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The Centers for Medicare & Medicaid Services Paid Medicare Advantage Organizations for Services Provided to Beneficiaries Confined in Mental Health Facilities for Court-Ordered Purposes

During calendar years 2011 and 2012, the Centers for Medicare & Medicaid Services (CMS) made 1,018 payments, totaling $1 million, to Medicare Advantage (MA) organizations on behalf of 207 beneficiaries confined in mental health facilities by court order under a penal code (confined beneficiaries). Had those same persons been enrolled in Medicare Parts A or B, payment would generally not have been made. This occurred because CMS policy permits Medicare payments to be made on behalf of confined beneficiaries enrolled in MA but not on behalf of those enrolled in Part A or Part B.

Federal regulations state that an individual is eligible to enroll in an MA plan if he or she is entitled to Medicare under Part A and enrolled in Part B. For Parts A and B, beneficiaries in custody of penal authorities include confined beneficiaries. Medicare generally does not pay Part A and Part B benefits to incarcerated beneficiaries, but those beneficiaries retain their entitlement to Part A and can retain their enrollment in Part B with the payment of premiums. However, under current policy for the administration of MA, CMS does not consider confined beneficiaries to be incarcerated for the purpose of MA eligibility, regardless of the reason for their confinement. Accordingly, these confined beneficiaries would be eligible for payments under MA.

We recommended that, to be consistent with the relevant provisions of Medicare Part A and Part B, CMS revise its MA guidelines to prohibit MA payments made on behalf of beneficiaries who have been confined in mental health facilities by court order under a penal code, which could have resulted in cost savings totaling $1 million for the 2-year period we reviewed. CMS did not concur with our recommendation, but stated that it recently proposed regulatory changes that will prohibit new or continued enrollment of incarcerated beneficiaries in managed care. After reviewing CMS's comments, we note that CMS's proposed change to the definition of "service area" will exclude mental health facilities from facilities in which individuals are incarcerated. This will not serve to exclude from MA coverage individuals held in the custody of penal authorities in mental health facilities. CMS could implement our recommendation by not adopting the proposed change to the definition of "service area" and by defining individuals who are in custody of penal authorities for purposes of MA in the same manner that it defines those individuals for Medicare Parts A and B in Federal regulations and the Medicare Benefit Policy Manual.

Filed under: Center for Medicare and Medicaid Services