives only a portion of health care costs from the veteran's insurer (for example, 80 percent of costs), the VA may not bill the veteran for any amount in excess of the veteran's VA deductible.

The conference committee report on the provision for recovery by VA from third party insurers (section 629 of title 38) indicates that a veteran who pays a deductible to VA in order to receive care would not be responsible for any additional amount which would be payable under the terms of his or her insurance policy. H.R. Rep. No. 300 at 789. Using your example, the veteran's only obligation runs to the VA for the $540 deductible even if 20 percent of the costs, or $1000, remains unpaid by the insurer. Presumably, the VA is to absorb this unpaid cost ($460).

In the event that the insurer pays to VA an amount which is less than the entire health care costs but which, if added to the veteran's deductible, would exceed the total cost (in your example, assume the insurer pays $4800 of the total $5000), the VA, in our opinion, should seek to recover from the veteran only the difference remaining ($200) and not the entire amount of the deductible ($540), since a portion of that amount has in effect been satisfied by the veteran's insurer and may be applied to his obligation.

Assuming that billing is done sequentially, there would seem to be little likelihood that VA would receive from the insurer and the veteran more than the cost of the health care services provided (in your example, more than $5000). However, should an excess amount be erroneously recovered, the VA should refund the amount of the over payment to either the insurer or the veteran, depending on the particular terms of the health insurance policy in question.

/1/ The VA is empowered to administer all laws relating to relief and benefits to veterans. 38 U.S.C. Sec. 201.