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Billing Medicaid Would Save NC $11.5 Million in Prison Medical Care Costs

The North Carolina Department of Corrections (NCDOC) “could save about $11.5 million a year by requiring hospitals and other medical service providers to bill Medicaid for eligible inmate inpatient hospital and professional services,” according to an August 2010 report by the North Carolina State Auditor’s Office.

The NCDOC “cooperates with 35 hospitals to provide medical services for over 40,000 inmates housed in 71 prisons.” In 2008-2009, the NCDOC spent approximately $159.8 million in prisoner health care expenses but “does not require hospitals or other medical service providers to bill Medicaid for any inmate health care costs,” the audit found. A previous audit had “concluded that the Department pays an average of 467% (from 198% to as high as 879%) of Medicaid rates for inmate health care costs.” [See: PLN, Nov. 2010, p.48].

State auditors found the NCDOC “could reduce its inmate healthcare costs if medical providers billed Medicaid for inpatient services provided to Medicaid-eligible inmates.”
The Medicaid eligibility requirements “include income and resource limits, citizenship and alien status, state of residence, 20 years old or younger, 65 years old or older, pregnant, blind or disabled,” according to the audit report. Prisoners “could also be Medicaid eligible if they are considered physically or mentally disabled under the federal Supplemental Security Income (SSI) program. There are nine diagnostic categories of mental disorders under SSI including personality disorders and substance addiction disorders which may establish disability.”

The federal government typically “will not reimburse states (called federal financial participation or FFP) for inmate medical care under the Medicaid program.” However, an exception is allowed “during that part of the month in which the individual is not an inmate of a public institution,” auditors noted, citing 42 CFR 435.1008.

The Centers for Medicare and Medicaid Services (CMMS) – part of the U.S. Department of Health and Human Services – is the federal agency that administers Medicare, Medicaid and the Children’s Health Insurance Program. CMMS “indicates the inmates lose their ‘inmate status’ and obtain ‘inpatient status’ when treated in an inpatient hospital setting that is not under the control of a state’s correction system,” the auditors noted.
“Consequently, FFP is available for an inmate’s health care expenses if the inmate is Medicaid eligible and he or she is an inpatient of a medical institution.” This includes being admitted to a hospital, nursing facility, juvenile psychiatric facility or intermediate care facility.

“Billing Medicaid for eligible inmate health care costs would reduce the Department’s costs in two ways,” auditors found. “First, the Department would realize reduced costs because hospital and medical services for eligible inmates would be reimbursed at Medicaid rates that are lower than the rates currently paid by the Department. Second, billing Medicaid ... would reduce the Department’s costs by transferring these costs to the federal government because the federal government reimburses the States about $.65 for every $1.00 spent on Medicaid.”

Additional cost savings could be realized when the Patient Protection and Affordable Care Act, part of the federal health care reform bill, goes into effect on January 1, 2014. The Act “establishes a new eligibility category for all non-pregnant, non-Medicaid eligible childless adults under age 65 who are not otherwise eligible for Medicaid and requires minimum Medicaid coverage at 133% FPL (federal poverty level).” As a result, “more inmates will become Medicaid eligible [as] ‘newly eligible individuals’ during the first three years: January 2014 through December 2016” under the Act.

Although beyond the scope of the audit, the report observed that “local governments could also realize savings by requiring medical providers to bill Medicaid for eligible inmate health care.”

Noting that five states – Louisiana, Mississippi, Nebraska, Oklahoma and Washington – report charging “eligible inmate inpatient health care to their Medicaid programs,” the auditors recommended that NCDOC likewise “charge Medicaid for eligible inmate inpatient health care costs.” See: North Carolina State Auditor’s Office, Performance Audit, Department of Correction, Inmate Medicaid Eligibility (August 2010), available online at and on PLN’s website.

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