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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Medicare Payments for Services Provided To California Residents Identified as Incarcerated," (A-09-02-00050)

October 9, 2002

Complete Text of Report is available in PDF format (1.52 MB). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The objective of this audit was to determine whether Medicare fee-for-service claims paid in California for beneficiaries identified as incarcerated during the period January 1, 1997 through December 31, 1999 were in compliance with federal regulations and Centers for Medicare & Medicaid Services’ (CMS) guidelines.  California was 1 of 10 states selected for review.  We audited a random sample of 100 Medicare fee-for-service claims for beneficiaries identified as incarcerated during the 3-year audit period to determine whether these payments were appropriate.  We found that our sample of 100 claims included 58 allowable claims, 12 unallowable claims and 30 claims for which the allowability of the claim could not be determined.  Medicare paid for the 12 unallowable claims because the prisoner data from the Social Security Administration (SSA) was not contained in CMS’ records, which are used by the Medicare contractors to process claims.

We have been informed that 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.