Third Party Payers - Community Care
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Third Party Payers

icon hand holding moneyOne of the important ways that the Department of Veterans Affairs (VA) supports quality healthcare for Veterans is by working closely with private health insurance companies also known as third party payers or TPPs. Many Veterans have private health insurance coverage in addition to Veterans Affairs (VA) health care benefits. Under federal law, VA bills eligible Veterans private health insurance companies for non-service connected conditions. Veterans can use these insurance benefits to help offset copayments that VA may charge for these services.

TPPs must pay VA billed charges, or an amount comparable to what is paid, for similar services to commercial providers in the same geographic area (defined as a 3-digit postal zip code). If third party payers pay billed charges, they will not be subject to rate verification. For more details, read 38 CFR § 17.101, Collection or Recovery by VA for Medical Care or Services Provided or Furnished to a Veteran for a Nonservice-Connected Disability.

Code of Federal Regulations, Title 38 § 17.101

Frequently Asked Questions

What is the VA eligibility and enrollment process for Veterans?

For the purposes of VA health benefits and services, a person who served in the active military service for at least 24 months and who was discharged or released under conditions other than dishonorable is considered a Veteran. VA operates an annual enrollment system that helps to manage the provision of healthcare. VA applies a variety of factors during the application verification process when determining a Veteran’s eligibility for enrollment, but once a Veteran is enrolled, that Veteran remains enrolled in the VA healthcare system and maintains access to certain VA health benefits. Insurance is only billed for Veterans with nonservice-connected conditions and through commercial insurance.

It was my understanding that services at VA hospitals are provided at no cost to Veterans if the patient was accepted for treatment under qualifying conditions. Is this accurate?

Healthcare is provided at no cost to the Veteran, although the Veteran may be responsible for a copayment. VA funding for the care and treatment provided to Veterans is primarily through congressional appropriations. However, care and treatment for Veterans with nonservice-connected conditions is offset through collections from private insurance companies, typically referred to as third party payer collections. 38 USC 1729, Title 38, United States Code (USC) is VA’s authority to seek reimbursement from third party insurance carriers, including Medigap and other Medicare supplemental insurances. More information about why VA bills private health insurance is available on VA’s health benefits website.

Determine Costs of Care-Health Care Insurance

How does VA determine the charges billed to third party payers for Veterans with private health insurance who receive care for nonservice-connected conditions?

38 C.F.R 17.101 stipulates the basic methodology by which VA bills third party insurance carriers. In order to generate a charge for medical services, VA establishes reasonable charges for five categories of charges:

  1. Inpatient facility
  2. Skilled nursing facility (SNF)/sub-acute inpatient facility
  3. Outpatient facility
  4. Physicians
  5. Nonphysician providers

Reasonable charges are developed nationally and then adjusted locally by each VA medical center based on their Geographical Area Adjustment Factor (GAAF). Billing for inpatient facilities and skilled nursing facilities are 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 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. Data for calculating actual charge amounts are published in a notice within the Federal Register or can be viewed on the VHA OCC website.

Payer Rates and Charges

VA will bill using its most recent published or posted charge based on the date of service for the treatment provided.

What expectations are outlined in contracts between VA and private health insurance companies, also known as third party payers (TPPs)?

A national contract or agreement between VA and a TPP outlines VA’s provider network and the medical services expected to be covered.

VA’s provider network, administered by the Veterans Health Administration (VHA), includes:

  • Veteran Affairs Medical Centers (VAMCs)
  • Physicians/providers (employed)
  • Outpatient clinics
  • All states and territories


Medical services expected to be covered include:

  • Durable Medical Equipment (DME)
  • Home Health
  • Inpatient/Outpatient
  • Mental Health
  • Pharmacy
  • Prosthetics
  • Rehabilitation
  • Skilled Nursing Facility (SNF)
  • Substance Abuse
  • Transplant Services
Can nonveterans be covered under contractual arrangements between VA and private health insurance companies, otherwise known as third party payers?

The contractual relationship between VA and third party payers applies to eligible Veterans for nonservice-connected conditions only. 

What is VA’s annual estimate of the number of Veterans who use VA as their healthcare provider and what is the average number of visits or encounters each year?

VA suggests that health insurance companies use VA tax ID numbers to generate internal reports on past VA service utilization to estimate probable volume and utilization of services by Veterans.

Can VA provide third party payers with a sample agreement template?

Yes, VA can provide third party payers with a sample template that identifies key provisions related to VA operations and federal payment requirements that must be included in any agreement between VA and the third party payer. Contact the CPAC Program Management Office (PMO), Payer Relations Office to request more information.

Email the CPAC PMO, Payer Relations Office

How does VA communicate its contractual relationship with private health insurance companies?

VA provides internal communication to private health insurance companies for billing, operations, and collection purposes only. It is not the intent of VA to communicate and market the relationship to solicit business. 

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 Part 17, Charges Billed to Third Parties for Prescription Drugs Furnished by VA to a Veteran for a Nonservice-Connected Disability