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Third Party Billing

icon hand holding moneyBy law, the Department of Veterans Affairs (VA) can bill an eligible Veteran’s private health insurance company for care furnished or paid for by VA for a nonservice-connected condition. For the purposes of billing, a Veteran’s health insurance company is known as a Third Party Payer (TPP). Reimbursements VA receives from TPPs supplement appropriations by Congress to pay for VA health care.

For more details, read Code of Federal Regulations Title 38 §17.101, Collection or Recovery by VA for Medical Care or Services Provided or Furnished to a Veteran for a Nonservice-Connected Disability.

TPPs must pay VA billed charges or the amount TPPs pay commercial providers for the same services in the same geographic area, which is subject to verification by VA. TPPs aren’t subject to a rate verification so long as they pay billed charges.


Federal regulations (38 C.F.R §17.101) stipulate the basic methodology by which VA bills third party payers. To generate a charge for medical services, VA establishes national reasonable charges which are then adjusted locally by each VA medical center based on their Geographical Area Adjustment Factor (GAAF). Reasonable charges are developed for five categories of care: inpatient facility, outpatient facility, skilled nursing facility, physicians, and nonphysician providers.

Inpatient facility and skilled nursing facility care are billed on a per diem basis. For inpatient facility charges, the per diem charges vary by the treated condition as classified by Medicare Severity Diagnosis Related Groups (MS-DRG) codes.

Billing for outpatient facility care and provider charges vary by procedure performed as classified by Current Procedural Terminology (CPT) codes and Healthcare Common Procedure Coding System (HCPCS) Level II codes.

Billing for third party outpatient pharmacy prescription drugs not administered during treatments and furnished by the VA to a Veteran for a nonservice-connected disability are calculated using the actual VA cost of a drug, which is the actual amount expended by the VA facility for the purchase of the specific drug plus the Pharmacy Administrative cost.

The administrative cost is determined annually using VA's managerial cost accounting system. Under this accounting system, the average administrative cost is determined by adding the total VA national drug general overhead costs (such as costs of buildings and maintenance, utilities, billing, and collections) to the total VA national drug dispensing costs (such as costs of the labor of the pharmacy department, packaging, and mailing) with the sum divided by the actual number of VA prescriptions filled nationally.

Based on this accounting system, VA determines the amount of the average administrative cost annually for the prior fiscal year (October through September) and then applies the charge at the start of the next calendar year. The annual Outpatient Pharmacy Average Administrative charge is posted on the Average Administrative Cost for Prescriptions page.

Data for calculating actual charge amounts are published in a Federal Register notice, available on the Payer Rates and Charges page. VA bills using the most recently published or posted charge based on the date of service for the treatment provided.


In some cases, VA may enter into an agreement with a TPP related to billed charges for eligible Veterans in order to ensure a more predictable business relationship subject ultimately to federal law.

Email us at for more information.

Frequently Asked Questions

Do Veterans have to provide VA with their private health insurance information?
Yes. Veterans are required to provide information to VA about health insurance coverage, including coverage provided under their spouse’s policies.

See the VA page on Health Insurance for more information.

Does VA collect copayments on behalf of Third Party Payers?
No, VA cannot collect third party insurance copayments on behalf of the TPP. However, VA can charge certain Veterans a VA copayment for care or services provided for non-service connected conditions.

Review the VA copayments page for more information.

Do Veterans have to pay for the remaining balance on the Explanation of Benefits?
No, Veterans are not responsible for the remaining balance shown as patient responsibility on the explanation of benefits from their insurance carrier. Veterans are only responsible for the required VA copayment.

Review the VA copayments page for more information.

Do Veterans need to complete a Coordination of Benefit (COB) form?
No. The obligation of the third-party payer to pay is not dependent upon the Veteran executing an assignment of benefits to VA or any other submission by the Veteran. In other words, denials from Third Party Payers for Coordination of Benefits violates Federal regulations, and the payer is still obligated to pay VA.

Read 38 CFR §17.106(d) on the website.

Contact Us

Pharmacy Benefit Managers and Third Party Payers may email questions to:


  • Average Administrative Cost for Prescriptions
    VA updates the average national administrative cost used for billing third party pharmacy prescription drugs every calendar year (CY) for nonservice-connected disabilities.
  • Payer Rates and Charges
    View reasonable charges rules, notices and the Federal Register, as well as data tables, data sources and facility locations for VA medical rates.
  • 38 CFR Section17, Charges Billed to Third Parties for Prescription Drugs Furnished by VA to a Veteran for a Nonservice-Connected Disability