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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Medicare Payments for Services Provided to Incarcerated Beneficiaries," (A-07-02-03008)

October 9, 2002

Complete Text of Report is available in PDF format (420 KB). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


This review was made to determine whether Medicare payments were made for services to incarcerated beneficiaries.  Missouri was one of ten states selected for review.  During our review in Missouri we discovered that there were two major groups of incarcerated individuals that potentially could have had improper Medicare claims paid on their behalf.  The first group was comprised of state prisoners in state correctional facilities under control of the Department of Corrections (DOC).  The other group was individuals who were residing in state mental health facilities under the control of the Department of Mental Health (DMH).  This group of individuals is comprised of forensic patients who had been found either "Not Guilty By Reason of Insanity" or "Incompetent to Stand Trial" by the court system.

For the first major group of incarcerated individuals, Missouri Statute, sections 217.829 requires these individuals to reimburse the DOC for the cost of their care while they were incarcerated.  This law, if followed, would allow the Missouri state prisons to bill Medicare.  However, during our review we learned that Missouri DOC has a contract with Correctional Medical Services.  Under this contract, Correctional Medical Services is required to pay for all care provided to state prisoners.  Therefore, the state prisons should not bill any other insurance company, including Medicare, for medical services provided to state prisoners.

For the second major group of incarcerated individuals, forensic patients under the control of the Missouri DMH, Missouri Statute, section 552.080 requires these individuals to reimburse the DMH for the cost of care.  All 100 of Missouri's sample claims were for this group of individuals.  We found that DMH follows all of the various laws and regulations regarding the diligent pursuit of payment and therefore all of the payments made by Medicare for these claims were allowable.

We have been informed that the Centers for Medicare and Medicaid Services (CMS) plans to establish an edit in the common working file that will deny claims for incarcerated beneficiaries.  Claims meeting the conditions of payment will not be subject to this edit if the supplier or provider submitting the claim certifies, by using a modifier or condition code on the claim, that he or she has been instructed by the state or local government component that the conditions for Medicare payment have been met.  We recommended that CMS:  (1) make a concerted effort to educate suppliers and providers on the meaning of the modifier or condition code and circumstances relating to their proper use, (2) monitor claims with the modifier or condition code to assure that federal guidelines are met, and (3) monitor claims to ensure that only commitment codes that meet Medicare criteria are paid and that uniform collection procedures are enforced.  The CMS concurred with our findings and recommendations.