Veteranclaims’s Blog

June 28, 2012

Heino v. Shenseki, No. 2011-7160 (Decided: June 28, 2012) VA’s Copayment Regulation Section 1722A

Excerpt from decision below:
Finally, looking to the purpose of section 1722A as a
whole, it is clear the VA’s copayment regulation is reasonable.
The purpose of section 1722A is to allow the VA
to recoup some of the cost of its benefit program while
HEINO v. DVA
17
ensuring that the VA does not charge so much as “to
result in veterans not seeking needed care and services . .
. .” Id. The current regulation keeps copayments to a
minimum by not charging veterans for the actual cost of
their medication, 66 Fed. Reg. at 36,961, and charging a
copayment below the VA’s calculated administrative cost,
77 Fed. Reg. at 19,425. Moreover, the VA increases
copayments only with inflation and has sought to reexamine
its procedures to ensure that the VA continues to be
an attractive medication provider. See 74 Fed. Reg.
69,283, 69,283-69,284 (freezing many copayments at $8 to
determine whether increases in copayments under the
prescription drug component of the Medical Consumer
Price Index “might pose a significant financial hardship
for certain veterans and if so, what alternative approach
would provide appropriate relief for these veterans”).
These measures adequately fulfill Congress’s charge and
therefore the VA’s copayment regulation is reasonable.

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United States Court of Appeals
for the Federal Circuit
__________________________
WILLIAM H. HEINO, SR.,
Claimant-Appellant,
v.
ERIC K. SHINSEKI, SECRETARY OF VETERANS
AFFAIRS,
Respondent-Appellee.
__________________________
2011-7160
__________________________
Appeal from the United States Court of Appeals for
Veterans Claims in Case No. 09-112, Judge William A.
Moorman.
___________________________
Decided: June 28, 2012
___________________________
NATHAN S. MAMMEN, Kirkland & Ellis LLP, of Washington,
DC, argued for claimant-appellant. With him on
the brief was JOSEPH F. EDELL.
MICHAEL P. GOODMAN, Trial Attorney, Commercial
Litigation Branch, Civil Division, United States Department
of Justice, of Washington, DC, argued for respondent-
appellee. With him on the brief were TONY WEST,
Assistant Attorney General, JEANNE E. DAVIDSON, Director,
and MARTIN F. HOCKEY, JR., Assistant Director. Of
HEINO v. DVA 2
counsel on the brief were SUSAN BLAUERT, Deputy Assistant
General Counsel, and JENNIFER A. GRAY, Attorney,
United States Department of Veterans Affairs, of Washington,
DC.
__________________________
Before RADER, Chief Judge, PLAGER, and WALLACH,
Circuit Judges.
Opinion for the court filed by Circuit Judge WALLACH.
Opinion concurring filed by Circuit Judge PLAGER.
WALLACH, Circuit Judge.
William H. Heino, Sr. (“Mr. Heino”) appeals from a
judgment of the United States Court of Appeals for Veterans
Claims (“Veterans Court”) affirming a decision by the
Board of Veterans’ Appeals (“Board”) denying him a lower
copayment for his prescribed medication. Mr. Heino
contends that his copayment amount must be reduced
because it is more than what the Department of Veterans
Affairs (“VA”) pays for his medication and that 38 U.S.C.
§ 1722A(a)(2) prohibits the VA from charging a copayment
in excess of what the VA pays for a veteran’s medication.
However, because section 1722A(a)(2) is
ambiguous, and because the VA’s copayment regulation,
38 C.F.R. § 17.110, is reasonable in light of the statute,
we affirm.
I.
Mr. Heino, a veteran, is prescribed a daily dose of 12.5
milligrams of Atenolol.1 The lowest strength available for
the prescription is a 25 milligram tablet, so Mr. Heino’s
physician instructed him to split each tablet in half. At
the time this case began, Mr. Heino paid a $7 copayment
1 Atenolol is a drug commonly used to treat high
blood pressure.
HEINO v. DVA 3
for a 30-day supply of 15 tablets, which he claimed was
excessive in light of the fact that some veterans paid the
same copayment for twice the medication. On March 13,
2002, Mr. Heino sent a letter to the VA requesting that it
adjust his copayment. The VA responded by stating that
the copayment “is being applied as it should be.” In
February 2004, Mr. Heino again contested his copayment
amount to the VA. In a letter dated February 11, 2005,
the VA Office of Regional Counsel determined that the $7
copayment was correct under applicable law and regulation.
Mr. Heino filed a Notice of Disagreement with the
VA’s decision and on December 24, 2008, the Board concluded
that the $7 copayment amount was proper.2
Mr. Heino appealed the Board’s decision to the Veterans
Court, and the Veterans Court affirmed. Heino v.
Shinseki, 24 Vet. App. 367 (2011). Mr. Heino argued that
the regulation the VA uses to calculate his copayment
amount, 38 C.F.R. § 17.110, conflicts with section
1722A(a)(2), which prohibits the VA from charging a
copayment “in excess of the cost to the Secretary for
medication,” because the actual cost of his Atenolol prescription
was well below $7.3 Contrary to Mr. Heino’s
interpretation of the statute, the Veterans Court held that
“the cost” referred to in section 1722A(a)(2) could “be
2 The Board initially agreed with the VA in a March
2007 decision. After Mr. Heino appealed that Board
decision to the Veterans Court, it was discovered that the
VA had lost Mr. Heino’s claims file. As a result, the
Veterans Court remanded the case for readjudication.
The readjudicated proceeding was decided by the Board
on December 24, 2008.
3 Throughout this opinion we refer to the cost of a
veteran’s prescribed medication—the pills or tablets
themselves—as the “actual cost” of medication. We refer
to the cost associated with dispensing a veteran’s prescription
as the VA’s “administrative cost.”
HEINO v. DVA 4
interpreted as including the Secretary’s costs in dispensing
the medication, i.e., his administrative costs” as well
as the VA’s actual cost. Id. at 373. Because the term “the
cost” was ambiguous, the Veterans Court reviewed the
VA’s copayment regulation, which did not charge Mr.
Heino a copayment in excess of the VA’s projected average
administrative cost, for reasonableness. Id. The Veterans
Court held that given the “regulatory and statutory
history, as well as the statutory framework,” the regulation
was valid.4 Id.
Judge Hagel dissented in part and reasoned that the
phrase “the cost to the Secretary for medication” in section
1722A(a)(2) is “clear, unambiguous, and cannot be
construed as including costs incurred by the Secretary in
dispensing the medication.” Id. at 376 (Hagel, J., dissenting).
Judge Hagel stated that “[n]owhere in this statutory
interplay is there a reference to administrative costs
incurred by the Secretary in dispensing the veteran’s 30-
day supply of medication, costs that are wholly apart from
the cost to the Secretary for the medication itself.” Id. at
377.
Mr. Heino filed a timely notice of appeal to this court.
We have jurisdiction over this appeal pursuant to 38
U.S.C. § 7292(a).
4 Mr. Heino also argued that his copayment was excessive
because he was charged the same copayment as
other veterans who receive more medication in their 30-
day supply. The Veterans Court held that section
1722A(a)(1), which states that the VA may charge a
veteran a copayment “for each 30-day supply of medication”
allows the VA to charge a copayment for “a 30-day
supply of medication—regardless of the dosage prescribed
for the 30-day period.” Heino, 24 Vet. App. at 372 (emphasis
in original).
HEINO v. DVA 5
II.
To determine whether the VA is correctly charging
Mr. Heino, we must interpret 38 U.S.C. § 1722A and
determine whether 38 C.F.R. § 17.110 comports with the
statute. We will first discuss the law and regulations at
issue in this case and then will proceed by examining
them under the framework provided in Chevron U.S.A.
Inc. v. Natural Resources Defense Council, Inc., 467 U.S.
837 (1984).
A.
What is now section 1722A was initially codified as 38
U.S.C. § 622A by the Omnibus Budget Reconciliation Act
of 1990, Pub. L. No. 101-508, § 8012, 104 Stat. 1388
(1990). In 1991 Congress redesignated the law as 38
U.S.C. § 1722A without amending its language. Pub. L.
No. 102-83, § 5(a), 105 Stat. 378 (1991). The current
section 1722A(a)(1) is substantively the same as the 1990
law, see 38 U.S.C. § 1722A(a)(3) (incorporating the language
removed from the original section 622A(a)(1)), and
the current section 1722A(a)(2) is identical to the original
statute. The current law reads:
(a)(1) Subject to paragraph (2), the Secretary
shall require a veteran to pay the United States
$2 for each 30-day supply of medication furnished
such veteran under this chapter on an outpatient
basis for the treatment of a non-service-connected
disability or condition. If the amount supplied is
less than a 30-day supply, the amount of the
charge may not be reduced.
(2) The Secretary may not require a veteran to
pay an amount in excess of the cost to the Secretary
for medication described in paragraph (1).
HEINO v. DVA 6
38 U.S.C. § 1722A(a)(1)-(2) (emphasis added). In 1999, as
part of the Veterans Millennium Health Care and Benefits
Act, Pub. L. No. 106-117, § 201, 113 Stat. 1545 (1999),
Congress added the current subsection (b) to the statute,
which reads:
(b) The Secretary, pursuant to regulations which
the Secretary shall prescribe, may–
(1) increase the copayment amount in effect under
subsection (a); and
(2) establish a maximum monthly and a maximum
annual pharmaceutical copayment amount
under subsection (a) for veterans who have multiple
outpatient prescriptions.
38 U.S.C. § 1722A(b) (emphasis added). A report from the
House Committee on Veterans’ Affairs stated that the
VA’s new authority under section 1722A(b) was intended
to bring the VA’s benefit program in line with private and
other government healthcare providers where individuals
carry a larger share of costs. H.R. Rep. No. 106-237, at 41-
42 (1999). The report stated that allowing the VA:
to set reasonable copayment increases on prescription
drugs is a reasonable policy in the face of
VA’s mounting pharmaceutical costs–approaching
$2 billion annually. Notwithstanding an aggressive
pharmacy benefits management policy, VA’s
pharmacy costs have nearly doubled since copayments
were instituted some nine years ago.
Id. at 42. The report mentioned that although Congress
was granting the VA “relatively broad discretion” to raise
copayments, the VA should exercise “caution that copayments
not be set so high as to result in veterans not
seeking needed care and services . . . .” Id. at 43.
HEINO v. DVA 7
Pursuant to subsection (b)(1), the VA published a proposed
rule in 2001 that would increase the copayment
amount to $7 from the $2 listed in section 1722A(a)(1).
Copayments for Medications, 66 Fed. Reg. 36,960, 36,960-
36,961 (proposed July 16, 2001) (to be codified at 38
C.F.R. pt. 17). Additionally, the proposed rule would
enact an escalator provision to increase copayments with
inflation as measured by the prescription drug component
of the Medical Consumer Price Index. Id. However, the
provision would round all increases in inflation down to
the nearest whole dollar.5 Id. In that proposed rulemaking,
the VA stated:
[U]nder 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.
[The Veterans Health Administration]
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
5 The proposed rule would increase copayments according
to a set formula. As the VA stated:
For each calendar year beginning after December
31, 2002, the [prescription drug component of the
Medical Consumer Price 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.
Copayments for Medications, 66 Fed. Reg. at 36,961.
HEINO v. DVA 8
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.
Id. at 36,961 (emphasis added). The VA further stated
that “based on commensurate increased costs to VA, we
believe that VA’s costs would remain higher than the
increases made by the escalator provisions.” Id. Following
a notice-and-comment period, the VA issued a final
rule implementing the proposed rule, which was codified
as 38 C.F.R. § 17.110. In finalizing the rule, the VA
stated:
Many recent newspaper articles have reported
dramatic increases throughout the health care industry
for medication copayment amounts which
are reflective of increases in medication costs. Accordingly,
even with the increase we may have
one of the lowest copayment amounts. Under
these circumstances, we believe that a $7 copayment
amount is reasonable. Further, we believe
that increases should be based on the Prescription
Drug Component of the Medical Consumer Price
Index since it is most relevant to the cost of prescriptions
and thereby should be relevant to any
general increases in medication copayments in the
private sector.
Copayments for Medications, 66 Fed. Reg. 63,449 (Dec. 6,
2001). In response to commenters that stated “they would
return to private-sector health care if the copayment were
increased,” the VA stated that it believed its copayments
HEINO v. DVA 9
were “still on the low end of the private-sector copayment
scale.”6 Id. at 63,450.
B.
This court has limited jurisdiction to review appeals
from the Veterans Court. We lack jurisdiction to review
factual determinations outside of constitutional claims,
but can review questions of law. 38 U.S.C. § 7292(d). We
review the Veterans Court’s interpretation of a statute de
novo. Boggs v. Peake, 520 F.3d 1330, 1334 (Fed. Cir.
2008).
Under applicable law, the VA may not charge a veteran
a copayment “in excess of the cost to the Secretary
6 Effective January 2006, the VA increased the copayment
amount from $7 to $8 pursuant to the escalator
provision. Copayment for Medication, 70 Fed. Reg. 72,326
(Dec. 2, 2005). In December 2009, the VA issued a temporary
“freeze” on the copayment amount at $8 to “determine
whether the current methodology for establishing
copayment amounts, consistent with [VA’s] responsibility
under 38 U.S.C. § 1722A to require a copayment in order
to control health-care costs, is appropriate for all veterans.”
Copayments for Medications, 74 Fed. Reg. 69,283,
69,283-69,284 (Dec. 31, 2009). In 2010, the VA extended
the $8 copayment freeze until January 1, 2012 for veterans
in enrollment priority categories 2 through 6 but
increased the copayment amount to $9 for veterans in
priority categories 7 and 8. Copayments for Medications
After June 30, 2010, 75 Fed. Reg. 32,670, 32,670-32,671
(June 9, 2010); see 38 C.F.R. § 17.36 (establishing order of
priority). Most recently, the VA again extended the $8
copayment freeze for priority categories 2 through 6 until
2013 but did not freeze copayments for veterans in priority
categories 7 and 8, which are permitted to increase
according to the escalator provision. Copayments for
Medications in 2012, 76 Fed. Reg. 78,824, 78,824-78,825
(Dec. 20, 2011).
HEINO v. DVA 10
for medication described in [section 1722A(a)(1)].” 38
U.S.C. § 1722A(a)(2). The dispute in this case lies in the
meaning of that phrase. In reviewing the VA’s copayment
scheme, we must apply a Chevron analysis, which requires
two steps. First, we must determine “whether
Congress has directly spoken to the precise question at
issue.” Chevron, 467 U.S. at 842. In this case, the “precise
question at issue” is whether “the cost to the Secretary for
medication,” 38 U.S.C.§ 1722A(a)(2), refers to only the
actual cost of medication or may also refer to administrative
costs. “If the intent of Congress is clear, that is the
end of the matter . . . .” Chevron, 467 U.S. at 842-43.
However, if “Congress has not directly addressed the
precise question at issue,” we must, second, determine if
the VA’s copayment regulation is “based on a permissible
construction of the statute.” Id. at 843.
1.
In order to determine whether a statute clearly shows
the intent of Congress in a Chevron step-one analysis, we
employ traditional tools of statutory construction and
examine “the statute’s text, structure, and legislative
history, and apply the relevant canons of interpretation.”
Delverde, SrL v. United States, 202 F.3d 1360, 1363 (Fed.
Cir. 2000).
Beginning with the statute’s text, Mr. Heino argues
that “the cost” referred to in section 1722A(a)(2) should be
afforded its plain meaning, which he contends is the
actual cost of medication given that several dictionary
definitions equate “cost” to a purchase price. Mr. Heino
further contends that the statute refers to a singular
(“the”) and specific (“cost”) amount, which he argues can
only be what VA paid for the medication itself. However,
a term as general as the word “cost” in section 1722A does
not have a single plain meaning. See Webster’s Ninth
HEINO v. DVA 11
New Collegiate Dictionary 295 (1986) (defining “cost” as
“a: the amount or equivalent paid or charged for something:
PRICE” as well as “b: the outlay or expenditure (as
of effort or sacrifice) made to achieve an object”); Random
House Unabridged Dictionary 457 (2d ed. 1993) (defining
“cost” as “1. the price paid to acquire, produce, accomplish,
or maintain anything: the high cost of a good meal.
2. an outlay or expenditure of money, time, labor, trouble,
etc.: What will the cost be to me?”). Thus, the plain
meaning of the term “the cost” in section 1722A(a)(2) is
ambiguous and does not reveal congressional intent. See
Verizon Commc’ns, Inc. v. FCC, 535 U.S. 467, 500 (2002)
(“without any better indication of meaning than the
unadorned term, the word ‘cost’ in [47 U.S.C. § 252(d)(1)],
as in accounting generally, is ‘a chameleon,’ . . . a ‘virtually
meaningless’ term”) (quoting Strickland v. Comm’r,
Me. Dep’t of Human Servs., 96 F.3d 542, 546 (1st Cir.
1996)).
Section 1722A’s structure further demonstrates how
the statute is ambiguous. “[T]he cost to the Secretary for
medication” in section 1722A(a)(2) is that “described in
paragraph (1),” which is a “30-day supply of medication
furnished such veteran under this chapter on an outpatient
basis for the treatment of a non-service-connected
disability or condition.” 38 U.S.C. § 1722A(a)(1). Mr.
Heino argues that subsection (a)(2) relates only to a
veteran’s “supply of medication” and that because a
veteran is only supplied with his or her actual medication,
the intended “cost” in subsection (a)(2) can only be the
actual cost of medication. However, as the Veterans
Court found, it is not clear that section 1722A(a)(2) only
refers to “the cost” of a veteran’s “supply of medication”
and may also refer to “the cost” to “furnish[]” veterans
with medication. Heino, 24 Vet. App. at 374 (“The costs of
furnishing the 30–day supply of the medication implies
HEINO v. DVA 12
that the cost of the medication also includes the costs
incurred for providing or getting the pills into the hands
of the veterans—the administrative costs associated with
dispensing of the medication.”).
Similarly, the legislative history surrounding section
1722A does not clarify the meaning of “the cost to the
Secretary for medication.” 38 U.S.C. § 1722A(a)(2). When
Congress passed then section 622A(a)(2) (now section
1722A(a)(2)) in 1990, it was silent with respect to what
“cost” was being referenced. Neither the 1990 Act, Pub. L.
No. 101-508, § 8012, 104 Stat. 1388, nor the House Conference
Report accompanying the Act, H.R. Rep. No. 101-
964, at 2693-94 (1990) (Conf. Rep.), discuss what Congress
may have meant with regard to section
1722A(a)(2).7
Finally, relevant canons of construction do not reveal
a clear congressional intent for the phrase “the cost to the
Secretary for medication.” 38 U.S.C. § 1722A(a)(2). Mr.
Heino argues that if Congress intended various “administrative
costs” to be encompassed by section 1722A(a)(2) it
would have said so expressly, as it has done elsewhere.
7 The Veterans Court cited legislative history from
the 1999 amendment to section 1722A to support its
interpretation of section 1722A(a)(2), which was enacted
in 1990 and has never been amended. Heino, 24 Vet. App.
at 374 (citing H.R. Rep. No. 106-237, § 201, 106th Cong.,
1st Sess. (July 16, 1999) (to accompany H.R. 2116)).
Although the Veterans Court’s interpretation of section
1722A(a)(2) was correct, statements made nine years
after a statute was enacted shed little light on an earlier
statute’s meaning. See Huffman v. Office of Pers. Mgmt.,
263 F.3d 1341, 1354 (Fed. Cir. 2001) (“post-enactment
statements made in the legislative history of the 1994
amendment have no bearing on our determination of the
legislative intent of the drafters of the 1978 and 1989
legislation”).
HEINO v. DVA 13
See, e.g., 38 U.S.C. § 2306(e)(3)(B) (the VA requires a
veteran’s survivors, in some circumstances, to “pay the
amount of the administrative costs incurred by the Secretary”
in providing an outer burial receptacle, among other
costs). It is well settled that “[w]here Congress includes
particular language in one section of a statute but omits it
in another section of the same Act, it is generally presumed
that Congress acts intentionally and purportedly
in the disparate inclusion or exclusion.” Russello v. United
States, 464 U.S. 16, 23 (1983) (quoting United States v.
Wong Kim Bo, 472 F.2d 720, 722 (5th Cir. 1972)). However,
the statutes Mr. Heino cites to support his argument
are neither part of section 1722A nor neighboring statutes.
See Sioux Honey Ass’n v. Hartford Fire Ins. Co., 672
F.3d 1041, 1052 (Fed. Cir. 2012) (citing Russello and
looking to Congress’s use of the term “jurisdiction” in 28
U.S.C. §§ 1581-1584 to determine the meaning of a term
in 28 U.S.C. § 1585). Therefore, the presumption Mr.
Heino relies upon is not applicable in this case because
section 1722A and the statutes he cites are entirely
different Acts.8
8 Mr. Heino further argues that the veteran’s canon
of construction, which states that “interpretive doubt is to
be resolved in the veteran’s favor,” resolves any ambiguity
in section 1722A(a)(2) in his favor. Brown v. Gardner, 513
U.S. 115, 118 (1994). It is not clear where the Brown
canon fits within the Chevron doctrine, or whether it
should be part of the Chevron analysis at all. Compare
Nielson v. Shinseki, 607 F.3d 802, 808 (Fed. Cir. 2010)
(stating that the Brown canon “is only applicable after
other interpretive guidelines have been exhausted, including
Chevron”), with Disabled Am. Veterans v. Gober, 234
F.3d 684, 692, 694 (Fed. Cir. 2000) (stating that the
Brown canon “modif[ies] the traditional Chevron analysis”).
Regardless, Mr. Heino asks this court to resolve
“interpretive doubt” in his favor by holding that there is
no doubt as to what “the cost to the Secretary” could
HEINO v. DVA 14
Thus, after employing traditional tools of statutory
construction, we hold that Congress has not directly
spoken to the precise question of whether “the cost to the
Secretary for medication” refers to only the actual cost of
medication or may also refer to administrative costs.
2.
When a statute is silent or ambiguous and implicitly
delegates to an agency on a particular question, “the
question for the court is whether the agency’s answer is
based on a permissible construction of the statute.” Chevron,
467 U.S. at 843. In such a circumstance, the agency’s
interpretation of a statutory term “governs if it is a reasonable
interpretation of the statute—not necessarily the
only possible interpretation, nor even the interpretation
deemed most reasonable by the courts.” Entergy Corp. v.
Riverkeeper, Inc., 556 U.S. 208, 218 (2009) (emphasis in
original).
Mr. Heino argues that even if the phrase “the cost to
the Secretary” is ambiguous and could encompass the
actual cost of medication as well as the administrative
cost associated with dispensing medication, the VA’s
copayment regulation is unreasonable because it is not
linked to the actual cost of medication provided to the
veteran. Rather, the VA’s regulation allows the agency to
charge a copayment based on generalized and averaged
calculations. Moreover, Mr. Heino takes issue with the
VA’s reliance on the Consumer Price Index as a means to
raise copayments because, Appellant argues, the cost of
some medication may not rise with inflation. Mr. Heino
believes that the VA’s reliance on the Index completely
mean. However, we will not hold a statute unambiguous
by resorting to a tool of statutory construction used to
analyze ambiguous statutes.
HEINO v. DVA 15
untethers the copayment regulation from the VA’s realworld
costs as copayments rise according to an algorithm.
We hold that the VA’s copayment regulation, 38
C.F.R. § 17.110, is reasonable in light of section 1722A
and therefore valid. Given the ambiguous nature of the
word “cost” in section 1722A(a)(2), it was reasonable for
the VA to conclude that the statute prohibits the Secretary
from charging veterans a copayment “in excess of the
actual cost of the medication and the pharmacy administrative
costs related to the dispensing of the medication.”
66 Fed. Reg. at 36,961 (emphasis added). The VA has
reasonably calculated its cost to determine it does not
charge a veteran in excess of the cost to the Secretary for
medication. The VA estimates that its national average
administrative cost for dispensing prescription drugs is
$12.39 for calendar year 2012. Prescription Drugs Not
Administered During Treatment; Update to Administrative
Cost for Calendar Year 2012, 77 Fed. Reg. 19,425
(March 30, 2012). Yet, the VA currently does not charge
any veteran more than a $9 copayment under the regulation,
and many copayments are currently frozen at $8. See
38 C.F.R. § 17.110; 76 Fed. Reg. 78,824, 78,824-78,825
(Dec. 20, 2011). Thus, the VA’s regulation does not charge
a veteran “in excess” of the average administrative costs
associated with a veteran’s prescription, let alone the
combined administrative and actual cost of a prescription.
As a result, the VA’s copayment regulation is reasonable
in light of the statute’s ambiguity.
It is also reasonable for the VA to base copayments on
the average administrative cost associated with dispensing
medication, as opposed to the administrative cost
associated with each individual’s supply of medication.
Congress stated that it was granting the VA “relatively
broad discretion” to raise copayments so long as the
increases the VA made were reasonable. H.R. Rep. No.
HEINO v. DVA 16
106-237, at 41-42. We find nothing unreasonable in the
VA’s choice not to base copayments on the exact calculated
administrative cost associated with each veteran’s
prescription, but rather on an average administrative
cost. Indeed, as the Government points out, charging
copayments based on an average administrative cost
without taking into account the actual cost of a veteran’s
medication was a way to ensure the VA remained an
attractive medical provider to all veterans, not just those
whose medication is cheap or entails a low administrative
cost. Appellee Br. at 49; see also Oral Argument at 15:45 –
16:33, Heino v. Shinseki, No. 2011-7160, available at
http://www.cafc.uscourts.gov/oral-argumentrecordings/
all/heino.html; 66 Fed. Reg. at 63,449 (considering
copayment costs for other competitive plans).
Moreover, the VA’s choice to increase copayments
with the Medical Consumer Price Index is reasonable in
light of section 1722A. After the VA set its base copayment
to $7, an amount below what the agency calculated
its administrative cost alone to be, the copayment regulation
rises only when inflation, as measured by the prescription
drug component of the Medical Consumer Price
Index, increases a full dollar. 38 C.F.R. § 17.110. Such a
program certainly reflects the “reasonable copayment
increases” contemplated by Congress. H.R. Rep. No. 106-
237, at 42. Although Mr. Heino argues that the price of
some prescriptions may not rise with inflation, given the
VA’s “relatively broad discretion” to enact copayment
regulations, H.R. Rep. No. 106-237, at 43, it was reasonable
for the VA to rely on the Medical Consumer Price
Index.
Finally, looking to the purpose of section 1722A as a
whole, it is clear the VA’s copayment regulation is reasonable.
The purpose of section 1722A is to allow the VA
to recoup some of the cost of its benefit program while
HEINO v. DVA
17
ensuring that the VA does not charge so much as “to
result in veterans not seeking needed care and services . .
. .” Id. The current regulation keeps copayments to a
minimum by not charging veterans for the actual cost of
their medication, 66 Fed. Reg. at 36,961, and charging a
copayment below the VA’s calculated administrative cost,
77 Fed. Reg. at 19,425. Moreover, the VA increases
copayments only with inflation and has sought to reexamine
its procedures to ensure that the VA continues to be
an attractive medication provider. See 74 Fed. Reg.
69,283, 69,283-69,284 (freezing many copayments at $8 to
determine whether increases in copayments under the
prescription drug component of the Medical Consumer
Price Index “might pose a significant financial hardship
for certain veterans and if so, what alternative approach
would provide appropriate relief for these veterans”).
These measures adequately fulfill Congress’s charge and
therefore the VA’s copayment regulation is reasonable.

III.
For the reasons discussed above, we affirm the Veterans
Court’s decision.
AFFIRMED
No Costs.

United States Court of Appeals for the Federal Circuit
__________________________
WILLIAM H. HEINO, SR.,
Claimant-Appellant,
v.
ERIC K. SHINSEKI, SECRETARY OF VETERANS
AFFAIRS,
Respondent-Appellee.
__________________________
2011-7160
__________________________
Appeal from the United States Court of Appeals for
Veterans Claims in Case No. 09-112, Judge William A.
Moorman.
___________________________
PLAGER, Circuit Judge, concurring.
The statute at issue (38 U.S.C. § 1722A) is entitled
“Copayment for Medications.” Subsection (a)(1) specifies a
copayment to be paid by veterans “for each 30-day supply
of medication furnished such veteran . . . for the treatment
of a . . . condition.” The court in its opinion here
recognizes that “medication” refers to the prescribed pills
or tablets themselves, as distinct from any associated
administrative cost. See Maj. Op. at 3, n.3.
Nevertheless, based on this statute the VA charges
veterans a copayment calculated not on the actual cost of
a veteran’s individual medications or even an overall
HEINO v. DVA
2
average of actual costs for the medications VA dispenses,
but on the overall average of administrative costs the VA
incurs in dispensing the medications. Then, to further
complicate the matter, the VA adjusts that copayment for
inflation by using the prescription drug component of the
Medical Consumer Price Index.
What are we to make of this? Judge Hagel, dissenting
in the decision of the Veterans Court in this case, and Mr.
Heino are both of the view that the statute is plain and
unambiguous and means the actual cost of the medications,
not the cost to administer them; and so it would
seem. Mr. Heino would like his co-payment to be based
only on his particular medicine, and then only the quantity
of it that he takes. But the administrative complications
that practice would introduce can only be imagined,
given the several billion dollars worth of drugs that pass
through the VA each year. Whatever may be the case for
the individual medications themselves, the VA can reasonably
approximate its annual administrative cost for
dispensing medications, and roughly bases individual copayments
on that number averaged among its medical
beneficiaries, though in recent years, for policy reasons, it
has held that number from increasing. See id. at 9, n.6.
With a creative bit of definitional construction and
Chevron analysis, we conclude that what the VA does is
legitimate; this avoids throwing the VA co-payment
system into total chaos, and probably is, in a broad sense,
consistent with what Congress thought the VA should be
doing. Even so, to clear itself from further challenges, the
VA might want to either re-jigger its methodology to base
it on the calculated cost of medications—no doubt arriving
at a similar co-payment number—or get Congress to add
consideration of administrative costs to the statute.

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