Medical Billing for Healthcare Services Provided by Department of Defense Military Medical Treatment Facilities to Civilian Non-Beneficiaries

SUPPLEMENTARY INFORMATION:

The NDAA-23 also grants the Director of DHA discretionary authority to waive assessment of medical fees of non-beneficiaries when the healthcare provided enhances the knowledge, skills, and abilities (KSAs) of healthcare providers, as determined by the Director of DHA. The DHA is proposing to implement the amendments to 10 U.S.C. 1079b enacted through the NDAA-23. By statute (Pub. L. 117-263, div. A, title VII, § 716(c), Dec. 23, 2022, 136 Stat. 2661), the sliding fee scale and/or catastrophic fee waivers apply to bills for healthcare services provided at MTFs on or after June 21, 2023.

I. Background and Authority

Title 10, United States Code (U.S.C.), section 1073d requires the Department of Defense (DoD) to maintain MTFs for the purposes of supporting the medical readiness of the armed forces and the readiness of deployable medical personnel. To maintain medical currency and bolster the KSAs of DoD healthcare providers, the DoD renders emergency, trauma, and other medical services to beneficiaries of the MHS which consist of service members and former service members, and their dependents. The MHS may provide healthcare services to other individuals who are not eligible beneficiaries, in certain circumstances, as authorized by law, and typically on a reimbursable basis (Pub. L. 114-328, 717(c), Dec. 23, 2016, as amended (10 U.S.C. 1071 note); and § 1074(c)).

Proposed rules implementing DoD's authority under 10 U.S.C. 1095 and related provisions of law to compute reasonable charges for inpatient and ambulatory (outpatient) care provided by MTFs, including charges for pharmaceuticals, durable medical equipment, supplies, immunizations, injections, or other medications, are at 32 CFR part 220, last updated on August 20, 2020 (55 FR 21742-21750). Medical billing is structured under three existing healthcare cost recovery programs: Third Party Collections (10 U.S.C. 1095); Medical Services Account (10 U.S.C. 1079b, 1085, and 1104); and Medical Affirmative Claims (42 U.S.C. 2651-2653). The rates used for billing are modeled after the rates published by the Centers for Medicare & Medicaid Services. The rates are approved annually by the Assistant Secretary of Defense for Health Affairs (ASD(HA)) and published on the DoD Comptroller's website at https://comptroller.defense.gov/Financial-Management/Reports/rates2023/. Funds collected through the healthcare cost recovery programs are used to enhance healthcare delivery at MTFs.

In carrying out the DoD's healthcare cost recovery programs, charges and fees for care provided are assessed, as applicable, to civilian non-beneficiary patients who receive treatment at MTFs. When medical care is provided, such individuals become indebted to the United States. The DoD has authority under the Debt Collection Improvement Act of 1996 (DCIA) (Pub. L. 104-134) to compromise, or terminate the collection of, claims involving monetary indebtedness to the United States. The Federal Claims Collection Standards (FCCS) promulgated at 31 CFR parts 900through 904, which implement the DCIA, require that Federal agencies aggressively collect all debts arising out of activities of that agency. Collection activities must be undertaken promptly with follow-up action taken as necessary. Although an individual's financial circumstances are considered in applying the FCCS, the relevance of such information in determinations concerning debt compromise or termination concerns the likelihood of repayment or successful enforced collection within a reasonable period of time, rather than the impact on or financial harm to an individual that is consequential to being indebted. Accordingly, DoD MTFs have generated medical claims and invoices for care to civilian non-beneficiaries rendered within MTFs and have administered delinquent accounts consistent with the FCCS.

Title 10 U.S.C. 1079b, as amended by section 716 of NDAA-23, establishes financial harm to certain individual civilian non-beneficiaries as a statutory factor used in setting the amount of fees and charges assessed.

II. Problem Being Addressed Through This Rulemaking

Due to the high cost of healthcare in the United States and the mandate for Federal agencies to aggressively pursue collection of debts under FCCS, civilian non-beneficiaries who were provided emergency or trauma healthcare services in DoD MTFs have experienced financial harm after receiving substantial medical bills from MTFs. The DoD does not have authority to forgive indebtedness for MTF charges outside of the FCCS and has not had authority to discount charges and fees for medical care, in contrast to for-profit and non-profit hospitals that offer various financial assistance policies (FAPs). In consequence, Congress wholly amended 10 U.S.C. 1079b via section 716 of NDAA-23. Section 716 directs DoD to apply a sliding fee and/or a catastrophic fee waiver when assessing fees and charges to non-beneficiaries. For non-beneficiaries with health insurance, Section 716 directs DoD to accept payments from health insurers as full payment and to not balance bill non-beneficiaries except for copays, coinsurance, deductibles, nominal fees, and non-covered services. It also provides the Director of DHA conditional, discretionary authority to waive the assessment of fees that otherwise would be charged to non-beneficiaries when the healthcare provided enhances the KSAs of healthcare providers, as determined by the Director of DHA. The NDAA for FY 2017 (NDAA-17) authorizes provision of such care on a reimbursable basis to civilians who are not covered beneficiaries. Public Law 114-328, § 717(c), Dec. 23, 2016, as amended, 10 U.S.C. 1071 note.

III. Alternatives Considered

Section 716(c) of NDAA-23 mandates that DoD implement the amendments to 10 U.S.C. 1079b within 180 days of enactment. With this constrained timeline, the DoD undertook expedited research efforts to ascertain whether private sector hospitals offered programs similar to what the statute mandates and which might serve as a model for the DoD. Research conducted indicated that while there is financial reporting of charitable care and FAPs by non-Federal entities that provide medical care, there is no single accessible and authoritative source which outlines the content and structure of those programs. Programs vary widely across the researched entities. The market research also included a review of the rules pertaining to eligibility for Federal and State programs such as Medicaid. The research provided a few alternative models for consideration in establishing the MHS MPWP, including:

• Alternative #1: Although charity care policies vary by state, generally, for-profit and non-profit hospitals determine a patient's eligibility for their FAPs by comparing the applicant's annual household income against the Federal Poverty Guidelines (FPGs). The FPGs are published annually by the Department of Health and Human Services pursuant to42 U.S.C. 9902(2). There are separate FPGs for the contiguous 48 states and Washington DC, for Alaska, and for Hawaii. The Census Bureau annually publishes FPG thresholds. The threshold is a statistical calculation used to identify the number of people living in poverty. There is no geographic variation; the same figures are used for all 50 states and Washington DC. The Office of Management and Budget (OMB) designates the Census Bureau poverty thresholds as the Federal Government's official statistical definition of poverty. The FPGs are also used by State and Federal agencies for determining an individual's eligibility for programs such as Medicaid.
• Alternative #2: Both for-profit and non-profit hospitals often offer discounted charges and fees on a sliding scale based upon the patient's household income when compared to the FPGs. Predominantly, discounts are offered to individuals whose household income falls within the range of 125 percent to 400 percent of the FPGs, with most hospitals offering discounts to patients whose income is at or below 200 percent of the FPGs.
• Alternative #3: Most private sector hospitals do not offer programs, additional to their needs-based FAPs for further waiver of charges or fees, that are analogous to § 1079b(c)(3)'s mandate for a DoD catastrophic fee waiver program, but a few will limit a patient's bill to a maximum percentage of the patient's household income (range of 10 to 20 percent of monthly income). In addition, we examined the maximum percentage that agencies generally can administratively garnish from an individual's monthly income (generally 15 percent of monthly income). See31 U.S.C. 3720D(b)(1); 31 CFR 285.11.

IV. Recommended Proposed Policy

The three alternative models identified through market research represent fair and reasonable approaches that could readily be adopted for use in the administration of the MHS MPWP, with some modifications, and without incurring significant costs to implement. This regulation's proposed way forward is a combination of all three alternatives that make up the recommended policy. Specifically:

• Alternative #1: Since10 U.S.C. 1079b mandates the application of a sliding scale and catastrophic fee waivers, the FPGs will be used as the measure to determine a patient's eligibility for these discounts. Alternative #2: The FPG range for eligibility for the sliding scale discount set by the ASD(HA) will be published annually on the DoD Comptroller's Reimbursement Rates website available at https://comptroller.defense.gov/Financial-Management/Reports/rates2024/. The ASD(HA) may revise the range, when appropriate, to mitigate financial harm. Alternative #3: Eligibility for a catastrophic fee waiver will be limited based on a maximum percentage of a patient's monthly household income determined by the ASD(HA) and published annually on the DoD Comptroller's Reimbursement Rates website. The ASD(HA) may revise the percentage applied to household income, when appropriate, to mitigate financial harm.

In summary, the DoD proposes to adopt and implement fair and reasonable application of a sliding scale and catastrophic fee waivers in accordance with precedent and market best practices. The FPGs will be used as the definitive measure to determine a patient's eligibility for discounts and waivers.

The FPG range of eligibility for the sliding scale discount will be published annually on the DoD Comptroller's Reimbursement Rates website, giving DoD maximum flexibility to mitigate financial harm.

The catastrophic percentage will be published annually on the DoD Comptroller's Reimbursement Rates website, giving DoD maximum flexibility to mitigate financial harm.

V. Other Applicable Authority

Section 717 of NDAA-17 conditionally authorizes DoD to evaluate and treat civilian non-beneficiaries at MTFs if the evaluation and treatment is necessary to maintain medical readiness skills and competencies of healthcare providers. Section 717(c) mandates that DoD bill such individuals for the costs of such healthcare services provided. By amending 10 U.S.C. 1079b, section 716 of NDAA-23 has provided discretionary authority to waive an individual's responsibility to pay those statutorily mandated charges if the provision of care enhances the KSAs of healthcare providers, as determined by the DHA. If, under 10 U.S.C. 1079b(b), DoD elects to waive charges it is otherwise statutorily required to collect from an individual, any resulting discharge of indebtedness may need to be reported to the Internal Revenue Service (IRS) in accordance with the reporting requirements at 26 U.S.C. 6050P. DoD may also be required to issue a Form 1099-C, “Cancellation of Debt” (OMB Control Number 1545-1424), available at https://www.irs.gov/pub/irs-pdf/f1099c.pdf, to the patient in accordance with the same reporting requirements. This discharge of indebtedness could result in gross income being attributed to the patient under 26 U.S.C. 61. Authority provided by § 1079b(c) to adjust or waive assessment of fees and charges for medical care will be exercised by applying criteria applicable to civilian non-beneficiaries, rather than by exercising discretion to discharge indebtedness with respect to non-beneficiaries. Consequently, to reduce avoidable gross income to a patient under 26 U.S.C. 61, DoD will consider a waiver under 10 U.S.C. 1079b(b) of an individual's responsibility to pay charges only after any sliding scale discounts and catastrophic cap on charges have been applied.

VI. Summary of Current Billing and Collection Processes Involving Non-Beneficaries

For non-beneficiary medical encounters occurring prior to June 21, 2023, an MTF processes a bill to either the patient, the patient's third-party insurance, or to another guarantor. The current legal framework to process non-beneficiary bills is established under 10 U.S.C. 1079b (Procedures for Charging Fees to Civilians). Collection of medical debt resulting from medical bills is subject to the DCIA.

Title 10 U.S.C. 1079b directs the Secretary of Defense to implement procedures by which a non-beneficiary will be billed. The ASD(HA) publishes medical rates packages that are updated annually. The ASD(HA) rates reflect the full cost to the Government of providing care to a non-beneficiary patient; the rates generally reflect the same amounts that DoD reimburses to civilian healthcare providers when care is rendered outside of an MTF to a beneficiary patient, and they are also the same rates that DoD uses to bill third-party health insurers (under 10 U.S.C. 1095) when a beneficiary patient receives care in an MTF.

A bill generated for care at an MTF must be paid in full, whether by the patient, medical insurer, or other guarantor. The full amount is pursued against the patient and/or the patient's guarantor. If the debt is not paid within 180 days of the due date (or an installment plan due date), the debt is transferred to the Cross-Servicing Program (“Cross-Servicing”) of the Department of the Treasury, Bureau of the Fiscal Service, for collection. Agencies may also refer eligible debts that are less than 180 days delinquent to the Cross-Servicing program.

Under the current legal framework there is no authority to reduce the amount of a debt owed by a patient who received care at an MTF. There is an ability to compromise a balance that cannot be paid by the non-beneficiary. However, the FCCS governing a compromise requires that a debtor reasonably demonstrate the inability to pay the debt balance, which entails evaluation of a debtor's current financial condition, and obtaining a credit report or other financial information in order to evaluate the debtor's assets, liabilities, income, and expenses.

VII. Changes With This Rulemaking

A. MHS Modified Payment and Waiver Program

Under title 10 U.S.C. 1079b, as amended by NDAA-23, the DoD is required to apply a sliding scale and/or catastrophic fee waivers to medical invoices generated by MTFs in certain instances. The statute also gives the Director of DHA discretionary authority to waive charges mandated by section 717 of NDAA-17, when the care provided enhances the medical KSAs of MHS healthcare providers, as determined by the Director of DHA. Consequently, the DoD proposes to implement § 1079b authorities with the objective of mitigating financial harm to civilian non-beneficiaries. The MHS MPWP will be applied uniformly to all civilian non-beneficiary patients who apply to the program. Applicable discounts will be based only on household income and family size. All patients will be eligible to apply for the MHS MPWP in order to mitigate financial harm.

The MHS MPWP will involve a cascading, sequential process that begins with collecting health insurance information from all patients. For patients with health insurance, the patient must agree to allow DoD to file medical claims on the patient's behalf. Patients with health insurance who do not consent to allowing DoD to file insurance claims on their behalf will not be eligible for the MHS MPWP. By allowing DoD to file insurance claims on the patient's behalf, the DoD will be assured that insurance remittances and Explanation of Benefits (EOB) documents are properly sent to the DoD. This will enable the DoD to adjust balances on the patient's account inclusive of the amount paid by the insurance carrier, amounts disallowed, and amounts that are the patient's responsibility as determined by the insurance carrier ( i.e., copays, coinsurance, deductibles, nominal fees and non-covered services). Once the patient's account is properly adjusted in accordance with the EOB, the DoD will bill insured patients only for portions of the bill that are their responsibility. For patients without health insurance, DoD will bill the patient.

Patients who are uninsured, underinsured and/or who have a remaining balance for copay, coinsurance, deductible, nominal fee, or non-covered services may apply to the MHS MPWP for application of the sliding scale discounts and catastrophic fee waiver discounts.

Patients unable to pay the remaining balance after the application of the sliding scale and catastrophic fee waiver may also apply for a waiver of their medical fees under 10 U.S.C. 1079b(b), by submitting a completed DD Form 3201-1, “Request for Medical Debt Waiver, Military Health System Modified Payment and Waiver Program” ( https://www.esd.whs.mil/Directives/forms/dd3000_3499/ ). Waivers may be approved when—at the discretion of the DHA Director, the care rendered to the patient enhanced the KSAs of the healthcare providers. KSAs are a set of clinical skill requirements a provider needs in order to provide medical care/treatment in the deployed environment. Additionally, waivers will be used sparingly and generally only in instances where severe financial harm cannot be reasonably mitigated through application of discounts. Waivers may result in financial reporting to the IRS and issuance of an IRS Form 1099-C to the patient. Generally, waivers may be granted if: (a) The patient has completed a DD Form 2569, “Third Party Collection Program/Medical Services Account/Other Health Insurance” (OMB Control Number 0720-0055), available at https://www.esd.whs.mil/Directives/forms/dd2500_2999/; (b) the patient has submitted a completed application for the MHS MPWP via the DD Form 3201 and any and all appropriate discounts have been applied; (c) DHA competent medical authority confirms in writing on the DD Form 3201-1 that the care provided to the patient enhanced the KSAs of the DoD healthcare provider; and (d) the DHA determines that a waiver is necessary to mitigate severe financial harm. If the above conditions are met, the Director of DHA may exercise discretionary authority to waive the medical invoice.

B. Collection of Health Insurance Information

All patients receiving healthcare services at a DoD MTF are asked to complete a DD Form 2569 to collect health insurance information along with the patients' consent for the DoD to file a claim on their behalf. The form advises patients that their “records may be disclosed outside of DoD to healthcare clearinghouses, commercial insurance providers, and other third parties in order to collect amounts owed to the Department of Defense.”

C. Billing Insurance

For non-beneficiaries with health insurance who complete the DD Form 2569, the DHA will bill the non-beneficiary's health insurance and accept remittances. When payment or an EOB is received from the insurance company, the DoD will not bill the patient except for copays, coinsurance, deductibles, nominal fees, and amounts for non-covered services. The DoD will suspend collection against the patient for up to 120 days to allow the patient's insurance to process the claim. The DoD will not bill the patient until a determination on payment and/or an EOB is received from the insurance company, or 120 days has lapsed, whichever comes first. If the DoD receives an insurance remittance after 120 days have elapsed, the DoD will deposit the check, adjust the patient's account in accordance with the EOB, and issue the patient a refund for overpayments, if any have been received. The DoD will ensure that medical invoices sent to the patient reflect information about the MHS MPWP, including instructions for applying to the program.

D. Delinquent Accounts

Delinquent accounts will be processed in accordance with the DCIA as implemented by the FCCS.

E. Applications for MHS MPWP Received for Delinquent Accounts Transferred to the Department of the Treasury

Individuals may still submit an application for the MHS MPWP even if their account has been transferred to Cross-Servicing; however, any reductions to the medical invoice from the MPWP may be subject to interest, penalties, and costs. For patients who apply and are eligible for a reduction under the MHS MPWP, the DoD will recall the debt from Cross-Servicing. For patients who apply and are ineligible for a reduction under the MHS MPWP, the debt will remain at Cross-Servicing. Patients may request reconsideration for the MHS MPWP when their financial circumstances appear to have significantly changed.

F. Income Verification and Collection of Income Information

Required MHS MPWP application documentation. Patients who desire to apply for the MHS MPWP must do so by completing a DD Form 3201, “Application for Military Health System Modified Payment and Waiver Program” (OMB Control Number PENDING), available at https://www.esd.whs.mil/Directives/forms/dd3000_3499/, and submitting the requisite documents. All DoD patient invoices will include a description of the documents that patients must submit together with DD Form 3201 in order to demonstrate their eligibility for the MHS MPWP. To demonstrate eligibility for a sliding fee/catastrophic fee waiver, the patient must first complete a DD Form 2569 (even in cases where the patient possesses no health insurance). Patients must also attach a copy of their most recent filed Federal income tax return and the patient's (or guarantor's if the patient is a minor) last two pay stubs. Patients who did not file a Federal income tax return for the preceding year, must certify that they did not file an income tax return on the DD Form 3201. Additionally, when the patient has no verifiable income, the patient must provide a certification to that effect on the DD Form 3201. The last two pay stubs or disability check stubs may be used if no Federal income tax return is provided in conjunction with the patient's certification of annual income on the DD Form 3201 to determine the patient's income. Finally, when the patient has certified to having no verifiable income and has neither a tax return nor pay stubs, other information may be used to validate the patient's lack of income including, but not limited to, the last two bank statements (savings and checking), or a Social Security benefits letter.

For patients with health insurance, the patient must agree to allow DoD to file medical claims on the patient's behalf.

G. Application for MHS MPWP Discounts and Waivers

Consideration for sliding scale and catastrophic fee waiver requires evaluation of the patient's household income. To receive consideration for the sliding fee discount or catastrophic fee waiver, or to be considered for a full waiver of fees under 10 U.S.C. 1079b(b), the patient must apply to the MHS MPWP after receiving the MTF medical invoice by completing and submitting the DD Form 3201 (OMB Control Number PENDING). Applications can be made by: (1) patients with a remaining balance after insurance has been billed by the DoD and the insurance remittance and/or EOB has been received by the DoD; (2) by patients without insurance who have a balance; and (3) by patients with a remaining balance after recovery from tortfeasors is made. Application instructions will be printed on the DoD invoice. Applicants to the MHS MPWP will be notified of the status of their application via the following methods: (1) For approved applications, the DoD will issue to the patient a modified medical invoice reflecting the balance due after applying the sliding fee and/or catastrophic fee waiver; (2) for disapproved applications, the DoD will issue a letter reflecting the reason why the application was disapproved. The letter will inform the patient of the right to reapply should the patient's financial circumstances change.

H. Sliding Fee Discount

Applicants to the MHS MPWP will first be considered for a sliding fee discount, and then for a catastrophic fee waiver. The threshold for the sliding fee discount will be set to a 100 percent medical bill discount and no nominal fee for applicants whose annual household income is at or below 100 percent of the applicable year's FPGs; and a 100 percent medical bill discount plus a stratified nominal fee for applicants whose annual household income is greater than 100 percent and up to 400 percent of the applicable year's FPGs. The ASD(HA) may periodically adjust the threshold limits by issuing policy to be published on the DoD Reimbursement Rates website ( https://comptroller.defense.gov/Financial-Management/Reports/ ). Stratified nominal fees are generally established in a manner that is equitable with what military retirees enrolled in the TRICARE program would be required to pay in the private sector for comparable services. The ASD(HA) will annually set the stratified nominal fees for outpatient and inpatient care and may periodically adjust the nominal fee by issuing policy to be published on the DoD Reimbursement Rates website (available at https://comptroller.defense.gov/Financial-Management/Reports/ ). The initial nominal stratified fees are as follows: