View Rule

View EO 12866 Meetings Printer-Friendly Version     Download RIN Data in XML

DOD/DODOASHA RIN: 0720-AB87 Publication ID: Fall 2023 
Title: Collection From Third Party Payers of Reasonable Charges for Healthcare Services; Amendment 

The Department of Defense, Defense Health Agency (DHA), is proposing a rule to implement Section 716 of the Fiscal Year 2023 National Defense Authorization Act (Pub. L. 117-263).  Section 716, which provides new statutory language that supersedes language previously enacted in Section 702 of the Fiscal Year 2021 National Defense Authorization Act (Pub. L. 116-283), directs the Director of the DHA to implement a modified payment plan for certain civilians (who are not covered beneficiaries). This Section also provides the Director with the authority to waive fees for medical care provided to such civilians, when the provision of care enhances the knowledge, skills and abilities of health care providers.

Agency: Department of Defense(DOD)  Priority: Other Significant 
RIN Status: Previously published in the Unified Agenda Agenda Stage of Rulemaking: Final Rule Stage 
Major: No  Unfunded Mandates: No 
CFR Citation: 32 CFR 220   
Legal Authority: NDAA 2021, sec. 716   
Legal Deadline:
Action Source Description Date
NPRM  Statutory    06/21/2023 

Statement of Need:

Due to the high cost of healthcare in the United States and the mandate to aggressively pursue collection of debts, some civilian non-beneficiaries who were provided emergency or trauma healthcare services in DoD MTFs have incurred financial harm after receiving MTF medical invoices.  Other than the requirements of FCCS, the DoD did not have authority to provide FAPs like those offered by for-profit and non-profit hospitals which include elements such as sliding fees and catastrophic waivers.  In consequence, Congress wholly amended 10 U.S.C. 1079b via section 716 of the FY 2023 NDAA.  Section 716 directs DoD to apply a sliding fee and/or a catastrophic waiver to medical invoices of non-beneficiaries.  For non-beneficiaries who have 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 grants the Director of DHA discretionary authority, to waive medical debts of non-beneficiaries when the healthcare provided enhances the knowledge, skills, and abilities of healthcare providers, as determined by the Director of DHA.

Summary of the Legal Basis:

DoD’s authority 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, is found 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. 26512653).  The rates used for billing are modeled after the rates published by the Centers for Medicare and 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  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, DoD abides by the Federal Claims Collection Standards (FCCS), under 31 CFR parts 900-904, which are published jointly by the Department of the Treasury and the Department of Justice.  The FCCS 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.  Accordingly, DoD MTFs generate medical claims and invoices for care rendered within MTFs and execute the FCCS requirements.



In accordance with 26 CFR 1.6050P-1(b)(2)(G), if DoD waives fees under 10 U.S.C. 1079b(b), then it would trigger information reporting requirements to the Internal Revenue Service (IRS) and the furnishing of Form 1099-C, Cancellation of Debt, to the patient since the discharge of indebtedness under 10 U.S.C. 1079b(b) qualifies as an identifiable event.  Consequently, the waived medical fees could result in the debt being attributed to the patient as taxable income; and have the effect of causing severe financial harm.  Therefore, DHA will consider a waiver of fees under 10 U.S.C. 1079b(b), only after any discounts according to the sliding scale and catastrophic cap have been applied.  Any fees waived will be from the discounted amount, which will mitigate some of the financial impact of attributing the waived amount as income.    Additionally, the DoD will seek to use that authority judiciously, on a case-by-case basis, and when other efforts such as application of a sliding and catastrophic waiver fail to mitigate the risk of severe financial harm to the civilian non-beneficiary.


The amended 10 U.S.C. 1079b mandates that DoD implement the amended statute within 180 days of the amendment being enacted.  With this constrained timeline, the Department launched research efforts to discern whether private sector hospitals offered programs similar to what the statute mandates and which could potentially serve as a model for the Department.  This research was necessary because prior to enactment of the amended 10 U.S.C. 1079b, the DoD did not have the authority to apply sliding scale or catastrophic waiver discounts to medical bills generated by MTFs, nor did the Director of DHA have discretionary authority to waive medical bills.  Market research on charity care and FAPs offered by both for-profit and non-profit hospitals throughout the United States and eligibility requirements for those programs were reviewed.  Of note, while for-profit and non-profit hospitals derive a tax benefit from the provision of charity care and FAPs, the DoD’s hospitals do not.  Research conducted yielded that while there are generally accepted accounting standards applicable to the financial reporting of charity and FAPs, there is no single standard, statute, or regulation that outlines the content and structure of those programs.  Programs vary widely.  The market research also included a review of the rules pertaining to eligibility for Federal and State FAPs such as Medicaid.  The research provided a few alternatives for consideration in establishing the MHS FAP, including:

  •          Alternative #1:  Generally, for-profit and non-profit hospitals determine a patient’s eligibility for FAPs by measuring 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 to 42 U.S.C. 9902(2).  There is one set of FPGs for the contiguous 48 states and Washington D.C., one set for Alaska, and another 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 D.C.  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 Federal programs such as Medicaid.
  •          Alternative #2:  Both for-profit and non-profit hospitals typically offer a sliding fee discount 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% to 400% of the FPGs, with most hospitals offering discounts to patients whose income is at or below 200% of the FPGs.
  •          Alternative #3:  Most private sector hospitals do not offer a catastrophic waiver policy, 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 Department of the Treasury’s Administrative Wage Garnishment policy to determine the maximum percentage that the Treasury garnishes from an individual’s monthly income (15 percent).

The three alternatives uncovered through market research represent fair and reasonable approaches that could readily be adopted for use in the administration of the MHS FAP, with some modifications, and without incurring significant costs to implement.  Specifically:

Alternative #1:  Adopted.  Since 10 U.S.C. 1079b mandates the application of a sliding scale and catastrophic waivers, the FPGs will be used as the measure to determine a patient’s eligibility for these discounts.

Alternative #2:  Adopted.  The FPG range for eligibility for the sliding scale discount will be set annually by policy issued by the ASD(HA).  The range will be published on the DoD Comptroller’s Reimbursement Rates web site.  Reserving the ability to set the range via policy gives DoD maximum flexibility to mitigate financial harm.

Alternative #3:  Adopted.  The catastrophic waiver will be limited to a percentage of a patient’s monthly household income.  The percentage will be established by policy issued annually by the ASD(HA).  The percentage will be published on the DoD Comptroller’s Reimbursement Rates web site.  Reserving the ability to set the percentage via policy gives DoD maximum flexibility to mitigate financial harm.

Anticipated Costs and Benefits:

Benefit Cost Analysis: The anticipated costs for the MHS Financial Assistance and Waiver Program include only the time required for a patient’s application to be reviewed. This includes time required for a civilian non-beneficiary patient to complete the associated DD Form 3857, Application for Military Health System Financial Assistance Program/Waiver Program, declaring their income, DHA UBO and associated agencies to receive and assess the application, followed by the determination of the eligibility for a sliding scale discount, catastrophic waiver, or debt cancellation waiver, and the response time for the decision. The total estimated time is less than 90 days.


Currently, Federal debt collection legislation and policies can lead to serious financial harm to some civilian non-beneficiary patients who receive treatment at MTFs.  Delays in implementation of this rule could potentially exacerbate these problems. 

Action Date FR Cite
Interim Final Rule  03/00/2024 
Regulatory Flexibility Analysis Required: No  Government Levels Affected: None 
Small Entities Affected: No  Federalism: No 
Included in the Regulatory Plan: Yes 
RIN Data Printed in the FR: No 
Agency Contact:
DeLisa Prater
DHA Uniform Business Office Program Manager
Department of Defense
Office of Assistant Secretary for Health Affairs
8111 Gatehouse Road, Suite #221,
Falls Church, VA 22042-5101
Phone:703 275-6380