01-17734. Copayments for Medications

AGENCY:

Department of Veterans Affairs.

ACTION:

Proposed rule.

SUMMARY:

This document proposes to amend VA's medical regulations to set forth copayment requirements for medications. This document is 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 [phone]; or e-mail comments to [e-mail]. 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 [phone], 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 [§ 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 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 × 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 § 17.110 are added to read as follows:

Copayments

§ 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 § 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

(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)