Industrial medical treatment rendered at Veteran Administration (VA) hospitals and facilities are exempt from reduction per the California Official Medical Fee Schedule and are reimbursable for the full value of the rates that the VA charges. The rates prescribed are federally set and do not need to conform to the requirements of Labor Code §§ 4603.2 nor 5307.1. The Secretary of the VA prescribes regulations for the purpose of determining reasonable charges for care or services. 38 U.S.C. § 1729(c)(2)(A). The charges are computed using formulae prescribed under existing regulations and are presumptively reasonable.
38 U.S.C. § 1729(a)(1) provides:
Subject to the provisions of this section, in any case in which a veteran is furnished care or services under this chapter for a non-service connected disability…the United States has the right to recover or collect the reasonable cost of services (as determined by the Secretary) from a third party to the extent that the veteran (or the provider of the care or services) would be eligible to receive payment for such care or services from a third party if the care or services had not been furnished by a department or agency of the United States.
Section (f) establishes:
No law of any State or of any political subdivision of a State and no provision of any contract or other agreement, shall operate to prevent recovery or collection by the United States under this section…
The United States Congress explicitly intended this right to preempt any competing State law by providing that “[n]o law of any State or of any political subdivision of a State and no provision of any contract or other agreement, shall operate to prevent recovery or collection by the United States under this section.” Furthermore, federal law preempts state law with regard to any limitations on payments for medical treatment administered through the VA for work-related injuries covered by a workers’ compensation plan.
38 C.F.R. § 17.106(a) states:
(1) General rule. VA has the right to recover or collect reasonable charges from a third-party payer for medical care and services provided for a nonservice-connected disability in or through any VA facility to a veteran who is also a beneficiary under the third-party payer’s plan. VA’s right to recover or collect is limited to the extent that the beneficiary or a nongovernment provider of care or services would be eligible to receive reimbursement or indemnification from the third-party payer if the beneficiary were to incur the costs on the beneficiary’s own behalf.
In Section (a)(2)(P)(F) the definition of a third-party payer includes “workers’ compensation program or plan sponsor, underwriter, carrier, or self insurer.”
In 38 U.S.C. § 1729(a)(1), a non-service connected disability includes a disability “that is incurred incident to the individuals employment and that is covered under a workers’ compensation law or plan that provides for payment for the cost of health care and services provided to the individual by reason of the disability.”
Congress did not intend to bind the VA to varying, unpredictable policies, vis-à-vis state statutes, for which the VA has no control or input.
This position is reinforced by a full reading of the statute. Federal law does allow for payment at regional rates. 38 U.S.C. § 1729(c)(2)(B) expressly requires that the VA’s regulations used to determine the reasonable charges for care or services provide that such charges may not exceed the amount that a party liable under a health-plan contract demonstrates to the satisfaction of the VA they would otherwise pay to a non-federal government medical facility in the same geographic area. The statute defines a health-plan contract, which explicitly excludes workers’ compensation laws or plans. 38 U.S.C. § 1729(i)(1)(B)(iii).
The court in Borgosano v. Babcock Wilcox Power Co. (1996) 10 Mass. Workers’ Comp. Rep. 120 confronted this very issue. The VA appealed from a decision by the administrative law judge denying its claim that the Supremacy Clause mandated the insurer reimburse it for medical expenses incurred by the employee at rates set by the Office of Management and Budget, rather than the rates set by the Massachusetts Rate Setting Commission, a counterpart to California’s OMFS. In reversing the decision, the court reasoned that 38 U.S.C. § 1729(f) mirrored the Supremacy Clause under the United States Constitution, and found that the interpretation of state law in the lower court prevented collection by the VA. Id. The court held that once medical care is determined to be compensable, the rate of payment is governed by the federal process. Since the federal rate determined by the Secretary of the VA would conflict with the state rate, the federal rate must prevail. Accordingly, application of any other rate in this matter, such as California’s OMFS, would frustrate the VA’s right to collection contrary to the Supremacy Clause mirrored under 38 U.S.C. § 1729(f) and would violate federal law. Higher courts in several other states have found that state workers’ compensation reimbursement rates are federally preempted.
The WCAB Has Already Ruled that Federal Rates Preempt the OMFS
In a California case addressing federal preemption, an insurance carrier sought to reduce the lien of an air ambulance service to an amount consistent with California’s OMFS under Labor Code § 5307.1 and Title 8 Cal. Code Reg. § 9789.7(a), which set the maximum reasonable fee for an ambulance service. Zenith Insurance Company v. WCAB (2014) (Enriquez) 79 CCC 1097 (writ denied.) The air ambulance company successfully asserted that the Labor Code was preempted by the Federal Airline Deregulation Act (“ADA”), 49 U.S.C. § 4173(b)(1), and that its lien should be paid in full, notwithstanding California’s OMFS. On appeal, Defendant asserted the administrative law judge exceeded his authority vested under California’s Constitution by making a substantial ruling on a federal preemption, and that the administrative law judge erred in concluding the ADA preempted 8 Cal. Code § 9789.7(a). The WCAB ruled that the California Constitution did not prevent federal preemption, and that the ADA did in fact preempt the Labor Code.
The VA’s Billed Charges Are Judicially Noticed
The VA’s billed charges are set by methodology based on the type of care and geographic area, and all rates are published by notice in the Federal Register. 38 C.F.R. § 17.101(a)(2). Pursuant to 44. U.S.C. § 1507, VA billing rates “shall be” judicially noticed, and as such state courts are bound to judicial notice of federal laws and regulations. Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal. App. 4th 743, 757; See also Cal. Evid. Code § 451.
The VA’s Billed Charges Are Presumptively Reasonable
Under the authority of 38 U.S.C. § 1729, the Secretary of the VA created formulas in 38 C.F.R. § 17.101 by which the VA would determine the reasonable cost of its care. The implementing regulations, 38 C.F.R. § 17.101 et seq., establish reasonable charges based on the type of care being billed. The type of care is determined by medical providers, and the United States government is not required to litigate the reasonableness of administratively fixed rates, such as the VA’s reasonable charges. The reasonableness of the VA’s charges has been judicially determined to be presumptive and cannot be challenged as unreasonable or arbitrary.
There is case law standing for this proposition involving the Federal Medical Care Recovery Act (“MCRA”) under 42 U.S.C. § 2651-53. The MCRA was created to allow federal medical care providers to recover the reasonable value of care provided from a third-party liable to the patient in tort. Congress granted the President of the United States authority to prescribe regulations to determine the value of treatment provided. 42 U.S.C. § 2652. The President delegated that authority to the Director of the Office of Management and Budget. Exec. Order No. 11060, 27 Fed. Reg. 10925 (Nov. 7, 1962).
In Phillips v. Trame (1966) 252 F. Supp. 948, 951, the defendant argued that if the United States, who had intervened in the action, had a right to recover, the amount was “…unreasonable, arbitrary and bears no relation to the treatment furnished or services provided.” The court held that the rates were not subject to challenge as unreasonable or arbitrary because they were the result of a federal action delegating the determination and establishment of such rates.
Similarly, in another tort action, the United States asserted a lien for reimbursement for medical treatment administered at government hospitals where three separate defendants argued the government’s right to reimbursement under 42 U.S.C. §§ 2651-2653 was unconstitutional. United States v. Jones (1967) 264 F. Supp. 11, 13. The court held that the President may prescribe regulations with respect to the determination and establishment of the reasonable value of the hospital, medical, surgical, or dental care and treatment furnished or to be furnished. As was held in the Trame case, the court reasoned that the rates established by regulation were not subject to challenge as unreasonable or arbitrary.
Conclusion
In conclusion, liens for medical treatment rendered to veterans at Veteran Administration facilities are not reducible per the California Official Medical Fee Schedule, are judicially noticed not requiring witness testimony for authentication, and are presumptively reasonable. The VA is actively seeking cases in California to take up on appeal to the state’s higher courts on this issue.