Medicare Improperly Paid Millions of Dollars for Prescription Drugs Provided to Incarcerated Beneficiaries During 2006 Through 2010

An individual is eligible for Medicare Part D benefits if he or she is entitled to Medicare benefits under Part A or enrolled in Part B and lives in the service area of a Part D plan. Federal regulations specify that facilities in which individuals are incarcerated are not to be regarded as being within service areas for purposes of Part D coverage.

The Centers for Medicare & Medicaid Services (CMS) inappropriately accepted prescription drug event (PDE) records submitted by Part D sponsors for prescription drugs provided to incarcerated beneficiaries and used those records to make its final payment determinations. Specifically, for 49 of the 100 beneficiaries that we sampled, CMS accepted 1,298 PDE records submitted by sponsors for prescription drugs provided to incarcerated beneficiaries. The gross drug costs associated with these 1,298 accepted PDE records totaled $326,000. On the basis of our sample results, we estimated that CMS accepted PDE records with gross drug costs totaling an additional $11.7 million for incarcerated beneficiaries.

CMS inappropriately accepted PDE records submitted by sponsors for prescription drugs provided to incarcerated beneficiaries because it had inadequate internal controls during our review. Additionally, CMS did not provide sufficient and timely information to sponsors that would have allowed them to readily and accurately verify a beneficiary's incarceration status and dates of incarceration.

We recommended that CMS (1) resolve improper Part D payments made for prescription drugs provided to incarcerated beneficiaries; (2) strengthen internal controls to ensure that Medicare does not pay for prescription drugs for incarcerated beneficiaries; and (3) identify and resolve improper payments made for prescription drugs provided to incarcerated beneficiaries, which would include the estimated additional gross drug costs identified in this report, by reopening and revising final payment determinations for all periods before implementation of the enhanced policies and procedures that would contribute to the strengthened internal controls. CMS concurred with our first two recommendations but did not concur with our third recommendation.